Physicians For a National Health Care Plan
By Elisabeth Rosenthal
The New York Times, September 28, 2014
Patients have no choice about which physician they see when they go to an emergency room, even if they have the presence of mind to visit a hospital that is in their insurance network. In the piles of forms that patients sign in those chaotic first moments is often an acknowledgment that they understand some providers may be out of network.
But even the most basic visits with emergency room physicians and other doctors called in to consult are increasingly leaving patients with hefty bills: More and more, doctors who work in emergency rooms are private contractors who are out of network or do not accept any insurance plans.
When legislators in Texas demanded some data from insurers last year, they learned that up to half of the hospitals that participated with UnitedHealthcare, Humana and Blue Cross-Blue Shield — Texas’s three biggest insurers — had no in-network emergency room doctors. Out-of-network payments to emergency room physicians accounted for 40 to 70 percent of the money spent on emergency care at in-network hospitals, researchers with the Center for Public Policy Priorities in Austin found.
“It’s very common and there’s little consumers can do to prevent it and protect themselves — it’s a roll of the dice,” said Stacey Pogue, a senior policy analyst with the nonpartisan center and an author of the study.
When emergency medicine emerged as a specialty in the 1980s, almost all E.R. doctors were hospital employees who typically did not bill separately for their services. Today, 65 percent of hospitals contract out that function. And some emergency medicine staffing groups — many serve a large number of hospitals, either nationally or locally — opt out of all insurance plans.
Regulations created by the Affordable Care Act specify that insurers must use the best-paying among three methods for reimbursing out-of-network physicians dispensing emergency care: pay the Medicare rate; pay the median in-network amount for the service; or apply the usual formula they use to determine out-of-network reimbursement, which often depends on “usual and customary rates” in the area.
But in most states, doctors can then bill patients for the difference between their charge and what the insurer paid.
Center for Public Policy Priorities study of out-of-network emergency room doctors:http://forabettertexas.org/images/HC_2014_09_PP_BalanceBilling.pdf
KFF on state balance billing restrictions: http://kff.org/private-insurance/state-indicator/state-restriction-again…
A consequence of allowing health insurers to contract selectively with health care professionals (physicians) and institutions (hospitals) is that patients not only are financially penalized should they elect to obtain their care outside of the contracted networks, they may unavoidably face such penalties when they have sought care only within networks.
One of the more egregious examples is when they obtain emergency services at a contracted emergency room only to find out after the fact that the physicians staffing the emergency room are not in the network. The patient then is billed not only for deductibles and copayments applied to allowed charges, but also for the balance of the charges in excess of the allowed charges – a process known as balance billing.
“The Affordable Care Act provides some protections for enrollees in need of emergency services, but does not prohibit balance billing by out-of-network providers” (KFF). For further information on state restrictions on balance billing, use the KFF link above.
When something is not right, as it clearly isn’t here, it is important to define the problem before crafting a solution. State regulators and legislators are defining this as a problem of balance billing “abuse” and are looking at mechanisms to prohibit balance billing. But is that really the problem?
Insurers, with the complicity of state and federal legislators, have established limited networks of providers to leverage more favorable payment rates for health care services. But these rates neglect the health care delivery system outside of the networks. Now states are considering making out-of-network physicians comply with contracts to which they never agreed. That is as unreasonable as making insurers pay out-of-network fees in full simply because the insurers did not have a contract with the physicians. Do you have a contract or not? You can’t have it both ways.
The problem here needs to be redefined. Balance billing is not the primary defect. It is the nature of our complex, dysfunctional financing infrastructure that leads to a multitude of perverse consequences such as balance billing – an infrastructure that was perpetuated and expanded by the Affordable Care Act. We need to rebuild the infrastructure. We need a single payer national health program. Balance billing would not exist under such a system.
Kaiser Health News, Daily Health Policy Report, September 26, 2014
Obamacare enrollees are straining the finances of community health centers around the country, some health center leaders say. The issue is that many lower-income patients with insurance coverage through the federal and state exchanges bought bronze-tier plans with lower premiums but high deductibles, coinsurance and copayments and no federal cost-sharing subsidies. When these patients face high out-of-pocket costs for care that falls below the deductible, they can’t afford it. So the centers are subsidizing that care by offering them means-tested sliding-scale fees. When the centers, which are not allowed to turn away patients for inability to pay, try to get the insurers to pay, the claims are usually denied, and the centers have to write it off as uncompensated care (Modern Healthcare, Dickson, 9/25).
One of the advantages of reform that ensures that everyone would have health care coverage is that safety-net institutions, such as community health centers (CHCs), could be assured that payments would be made for the services they provide, ending the continual struggle of funding these institutions. As it turned out, reform will still leave 31 million uninsured, perpetuating this problem. But at least those now insured will no longer stress the budgets of the CHCs. Or will they?
Those purchasing the cheapest plans on the exchanges – the bronze plans – have an average of only 60 percent of their health care costs covered. This requires very high deductibles which are not affordable for many of the low-income individuals purchasing these plans. Because of high deductibles which are difficult to collect after services are rendered, many health care providers are requiring payment upfront. Many would-be patients end up walking away because of the lack of funds.
Where are these people to turn? The CHCs of course. They cannot turn patients away, so they see them. When the CHCs then bill the bronze plan insurers, the charges are below the deductibles and so the claims are denied. They can then turn to the patients to try to collect means-tested fees that would apply to the deductibles, but such efforts are often futile, and so the CHCs end up writing off the charges as uncompensated care.
This is the plight of the underinsured and of the providers who care for them. With low actuarial value plans and often-inaccessible narrow networks, underinsurance has become ubiquitous. It is one of the most serious flaws in health care financing today, not only for the exchange plans but now also for a rapidly growing percentage of employer-sponsored plans.
This is just one of thousands of major flaws in our financing system. It just isn’t right. We can fix this by changing to a single payer national health program. Let’s do it. Now.
The Economist, September 20, 2014
It is now nearly a year since the roll-out of Obamacare.
Ironically the “socialist” Mr Obama did not do the one thing that might have cut taxpayers’ costs dramatically: introduce a European “single payer” health-care system. Instead he tried to tweak America’s system in two ways – to expand coverage and to reduce costs.
The results are mixed. Practically every competent health-industry lobbyist managed to insert a line protecting the services his paymasters provide – so Obamacare is too costly and too complicated.
So what would make American health care better now? Since its failings lie more within the system than with the president’s attempt to reform it, health reformers should concentrate on three areas that could make its flawed market work better: directing handouts towards the poor rather than the affluent, nudging individuals to take charge of their own health care, and making sure that prices are transparent.
If America wants to stick to the idea that it has a health-care market, then it should focus on trying to make it more like a market – with prices, competitors and some form of choice.
After telling us that it is ironic that President Obama did not introduce a single payer system, The Economist tells us that we should use prices, competitors and choice if we want to make our health care system more like a market. That seems odd advice since their system is not only single payer, it is socialized medicine – a national health service.
The Economist is not naive. They certainly know of the work of Nobel laureate Kenneth Arrow showing us that markets do not work in health care. Maybe their recommendation for market reform of U.S. health care stems from their reputation as excelling in understated wit, but what the market approach has done to drive up costs and impair the functioning of our health care delivery system isn’t really very funny.
Let’s just take them at their word that a single payer system would have been a much more effective choice. And we can still make that choice.
By Jonathan Stempel
Reuters, September 23, 2014
HCA Holdings Inc, one of the largest U.S. hospital chains, must face a shareholder class-action lawsuit accusing it of concealing revenue declines and its routine performance of unnecessary cardiac procedures prior to its $4.35 billion initial public offering in March 2011.
U.S. District Judge Kevin Sharp in Nashville, Tennessee, rejected HCA’s claim that the plaintiffs had missed “multiple opportunities” to learn more about the company before buying their shares, including from media reports, conference calls, and disclosures during the IPO road show.
Shareholders alleged that HCA, its directors, its former private equity owners and its investment banks concealed how the company was seeing adverse trends in Medicare revenue including cardiology, and Medicaid revenue per admission; and accounted improperly for a 2006 reorganization and a 2010 restructuring.
“Given defendants’ alleged violation of the federal securities law and its impact on a large number of geographically dispersed investor(s), a class action is the superior vehicle for adjudication of the claims,” Sharp wrote. “The alternative would be to have (potentially) thousands of individual actions, which is likely impractical for most investors, and which would risk burdening the judicial system.”
The IPO had been the largest by a company owned by private equity firms. HCA had been taken private in 2006 by a group led by Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch’s private equity arm.
The case is Schuh et al v. HCA Holdings Inc et al, U.S. District Court, Middle District of Tennessee, No. 11-01033.
The private insurers are not the only villains that are driving high health care costs in the United States. The private, investor-owned segment of the health care delivery system is also bringing us higher costs, often with inferior quality. A case in point is HCA – one of the nation’s largest investor-owned hospital chains.
HCA is already infamous for having set a record in paying a $1.7 billion settlement for Medicare fraud. This new allegation of fraud does not directly involve patients or taxpayers, rather it involves potential shareholders at the time of their 2011 initial public offering (IPO). The private owners at that time included the Frist family and some private equity firms, including Bain Capital.
The reason that this is important to those of us concerned about health care reform is that these people are so dishonest that they not only cheat patients and taxpayers, they also cheat their own shareholders!
When we expel the private insurers from our health care system, we need to expel the passive investors as well. HR 676 – the Expanded & Improved Medicare For All Act, sponsored by John Conyers (now with 62 cosponsors) does both. It converts the health care delivery system to non-profit status, and it replaces private insurers with a single payer national health program.
HCA was founded by the family of Bill Frist, former leader of the U.S. Senate. The Medicare fraud case was initiated when Florida Governor Rick Scott was head of HCA. Bain Capital was co-founded by presidential candidate Mitt Romney. If we are going to achieve health care justice for all, the voters do have some responsibility here.
By Michael B. Rothberg, MD, MPH; Joshua Class, BS; Tara F. Bishop, MD, MPH; Jennifer Friderici, MS; Reva Kleppel, MPH, MSW; Peter K. Lindenauer, MD, MSS
JAMA Internal Medicine, September 15, 2014
The overuse of tests and procedures because of fear of malpractice litigation, known as defensive medicine, is estimated to cost $46 billion annually in the United States, but these costs have been measured only indirectly. We estimated the cost of defensive medicine on 3 hospital medicine services in a health system by having physicians assess the defensiveness of their own orders. We hypothesized that physicians who were concerned about being targeted by litigation would practice more defensively and have higher overall costs.
In this study of hospital medicine services at 3 institutions in a health system, 28% of orders and 13% of costs were judged to be at least partially defensive, but only 2.9% of costs were completely defensive. Most costs were due to potentially unnecessary hospitalization. Defensive medicine practices varied substantially, but physicians who wrote the most defensive orders spent less than those who wrote fewer such orders, highlighting the disconnect between physician beliefs about defensive medicine and their contribution to costs.
