By Rebecca Vesely
ModernHealthcare.com
May 10, 2010

The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.

“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”

But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.

Meanwhile, some employers are moving full-force to apply behavioral economics to benefit-package design in order to cut healthcare costs.

The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10-state pilot program for similar wellness initiatives on the individual insurance market.

The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were pioneered by the grocery chain Safeway.

But the American Diabetes Association, the AARP and other groups have criticized the enhanced incentives, saying that they could penalize those with chronic diseases by forcing them to pay more for healthcare.

“Our position hasn’t changed,” said Colleen Fogarty, spokeswoman for the American Diabetes Association, in an e-mail. “We remain opposed to the language, but it is now the law and we have to work to ensure that these provisions do not have a harmful or unfair impact on people with chronic diseases.”

Proponents of the provision say it is a good example of a component of behavioral economics called “choice architecture.” Essentially, choice architecture is organizing choices in such a way that influences people’s decisions. In theory, enhanced wellness program incentives allow employers to encourage workers to make the healthiest choices.

Choice architecture is sure to be hugely influential in how the government structures new health insurance exchanges, set to go online in 2014, Garber said. While the government won’t be able to pick favorites among insurers participating in the state-run exchanges, it will be able give customers information about the plans, using transparency measures. This has already been done through the Medicare Part D prescription drug program, which lets insurers compete on the Medicare website for business.

“Behavioral incentives can be powerful, but they are unlikely to overcome a powerful financial incentive,” Garber said. So, for some people, an expensive healthcare plan they have to pay for in monthly premiums could be less appealing than a once-a-year financial penalty.

The dangers of financial penalties in healthcare have been shown time and time again when examining prescription drug use. If copayments go up too high, then some people stop filling their prescriptions and wind up sicker.

On the other hand, financial incentives don’t always work to change behavior, as evidenced by the disappointing results in physician pay-for-performance programs.

“We’ll be seeing some interesting experiments unfolding over the next few years,” Garber said. “This will, in the end, play out in the market.”

Express Scripts, a St. Louis-based pharmacy benefit manager, in 2008 launched the Center for Cost-Effective Consumerism and hired experts in behavioral economics—including Garber at Stanford University—to its advisory board.

Lowe’s, the home-improvement retail chain, saved $5.2 million in 2009 by getting employees who take maintenance prescription medications to switch to home pharmacy delivery. It did it using behavioral economics. Bob Ihrie, senior vice president of employee rewards and services at Lowe’s Cos., describes the method as “carrot, carrot, stick, big stick.”

Lowe’s started by educating its 225,000 employees nationwide about home drug delivery, and the cost savings involved. After the third month, if workers hadn’t switched, they are notified at the pharmacy when picking up their prescription and told that if they don’t switch to home delivery, they would start paying the full price of the prescription. The next month, if they hadn’t signed on for home delivery, they paid full price at the in-store pharmacy.

Another carrot followed. Last September, about 22,000 employees who were not signed on for home delivery received a postcard from Lowe’s informing them that if they select home delivery, their prescription drug would be free the first month. About 10% responded to this incentive, Ihrie said.

At the end of 2009, nearly 38,000 workers had switched to home delivery, up about 160% from 14,500 in 2008. Then came the big stick. Starting in January, employees eligible for home delivery but not yet enrolled pay twice the retail price for the drug in store. “We are still waiting to see the outcome of this,” Ihrie said.

The program has worked by breaking the cycle of procrastination, Ihrie said. “We give them choices upfront and then gradually move them along a path that is more mandatory,” he said. Conducted in partnership with Express Scripts, the program cuts waste out of the system without affecting clinical outcomes, Ihrie said.

Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, co-author of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.

http://www.modernhealthcare.com/article/20100510/INFO/100509942#

Comment: 

By Don McCanne, MD

“Behavioral economics” and “choice architecture” are being used to shift health care spending from the healthy to the sick by directly or indirectly assessing financial penalties against those who are unfortunate enough to have greater health care needs. This is strictly another scheme by pro-market enthusiasts who support the flawed concept of consumer-directed health care.

