Insurers sell products to fill the gap

By L. M. Sixel
The Houston Chronicle, Dec. 8, 2010

As employees face higher co-pays, deductibles and health care premiums, a relatively new insurance product has become increasingly popular.

It’s known as “gap” or “bridge” insurance, and it covers some of the out-of-pocket health care costs that are becoming more difficult for employees to shoulder, such as annual deductibles that are rising to $1,000, $2,500 or even $5,000.

Families that live paycheck to paycheck can’t absorb the increase in costs, said Brad Peak, vice president of products and marketing with the insurance carrier Assurant Employee Benefits in Kansas City, Mo.

The trend is moving toward the $2,500 deductible, Peak said. Assurant views that as the “sweet spot” that makes gap insurance attractive to employees on a budget.

Some employee benefits experts, however, question the value of gap insurance. It can be expensive for what it offers. Some limitations on coverage for pre-existing conditions can make it useless for someone with a chronic medical problem. And the rules may be prohibitively restrictive, such as limiting reimbursement to patients whose conditions require hospitalization.

(Brett Haugh, a partner with Employee Benefit Solutions in Houston) said the policies can be pricey, with about 50 cents of every dollar going toward the broker’s commission.

http://www.chron.com/disp/story.mpl/business/sixel/7330802.html

It was inevitable. First in the individual market and then in the employer-sponsored insurance market relief from skyrocketing insurance premiums was gained by switching to high-deductible plans. Although this slowed the acceleration of premium increases, actual health care access was impaired for many because of the often-inappropriate financial disincentives of the  deductibles and other cost sharing. This financial barrier opened the doors for the insurance industry to sell protection against the deductibles by offering an additional insurance product to fill the gap in the primary insurance product – an insurance policy to insure against the adverse effects of another insurance policy.

If it sounds familiar, it is. Medigap policies are purchased by the majority of individuals covered by the traditional fee-for-service Medicare program. Medigap plans are private insurance products that cover the gap for deductibles and other out-of-pocket expenses that Medicare beneficiaries would otherwise face when they have health care needs.

We already know how lousy these products are. Medigap plans offer the worst value of commonly available insurance products. They impose a second wasteful administrative layer on top of the primary Medicare coverage. They typically have medical loss ratios of about 65 percent, meaning that they consume 35 percent of the Medigap premiums for their own intrinsic purposes. Yet seniors buy these plans because of fear of facing financial hardship just when health care needs are greatest.

In a bit of irony, the Patient Protection and Affordable Care Act requires that the Medigap plans be revised to “include nominal cost sharing requirements that encourage the use of appropriate Part B physician services.” Thus Congress, in its wisdom, wants Medicare beneficiaries to experience price sensitivity by establishing deductibles for the supplemental Medigap plans that pay the deductibles for the traditional Medicare program. What?

Now we have a market of similar private gap plans that cover private insurance plans, with all of the same inefficiencies and excesses as Medigap plans, except that they’ve added the market innovation of using half of the premiums just for the insurance brokers’ commissions (if you believe Brett Haugh, quoted in the Houston Chronicle article above).

This is so unnecessary. Deductibles have been proven to result in harm by causing patients to forgo appropriate care, yet they have very little impact in reducing our total national health expenditures. The administrative waste of gap plans can be avoided by simply eliminating the deductibles and other cost sharing. Then you wouldn’t need the gap plans at all.

In a recent response to a New York Times blog on how higher deductibles cause families to delay or forgo medical care I explained why the cost of eliminating deductibles is not that great. It is response # 23 at this link:
http://community.nytimes.com/comments/prescriptions.blogs.nytimes.com/2010/11/22/higher-deductibles-lower-spending/

Raising Premiums And Other Costs For Oregon Health Plan Enrollees Drove Many To Drop Out

By Bill J. Wright, Matthew J. Carlson, Heidi Allen, Alyssa L. Holmgren and D. Leif Rustvold
Health Affairs
December 2010

The Oregon Health Plan was created to be a sustainable program that could weather budgetary storms without having to cut enrollees from Medicaid. A 2003 redesign of the program increased premiums, raised cost sharing, and imposed rigid premium payment deadlines for members in the “Standard” version of the program but not for members of the “Plus” version. This paper adds two years of longitudinal data to a previous study on the impacts of these changes. It shows that the redesign was a key factor driving a 77 percent disenrollment rate in the Standard program, from a high of 104,000 enrollees in February 2003 to just 24,000 by the end of the study period, November 2005. Those who were in the Standard plan when the reduced benefits and higher member costs went into effect were also nearly twice as likely to have unmet health care needs compared to those in the Plus plan.