In 2008, Massachusetts internists reported that 27% of computed tomographic scans, 16% of laboratory tests, and 14% of hospital admissions were ordered owing to concerns about liability. We allowed our physicians to offer a graded response, which revealed that defensiveness is not absolute. Compared with the previous study, our respondents reported higher percentages of defensive medicine but lower percentages of completely defensive medicine (2% of radiology, 6% of laboratory testing, and 2% of hospital days).
In conclusion, although a large portion of hospital orders had some defensive component, our study found that few orders were completely defensive and that physicians’ attitudes about defensive medicine did not correlate with cost. Our findings suggest that only a small portion of medical costs might be reduced by tort reform.
****The cost of defensive medicine
By Aaron Carroll
AcademyHealth Blog, September 15, 2014
I was so pleased to see a new study published in the journal JAMA Internal Medicine, “The Cost of Defensive Medicine on 3 Hospital Medicine Services“.
As the researchers note, past studies have found that “27% of computed tomographic scans, 16% of laboratory tests, and 14% of hospital admissions were ordered owing to concerns about liability.” But such studies would include any level of defensiveness in the orders at all. We can realistically expect, however, that only completely defensive orders would be eliminated by tort reform. After all, if there are other reasons to order tests above our fears of being sued if we don’t, those reasons will still exist even after comprehensive malpractice reform became law.
If we assume that overall health care spending is about $2.7 trillion, then 2.9% of that would be about $78 billion. That’s not chump change, mind you, but it’s still a very small component of overall health care spending. Given that there’s little evidence that tort reform would lead to a significant reduction in this already small percentage of spending, there seems little reason to pursue it as a means to dramatically reduce health care spending in the United States.
From response by Uwe Reinhardt:
It is also ironic that the very folks who constantly bring up the refrain that “one size does not fit all” in health policy (and that in the land of McDonalds!) always clamor for a one-size-fits-all solution to malpractice: an upper limit on payments for pain and suffering.
At forums discussing the high costs of health care and what can be done about it, inevitably the subject of malpractice comes up. People hold very strong views on the topic. Such discussions generate much heat, often blaming frivolous lawsuits, excessive defensive medicine, outrageous jury awards, and attorney greed, but we need to step back and see if we can generate a little more light and a little less heat.
We do need medical liability reform, but not for the reasons often given. The system simply does not work well for achieving its primary goal: compensating individuals who are victims of medical injury. Most individuals who experience medical injury are never compensated; the majority do not even file lawsuits. When lawsuits are filed, much of the costs are consumed by legal processes, including paying the fees for plaintiff and defense attorneys.
The reform that we do need, assuming that we agree that individuals should be compensated for medical injuries, is to end the emotionally painful, expensive tort process and replace it with a process of alternate dispute resolution – a process not unlike workers compensation wherein the injuries are acknowledged and appropriate compensation is made.
What about some of the issues that generate so much heat?
Frivolous lawsuits are not a problem. An attorney will not accept a case in which a medical injury has not occurred. The attorney will not invest time and the expenses of an investigation if there is no possibility for an award. It may be that the medical injury might have occurred because of factors not related to medical error, but that is the point of discovery and of the followup trial, if necessary. These are not frivolous actions.
What about the costs of defensive medicine – ordering tests or procedures that are totally unnecessary but ordered only to provide defense in the event of a future lawsuit. The study by Michael Rothberg and his colleagues really helps us understand better the extent of this problem. Most tests and procedures ordered that were thought to provide some insulation against potential lawsuits were actually tests that were medically indicated and would assist in providing the best care for the patient. That is, most medicine that has been labeled as defensive medicine is simply appropriate health care. Considering this, very little could be saved by clamping down on defensive medicine.
This study supposedly does show that almost 3 percent of care was completely defensive, not an insignificant amount. But think about this. What test would a physician ever order that had a 100 percent chance that the result would provide absolutely no benefit in management of the patient? If such a test were omitted then there is no possibility of a lawsuit for having failed to obtain that test. Low yield tests may be considered to be defensive, but as long as there is a real possibility that the results could change the patient’s outcome favorably, then clinical judgement should be used to determine if the test should be ordered. If the test cannot possibly change the outcome – a no yield test – then that test should not be ordered. But that has to be a very rare occurrence, far less than the 3 percent reported in this study.
What about excessive jury awards, which are coupled with attorney “greed”? Awards that compensate for specific losses such as medical bills and loss of income are not excessive; they are simply compensating losses. General damages, often considered pain and suffering awards, along with punitive damages, are where juries may be particularly generous with rewards. However, even there judges tend to reduce the awards to levels that most people would consider appropriate.
The award for general damages – non-economic damages – has received much attention, especially from conservatives, since placing a cap on such awards seems to be a simple way of limiting “outrageous” awards. Indirectly it would also limit payments to “greedy” attorneys since their fees usually come out of this portion of the award. It has been suggested that general damages should be limited to $250,000 as in California, though California now has a ballot measure to increase the cap to $1,000,000 and index it for inflation. The problem is that this does nothing to correct the fundamental structural deficiencies in our system of compensating for medical injury – a system that fails most individuals experiencing medical injury. Instead of fine tuning our system, we should be replacing it with a system that works.
One more very important point. Why does the United States have such a great problem with medical malpractice lawsuits when most other nations that have universal systems and much lower health care costs have much less of a problem? Think about that. In other nations everyone receives health care. They do not have intrusive intermediaries who tell you where you can go or what care you can have. They do not expose you to financial hardship simply because you have a medical need. Our dysfunctional system breeds animosity which is a setup for litigation. Their systems are egalitarian – health care is a given. Why would they want to sue their doctor?
Under a single payer national health program physicians are free to obtain the most appropriate care for their patients. An egalitarian, high-performance health care system would do more than anything else to reduce the scourge of medical malpractice lawsuits.
By Elisabeth Rosenthal
The New York Times, September 20, 2014
Before his three-hour neck surgery for herniated disks in December, Peter Drier, 37, signed a pile of consent forms. A bank technology manager who had researched his insurance coverage, Mr. Drier was prepared when the bills started arriving: $56,000 from Lenox Hill Hospital in Manhattan, $4,300 from the anesthesiologist and even $133,000 from his orthopedist, who he knew would accept a fraction of that fee.
He was blindsided, though, by a bill of about $117,000 from an “assistant surgeon,” a Queens-based neurosurgeon whom Mr. Drier did not recall meeting.
In Mr. Drier’s case, the primary surgeon, Dr. Nathaniel L. Tindel, had said he would accept a negotiated fee determined through Mr. Drier’s insurance company, which ended up being about $6,200. (Mr. Drier had to pay $3,000 of that to meet his deductible.) But the assistant, Dr. Harrison T. Mu, was out of network and sent the $117,000 bill.
When Mr. Drier complained to his insurer, Anthem Blue Cross Blue Shield, that he should not have to pay the out-of-network assistant surgeon, Anthem agreed it was not his responsibility. Instead, the company cut a check to Dr. Mu for $116,862, the full amount.
For months, Mr. Drier stewed over what to do with the $117,000 check Anthem Blue Cross had sent him to pass on to Dr. Mu, refusing to sign over a payment he considered “outrageous and immoral.”
Mr. Drier tried to negotiate with the surgeons to divvy up the $117,000 payment in a way he believed was more fair; he liked Dr. Tindel and felt he was being underpaid. Mr. Drier’s idea, he wrote in an email, was to settle on “a reasonable fee for both the surgeon and assistant and return the rest of the check to the insurance company/employees” of his company.
But in July, he received a threatening letter from Dr. Mu’s lawyer noting that he had failed to forward the $117,000 check. So he sent it along, with regret.
If the surgery had been for a Medicare patient, the assistant would have been permitted to bill only 16 percent of the primary surgeon’s fee. With current Medicare rates, that would have been about $800, less than 1 percent of what Dr. Mu was paid.
In recent years, unexpected out-of-network charges have become the top complaint to the New York State agency that regulates insurance companies.
Although this is an outrageous example of the perversities of private insurers using provider networks to manipulate health care spending, it nevertheless helps us understand why we should reject the private insurers and their patient-unfriendly, investor- or board-pleasing business tools of health care.
Depending on which state regulations, which insurer, and which specific insurance plan, this out-of-network billing for Mr. Drier’s assistant surgeon could have had different outcomes. The worst is that he could have been responsible for the entire $117,000 fee and that it would not have applied to his deductible nor to his maximum out-of-pocket benefit cap. In this case, Mr. Drier did not experience a major financial loss, but those who pay insurance premiums will have to pay more when considering the cumulative effect of all such benefit overpayments.
It just doesn’t seem right when you try to buy the best insurance that you can afford, and the insurers then tell you which physicians and hospitals you can use if you want full coverage. Plus they frequently expose you to high out-of-pocket costs – costs that you would think insurance should cover – when you end up under the care of an out-of-network provider, often through no fault of your own as in this instance with Mr. Drier.
Had the procedure been provided under Medicare, the assistant surgeon’s fee would have been determined automatically, and at a fraction of the billed price. An improved Medicare for all not only would have set the fee at a fair level, it also would not have had network issues to deal with since the entire health care system would be one single “network” (integrated systems such as Kaiser Permanente merely being additional providers of one’s personal choice within the universal health care delivery system).
The full New York Times article by Elisabeth Rosenthal describes many other instances of surprises and misunderstandings that stem from the complexities of various plans and their networks – surprises that would not occur in a well designed, single payer national health program. Under single payer, you get the health care that you need, wherever it’s needed, and it’s simply paid for by our own public insurer.
By Peggy Binette
University of South Carolina, September 18, 2014
Employees working for Fortune 500 companies can expect to pay higher employee contributions for their health insurance, according to a survey of chief human resource officers about the impact of the Patient Protection and Affordable Care Act (also known as PPACA or Obamacare) conducted by the Darla Moore School of Business at the University of South Carolina this past May/June.
Patrick Wright, a professor in strategic human resource management, directs the annual the HR@Moore Survey of Chief HR Officers.
Key findings from the survey include:
• 78 percent report a rise in health insurance costs (average of 7.73 percent);
• 73 percent report having moved or will move employees to Consumer Directed Health Plans;
• 71 percent report raising or plans to raise employee contributions to health insurance;
• 30 percent report moving or plans to move pre-65 retirees to ACA health exchanges;
• 27 percent report cutting back health insurance coverage eligibility;
• 24 percent report ensuring that part-time employees work less than 30 hours weekly to avoid penalty;
• 12 percent report increasing or plan to increase part-time workers; and
• 10 percent report limiting or plan to limit the full-time employee hires.
87 percent of chief HR officers reported taking or planning to take last least one action to reduce costs. And, most of those actions are being shouldered by employees.
The most common strategy is moving employees into Consumer Directed Health Plans. CDHPs provide employees with a set amount of money for regular (not catastrophic) healthcare that they manage, which shifts responsibility from employer to worker. Firms also are defraying the rising cost of health insurance to employees by raising the premiums they pay for their health insurance and limiting dependent coverage.
PPACA requires employers to provide health insurance to employees who work 30 hours or more weekly. While small businesses are more likely to hire part-time workers, Wright says, larger firms are enforcing the cap to avoid increased costs.