As an example of the flaws, a scheme that requires patients to pay twice the usual retail price for a drug is a perverse scheme indeed. Another example is Safeway’s fraudulent claims of savings from their wellness programs when their savings were really only from shifting to high-deductible health plans.

Instead of jerking patients around with perverse market tools, we need to switch to a public system that simply helps patients get the care that they need – an improved Medicare for everyone.

For good behavior

By Rebecca Vesely
ModernHealthcare.com
May 10, 2010

The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.

“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”

But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.

Meanwhile, some employers are moving full-force to apply behavioral economics to benefit-package design in order to cut healthcare costs.

The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10-state pilot program for similar wellness initiatives on the individual insurance market.

The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were pioneered by the grocery chain Safeway.

But the American Diabetes Association, the AARP and other groups have criticized the enhanced incentives, saying that they could penalize those with chronic diseases by forcing them to pay more for healthcare.

“Our position hasn’t changed,” said Colleen Fogarty, spokeswoman for the American Diabetes Association, in an e-mail. “We remain opposed to the language, but it is now the law and we have to work to ensure that these provisions do not have a harmful or unfair impact on people with chronic diseases.”

Proponents of the provision say it is a good example of a component of behavioral economics called “choice architecture.” Essentially, choice architecture is organizing choices in such a way that influences people’s decisions. In theory, enhanced wellness program incentives allow employers to encourage workers to make the healthiest choices.

Choice architecture is sure to be hugely influential in how the government structures new health insurance exchanges, set to go online in 2014, Garber said. While the government won’t be able to pick favorites among insurers participating in the state-run exchanges, it will be able give customers information about the plans, using transparency measures. This has already been done through the Medicare Part D prescription drug program, which lets insurers compete on the Medicare website for business.

“Behavioral incentives can be powerful, but they are unlikely to overcome a powerful financial incentive,” Garber said. So, for some people, an expensive healthcare plan they have to pay for in monthly premiums could be less appealing than a once-a-year financial penalty.

The dangers of financial penalties in healthcare have been shown time and time again when examining prescription drug use. If copayments go up too high, then some people stop filling their prescriptions and wind up sicker.

On the other hand, financial incentives don’t always work to change behavior, as evidenced by the disappointing results in physician pay-for-performance programs.

“We’ll be seeing some interesting experiments unfolding over the next few years,” Garber said. “This will, in the end, play out in the market.”

Express Scripts, a St. Louis-based pharmacy benefit manager, in 2008 launched the Center for Cost-Effective Consumerism and hired experts in behavioral economics—including Garber at Stanford University—to its advisory board.

Lowe’s, the home-improvement retail chain, saved $5.2 million in 2009 by getting employees who take maintenance prescription medications to switch to home pharmacy delivery. It did it using behavioral economics. Bob Ihrie, senior vice president of employee rewards and services at Lowe’s Cos., describes the method as “carrot, carrot, stick, big stick.”

Lowe’s started by educating its 225,000 employees nationwide about home drug delivery, and the cost savings involved. After the third month, if workers hadn’t switched, they are notified at the pharmacy when picking up their prescription and told that if they don’t switch to home delivery, they would start paying the full price of the prescription. The next month, if they hadn’t signed on for home delivery, they paid full price at the in-store pharmacy.

Another carrot followed. Last September, about 22,000 employees who were not signed on for home delivery received a postcard from Lowe’s informing them that if they select home delivery, their prescription drug would be free the first month. About 10% responded to this incentive, Ihrie said.

At the end of 2009, nearly 38,000 workers had switched to home delivery, up about 160% from 14,500 in 2008. Then came the big stick. Starting in January, employees eligible for home delivery but not yet enrolled pay twice the retail price for the drug in store. “We are still waiting to see the outcome of this,” Ihrie said.

The program has worked by breaking the cycle of procrastination, Ihrie said. “We give them choices upfront and then gradually move them along a path that is more mandatory,” he said. Conducted in partnership with Express Scripts, the program cuts waste out of the system without affecting clinical outcomes, Ihrie said.

Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, co-author of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.

http://www.modernhealthcare.com/article/20100510/INFO/100509942#

Comment: 

By Don McCanne, MD

“Behavioral economics” and “choice architecture” are being used to shift health care spending from the healthy to the sick by directly or indirectly assessing financial penalties against those who are unfortunate enough to have greater health care needs. This is strictly another scheme by pro-market enthusiasts who support the flawed concept of consumer-directed health care.

As an example of the flaws, a scheme that requires patients to pay twice the usual retail price for a drug is a perverse scheme indeed. Another example is Safeway’s fraudulent claims of savings from their wellness programs when their savings were really only from shifting to high-deductible health plans.

Instead of jerking patients around with perverse market tools, we need to switch to a public system that simply helps patients get the care that they need – an improved Medicare for everyone.

For good behavior

By Rebecca Vesely
ModernHealthcare.com
May 10, 2010
The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.
“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”
But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.
Meanwhile, some employers are moving full-force to apply behavioral economics to benefit-package design in order to cut healthcare costs.
The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10-state pilot program for similar wellness initiatives on the individual insurance market.
The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were pioneered by the grocery chain Safeway.
But the American Diabetes Association, the AARP and other groups have criticized the enhanced incentives, saying that they could penalize those with chronic diseases by forcing them to pay more for healthcare.
“Our position hasn’t changed,” said Colleen Fogarty, spokeswoman for the American Diabetes Association, in an e-mail. “We remain opposed to the language, but it is now the law and we have to work to ensure that these provisions do not have a harmful or unfair impact on people with chronic diseases.”
Proponents of the provision say it is a good example of a component of behavioral economics called “choice architecture.” Essentially, choice architecture is organizing choices in such a way that influences people’s decisions. In theory, enhanced wellness program incentives allow employers to encourage workers to make the healthiest choices.
Choice architecture is sure to be hugely influential in how the government structures new health insurance exchanges, set to go online in 2014, Garber said. While the government won’t be able to pick favorites among insurers participating in the state-run exchanges, it will be able give customers information about the plans, using transparency measures. This has already been done through the Medicare Part D prescription drug program, which lets insurers compete on the Medicare website for business.
“Behavioral incentives can be powerful, but they are unlikely to overcome a powerful financial incentive,” Garber said. So, for some people, an expensive healthcare plan they have to pay for in monthly premiums could be less appealing than a once-a-year financial penalty.
The dangers of financial penalties in healthcare have been shown time and time again when examining prescription drug use. If copayments go up too high, then some people stop filling their prescriptions and wind up sicker.
On the other hand, financial incentives don’t always work to change behavior, as evidenced by the disappointing results in physician pay-for-performance programs.
“We’ll be seeing some interesting experiments unfolding over the next few years,” Garber said. “This will, in the end, play out in the market.”
Express Scripts, a St. Louis-based pharmacy benefit manager, in 2008 launched the Center for Cost-Effective Consumerism and hired experts in behavioral economics—including Garber at Stanford University—to its advisory board.
Lowe’s, the home-improvement retail chain, saved $5.2 million in 2009 by getting employees who take maintenance prescription medications to switch to home pharmacy delivery. It did it using behavioral economics. Bob Ihrie, senior vice president of employee rewards and services at Lowe’s Cos., describes the method as “carrot, carrot, stick, big stick.”
Lowe’s started by educating its 225,000 employees nationwide about home drug delivery, and the cost savings involved. After the third month, if workers hadn’t switched, they are notified at the pharmacy when picking up their prescription and told that if they don’t switch to home delivery, they would start paying the full price of the prescription. The next month, if they hadn’t signed on for home delivery, they paid full price at the in-store pharmacy.
Another carrot followed. Last September, about 22,000 employees who were not signed on for home delivery received a postcard from Lowe’s informing them that if they select home delivery, their prescription drug would be free the first month. About 10% responded to this incentive, Ihrie said.
At the end of 2009, nearly 38,000 workers had switched to home delivery, up about 160% from 14,500 in 2008. Then came the big stick. Starting in January, employees eligible for home delivery but not yet enrolled pay twice the retail price for the drug in store. “We are still waiting to see the outcome of this,” Ihrie said.
The program has worked by breaking the cycle of procrastination, Ihrie said. “We give them choices upfront and then gradually move them along a path that is more mandatory,” he said. Conducted in partnership with Express Scripts, the program cuts waste out of the system without affecting clinical outcomes, Ihrie said.
Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, co-author of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.
http://www.modernhealthcare.com/article/20100510/INFO/100509942#