Impact In Oregon

The 2003 Medicaid redesign had profound effects on the Oregon Health Plan Standard population. In the months immediately after the redesign, many of those enrolled in the Standard plan left the program entirely. These people, as well as those who remained in the program, subsequently experienced greater unmet health care needs, reduced use of care, more medical debt, and greater household financial strain than members of the Plus plan, to whom the redesign did not apply.

Changes to the cost-sharing structure, which consisted of mandatory copays, increased monthly premiums for some members, and tightened administrative rules including a loss of coverage for nonpayment of premiums, affected Standard plan members in two main ways. First, the changes in premium rules led to heavy disenrollment initially, and those who left often experienced periods of uninsurance throughout the study time frame along with the other changes, such as higher rates of unmet need.

Second, even after gaps in coverage and other known differences between the populations were controlled for, members of the Standard plan experienced poorer outcomes than members of the Plus plan. This suggests that even for those who managed to stay enrolled in spite of higher premiums, increased cost sharing in the form of mandatory copays may have limited members’ access to and use of care, in addition to having a direct financial impact.

Implications For Other States

These findings contain lessons for other states, particularly as they implement Medicaid expansions under the Affordable Care Act. Some states already provide Medicaid coverage to nonelderly adults with incomes up to 133 percent of the federal poverty level, but the act is expected to result in more than seventeen million Americans’ becoming eligible for Medicaid by 2014.

Cost Sharing:

The first lesson is that although strict cost-sharing rules might be an appealing way to offset the costs associated with increased Medicaid enrollment, they create barriers for people to get and keep insurance.

Our data show that Medicaid members are sensitive to even small cost-sharing increases. Coupling those increases with stricter payment policies can create widespread coverage loss. In fact, previously published analyses of this study’s data suggest that the most vulnerable Standard plan members were the most likely to leave in response to changes in cost-sharing rules.

This fact is particularly important because recent analyses of census data suggest that nearly half of those who will become eligible for Medicaid under the new federal eligibility guidelines have incomes below 50 percent of the federal poverty level. In this newly eligible, very-low-income population, offering payment flexibility and exemptions might help ensure that the neediest benefit from coverage expansion.

Coverage Gaps:

Second, those who leave Medicaid in response to changes in cost-sharing rules are very likely to experience major coverage gaps. Over time, they have more difficulty meeting their health care needs, accumulate more medical debt, and experience greater financial strain than those who stay insured.

Unmet Need:

Third, even among those who remain enrolled, increased cost sharing in the form of copayments may result in greater unmet need for health care, along with increased household financial strain and medical debt. It may also greatly depress health care use. Although reducing unnecessary use is one of the goals of cost sharing, when reduced use is paired with an increase in unmet need, the question arises, does the reduction represent care that is needed or that would help prevent costly complications in the future?

http://content.healthaffairs.org/content/29/12/2311.abstract

Currently there is a fixation in the health policy community on designing plans that require a significant financial contribution from the beneficiary on the theory that high health care costs can be moderated by making patients more sensitive to those costs.

Many studies have now confirmed that these plan designs impair access to health care because of affordability issues, and result in impaired health outcomes. Although this is certainly true for those with moderate incomes, this new study confirms once again that it is particularly disastrous for low-income individuals.

As a result of the Patient Protection and Affordable Care Act (PPACA), in 2014 an estimated 17 million individuals will be added to state Medicaid programs. Because of tight budgets, states are already seeking federal waivers that would relax the PPACA requirements.

It is likely that most states will soon seek waivers for their Medicaid programs to allow flexibility in innovation. The innovations will not be for the purpose of assisting patients in getting the care that they need, but rather they will be for the purpose of reducing the Medicaid component of the state budgets.

PPACA has already enshrined high cost-sharing by establishing low-actuarial value plans (high deductibles, etc.) as the standard within the state insurance exchanges. The temptation for states to expand this concept to Medicaid will be great.