One CHRO told Wright “When we put the limit at 30 hours, we frequently had people that worked 32-34 hours, and if enough of them did so, it would put us at legal risk for fines. Therefore we now limit workers to 27 hours to ensure that we minimize the number that might exceed 30 hours.”
The recent U.S. jobs report in June reported an increase of 799,000 part-time jobs compared to an increase of 288,000 full-time jobs, which may reflect the employment strategies being reported in the HR@Moore survey.
Wright says what continues to be unclear is whether the quality of employee healthcare has improved or suffered as a result of Obamacare.
This academic survey of human resource officers at Fortune 500 companies shows that they plan to address rising costs of their health benefit programs by increasing the financial burden on their employees. Check the key findings from the survey listed above. Each one is bad news for the employees.
The most important reason given for choosing the model of reform that became the Affordable Care Act (ACA) was that the majority of Americans were receiving their health care coverage through their employment, and that these plans provided the best coverage available. The best of the best were the plans offered by the very large employers – the Fortune 500 companies.
So what is their response? As if there were not enough problems already with excess deductibles, narrower provider networks, tiering of health care services and drugs, limiting dependent coverage, and other innovations that impair access and reduce costs, in the face of ever more increasing costs the employers are now raising employee contributions to the plans, shifting to consumer directed plans that place a greater financial burden on the employees, reducing eligibility for their employees, shifting retirees out of their plans, reducing hours for part-time employees in order to avoid ACA penalties, and limiting full-time employee hires while increasing part-time workers. And this is the best of the best!
The diagnosis is obvious. ACA was the wrong model for reform. We need a single payer national health program. Delaying that change will only cause the deficiencies to get worse, especially when we leave the private insurers in charge. It’s too bad that the Fortune 500 executives don’t have a little more empathy for their employees. After all, it’s their employees who have been responsible for the increases in productivity – the gains of which the executives are scooping off the top.
If empathy doesn’t cut it, the executives need to be reminded of Nick Hanauer’s “The Pitchforks Are Coming … For Us Plutocrats”:
By Robert Pear
The New York Times, September 17, 2014
As hospitals merge and buy up physician practices, creating new behemoths, one federal agency is raising a lonely but powerful voice, suggesting that consumers may be victimized by the trend toward consolidation.
Hospitals often say they acquire other hospitals and physician groups so they can coordinate care, in keeping with the goals of the Affordable Care Act. But the agency, the Federal Trade Commission, says that mergers tend to reduce competition, and that doctors and hospitals can usually achieve the benefits of coordinated care without a full merger.
The commission is using a 100-year-old law, the Clayton Antitrust Act of 1914, to challenge some of the mergers and acquisitions, and it has had remarkable success in recent cases.
“Hospitals that face less competition charge substantially higher prices,” said Martin S. Gaynor, director of the F.T.C.’s bureau of economics, adding that the price increases could be “as high as 40 percent to 50 percent.”
Doctors and hospitals say they must collaborate to survive and thrive under the Affordable Care Act.
But Deborah L. Feinstein, director of the bureau of competition at the Federal Trade Commission, said the health care law did not repeal the antitrust laws.
Often, Ms. Feinstein said, when hospitals and doctors join forces, their goal is not just to control costs or improve care, but to “get increased leverage” in negotiations with health insurance companies and employers.
“They say they need better rates so they will have more money to invest in their facilities,” Ms. Feinstein said. “When you strip that down, it’s basically just saying, ‘We want a price increase.’ Even if the price increase is motivated by a desire to invest more in the business, that’s problematic. That incentive to invest may not be there if you don’t have competition as a spur to innovation — if you’re not worried about losing business to the hospital down the street.”
The F.T.C. has long argued that mergers can cause higher prices by reducing competition among hospitals in the same market. New research suggests that another dynamic, rarely considered by antitrust officials, can also lead to significant price increases.
The research shows that hospitals gain bargaining power when they are acquired and become part of a big hospital system that has no other presence in the local market.
“Acquisitions of hospitals by large national chains such as Hospital Corporation of America, Ascension Health or Tenet Healthcare may not increase hospital concentration in the affected local markets, but could nevertheless generate higher prices,” said Matthew S. Lewis, an associate professor of economics at Clemson University.
Integrating health care delivery services with the goal of improving the quality and price efficiency of health care services for the community at large is an admirable goal of the Affordable Care Act (ACA). The merger mania taking place is being marketed as a means of achieving that integration. Yet the monkey wrench in the model is the supposed dependency on market competition instead of government oversight as a means of providing higher quality at a lower cost.
Yet merging health care services with the claim that quality improves as costs go down is proving to be a fraud. For the last century we have had to enforce antitrust laws and regulations simply because market consolidation results in oligopolistic control and higher prices instead. We are now seeing this throughout our health care system as providers recognize the business opportunities of greater clout in rate negotiations made possible by anti-competitive consolidation. The FTC has challenged less than one percent of these deals, indicating the conflict within our government of supporting implementation of ACA as opposed to protecting the public from unfair antitrust activities.
The flaw is to be found in the ACA model of reform. Excessive power has been granted to private insurance intermediaries that negotiate in the private sector with the providers. The tool they cite repeatedly is competition. Yet not only do we have the seminal work of Nobel laureate Kenneth Arrow, we also have decades of experience that confirms that this fiction of a market has brought us an outrageously expensive system with only mediocre outcomes on average.
All other wealthy nations cover everyone at an average cost of half of what we spend per person. Their success is based on the role of relatively rigorous government regulation or direct management. Even if the FTC stepped up its antitrust functions, our private insurers would continue to use a wide variety of business practices that advance their own interests at our cost. The vested interests in the privately owned sectors of the health care delivery system would also continue to position themselves favorably.
If we had a single payer national health program with a not-for-profit health care delivery system, our stewards would be left with the task of trying to get the system to work best for the benefit of patients – all patients. Would that be so terrible?
By Gerry Oster, PhD, and A. Mark Fendrick, MD
AJMC.com, September 17, 2014
The new blockbuster drug sofosbuvir (Sovaldi) is offering hope to many patients with hepatitis C, but treatment is expensive and many insurers are demanding that patients shoulder a large portion of the cost. The demand that patients pay a larger share of their drug costs, however, is not limited to expensive new medicines. In fact, many patients are now facing substantially higher co-pays for various generic drugs that their insurers have designated “non-preferred,” often including those recommended as first-line treatment in evidence-based guidelines for hypertension, diabetes, epilepsy, schizophrenia, migraine headache, osteoporosis, Parkinson’s disease, and human immunodeficiency virus (HIV). We are concerned about this relatively recent development.
For many years, most insurers had formularies that consisted of only 3 tiers: Tier 1 was for generic drugs (lowest co-pay), Tier 2 was for branded drugs that were designated “preferred” (higher co- pay), and Tier 3 was for “nonpreferred” branded drugs (highest co-pay). Generic drugs were automatically placed in Tier 1, thereby ensuring that patients had access to medically appropriate therapies at the lowest possible cost. In these 3-tier plans, all generic drugs were de facto “preferred.” Now, however, a number of insurers have split their all-generics tier into a bottom tier consisting of “preferred” generics, and a second tier consisting of “non-preferred” generics, paralleling the similar split that one typically finds with branded products. Co-pays for generic drugs in the “non-preferred” tier are characteristically much higher than those for drugs in the first tier.
To better understand coverage policies in plans with 2 tiers for generic drugs, we identified several such offerings, including both commercial plans and those under the Medicare Part D program, via an informal search of the Internet. For 6 such plans, we examined coverage policies for 10 widely used drugs—all generically available—that are recommended as first-line treatment in current evidence-based guidelines.
While 2 of the plans provide access on a “preferred” basis to all of the medicines we considered, 1 or more of the drugs are “non-preferred” in all of the remaining plans. Metformin, for example, is a “non-preferred” drug in 1 plan, despite being a first-line treatment for type 2 diabetes mellitus. Two plans have no “preferred” generic anticonvulsant drugs; 3 plans have no “preferred” generic antipsychotic medicines; levodopa is designated a “non-preferred” agent in 3 plans; 4 plans have no “preferred” generic triptans (for migraine headache); and all generic antiretrovirals are Tier 2 agents in 4 plans. When there are no “preferred” generics from which clinicians and patients with particular diseases can choose, it may be argued that the diseases themselves effectively are “non-preferred.”
It is sometimes argued that patients should have “skin in the game” to motivate them to become more prudent consumers. One must ask, however, what sort of consumer behavior is encouraged when all generic medicines for particular diseases are “non-preferred” and subject to higher co-pays. The answer is informed, we believe, by a 2007 JAMA study of cost sharing by researchers at RAND, which was based on a review of 132 published studies. The authors report that “(i)ncreased cost sharing is associated with lower rates of drug treatment, worse adherence among existing users, and more frequent discontinuation of therapy” and that “for certain conditions, the evidence clearly indicates that more cost sharing is associated with increased use of other medical services, such as hospitalizations and emergency department visits.
When insurers designate clinically important generic medicines “nonpreferred” and there are no therapeutically equivalent “preferred” alternatives from which to choose, it cannot be argued that patients are thereby motivated to become more prudent consumers. The existence of clinically sound therapeutic choices is a precondition for any meaningful effort intended to make patients put “skin in the game.” Without choice, such policies are simply punitive and run counter to established principles of formulary design and management.
Charles Ornstein of ProPublica provides an excellent discussion of this in today’s New York Times: http://www.nytimes.com/2014/09/18/upshot/how-insurers-are-finding-ways-t…
Why are the insurers establishing tiers of generic drugs with different levels of cost sharing? Cost sharing does shift some of the responsibility of paying for care from the insurer to the patient, but this goes far beyond that.
Establishing tiers of drugs with different levels of cost sharing originally was to encourage patients to select generic drugs which were much less expensive for the insurer to cover. Unfortunately, with our let-the-market-work policies, drugs are being priced in the stratosphere. Even generics have seen skyrocketing price increases. You might think that this is why the private insurers have decided to place generics in tiers, but you would be missing their nefarious strategy.
What we are seeing is the placement of generic drugs used to treat serious chronic diseases into the non-preferred tier which then exposes the patient to greater cost sharing. The shopping behavior that the insurer is encouraging is to have patients with chronic disorders leave their plans and enroll in their competitors’ plans instead. Thus the tier of non-preferred generic drugs has been established to chase away patients who have “non-preferred” chronic diseases – non-preferred by the insurer, that is.
This really does demonstrate how much more evil the private insurers have become. They will continue to find new ways to swindle us. What is insane is that we continue to tolerate them when we know that there is a far better solution – a single payer national health program. Why is the nation not outrage?
By Louise Sheiner
Brookings Institution, September 2014
This paper examines the geographic variation in Medicare and non-Medicare health spending and finds little support for the view that most of the variation is likely attributable to differences in practice styles. Instead, I find that socioeconomic factors that affect the need for medical care, as well as interactions between the Medicare system and other parts of the health system, can account, in an econometric sense, for most of the variation in Medicare health spending.