“Behavioral economics” and “choice architecture” are being used to shift health care spending from the healthy to the sick by directly or indirectly assessing financial penalties against those who are unfortunate enough to have greater health care needs. This is strictly another scheme by pro-market enthusiasts who support the flawed concept of consumer-directed health care.
As an example of the flaws, a scheme that requires patients to pay twice the usual retail price for a drug is a perverse scheme indeed. Another example is Safeway’s fraudulent claims of savings from their wellness programs when their savings were really only from shifting to high-deductible health plans.
Instead of jerking patients around with perverse market tools, we need to switch to a public system that simply helps patients get the care that they need – an improved Medicare for everyone.

For good behavior

By Rebecca Vesely
ModernHealthcare.com
May 10, 2010

The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.

“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”

But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.

Meanwhile, some employers are moving full-force to apply behavioral economics to benefit-package design in order to cut healthcare costs.

The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10-state pilot program for similar wellness initiatives on the individual insurance market.

The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were pioneered by the grocery chain Safeway.

But the American Diabetes Association, the AARP and other groups have criticized the enhanced incentives, saying that they could penalize those with chronic diseases by forcing them to pay more for healthcare.

“Our position hasn’t changed,” said Colleen Fogarty, spokeswoman for the American Diabetes Association, in an e-mail. “We remain opposed to the language, but it is now the law and we have to work to ensure that these provisions do not have a harmful or unfair impact on people with chronic diseases.”

Proponents of the provision say it is a good example of a component of behavioral economics called “choice architecture.” Essentially, choice architecture is organizing choices in such a way that influences people’s decisions. In theory, enhanced wellness program incentives allow employers to encourage workers to make the healthiest choices.

Choice architecture is sure to be hugely influential in how the government structures new health insurance exchanges, set to go online in 2014, Garber said. While the government won’t be able to pick favorites among insurers participating in the state-run exchanges, it will be able give customers information about the plans, using transparency measures. This has already been done through the Medicare Part D prescription drug program, which lets insurers compete on the Medicare website for business.

“Behavioral incentives can be powerful, but they are unlikely to overcome a powerful financial incentive,” Garber said. So, for some people, an expensive healthcare plan they have to pay for in monthly premiums could be less appealing than a once-a-year financial penalty.

The dangers of financial penalties in healthcare have been shown time and time again when examining prescription drug use. If copayments go up too high, then some people stop filling their prescriptions and wind up sicker.

On the other hand, financial incentives don’t always work to change behavior, as evidenced by the disappointing results in physician pay-for-performance programs.

“We’ll be seeing some interesting experiments unfolding over the next few years,” Garber said. “This will, in the end, play out in the market.”

Express Scripts, a St. Louis-based pharmacy benefit manager, in 2008 launched the Center for Cost-Effective Consumerism and hired experts in behavioral economics—including Garber at Stanford University—to its advisory board.

Lowe’s, the home-improvement retail chain, saved $5.2 million in 2009 by getting employees who take maintenance prescription medications to switch to home pharmacy delivery. It did it using behavioral economics. Bob Ihrie, senior vice president of employee rewards and services at Lowe’s Cos., describes the method as “carrot, carrot, stick, big stick.”