The Oregon Health Plan may have provided an important lesson for other states, but that won’t prevent them from doing the same. After all, making price-sensitive shoppers out of people who have no money is effective in reducing health care spending, even if it does result in further financial hardship, physical suffering, and even death, and dead patients are the least expensive of all.

McAllen And El Paso Revisited: Medicare Variations Not Always Reflected In The Under-Sixty-Five Population

By Luisa Franzini, Osama I. Mikhail and Jonathan S. Skinner
Health Affairs
December 2010

Medicare spending for the elderly is much higher in McAllen, Texas, than in El Paso, Texas, as reported in a 2009 New Yorker article by Atul Gawande. To investigate whether this disparity was present in the non-Medicare populations of those two cities, we obtained medical use and expense data for patients privately insured by Blue Cross and Blue Shield of Texas.

Variations In Medicare Use And Spending

Total price-adjusted Medicare spending was 86 percent higher in McAllen than in El Paso, and was 75 percent above the national average in 2007.

In 2007, Medicare enrollees in McAllen were far more likely to be admitted to the hospital and to die in the hospital than they were in El Paso. They were also much more likely to be seen near the end of their lives by more than ten physicians — a good measure for fragmentation, in that the involvement of a large number of physicians typically signals a lack of coordination of care provided to patients. Finally, there were sharp differences in the extent of cardiac surgical procedures; again, rates were higher in McAllen.

Variations For The Insured Population Under Age Sixty-Five

Surprisingly, and in contrast to the Medicare data, for the population insured by Blue Cross Blue Shield of Texas, total spending per member per year in McAllen was 7 percent lower than in El Paso. Although spending for professional and inpatient services were similar in the two regions, spending for outpatient services in McAllen was 31 percent less.

Use of medical services was also similar or somewhat lower in McAllen compared to El Paso. Inpatient admissions in McAllen were 84 percent of admissions in El Paso; professional and outpatient services in McAllen were 94 percent and 72 percent, respectively, of those in El Paso.

(Variations by age for those under sixty-five)

For those age fifty and younger, use rates were generally similar or lower in McAllen than in El Paso — particularly for the population ages 25–50, for whom use of inpatient, outpatient, and professional services in McAllen were 66 percent, 80 percent, and 86 percent, respectively, of those in El Paso. Patterns were similar for spending measures.

It was in the population age 50 and older – largely people ages 50–64 — that strong differences between El Paso and McAllen in the use of inpatient medical services and spending emerged. Indeed, inpatient admissions for the Blue Cross and Blue Shield of Texas population age 50 and older were 89 percent higher in McAllen. Per patient inpatient spending for this same age group was 117 percent higher in McAllen — roughly the same difference as the overall difference in the use of Medicare services and spending. In part, the higher inpatient use of medical services and costs for this group are offset by lower outpatient medical services use and spending, leaving overall spending in McAllen for this age group 23 percent above those in El Paso. That is still well below the 86 percent Medicare differential between the two cities.

Conclusions

We have demonstrated that the sharp differences in the use of Medicare services between El Paso and McAllen, Texas, were not generally found in the population of Blue Cross and Blue Shield enrollees under age sixty-five in Hidalgo County (McAllen) and El Paso County. We considered several explanations for these patterns, including differences in prices, health, incomes, and other factors. Ultimately, we hypothesize that some part of the puzzle may be explained by private insurance companies and Medicare exhibiting very different interactions with local health care providers.

Thus, our study is consistent with Gawande’s finding of a “culture of money “— increasing the use of profitable Medicare services when there is diagnostic and procedural discretion and clinical latitude — but that such a culture may also be constrained by private insurance plans with their more stringent reviews of the use of medical services.

Because our study was limited to just two regions, we do not know to what extent providers may compensate for lower pricing from Medicare by negotiating higher prices, or cost shifting, to private insurance. Nor do we entirely understand why hospitalization rates for the privately insured residents of McAllen who are older than age fifty are so much higher — and outpatient rates so much lower — than in El Paso.