The paper also explores the econometric differences between controlling for health attributes at the state level (the method used in this paper) and controlling for them at the individual level (the approach used by the Dartmouth group.) I show that a state-level approach can explain more of the state-level variation associated with omitted health attributes than the individual-level approach, and argue that this econometric difference likely explains much of the difference between my results and those of the Dartmouth group.
More broadly, the paper shows that the geographic variation in health spending does not provide a useful way to examine the inefficiencies of our health system. States where Medicare spending is high are very different in multiple dimensions from states where Medicare spending is low, and thus it is difficult to isolate the effects of differences in health spending intensity from the effects of the differences in the underlying state characteristics. I show, for example, that previous findings about the relationships between health spending, the share of physicians who are general practitioners, and quality, are likely the result of omitted factors rather than the result of causal relationships.
It is well known that Medicare spending per beneficiary varies widely across geographic areas. The conventional wisdom from the leaders in this research area, the Dartmouth group, is that little of this variation is accounted for by variation in income, prices, demographics, and health status, and, instead, most of the variation represents differences in “practice styles.” Further, the Dartmouth research suggests that the additional health spending of the high-spending areas does not improve the quality of health care, and, indeed, might even diminish it.
One of the implications of the Dartmouth work is that health care spending can be reduced without significant effects on health outcomes. For example, Sutherland, Fisher, and Skinner (2009) argue “Evidence regarding regional variations in spending and growth points to a more hopeful alternative: we should be able to reorganize and improve care to eliminate wasteful and unnecessary service.” This view was promoted by the Obama Administration as part of the effort to reform health care. In a Wall Street Journal op-ed, then OMB-director Peter Orszag, referring to the Dartmouth work, noted “If we can move our nation toward the proven and successful practices adopted by lower-cost areas and hospitals, some economists believe health-care costs could be reduced by 30% — or about $700 billion a year — without compromising the quality of care.
The Dartmouth group has also argued that this geographic variation holds the key to reducing excess cost growth in health care. According to Fisher, Bynum, and Skinner (2009), “By learning from regions that have attained sustainable growth rates and building on successful models of delivery-system and payment system reform, we might… manage to “bend the cost curve.” ……. Reducing annual growth in per capita spending from 3.5% (the national average) to 2.4% (the rate in San Francisco) would leave Medicare with a healthy estimated balance of $758 billion, a cumulative savings of $1.42 trillion.”
In this paper, I reexamine the geographic variation in health spending at the state level and find little support for the Dartmouth views. I find that most of the geographic variation in Medicare spending is explainable, at least in an econometric sense, by differences in socioeconomic factors that affect the need for medical care and the resources available in the nonelderly population to finance it. Although it is not possible to rule out the Dartmouth view that the differences in spending reflect differences in practice styles, I show that there are other explanations for the variation in spending that seem to be better supported by the data. Furthermore, I show that the relationships between health spending (both Medicare and non-Medicare), physician composition, and quality are likely the result of omitted factors rather than the result of causal relationships.
More broadly, the paper shows that the geographic variation in health spending does not provide a useful way to examine the inefficiencies of our health system. States where Medicare spending is high are very different from states where Medicare spending is low, and thus it is difficult to isolate the effects of differences in health spending intensity from the effects of the differences in the underlying state characteristics. Insights into the relationship between health spending and outcomes are more likely to be provided by natural experiments such as that analyzed by Doyle (2007), who showed that among visitors to Florida who had heart attacks, outcomes were better at hospitals with higher spending, the true experiment run in Oregon in which a group of uninsured low-income adults was selected by lottery to be given the chance to apply for Medicaid (Finkelstein et al, 2011), or the recent paper by Finkelstein et al which focuses on Medicare beneficiaries who move (Finkelstein, 2013).
It is important to note at the outset that nothing in this paper suggests that improvements in our health system are unattainable. Rather, the paper suggests that comparisons of spending between high cost states and low costs states are unlikely to provide a measure of how much we can hope to gain by efforts to improve health system efficiency.
The paper is organized as follows. I first give a brief overview of the literature on geographic variation. Then I present the basic results from the Medicare regressions, and show that the cross-state variation in average Medicare spending is well explained by differences in population characteristics across states. I compare my results to those of the Dartmouth group and suggest a number of reasons why my results differ. I show that, econometrically, there is a difference between controlling for attributes at the individual level (the Dartmouth approach) and controlling for them at the state level (the approach used here), and that this difference is likely to be empirically important when it comes to health care. I argue that my state-level approach better controls for the variation in health and other socioeconomic variables that affect health demand. In addition, to the extent that there are area differences in practice styles, I show that these too likely reflect systemic differences across states, and thus would likely be difficult to alter.
I then explore the relationships between Medicare and non-Medicare spending across the states, and show that the two appear to be somewhat negatively correlated. This correlation is quite important in thinking about the relationship between provider workforce characteristics, quality, and health spending. In particular, I show that taking into consideration some of the demographics and health insurance variables by state changes the conclusions one gets from previous studies. Finally, I show that the growth rates of Medicare spending are negatively related to the level of health spending—that is, low spending states tend to have higher growth rates than high-spending states. The conclusion assesses the implications of this work for Medicare policy.
The evidence presented in this paper shows that most of the variation in Medicare spending across states is attributable to factors that affect health and health behaviors, rather than to random variation in practice styles. Isolating the exact channels through which differences in health affect Medicare spending is difficult, however, because both the need for health spending and provider practice styles will likely be affected by variations in population health and variables that are correlated with it.
But the paper has several findings that suggest that the variation in Medicare spending does not represent wasteful spending that could be easily eliminated without significant effects on the health system. First, population characteristics have more explanatory power for Medicare spending than measures of social capital, indicating that the variation in patient characteristics is more important than variation in provider characteristics. Second, health measures are significantly more correlated at the state level than at the individual level, making it likely that state level regressions do a better job of controlling for unobserved variation in population health. Third, there does not seem to be a significant relationship between the use of “preference- sensitive procedures” and the level Medicare spending. Fourth, states with high levels of Medicare spending tend to have lower levels of non-Medicare spending. Providers in these states may face greater financial difficulties, and may “volume shift” to Medicare patients in order to cover costs.
The paper also shows that conclusions about the relationships between health spending, physician composition, and quality are sensitive to the inclusion of variables like the share of the population uninsured, black, or diabetic. What this sensitivity demonstrates is the difficulty of using the geographic variation in spending for hypothesis testing. It is not surprising that states in the South spend more on Medicare and have worse outcomes. These states perform significantly worse in numerous areas, including high school graduation rates, test scores, unemployment, violent crime, and teenage pregnancy. There are many ways that such differences can affect health utilization and outcomes, including differences in underlying health, social supports and social stressors, patient self-care and advocacy, ease of access to services, capabilities of hospital and physician nurses and technicians, and cultural differences in attitudes toward care. A comparison of health spending in Mississippi with health spending in Minnesota is not likely to provide a useful metric of the “inefficiencies” of the health system in isolation; rather, the difference in spending likely mirrors broader societal problems unrelated to the health system per se.
Finally, the evidence also suggests that low-cost states are not low-growth states. Thus, the geographic variation in Medicare spending is probably not the key to finding ways to slow spending growth while continuing to improve quality over time.
Did this paper really say what it seems like it said? Wow! It is important because it seems to be a highly credible challenge to the principle that much of the waste in health care spending is due to variation in practice styles, as allegedly demonstrated by the Dartmouth group.
According to this Brookings paper by Louise Sheiner, “The evidence presented in this paper shows that most of the variation in Medicare spending across states is attributable to factors that affect health and health behaviors, rather than to random variation in practice styles.” Further, “But the paper has several findings that suggest that the variation in Medicare spending does not represent wasteful spending that could be easily eliminated without significant effects on the health system.”
Double wow! This suggests that the efforts of reducing waste through accountable care organizations (ACO) that are designed based on the Dartmouth studies of waste are mostly for naught. It also explains why to date the experiments with ACO models have had very little impact on either efficiency or quality.
Of particular concern is the finding that areas in the South with high Medicare spending have worse outcomes, and they also “perform significantly worse in numerous areas, including high school graduation rates, test scores, unemployment, violent crime, and teenage pregnancy.” You cannot help but think that more resources need to be directed toward these societal ills. It is not just health care that needs our attention.
For us, the important take-home point of this paper is that we should turn our attention away from puff programs such as ACOs that hold little promise of delivering on higher quality and lower costs, and turn instead to policies that have been proven in other nations to be effective. Of course we’re referring to a single payer national health program. We already know that it works.
AMA Wire, September 12, 2014
An increasingly common payment method among health insurers offers these companies significant financial rewards while sticking physicians with all the associated fees and extra work. But physicians are fighting back as the AMA and other health care associations take the issue to the federal government.
Many insurers are choosing to use virtual credit cards for claims payments to physicians, instead of sending paper checks or paying via the electronic funds transfer (EFT) standard transaction. When paying via virtual credit card, insurers send single-use credit card payment information and instructions to physicians via mail, fax or email. The physician’s office staff then processes the payment as they would a patient’s credit card.
For each of these payments, physicians are charged fees that typically amount to 3-5 percent of the total payment, the AMA explained in recent testimony (log in) to the National Committee on Vital and Health Statistics, an advisory board to the secretary of the U.S. Department of Health and Human Services (HHS).
That adds up. If a physician contractually is owed $5,000, for instance, he or she could have to shell out up to $250 in fees.
In a letter (log in) sent last week to HHS Secretary Sylvia Burwell, the AMA and three other leading organizations called on the agency to prohibit insurers from forcing physicians to accept this payment method.
Letter , August 25, 2014
To: The Honorable Sylvia Mathews Burwell, Secretary, Department of Health and Human Services
We, the undersigned organizations, are writing to you to convey our views and recommendations in response to recommendations made to you by the National Committee on Vital and Health Statistics (NCVHS) on May 15, 2014.
At issue is a type of non-standard electronic funds transfer (EFT) transaction known as a “virtual card” payment. In a virtual card payment, a health plan or its vendor sends a single-use credit card number to a provider by mail, fax or email. This is known as a virtual card because a physical card is never created or presented to the provider. The provider must then manually enter the virtual card number into its Point-of-Sale (POS) processing terminal, and the card processing network provides an authorization for the payment. The provider then receives funds in the same way as for other card payments – via an Automated Clearing House (ACH) funds transfer from the POS merchant acquiring vendor to the provider’s bank account. For these virtual card payment authorizations, providers pay interchange fees of approximately 3 percent of the value of the payment (though anecdotally some providers have reported paying as much as 5 percent). Providers are unexpectedly losing income through these card fees, which essentially reduce the contracted fee rate that has been negotiated with the health plan for a particular service or services. Many providers are understandably opposed to incurring these fees, especially when they did not choose to use this payment method and when they are faced with a manual, burdensome opt-out process that further delays payment. In many cases, decision- makers in the provider’s office only become aware of the incurred fees after receiving monthly statements from credit card merchants, as the virtual cards are processed by billing office staff without any strategic decision in the practice to accept this form of payment.