Lowe’s started by educating its 225,000 employees nationwide about home drug delivery, and the cost savings involved. After the third month, if workers hadn’t switched, they are notified at the pharmacy when picking up their prescription and told that if they don’t switch to home delivery, they would start paying the full price of the prescription. The next month, if they hadn’t signed on for home delivery, they paid full price at the in-store pharmacy.

Another carrot followed. Last September, about 22,000 employees who were not signed on for home delivery received a postcard from Lowe’s informing them that if they select home delivery, their prescription drug would be free the first month. About 10% responded to this incentive, Ihrie said.

At the end of 2009, nearly 38,000 workers had switched to home delivery, up about 160% from 14,500 in 2008. Then came the big stick. Starting in January, employees eligible for home delivery but not yet enrolled pay twice the retail price for the drug in store. “We are still waiting to see the outcome of this,” Ihrie said.

The program has worked by breaking the cycle of procrastination, Ihrie said. “We give them choices upfront and then gradually move them along a path that is more mandatory,” he said. Conducted in partnership with Express Scripts, the program cuts waste out of the system without affecting clinical outcomes, Ihrie said.

Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, co-author of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.

http://www.modernhealthcare.com/article/20100510/INFO/100509942#

“Behavioral economics” and “choice architecture” are being used to shift health care spending from the healthy to the sick by directly or indirectly assessing financial penalties against those who are unfortunate enough to have greater health care needs. This is strictly another scheme by pro-market enthusiasts who support the flawed concept of consumer-directed health care.

As an example of the flaws, a scheme that requires patients to pay twice the usual retail price for a drug is a perverse scheme indeed. Another example is Safeway’s fraudulent claims of savings from their wellness programs when their savings were really only from shifting to high-deductible health plans.

Instead of jerking patients around with perverse market tools, we need to switch to a public system that simply helps patients get the care that they need – an improved Medicare for everyone.

By Paul Armstrong
CNN
May 5, 2010

After weeks of feverish election campaigning, Britain’s political parties have fought over every issue, from the economy to the country’s nuclear deterrent, with one exception: the National Health Service.

To many Republican politicians in the United States, a publicly-funded national health system like the NHS is the embodiment of austere, Soviet-era style medical care, but in the UK it is viewed as sacrosanct.

Centrally-funded through taxation, pressure to respond to growing demand has seen record levels of investment in the past decade.

Ruth Thorlby, a research fellow at the King’s Fund, told CNN that all the major parties appreciate the NHS strikes an emotive chord with the public and that it is a price worth paying. She said: “We have this extraordinary political consensus now that the funding structure of the NHS is sound.”

Conservative leader David Cameron seems as committed to the NHS as Labour, despite his party’s ideological disposition to the private sector.

He recently acknowledged its value on his party’s Web site. “Millions of people are grateful for the care they have received from the NHS — including my own family,” he said.

“One of the wonderful things about living in this country is that the moment you’re injured or fall ill — no matter who you are, where you are from, or how much money you’ve got — you know that the NHS will look after you.”

Cameron’s words were reinforced by the party’s election manifesto, in which it calls itself “the party of the NHS” and pledges “never to change at the idea at its heart that healthcare in this country is free at the point of use and available to everyone based on need and not ability to pay.”

http://edition.cnn.com/2010/WORLD/europe/04/23/britain.nhs/?hpt=C2

Comment: 

By Don McCanne, MD

The United Kingdom has the ultimate system of socialized medicine: a government-owned and government-administered National Health Service (NHS). Though their system is much less expensive than ours in the United States, it is viewed as sacrosanct by the British citizens.

The system was launched in 1948 by a left-wing Labour government, but its appeal has become so universal that the right-wing Conservative party now claims to be “the party of the NHS.”

In the United States we have chosen a right-wing solution over which we remain politically divided because of its serious flaws. Since we spend far more on health care than any other nation, we should be able to use those funds to craft a system with such intense universal support that we would consider ours sacrosanct as well.