Further research is needed, such as the variations study mandated by the Affordable Care Act that is now being carried out under the auspices of the Institute of Medicine. But our preliminary results are consistent with the idea that health care providers can respond quite differently to incentives embedded in large federal programs such as Medicare compared to those present in private insurance programs.

http://content.healthaffairs.org/cgi/content/abstract/29/12/2302

And…

Study: Private insurance plans better at controlling costs

By Jason Millman
The Hill
December 7, 2010

Private insurance plans might be better at controlling healthcare costs than Medicare, according to a Health Affairs study released Tuesday morning.

http://thehill.com/blogs/healthwatch/medicare/132329-study-private-insurance-plans-better-at-controlling-costs

And…

The Cost Conundrum

Posted by Atul Gawande
The New Yorker
December 6, 2010

A new study introduces a fascinating — and hopeful — wrinkle to the McAllen, Texas, cost conundrum.

I visited McAllen, some readers may recall, to speak with doctors and hospital leaders about why its costs for Medicare patients have, for going on a decade, run almost double that for Medicare patients up the border in El Paso—almost sixteen thousand dollars per person versus eight thousand three hundred dollars in 2007. The populations had similar levels of poverty and poor health. By many quality measures, the hospitals were, if anything, better in El Paso. Yet the Medicare data showed McAllen doctors ordering markedly more tests, more surgery, more specialist visits, more home health services, more hospital admissions, more everything.

Yet can we really extrapolate from the costs of older Medicare patients to all younger ones? After the article was published, Texas Blue Cross Blue Shield gave unusual access to the complete cost files of their members under the age of sixty-five to researchers at the University of Texas School of Public Health and Dartmouth. This week, in the journal Health Affairs, the researchers published their findings. They discovered a shift with age. For members fifty or older, McAllen was indeed significantly more expensive than El Paso. But for those under fifty, McAllen was downright ordinary — even less costly than El Paso. They had escaped high-cost care.

It’s true that employees younger than fifty with Blue Cross coverage are a somewhat distinctive group. They are healthier than average and account for only a small percentage of local health costs. Nationally, people older than fifty account for about seventy per cent of total spending; among people under fifty, the poor and disabled account for much of the rest. The overall cost problem remains. But there is an important revelation here: not all the health care in a high-cost community has to be out of whack. The questions we then must ask are why the pattern is different for some groups of people, and whether such differences suggest ways to change the pattern for everyone.

There are two main explanations for the discrepancy: McAllen doctors could simply offer a lower-cost care for the kinds of conditions people under fifty have (pregnancies and traumatic injuries tend to be the big-ticket items); or Blue Cross could be particularly effective at restricting overspending. It’s hard to know which is the answer. Looking at the evidence available, we can’t be sure. But I am rooting for the idea that Blue Cross is making a difference.

http://www.newyorker.com/online/blogs/newsdesk/2010/12/the-cost-conundrum.html

According to this new study published in Health Affairs, the widely-publicized differences in Medicare use and spending between McAllen and El Paso did not occur in those individuals covered by Blue Cross and Blue Shield of Texas (BCBST), at least not quite. Today the media are reporting this study as demonstrating that private insurance plans are better at controlling costs than is Medicare. A closer look at the findings should make us question this conclusion.

Atul Gawande’s original report certainly confirmed that both health care use and spending in Medicare were much higher in McAllen than in El Paso, which he attributed to a culture of doctors in McAllen who treated patients as profit centers by increasing the intensity of services.

Is it true that BCBST was able to control the excesses of the McAllen physicians through managed care and other incentives? Or is there a more plausible explanation?

The population studied was insured by BCBST, which meant that, especially for the portion under 50, they were primarily healthy employees and their young, healthy families, certainly much healthier than the Medicare population. These individuals do not need much health care, and what they do use is quite straightforward. Preventive services, maternity care, fractures, acute illnesses and the such all have simple diagnostic and management algorithms. There really isn’t much leeway for adding superfluous services, so it is no surprise that use and spending would be about the same in both McAllen and El Paso.

What about the people over 50 on BCBST? These people are beginning to develop chronic disorders that do require more health care. During a continuum of care, there are more options for physicians to increase the frequency and intensity of services. For patients over 65 on Medicare, McAllen physicians do provide greater intensity of care, but does BCBST’s private insurer management techniques successfully control these excesses for patents under 65?

For BCBST patients aged 50 to 64, inpatient admissions in McAllen were 89 percent higher than in El Paso. Per patient inpatient spending was 117 percent higher in McAllen. Although outpatient use and spending were lower, overall spending was still 23 percent higher in McAllen for this age group. Besides, where are the real bucks? In the hospital or in outpatient care?