American Hospital Association (AHA)
American Medical Association (AMA)
Medical Group Management Association (MGMA)
NACHA, The Electronic Payments Association
It’s in their blood. Private insurers will always find a way to cheat others under the guise of good business practices. Now private insurers are using the scam of “virtual credit cards” in order to keep 3 to 5 percent of agreed upon payments made to physicians under their network contracts, while loading more administrative work onto the backs of the physicians’ staff members.
Thieves. That’s all they are. Thieves.
Some readers commented that the insurers do not receive the transaction fees.
It is true that the insurers do not get the full 3-5% processing fee, but, like reward credit cards, the insurers receive a rebate of up to 1.75% cash.
Private insurers are infamous for their administrative waste. With these virtual credit cards, the insurers are dumping on the providers the administrative fees associated with these virtual cards, plus keeping the card rebates. So the insurers are costing the providers 3-5% even though they are pocketing only a portion. When you think about it, the insurers are receiving roughly a 35 percent return on the administrative investment made by the physicians, and that return is being paid by the physicians. It’s not even the insurers’ own money!
KCRA.com/AP,September 9, 2014
Some Californians who purchased individual health coverage through the state’s insurance exchange are suddenly being dropped or transferred to Medi-Cal, the program for the poor that fewer doctors and providers accept.
The changes are occurring as incomes are checked to verify the policyholders can purchase insurance through the exchange.
Officials at Covered California acknowledged that a number of people are being shifted around during income checks and eligibility updates.
“It will happen continually,” spokesman Dana Howard said.
This year, he said, the exchange adjusted its income eligibility scale when the federal government updated the poverty scale. As a result, Howard said, people near the thresholds are sometimes moved between private health plans and Medi-Cal. The checks might also determine that some people make too much money to receive a subsidy.
Evette Tsang, a Sacramento insurance agent, said some of her clients unexpectedly received Medi-Cal cards even though they were content with the plan they purchased through the exchange.
“There’s a lot of people who have never been on Medi-Cal, and they don’t want to. You hear the service is not as good, providers are not easy to find,” Tsang said.
****A California solution for a Medicaid quirk
Editorial, Los Angeles Times, September 9, 2014
The 2010 federal healthcare reform law required virtually all adult Americans to carry insurance, starting this year. And to help make policies affordable, it offered subsidies to lower-income households while expanding the Medicaid insurance program to more of the poorest residents. But there’s a key difference between those two groups: Only those in the Medicaid program may find their estates billed after they die to pay back some of the aid.
Most troubling, the new requirement to obtain coverage is prompting millions of Californians to sign up for Medi-Cal, where they are put in Medi-Cal’s version of an HMO. Only after they enrolled are they told that, if they are 55 or older, the state will seek to recover the value of the coverage from their estates. They could be in perfect health, receiving no medical care at all, but still be running up a bill that their estate will have to pay.
The California Legislature responded by passing a bill (SB 1124) that would stop Medi-Cal, the state’s version of Medicaid, from trying to collect repayment for routine medical care and insurance premiums. The measure now awaits action by Gov. Jerry Brown, whose Department of Finance opposes the bill because it would cost Medi-Cal an estimated $30 million a year.
****What can be done about Covered California’s doctor gap?
Editorial, Los Angeles Times, September 8, 2014
A separate study of three rural counties by the California Health Report found that more than half of the doctors listed by Medi-Cal in those counties either were turning away new patients or couldn’t be reached by phone.
A related issue is whether the networks offered by health plans can actually deliver the coverage the plans promise.
Insurers say they’re taking the problem seriously, which should help both those who shop for individual policies and the growing ranks enrolled in managed-care plans through Medi-Cal.
At the beginning of the health care reform process, we complained that the various factors in the proposed multi-payer model that would determine what health care coverage a person would have would be highly variable and would result in instability of health care coverage. The current experience in California provides an inkling of the extent of this problem.
Some who purchased plans through California’s ACA insurance exchange – Covered California – are losing that coverage when auditing demonstrates that income levels were not confirmed, income levels changed, or income eligibility levels changed because of updates in the federal poverty thresholds. Regardless, people were losing the coverage which they had selected, and became uninsured or moved to other private plans, or, in some cases, were involuntarily enrolled in Medi-Cal – California’s Medicaid program.
The latter is a particular problem. First, many of these people pride themselves on their self-sufficiency, even though they need to accept government subsidies so that they could afford the exchange plans. They understand that these subsidies are necessary, not for their own personal failings but simply because health care has become so expensive that the average worker can no longer bear the full costs. For these people, being forced into a welfare program – Medi-Cal – can be humiliating.
But what is even worse, the Medi-Cal ticket doesn’t automatically grant them admission to the health care system. Although there was already a shortage of physicians who would accept Medi-Cal patients, the lists of providers currently contain names of many physicians who are now turning away new Medi-Cal patients. Also, most of the newly eligible are being enrolled in Medi-Cal managed care plans when preliminary reports indicate that these plans do not have the capacity to carry the load.
Just to add further insult, those moved into Medi-Cal may have their estates billed to recover Medi-Cal costs, when there is no recovery process for subsidies provided for the Covered California exchange plans.
There are thousands of other reasons that coverage is unstable under the Affordable Care Act. In contrast, a single payer system provides the same comprehensive national health program for life. You can’t get much better stability than that.
Federal Reserve Bulletin, September 2014
The Federal Reserve Board’s triennial Survey of Consumer Finances (SCF) collects information about family incomes, net worth, balance sheet components, credit use, and other financial outcomes. The 2013 SCF reveals substantial disparities in the evolution of income and net worth since the previous time the survey was conducted, in 2010.
- Between 2010 and 2013, mean (overall average) family income rose 4 percent in real terms, but median income fell 5 percent, consistent with increasing income concentration during this period.
- Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys.
- Families in the middle to upper-middle parts (between the 40th and 90th percentiles) of the income distribution saw little change in average real incomes between 2010 and 2013 and thus have failed to recover the losses experienced between 2007 and 2010.
- Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013.
- The differentials in average income growth between 2010 and 2013 are also observed for other family groupings in which large differences in income levels are observed, notably across education groups, by race and ethnicity, homeownership status, and levels of net worth.
- Consistent with income trends and differential holdings of housing and corporate equities, families at the bottom of the income distribution saw continued substantial declines in real net worth between 2010 and 2013, while those in the top half saw, on average, modest gains.
- Ownership rates of housing and businesses fell substantially between 2010 and 2013.
- Retirement plan participation in 2013 continued on the downward trajectory observed between the 2007 and 2010 surveys for families in the bottom half of the income distribution.
- The decrease in stock ownership rates was most pronounced for the bottom half of the income distribution.
The recovery of the economy has left behind everyone except the wealthy. Most individuals and families are less able to afford housing, education, retirement, vacations, college expenses, and, of especial concern to us, health care. Many economists believe that this may represent the new normal.
The public policies that we need to bring us all back on a solid footing are straightforward. But politics has resulted in the erection of almost impenetrable barriers. Just today the Senate reconfirmed the fact that billionaires are still free to buy our elections (and the billionaires have fared very well as the rest of us have been left behind).
If we could improve just the financing of health care so that it is affordable for everyone, we would have taken one major step towards implementing the public policies that we need to more equitably share the gains in our economy. The Affordable Care Act falls far too short of the level of equitable health care financing that we need. The progressive financing that characterizes a single payer system would move us more dramatically in the right direction. Not only would everyone have health care, but we would be improving family incomes and net worth as well.
Policy is easy. But we really have to work on the politics. The billionaires can buy the souls of the politicians for only so long. Start sharpening your pitchforks (Hanauer).
By Jonathan Gruber, Robin McKnight
The National Bureau of Economic Research, NBER Working Paper No. 20462, September 2014
Recent years have seen enormous growth in limited network plans that restrict patient choice of provider, particularly through state exchanges under the ACA. Opposition to such plans is based on concerns that restrictions on provider choice will harm patient care. We explore this issue in the context of the Massachusetts GIC, the insurance plan for state employees, which recently introduced a major financial incentive to choose limited network plans for one group of enrollees and not another. We use a quasi-experimental analysis based on the universe of claims data over a three-year period for GIC enrollees. We find that enrollees are very price sensitive in their decision to enroll in limited network plans, with the state’s three month “premium holiday” for limited network plans leading 10% of eligible employees to switch to such plans. We find that those who switched spent considerably less on medical care; spending fell by almost 40% for the marginal complier. This reflects both reductions in quantity of services used and prices paid per service. But spending on primary care actually rose for switchers; the reduction in spending came entirely from spending on specialists and on hospital care, including emergency rooms. We find that distance traveled falls for primary care and rises for tertiary care, although there is no evidence of a decrease in the quality of hospitals used by patients. The basic results hold even for the sickest patients, suggesting that limited network plans are saving money by directing care towards primary care and away from downstream spending. We find such savings only for those whose primary care physicians are included in limited network plans, however, suggesting that networks that are particularly restrictive on primary care access may fare less well than those that impose only stronger downstream restrictions.
Full paper available at this link: http://www.nber.org/papers/w20462
****Narrow Health Networks: Maybe They’re Not So Bad
By Margot Sanger-Katz
The New York Times, September 9, 2014
Lots of people shopping in the new health care marketplaces this year picked health plans that limited their choice of doctors and hospitals. The plans were popular because they tended to cost less than more conventional plans that covered nearly every health care provider in a region.
The proliferation of these more limited plans, called narrow networks, has worried consumer advocates and insurance regulators. The concern is that people will struggle to find the care they need if their choices are limited.
Maybe we don’t have to worry so much. A new study suggests that, done right, a narrow network can succeed in saving money and helping certain patients get appropriate health care. The study, published as a working paper with the National Bureau of Economic Research, looked at a program that used financial incentives to steer workers into narrow plans. Those that chose the plans saved their employer money, saw their primary care doctors more and used the emergency room less.
Mr. Gruber says this study should not be the final word on narrow networks, but he said he hoped it would change the tenor of the debate about them. Instead of automatically seeing a narrow network as a sinister plan feature, he said, he hopes market watchers will now see them as a tool that can, in some cases, help save money without hurting patients.
“Nobody is talking about forcing people into these plans,” he said. “We’re talking about offering people a choice with price incentives.”
NYT Reader Comments:
San Juan Capistrano, CA
Quoting from the Gruber and McKnight paper:
“We first find that patients are very price sensitive in their decisions to switch to limited network plans…”
“…those who are most healthy are the most price sensitive.”
“for the chronically ill… we find a strong shift in spending from specialists to primary care physicians…”
“…we conclude that the real savings from limited network plans arises from restrictions downstream from the primary care provider.”
Healthy individuals buy the cheapest plans not worrying about the choices in specialized care that they believe they will not need anyway. But for chronically ill patients who are responsible for most of our health care spending, they are losing specialized services when they are enrolled in these narrow network plans.
This study was too short to be able to measure adverse outcomes due to lack of specialized services. Shouldn’t we find that out before most of us are shoved into narrow networks?
Or better, shouldn’t we take a closer look at proven systems that use public policies to control spending without restricting patient choice – models such as single payer or a national health service?