Of course we can. Try to convince senior Tea Baggers to relinquish their Medicare, even though it is a government program. Medicare is a right that they have earned merely by being American taxpayers. Just imagine improving Medicare and providing it to everyone. After people experienced the benefits of an improved Medicare for all, can you imagine a major political party campaigning against the program? In fact, it’s the Republicans who are now expressing outrage over the fact that PPACA includes some reductions in Medicare funding.

Now that the Republican party seems to be presenting itself as “the party of Medicare,” wouldn’t you think that the Democrats would want to trump them by becoming “the party of an improved Medicare for all”?

Documents reveal AT&T, Verizon, others, thought about dropping employer-sponsored benefits

By Shawn Tully

Fortune
May 6, 2010

The great mystery surrounding the historic health care bill is how the corporations that provide coverage for most Americans — coverage they know and prize — will react to the new law’s radically different regime of subsidies, penalties, and taxes. Now, we’re getting a remarkable inside look at the options AT&T, Deere, and other big companies are weighing to deal with the new legislation.

Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill’s critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government.

That would dismantle the employer-based system that has reigned since World War II. It would also seem to contradict President Obama’s statements that Americans who like their current plans could keep them.

AT&T produced a PowerPoint slide entitled “Medical Cost Versus No Coverage Penalty.”

A document prepared for Verizon by consulting firm Hewitt Resources stated, “Even though the proposed assessments [on companies that do not provide health care] are material, they are modest when compared to the average cost of health care,” and that to avoid costs and regulations, “employers may consider exiting the health care market and send employees to the Exchanges.”

Kenneth Huhn, vice president of labor relations at Deere, said in an internal email that his company should look at the alternatives to providing health benefits, which “would amount to denying coverage and just paying the penalty,” and that he felt he already had the ability to make this change under his company’s labor agreement.

Caterpillar felt it would have to give “serious consideration” to the penalty option.

AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead.

(Caterpillar) could reduce its bill by over 70%, by Fortune’s estimate.

It’s these analyses — which show it’s a lot cheaper to “pay” than to “play” — that threaten to overthrow the traditional architecture of health care.

The full article contains links to documents supporting some of these assertions:
http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/index.htm

Comment

By Don McCanne, M.D.

Yesterday’s qotd message described measures in the Patient Protection and Affordable Care Act (PPACA) that would motivate employers to downgrade their health benefit programs to an actuarial value of 60 percent (the employees would pay an average of 40 percent of actual health care costs, in addition to their share of the insurance premium). Today’s message reveals that major employers are considering the option of dumping their health benefit programs altogether.

The government subsidies for plans purchased in the state exchanges are large enough to shift a major portion of the costs of the health benefit programs from the employers/employees to the taxpayers. Further, the subsidized Silver-tier plans in the exchanges provide an actuarial value of 70 percent, resulting in greater benefits than the downgraded plans would have, at a net lower cost for the employers.

Unfortunately, neither is a great deal for the employees and their families. Employer-sponsored plans currently have a typical actuarial value of 80 percent, and sometimes as high as 90 or 95 percent. PPACA exchange plans will shift more costs to those who need health care by reducing the effective actuarial value to 70 percent for those with incomes over 250% FPL (federal poverty level), and those with incomes over 400% FPL would have no out-of-pocket limits to protect them.

Regardless, the complex structure of PPACA will result in worse coverage for employees than many of them currently have. This was the result of Congress and the Obama administration insisting that reform be built on our existing employer-based system, while facing the complex logistical problems of balancing the flow of money between individuals, employers, the government, the insurers, and the providers of health care.

It would have been far simpler, less expensive, and much more effective to establish a single financing pool, equitably-funded through the tax system, while providing significantly greater value in health care purchasing for all of us through a publicly-owned, publicly-administered, beneficent monopsony – an improved Medicare for all. We can still do it.