Gawande is “rooting for the idea that Blue Cross is making a difference.” Is an 89 percent increase in hospitalization rates really an endorsement of the management services that the private insurers keep selling us?

And the media? You would think that they would read the study before reporting on it (only 8 pages) instead of merely lifting a few points from the Health Affairs press release this morning. The title: “New Health Affairs Study Suggests That Private Insurers Control Health Care Spending Better Than Medicare.” Maybe the Health Affairs editors also should read their own articles before issuing press releases on them.

Innovative Plan To Keep Yosemite Clinic Open

By Diana Marcum
California Healthline
December 6, 2010

The medical clinic in Yosemite National Park… will become the first medical clinic in a national park to be operated by the U.S. Public Health Service Commissioned Corps.

It’s an unusual solution to a problem that threatened to leave the storied tourist draw without a clinic.

Tenet — the Dallas-based investor-owned hospital company that’s owned the clinic since 1995 — has been losing money on the facility every year.

“There’s lots of patients, but not a lot of revenue,” said Yosemite spokesperson Scott Gediman, adding, “The bottom line was we were looking for a way to keep a clinic open when it couldn’t make money.”

Most national parks don’t have their own clinics because they are near cities. But no clinic in Yosemite would mean rangers, tourists and workers in the country’s most visited park would be more than an hour’s drive away from medical care.

In October, as the clinic’s fate remained precarious, local climbers hung a sign reading “Save Our Clinic ” high up on El Capitan, the iconic 3,000-foot vertical rock formation at the north end of Yosemite Valley.

Housed in a stone and timber lodge in the heart of Yosemite Village, the clinic, which opened in 1929, is a family practice and outdoor adventure emergency department rolled into one. The clinic has served about 7,000 patients annually.

“We see everything here,” Sean Pence, the clinic manager, said. He added, “We get colds and flus, abrasions, heart attacks. We’re orthopedic central — lots of ankles and wrist injuries from falls. We see snowboarders with head injuries, climbers with frostbite.”

The two agencies — Public Health Service and the National Park Service — will man the clinic together. The health service is providing doctors and nurses, and the park service is providing building maintenance and support staff.

http://www.californiahealthline.org/features/2010/innovative-plan-to-keep-yosemite-clinic-open.aspx

Yosemite visitors know how isolated Yosemite Valley is. With a large permanent park staff and the highest volume of tourists of all national parks, Yosemite’s 24-hour clinic has been a godsend for those with urgent or sometimes life-threatening needs. So what were they to do when the clinic’s operator, investor-owned Tenet, decided to leave because the clinic wasn’t profitable?

Where do we usually turn when there is a crying need that the private sector fails to fulfill? Did I hear… The Government?

Yes. Talk about an ideal solution. Our own Public Health Service providing health care in our own national park. Socialized medicine at its finest. This is an essential service being provided to those who need it – not based on the ability to milk a profit, but based simply on meeting the health care needs of a community, albeit an unusual community including many foreign visitors.

Think of how fortunate the park employees and visitors will be. They will have available, 24 hours a day, medical services of which we can be envious. Think about that. Wouldn’t it be nice if we had in our own communities 24-hour clinics staffed with our own public employees who were there with a mission to serve, rather than a mission to enhance profits?

Maybe we’ve been too wimpy in pushing merely for a single payer insurance program. We’re already pay more per capita through the tax system than do nations with socialized medicine. Maybe we should be advocating for a better deal by improving and expanding the National Health Service so that we could all have access to it. Not just Medicare for all, but National Health Service for all.

The opponents of health care reform have moved the goal posts so far to the right that even a Blue Cross/Blue Shield-like public option has been excluded. Suppose we move our goal posts far to the left to a program of socialized medicine – an improved National Health Service for all. If the opponents of reform really believed that was a genuine threat, maybe they would meet us center field with a private health care delivery system financed by a single payer Medicare for all.

Can we expect that coming from a government that is too timid to stand up to the billionaires who have benefited from the massive transfer from the workers to the wealthy? A government that would dig our deficit hole deeper by not allowing a temporary, decade-long, partial tax holiday for billionaires to expire as scheduled? Don’t think so. Obama promised health care for all, but instead he is delivering much more wealth for the wealthiest, and we’re paying.