One thing that really concerns me about this is people with rare or complex conditions that need specialty care. Waits, for example, for endocrinology in my city are a minimum of 3 months for new patients and diabetes is one of the nations’ biggest health problems. It is also very difficult now for new patients to find a new primary care MD depending their insurance. Narrow networks prevent people from accessing care. I am a nurse case manager, so arranging transitional care is what I do for a living. I’m surprised to see this article. It’s a little myopic.
Let’s be honest. Narrow networks are fine for people who are not sick now and are willing to take the chance that they will not get sick in the coming year. If you are already ill or worry that you may become ill, narrow networks are not good. Don’t lie to us…
The most important finding in this study is that enrollment of chronically ill patients in narrow networks results in a strong shift in care from specialists to primary care physicians. That reduces costs, but does it change outcomes? According to the authors, “we are unable to demonstrate health effects with any certainty.”
The work of Barbara Starfield and others has previously demonstrated that a strong primary care infrastructure does provide greater value in health care. But people with serious chronic disorders – where a disproportionate share of our health care spending is directed – may very well benefit from specialized care.
This study shows that narrow networks are used to block access to that specialized care, simply by excluding coverage of much of the specialized services offered within the community. As this study shows, the care defaults to the generalist regardless of the patient’s specific needs.
A well functioning system would provide liberal access to primary care services, which would then provide a portal to an appropriate level of specialized services. A singe payer national health program would do precisely that – primary care not serving as a gatekeeper but rather serving as a resource to improve integration of health care services.
Narrow networks are a tool of private insurers used to reduce spending by impairing access to care no matter how appropriate it might be. Jonathan Gruber indirectly acknowledges the concerns people have about narrow networks when he states, “Nobody is talking about forcing people into these plans.” But patients are backing into these plans simply because they cannot afford other plans with more comprehensive networks.
Under single payer, the network is the entire health care delivery system. That’s the network that we need – for all of us.
By David U. Himmelstein, Miraya Jun, Reinhard Busse, Karine Chevreul, Alexander Geissler, Patrick Jeurissen, Sarah Thomson, Marie-Amelie Vinet and Steffie Woolhandler
Health Affairs, September 2014
A few studies have noted the outsize administrative costs of US hospitals, but no research has compared these costs across multiple nations with various types of health care systems. We assembled a team of international health policy experts to conduct just such a challenging analysis of hospital administrative costs across eight nations: Canada, England, Scotland, Wales, France, Germany, the Netherlands, and the United States. We found that administrative costs accounted for 25.3 percent of total US hospital expenditures—a percentage that is increasing. Next highest were the Netherlands (19.8 percent) and England (15.5 percent), both of which are transitioning to market-oriented payment systems. Scotland and Canada, whose single-payer systems pay hospitals global operating budgets, with separate grants for capital, had the lowest administrative costs. Costs were intermediate in France and Germany (which bill per patient but pay separately for capital projects) and in Wales. Reducing US per capita spending for hospital administration to Scottish or Canadian levels would have saved more than $150 billion in 2011. This study suggests that the reduction of US administrative costs would best be accomplished through the use of a simpler and less market-oriented payment scheme.
From the Discussion
Hospitals’ administrative overhead varied more than twofold across the nations we studied as a share of total hospital costs and more than fourfold in absolute terms. These costs were far higher in the United States than elsewhere.
In all nations, hospital administrators must procure and coordinate the facilities, supplies, and personnel needed for good care. In nations where administrators have few responsibilities beyond these logistical matters, administration seems to require about 12 percent of hospital expenditures.
Modes of hospital payment can increase the complexity and costs associated with two additional management tasks: garnering operating funds and securing capital funds for modernization and expansion.
Garnering operating funds requires little administrative work in nations such as Canada, Scotland, and Wales, where hospitals receive global, lump-sum budgets. In contrast, per patient billing (for example, using DRGs) requires additional clerical and management personnel and special-purpose IT systems. This is true even in countries—such as France and Germany—where payment rates, documentation, and billing procedures are uniform.
Billing is even more complex in nations where each hospital must bargain over payment rates with multiple payers, whose documentation requirements and billing procedures often vary, as is the case in the United States and the Netherlands.
Differences in how hospitals obtain capital funds also appear to affect administrative costs. The combination of direct government grants for capital with separate global operating budgets—as in Scotland and Canada—was associated with the lowest administrative costs. (Wales has recently transitioned to such a system, reversing previous market reforms.) Hospitals in France and Germany, where direct government grants account for a substantial share of hospital capital funding, have relatively low administrative costs despite per patient, DRG-based billing.
Administration is costliest in nations where surpluses from day-to-day operations are the main source of hospital capital funds: the United States and, increasingly, the Netherlands and England. In such health care systems, the need to accumulate capital funds for modernization and expansion stimulates administrators to undertake the additional work that is needed to identify and pursue profit opportunities.
****Bureaucracy consumes one-quarter of US hospitals’ budgets, twice as much as in other nations: Health Affairs study
PNHP Press Release, September 8, 2014
A study of hospital administrative costs in eight nations published today in the September issue of Health Affairs finds that hospital bureaucracy consumed 25.3 percent of hospital budgets in the U.S. in 2011, far more than in other nations.
Administrative costs were lowest (about 12 percent) in Scotland and Canada, whose single-payer systems fund hospitals through global, lump-sum budgets, much as a fire department is funded in the U.S.
The article attributes the high administrative costs in the U.S. to two factors: (1) the complexity of billing a multiplicity of insurers with varying payment rates, rules and documentation requirements; and (2) the entrepreneurial imperative for hospitals to amass profits (or, for nonprofit hospitals, surpluses) in order to fund the modernization and upgrades essential to survival.
“We’re squandering $150 billion each year on hospital bureaucracy,” said lead author Dr. David Himmelstein, a professor at the CUNY/Hunter College School of Public Health and lecturer at Harvard Medical School. “And $300 billion more is wasted each year on insurance companies’ overhead and the paperwork they inflict on doctors.”
He added: “Only a single-payer reform can squeeze out the bureaucratic waste and use the money to give patients the care they need. Instead, we’re layering on more bureaucracy in insurance exchanges and ‘accountable care organizations.’”
This international comparison of hospital administrative costs further documents the profound administrative waste that characterizes U.S. health care financing. This study is particularly important because it clarifies the two major factors resulting in this waste: 1) the administrative complexity of interacting with a multitude of insurers, and 2) “the entrepreneurial imperative for hospitals to amass profits or surpluses” in a system with market-driven pricing.
Although all other nations waste less than we do on administration, they do so in varying degrees. Thus we can learn lessons from them, especially the two lessons above. Extrapolating from this Health Affairs article, the solution for hospital financing is obvious: switch to single payer and use global budgets for hospitals and separate budgeting for capital improvements. But don’t stop there. Apply single payer principles to the financing of our entire health care delivery system. That would free up perhaps $400 billion or more that could be used to ensure appropriate health care for everyone.
By Adele Shartzer and Sharon K. Long
Urban Institute, September 4, 2014
The Urban Institute’s Health Reform Monitoring Survey has been tracking health insurance coverage, including employer-sponsored insurance coverage (ESI), since the first quarter of 2013. This QuickTake reports on nonelderly (ages 18–64) workers’ ESI in June 2014. In June 2014, most workers (88.6 percent) were insured and, among those who were insured, most (80.7 percent) had ESI (data not shown). When asked to assess their ESI, workers were generally satisfied with their ESI in terms of available health care services, choice of doctors and other providers, and the quality of the care available under the plan; less than 5 percent of nonelderly workers with ESI coverage report being dissatisfied with any of these factors. However, satisfaction levels are much lower for the financial aspects of coverage, with workers more concerned about premiums, co-payments, and their potential financial risk from high medical bills. Nearly one in four nonelderly workers with ESI (23.4 percent) is dissatisfied with the premium they pay for coverage, and 27.2 percent are dissatisfied with the deductibles they pay when receiving care. The protection that ESI provides against high medical bills may be particularly limited for low-income nonelderly workers (those with family income at or below 138 percent of FPL): 32.1 percent of low-income workers with full-year ESI report having problems paying medical bills in the past 12 months. Overall, 14.2 percent of nonelderly workers with full-year ESI report having problems paying medical bills over the past 12 months.
****How People Feel About Their Employer-Sponsored Health Plans
By Margot Sanger-Katz
The New York Times, September 4, 2014
There are new results from the Urban Institute’s Health Reform Monitoring Survey, which asked people with employer-based coverage how they liked what they had.
For people earning between 138 percent and 400 percent of the federal poverty limit, or between $33,000 to $95,000 — the income range of people who are most likely to buy insurance on the public marketplaces — more than 23 percent of workers with employer coverage reported having problems paying their medical bills in the last year.
Sharon Long, a senior fellow at Urban, said that the results suggested that consumers might not be prepared for what happened when they combined a high-deductible insurance plan with big medical bills.
“What we’ve heard anecdotally from people with health plans is more people are signing up for high-deductible health plans and then being surprised that they have to pay the deductible,” she said. That’s a concern on the new health insurance marketplaces, too. Early evidence suggests that people tended to opt for cheaper plans, many of which came with high deductibles — meaning that the newly insured may face some of the same financial strain if they become seriously ill.
Deductibles and co-payments have been rising, as a growing number of employers embrace the idea that giving workers more of a financial stake in their medical care will help reduce overuse. “It’s been going up over the past few years,” said Gary Claxton, a director of the Health Care Marketplace Project at the Kaiser Family Foundation, which runs a comprehensive annual survey of the employer insurance market. And no one likes paying high insurance premiums or out-of-pocket costs
Over all, Ms. Long said, the rising costs of health care are likely to remain a concern for consumers, wherever they get their insurance. “I expect what we’ll see over time, unless we are able to get costs under control, is that all the cost questions are going to be an issue,” she said.
****Worried about health insurance? That’s common
By Jay MacDonald
Bankrate.com, September 4, 2014
Bankrate’s Health Insurance Pulse survey was conducted Aug. 21-24 by Princeton Survey Research Associates International.
Tom Baker, a professor of insurance law at the University of Pennsylvania Law School, points out that a majority of working adults receive their health insurance through their employer and thus have largely been spared a direct impact from the Obama health care law. But the survey’s concerned majority may partially reflect uneasiness about employer-based plans.
“There is research being done on liquidity, or ‘financial fragility,’ where they asked people if they could come up with $2,000 to pay for a major medical bill in the next month,” he says. “I think 40 percent of respondents said they either couldn’t or it would be very difficult. That suggests that people are financially fragile.”
David Cusano, a senior research fellow at Georgetown University’s Health Policy Institute in Washington, D.C., suspects some of the fear over health costs may stem from growing first-hand experience with how health insurance works.
“With the Affordable Care Act, anybody who now wants insurance can get it,” Cusano says. “The question now becomes: ‘Can I afford to use it?’ When you think about people confronting out-of-pocket maximums at around $7,000 or deductibles of $5,000 for a family, that’s a lot of money. You throw prescription drug copays into the mix, and I can see where you would be worried.”
These two surveys are of people who have employer-sponsored health insurance – the very large market of health plans that was protected by the Affordable Care Act (“you can keep the insurance you have”). The most significant change in employer-sponsored plans is in the increased use of high deductibles as a means of slowing premium growth for the employers.