Socialized healthcare: The ‘untouchable’ of UK politics

By Paul Armstrong
CNN
May 5, 2010
After weeks of feverish election campaigning, Britain’s political parties have fought over every issue, from the economy to the country’s nuclear deterrent, with one exception: the National Health Service.
To many Republican politicians in the United States, a publicly-funded national health system like the NHS is the embodiment of austere, Soviet-era style medical care, but in the UK it is viewed as sacrosanct.
Centrally-funded through taxation, pressure to respond to growing demand has seen record levels of investment in the past decade.
Ruth Thorlby, a research fellow at the King’s Fund, told CNN that all the major parties appreciate the NHS strikes an emotive chord with the public and that it is a price worth paying. She said: “We have this extraordinary political consensus now that the funding structure of the NHS is sound.”
Conservative leader David Cameron seems as committed to the NHS as Labour, despite his party’s ideological disposition to the private sector.
He recently acknowledged its value on his party’s Web site. “Millions of people are grateful for the care they have received from the NHS — including my own family,” he said.
“One of the wonderful things about living in this country is that the moment you’re injured or fall ill — no matter who you are, where you are from, or how much money you’ve got — you know that the NHS will look after you.”
Cameron’s words were reinforced by the party’s election manifesto, in which it calls itself “the party of the NHS” and pledges “never to change at the idea at its heart that healthcare in this country is free at the point of use and available to everyone based on need and not ability to pay.”
http://edition.cnn.com/2010/WORLD/europe/04/23/britain.nhs/?hpt=C2

The United Kingdom has the ultimate system of socialized medicine: a government-owned and government-administered National Health Service (NHS). Though their system is much less expensive than ours in the United States, it is viewed as sacrosanct by the British citizens.
The system was launched in 1948 by a left-wing Labour government, but its appeal has become so universal that the right-wing Conservative party now claims to be “the party of the NHS.”
In the United States we have chosen a right-wing solution over which we remain politically divided because of its serious flaws. Since we spend far more on health care than any other nation, we should be able to use those funds to craft a system with such intense universal support that we would consider ours sacrosanct as well.
Of course we can. Try to convince senior Tea Baggers to relinquish their Medicare, even though it is a government program. Medicare is a right that they have earned merely by being American taxpayers. Just imagine improving Medicare and providing it to everyone. After people experienced the benefits of an improved Medicare for all, can you imagine a major political party campaigning against the program? In fact, it’s the Republicans who are now expressing outrage over the fact that PPACA includes some reductions in Medicare funding.
Now that the Republican party seems to be presenting itself as “the party of Medicare,” wouldn’t you think that the Democrats would want to trump them by becoming “the party of an improved Medicare for all”?

Mercer
April 27, 2010

More than a third of the nation’s employers – 38% – have at least some employees for whom coverage would be considered “unaffordable” under the newly enacted Patient Protection and Affordable Care Act (PPACA), according to a new analysis of data from Mercer’s annual employer health plan survey.

According to Mercer’s analysis, one of the more challenging provisions to interpret and apply may be the rule that employers provide “affordable” coverage – meaning that full-time employees must generally be asked to pay no more than 9.5% of their household income for coverage.

If employer coverage is “unaffordable” by this definition, and at least one employee receives government assistance to buy individual coverage through a health insurance exchange, the employer must pay a yearly penalty of $3,000 per full-time employee who gets government assistance and buys coverage in an exchange (to a maximum of $2,000 times the number of full-time employees in excess of the first 30), starting in 2014. For employers trying to understand their potential risk for incurring the penalty, determining each employee’s household income presents a significant challenge. Without access to that information, employers can use a conservative approach by assuming that each employee’s pay is the total household income.

Apart from employers that don’t currently offer coverage at all, reform may have the biggest impact on employers with large part-time populations that don’t provide coverage to any part-time employees or require them to work more than 30 hours per week for coverage eligibility. Under the “shared responsibility” requirement, all employees working an average of 30 hours per week or more in a month must be eligible for affordable coverage, or the employer may be subject to a penalty.

Mini-med, or limited benefit, plans, which typically limit coverage to $50,000 to $100,000 per year, will no longer be an option for part-timers or other employees who work an average of 30 or more hours a week.

How many employers don’t have any of the three red flags – for unaffordable coverage, ineligible part-time employees, or mini-med plans – described above? Only about a third (38%) of them; close to half (48%) have one red flag and 14% have two.