The trade off is that employees and their families are exposed to greater out-of-pocket costs whenever they access health care. These surveys demonstrate that this exposure is not merely theoretical but is actually creating significant financial insecurity for the insured.
But isn’t the primary purpose of insurance to relieve you of financial hardship should you have health care needs? Instead, these newer insurance product designs are increasing the risk of financial hardship, both in the employer-sponsored market, and especially, by design, in the plans offered by the ACA insurance exchanges. That is why they selected a lower actuarial value plan as the benchmark plan in the exchanges.
Reform should have been about fixing the problems with our health care financing, not making them worse. A far better system would simply provide access to health care when needed, without linking that care to specific financial transactions controlled by a third party insurance intermediary. We don’t need private insurance programs. We would do far better with prepaid health care, financed equitably through progressive tax policies.
It’s in our name. PNHP is Physicians for a National Health Program, not physicians for private health insurance.
By Andrea M. Sisko, Sean P. Keehan, Gigi A. Cuckler, Andrew J. Madison, Sheila D. Smith, Christian J. Wolfe, Devin A. Stone, Joseph M. Lizonitz and John A. Poisal (all affiliated with CMS Office of the Actuary)
Health Affairs, September 2014
In 2013 health spending growth is expected to have remained slow, at 3.6 percent, as a result of the sluggish economic recovery, the effects of sequestration, and continued increases in private health insurance cost-sharing requirements. The combined effects of the Affordable Care Act’s coverage expansions, faster economic growth, and population aging are expected to fuel health spending growth this year and thereafter (5.6 percent in 2014 and 6.0 percent per year for 2015–23). However, the average rate of increase through 2023 is projected to be slower than the 7.2 percent average growth experienced during 1990–2008. Because health spending is projected to grow 1.1 percentage points faster than the average economic growth during 2013–23, the health share of the gross domestic product is expected to rise from 17.2 percent in 2012 to 19.3 percent in 2023.
Model And Assumptions
These projections remain subject to substantial uncertainty and reflect the variable nature of future economic trends, as exemplified by the prolonged and comparatively sluggish nature of the recovery from the 2007–09 recession. In addition, the United States has experienced only the initial effects of the ACA’s coverage expansions. The impacts of reform on the behavior of consumers, insurers, employers, and providers will continue to unfold throughout the projection period and beyond. In particular, the supply-side effects of the ACA remain highly speculative and are not included in these estimates.
Since the end of the Great Recession in 2009, economic growth in the United States, as measured by GDP, has remained slow: just 3.9 percent per year, on average, which is well below the average rate experienced in the four years following the three previous recessions. The fact that recent health spending increases have not returned to their prerecession rates is consistent with the long-standing relationship between overall economic growth and health spending growth.
Growth rates for both the economy and health spending have been slow. However, the health share of GDP has remained relatively constant since 2009 and is expected to be 17.2 percent in 2013. Contributing to the stable share in 2013 are continued low use of medical care and provisions of both sequestration and health reform that constrain payments to Medicare providers.
The period in which health care has accounted for a stable share of economic output is projected to end in 2014, primarily because of the coverage expansions of the ACA. It is anticipated that by 2017, once the mostly one-time transition effects of expanded coverage have fully transpired, the health share of GDP will increase, albeit at a slower rate than its historical average, as an improving economy and the aging of the baby-boom generation lead to faster health spending growth.
When people ask how much the United States is spending on health care, it is the numbers from this report that are usually cited. So how much are we spending now, and what will that spending grow to a decade from now?
Projected spending for 2014:
- National health expenditures (NHE): $3.057 trillion
- NHE per capita: $17,354
- NHE as a percent of GDP: 17.6%
Projected spending for 2023:
- National Health expenditures (NHE): $5.159 trillion
- NHE per capita: $26,691
- NHE as a percent of GDP: 19.3%
With the Affordable Care Act (ACA) the changes in spending represent not only the usual factors that the actuaries consider each year, they also include the changes in coverage due to the establishment of the insurance exchanges and the expansion of Medicaid, along with other direct and indirect results of implementing ACA. Considering all of the variables, the actuaries once again have done a commendable job in arriving at their estimates.
Although the authors do make it clear that there is substantial uncertainty in these predictions, especially due to the variable nature of economic trends, there is one aspect that should raise our concern. Their results depend on the prediction that there will be faster growth in disposable personal income. Yet when you read the work of Thomas Piketty, Emmanuel Saez, Joseph Stiglitz, Robert Reich and others, there is a very real concern that, though the economy may continue to reward the rentiers generously, personal incomes for workers may well remain stagnant. Many will have no discretionary income and may have to continue to cut into the portions of their budgets that pay for essential needs.
This will be of particular concern because of the increases in out-of-pocket spending that will be required as more people are shifted into lower actuarial value plans with higher cost sharing, especially higher deductibles. Many policy experts believe that a significant portion of the recent slowing in health care spending has been due to the high out-of-pocket costs for upfront health care, causing patients to decline care that they should have. This is not the way we should be trying to put a lid on health care spending. People will suffer and some will die simply because of their perception that health care is personally not affordable because of the high upfront costs.
Another important consideration is that predictions of future health care spending are dependent not only on expansion of health care coverage and on the other variables, but they also are dependent on the baseline costs of the existing health care financing system. As we all know, the administratively complex multi-payer system that we have in the United States is the most expensive model of financing health care with its tremendous built in waste. If we were to change to an efficient single payer system, not only would everyone have affordable access to health care, we would not be talking about a trend in national health expenditures that in a decade will consume almost one-fifth of our gross domestic product.
By Timothy Jost
Health Affairs Blog, August 29, 2014
On August 28, 2014, the Internal Revenue Service re-released the draft forms that will be used by employer, insurers, and exchanges for reporting Affordable Care Act tax information to individuals and to the IRS for 2014 and 2015, as well as the instructions for completing those forms. The IRS also released in the Federal Register requests for public comments on three of those forms – the 1094-B, the 1094-C, and the 1095-C – under the Paperwork Reduction Act. This post reports on these forms and instructions and on a guidance released by the Centers for Medicare and Medicaid Services.
The tax forms had been published earlier and are described in an earlier post. The instructions for the forms, however, had not been available and had been eagerly awaited by employers, insurers, exchanges, and tax professionals. Forms 1094-C and 1095-C will be used by large employers with more than 50 full-time or full-time-equivalent employees to determine whether the employer is responsible for penalties under the employer shared responsibility requirements of the ACA. They will also be used to determine whether employees have received an affordable and adequate offer of coverage, rendering them ineligible for premium tax credits. Employers are required to provide each full-time employee with a form 1095-C and to file each of these together with a transmittal form 1095-B form with the IRS.
The instructions for the 1094-C and 1095-C are by far the most complex of the instructions released on August 28, filling 13 pages with dense, two column, print. Most of the complexity derives from the options for complying with the employer mandate and the transition exceptions to that mandate that the administration has created…
Implementing Health Reform: Tax Form Instructions, by Timothy Jost:http://healthaffairs.org/blog/2014/08/29/implementing-health-reform-tax-…
IRS – 2014 Instructions for Forms 1094-C and 1095-C (Draft): http://www.irs.gov/pub/irs-dft/i109495c–dft.pdf
If you enjoy minutia, click on the links to the full blog post and the draft instructions and read away.
Although today’s message deals with only one minor provision of the Affordable Care Act – the instructions for tax forms used to report ACA tax information to individuals and to the IRS – the administrative detail required is mind-boggling. Extrapolate that to all aspects of ACA and it becomes obvious that, instead of gaining administrative simplicity, ACA greatly increased administrative complexity – on top of the most administratively complex health financing system in the world. What a waste!
Timothy Jost’s comment from yesterday’s message can be repeated again today: “We are doomed to continue to struggle with this complexity as long as we stubbornly cling to a private health insurance-based health care financing system.”
By Miguel Helft
Fortune, August 11, 2014
The company they founded two years ago, Flatiron Health, is going after a rather audacious goal: shaking up the health care world. … [Nat]Turner and [Zach] Weinberg hope to collect and analyze mountains of clinical data to make inroads into one of medicine’s most … difficult fields: cancer care. Never mind that the pair, who studied economics and entrepreneurship at the Wharton School, didn’t have time for as much as a biology class.
Pioneering researcher Robert Weinberg (no relation to Zach) highlighted the checkered relationship between big data and cancer in a recent essay in the journal Cell. Weinberg, a founding member of MIT’s Whitehead Institute for Biomedical Research, noted that the explosion of data sets on everything from the interaction between proteins to the genetic mutations in a tumor has overwhelmed researchers’ ability to interpret it. “There are people who are enthralled with bioinformatics,” Weinberg told Fortune. … “The idea of aggregating data, and assuming that from that alone, one can get insights that are qualitative and that were not previously accessible, is not obvious to me.”
John Ioannidis, a professor of medicine and health research and policy at Stanford, … doubts that major advances could result from data collected outside highly controlled clinical trials. “It’s an open question as to how much we can learn from big compilations of data collected without experimental design,” he says.
In case you blinked, big data is the newest new thing in establishment health policy. The July 2014 edition of Health Affairs carries on its spine the title, “Using big data to transform care.” It was funded by IBM and the UnitedHealth Foundation, among others. Last year McKinsey & Company published a paper entitled “The big-data revolution in US health care” in which the authors predicted big data will cut American health care costs by 12 percent to 17 percent. A public-private group called Health Data Consortium, which includes the Institute of Medicine, Hewlett-Packard, and Emdeon, was formed in 2012 to promote the collection of all forms of health data.
The article quoted above from Fortune testifies to the power of the hype promoting big data. Although the article quotes two experts in biology who throw very cold water on the notion that big data can make substantial improvements in cancer care, the article also reports that two very smart 28-year-old guys with business degrees from the Wharton School of Business have raised $138 million, $100 million of it from Google Ventures, for a company that will attempt to divine new treatments for cancer from massive amounts of data about cancer patients. Someone is going to be proven wrong here. Who will it be? The info tech wizards and their wealthy backers, or the biology experts (one of whom discovered the first oncogene)?
I’m betting on the biology experts. I don’t have a degree in computer science, biology or medicine, but I have common sense that has not been warped by financial incentives, and I am familiar with the devil-may-care attitude toward evidence within the American health policy community and the effect that attitude has had on other segments of society. I view Flatiron’s founders and investors as examples of smart people who have been badly misled by the willingness of health policy experts to make unsubstantiated claims for managed care nostrums. The big data fad is the direct result of a quarter century of hype about electronic medical records (EMRs) promoted by the health policy elite with the encouragement and financial assistance of the computer industry.
From the earliest days of the EMR movement, its most prominent leaders confidently asserted EMRs would improve quality and lower costs despite the absence of empirical evidence supporting that claim. Two of the earliest pro-EMR documents by prominent health policy experts illustrate my criticism.
In 1988, Paul Ellwood (inventor of the misnomer “health maintenance organization”) published a paper in the New England Journal of Medicine entitled “Outcomes management: A technology of patient experience.” (318:1549-1556) “Outcomes management would … pool clinical and outcome data on a massive scale,” he wrote. “Millions” of computerized medical records would be funneled into “a massive, computerized data base.” By means Ellwood neglected to flesh out, this pooling of data would create information about medical care so accurate it would reveal “the relation between medical interventions and health outcomes, as well as the relation between health outcomes and money”(p. 1551).
As if this weren’t hype enough, Ellwood went on to say, “Outcomes management will help every doctor become a better doctor” (p. 1554), and if doctors didn’t accept his word for this and they let the “payers” take the lead in managing outcomes, payers will “know more about the impact of physicians’ work than they [physicians] do” and when that happens “payers will succeed in circumventing whatever exclusive legitimacy medicine claims to have as a profession” (p. 1555).
Of the 16 endnotes in Ellwood’s paper, not one of them documented his claims. The closest thing to an appropriate citation was Ellwood’s reference to the old Health Care Financing Administration’s annual report card on hospital mortality rates, a report Ellwood praised as evidence of HCFA’s “latent evaluative capacity.” But HCFA terminated that report in 1994 because it was so inaccurate. HCFA’s hospital “death lists,” as they were known, were so bad that Bruce Fried, HCFA’s director of its Office of Managed Care, later referred to the reports as the “hospital mortality report debacle” and as evidence that “the road to hell is certainly paved with good intentions.” (“HCFA to require HMO quality data,” Modern Healthcare, Sept. 16, 1996, p 6).
The Institute of Medicine (IOM) joined the chorus in 1991 with the publication of a book entitled “The Computer-based Patient Record: An Essential Technology for Health Care.” The book was financed by IBM and Hewlett-Packard, among others. Like Ellwood (who advised the IOM’s authors), the IOM confidently asserted that EMRs (the IOM called them computer-based patient records, or CPRs) would improve quality and lower costs. The IOM did this despite explicitly acknowledging it had no evidence to support that claim. “[D]ata on CPR system benefits are sparse,” they wrote. “Few recent studies have analyzed actual costs and benefits. … CPRs may reduce the cost of care enough to offset the expense of acquiring and operating CPR systems, although this remains to be proved” (p. 102).
But 30 pages later, the IOM succumbed to its urge to evangelize. CPRs “are essential for health care,” they wrote. “CPRs can play an important role in improving the quality of patient care and strengthening the scientific basis of clinical practice; they can also contribute to the … moderation of health care costs” (p. 132). Then came the preordained recommendation: “Health care professionals and organizations should adopt the computer based patient record (CPR) as the standard for medical and all other records related to patient care” (p. 133).
Because Ellwood and the IOM were already opinion-setters within the health policy and political worlds, their Pollyannish pronouncements received widespread coverage in the mainstream and professional media and were influential for years after their publication. Ellwood’s paper and the IOM’s book had a twofold effect: They accelerated the movement to force doctors and hospitals to buy EMRs, and they reinforced the norm within the health policy community that it’s OK to make costly, sweeping recommendations based on groupthink rather than evidence.
By the early 2000s, EMR groupthink within the health policy community had become conventional wisdom among politicians and much of the media. In his January 2004 State of the Union Address, President George Bush announced, “By computerizing medical records, we can avoid dangerous medical mistakes, reduce costs, and improve care.” To take another example, in August 2004 Senators Hillary Clinton and William Frist published an op-ed in the Washington Post in which they repeated as facts all the canards about EMRs. “[W]e both agree that in a new [health care] system, innovations stimulated by information technology will improve care, lower costs, improve quality and empower consumers,” they wrote. The groupthink about EMRs was canonized in 2009 when Congress enacted the Health Information Technology for Economic and Clinical Health (HITECH) Act, a law that created sticks and carrots to get providers to buy EMRs.
In this environment – in a world in which the nation’s most prominent health policy experts and most powerful politicians peddle groupthink as fact – it is easy to see how people with little knowledge of biology or health policy could be fooled into thinking there’s money to be made applying big data to cancer. Flatiron’s founders may make some money, but if they do it will be because other investors were fooled by a quarter-century of EMR hype into buying Flatiron’s stock at inflated prices. It will not be because Flatiron will substantially improve our ability to “see what therapies worked best,” determine “cost-effective therapies,” and identify “wasteful health care spending,” to quote the Fortune article.
In a decade or two it may turn out that Flatiron made modest contributions to cancer treatment by speeding up the rate at which researchers generate hypotheses, by identifying drugs and treatments that are causing serious side effects in some patients, and by speeding up recruitment of patients into clinical trials of new drugs. But in a decade or two we will not be saying, “Wow, big data reduced the cost of treating cancer and led directly to new treatments.”
All of us – citizens, policy-makers, but especially health policy experts – need to start following the money. We need to start paying attention to financial incentives that influence health policy experts. The health policy elite in this country incessantly bemoan the financial incentives that affect doctors and hospitals, but they have nothing to say about the role that financial incentives play in causing health policy experts to recommend health policies that don’t work and to refuse to say a kind word for health policies that do work, such as single-payer systems.
Kip Sullivan, J.D., is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program. His writing has appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.
By Avik Roy
Manhattan Institute for Policy Research, August 2014
The proposal contained herein — dubbed the Universal Exchange Plan (“the Plan”) — seeks to substantially repair both sets of health-policy problems: those caused by the ACA and those that predate it.
The Universal Exchange Plan would introduce major changes to the broad set of federal health care entitlements: Obamacare, Medicare, and Medicaid. The Plan uses a reformed version of the ACA’s health insurance exchanges as the basis for far-reaching entitlement reform.
The Plan would repeal many of the ACA’s cost-increasing insurance mandates, including the individual mandate. But it would preserve the ACA’s guarantee that every American can purchase coverage regardless of preexisting conditions. And it would utilize the concept of using federal premium support subsidies, on a means-tested basis, to defray the cost of private health coverage.
It would gradually migrate most Medicaid recipients, along with future retirees (N.B.: Medicare), onto these reformed exchanges.
The plan has its roots in real-world examples of market-oriented, cost-effective health reform. Notably, two wealthy nations — Switzerland and Singapore — spend a fraction of what the United States spends on health care subsidies; yet they have achieved universal coverage with high levels of access and quality.
Following is a posted response by Don McCanne to an August 13, 2014 Forbes article in which Avik Roy introduced his reform proposal:
“A 2011 OECD & WHO report of the Swiss health system revealed that it is highly inefficient with profound administrative waste. It is inequitably funded using regressive financing. It has excessive out-of-pocket costs that can create financial hardships. And it has an increasing prevalence of managed care intrusions through a private insurance industry that has learned how to game risk selection. The problems are severe enough that current polls indicate that a majority of the Swiss support their upcoming ballot measure (September 28) that would convert Swiss health care financing to a single payer system. Obviously the current failed Swiss system should not serve as a model for U.S. reform.”
****Transcending Obamacare? Analyzing Avik Roy’s ACA Replacement Plan
By Timothy Jost
Health Affairs Blog, September 2, 2014
Avik Roy’s proposal, “Transcending Obamacare,” is the latest and most thoroughly developed conservative alternative for reforming the American health care system in the wake of the Affordable Care Act.
Roy’s proposal is a curious combination of conservative nostrums (limiting recoveries for victims of malpractice), progressive goals (eliminating health status underwriting, providing subsidies for low-income Americans), and common sense proposals (enacting a uniform annual deductible for Medicare).
Most importantly, however, Roy proposes that conservatives move on from a single-minded focus on repealing the ACA toward building upon the ACA to accomplish their policy goals. He supports repealing certain features of the ACA—including the individual and employer mandate—but would retain others, such as community rating and exchanges. As polling repeatedly shows that many Americans are not happy with the ACA, but that a strong majority would rather amend than repeal it, and as it is very possible that we will have a Congress next year less supportive of the ACA than the current one, Roy’s proposal is important.
Much of Roy’s proposal is taken up with traditional conservative talking points on health care reform. It is tempting to respond to these point by point. For example, Roy trots out the health systems of Switzerland and Singapore as models for the United States because they depend heavily on consumer-funded health financing. The bottom line, however, is that we are not Switzerland and we are certainly not Singapore, and we cannot have their health care systems.
Roy also has his own hobby horses. He claims that people are better off being uninsured than on Medicaid and trots out a long list of studies that he claims show negative effects from Medicaid coverage.
Roy’s Universal Exchange Plan
Rather than respond to Roy point by point, however, this review will focus on the heart of Roy’s proposal; his universal exchange plan. (To access Jost’s critique of Roy’s universal exchange plan, use the link below.)
Projecting The Benefits And Costs Of Roy’s Proposal
In sum, higher cost-sharing should result in lower premiums for health plans — a 40 percent actuarial value plan should cost less than a 60 percent plan. Skinnier benefits could also reduce premiums. Reduced premiums should in turn draw more uninsured into the market and reduce federal subsidy costs. But higher cost-sharing would reduce access to care, decrease treatment adherence, and increase provider bad debt. The savings Roy touts come at a high cost.
The Stubborn Problem Of Complexity
Another important point about the Roy plan must be noted: It does not reduce the complexity of the ACA. Indeed, it might increase it.
The ACA has been woven inextricably into the fabric of our health care system, and even ignoring, if that were possible, the millions of Americans who are now covered under the ACA, it is simply not possible to return to status quo ante through repeal. Roy reasonably recognizes this and proposes instead to build on the ACA to move toward a system that he finds more sympathetic.
But “transcending Obamacare” will not be easy. One of the greatest defects of the ACA is its complexity. That complexity has required the Obama administration to exercise considerable creativity in implementing the law. But the law’s complexity simply follows from the fact that the drafters of the ACA attempted to build on, rather than to radically change, our current, impossibly complex, health care system.
Much of Roy’s proposal is still a broad conceptual framework. Even that framework is complicated, but were the proposal reduced to actual legislation, much less regulation, it would become far more convoluted and politically contested. We are doomed to continue to struggle with this complexity as long as we stubbornly cling to a private health insurance-based health care financing system.
Avik Roy presents his model of health care reform as a plan that does not require the repeal of the Affordable Care Act, but rather represents a reform of the ACA insurance exchanges along with the eventual elimination of Medicaid and Medicare. His proposed system is not yet fleshed out, but to achieve his stated ends, tremendous administrative complexity would have to be introduced.
There is much to criticize about Roy’s conservative, consumer-directed approach to health care financing – the worst flaw being the great financial burden that would be placed on those requiring health care. Should his proposal ever be seriously considered by Congress, a detailed response should be effective in countering it.
But for now, Timothy Jost summarizes the fatal flaw of his approach in two sentences:
“But the law’s complexity simply follows from the fact that the drafters of the ACA attempted to build on, rather than to radically change, our current, impossibly complex, health care system.”
“We are doomed to continue to struggle with this complexity as long as we stubbornly cling to a private health insurance-based health care financing system.”
Avik Roy has contributed to the cause by showing us a proposal that makes it ever more clear why we must change to a single payer national health program. And we can thank Timothy Jost for clarifying that for us.