Although they may require the most significant changes in benefit strategy, these aren’t the only provisions affecting employer plans. Employers will have to discontinue lifetime maximums, most annual dollar maximums, and cost-sharing on preventive care – even something as modest as a $10 copay. The use of lifetime benefit maximums, banned under PPACA, currently is the rule rather than the exception. About three-fifths all employers (61%) and nearly three-fourths of large employers (71%) have lifetime benefit maximums in their PPO plans. Lifetime maximums are less common in HMOs, where 25% of sponsors currently use them.
 
“The design changes really have to be looked at in concert with the affordability requirement for contributions. Simply stated, it’s going to cost an employer more to offer a generous plan and cap the contributions for low-income employees at 9.5% of their income,” said (Tracy Watts, a partner in Mercer’s Washington, DC, office). “An unintended consequence of reform may be that employers adopt a ’safety-net‘ plan that meets the minimum requirements as their new standard plan and offer a more generous plan at higher cost to employees.”

http://www.mercer.com/summary.htm?idContent=1378875

And…

Study: Many Health Plans Not Affordable

CFO
May 3, 2010

Nearly 40% of employers may be at risk for violating the Patient Protection and Affordable Care Act’s (PPACA) mandate that company health-care plans be affordable, according to a recent Mercer analysis of close to 3,000 employer-sponsored health plans.

… experts say the level of health coverage would likely degenerate compared with current levels, in order to make the plans cheaper. Particularly if all plans must be affordable, “you’ll probably see the level of coverage going down,” says (Beth Umland, director of research for health and benefits at Mercer), with employers making additional, richer coverage available for workers to purchase with aftertax dollars.

The law does require a minimum level of coverage — specifically, that health insurance plans cover 60% or more of medical costs — but most appear to be well within that constraint, says Umland, offering plenty of leeway for downgrading.

http://www.cfo.com/article.cfm/14495563/c_14495857?f=home_todayinfinance

Comment: 

By Don McCanne, MD

One of the more important reasons given for choosing the model of reform that was eventually enacted (PPACA) was that the administration and Congress did not want to disrupt the portion of health plan coverage that was working fairly well: employer-sponsored health plans.

Not only did this represent the largest sector of those already insured, the benefits in the plans were relatively generous compared to the individual insurance market, and, most importantly, policymakers were reluctant to forgo the massive infusion of health care funds already provided by the employers. Though these funds actually represent forgone wage and salary increases for the employees, the financing was already in place, thereby eliminating the need to try to fit this enormous expense into the federal budget.

Although the individual and small group insurance market was a disaster, Congress recognized that employer-sponsored plans also were facing difficulties. Because of rising health care costs, plans were becoming less affordable. Employers began shifting more costs to employees through benefit design changes (high-deductibles, etc.), and some employers were even dropping coverage altogether. To reduce the financial burden on the employer, Congress decided that the plans would not be required to have an actuarial value of greater than 60 percent, even though that shifted more costs to the employees and their families. Congress also realized that employees would not be able to bear an excessive share of the increasing insurance premiums, so they limited the employee premium contribution to 9.5 percent of household income. Further, to be sure that employers did not bail out, they established a $3000/$2000 employer penalty for any employees that purchased government subsidized plans in the exchanges.

Put those numbers together and then ask yourself, was Congress effective in its effort to avoid disrupting the employer-sponsored segment of private health plans? The structure of the reform leaves employers with almost no other option than to significantly downgrade their plans, shifting more costs to individuals and families who actually need health care. They may continue to offer their employees the option to purchase better plans, but only those employees who can afford the additional costs of after-tax premiums will do so. Thus Congress has further intensified the economic divide between the wealthy and the rest of us.

Although disruptive innovation has great appeal on Wall Street, Congress’s disruptive innovation for employer-sponsored health plans will be a disaster for our workforce and their families who need health care.

It’s not too late to dump the highly flawed PPACA and move on with a program that actually would work: an improved Medicare for everyone.