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The nefarious plot of generic drug tiers

Wed, 2014-09-17 15:41
Is All “Skin in the Game” Fair Game? The Problem With “Non-Preferred” Generics

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.

http://www.ajmc.com/publications/issue/2014/2014-vol20-n9/Is-All-Skin-in…

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?

Dartmouth studies sending us in the wrong direction?

Tue, 2014-09-16 16:36
Why the Geographic Variation in Health Care Spending Can’t Tell Us Much about the Efficiency or Quality of our Health Care System

By Louise Sheiner
Brookings Institution, September 2014

Abstract

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.

I. Introduction

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.

VIII. Conclusions

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.

http://www.brookings.edu/~/media/projects/bpea/fall%202014/fall2014bpea_…

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.

Private insurers using “virtual credit cards” to loot physician payments

Mon, 2014-09-15 14:01
Footing bill for insurers’ pay methods shouldn’t fall on doctors

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.

http://www.ama-assn.org/ama/pub/ama-wire/ama-wire/post/footing-bill-insu…

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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

(Requires login): https://download.ama-assn.org/resources/doc/psa/x-pub/joint-virtual-card…

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.

Addendum:

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!

Some Covered California patients involuntary transferred to Medi-Cal

Fri, 2014-09-12 14:32
Income checks throw Californians off health plans

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.

http://www.kcra.com/news/income-checks-throw-californians-off-health-pla…

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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.

http://www.latimes.com/opinion/editorials/la-ed-medi-cal-20140910-story….

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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.

http://www.latimes.com/opinion/editorials/la-ed-health-insurance-network…

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 report on consumer finances

Thu, 2014-09-11 16:09
Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances

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.

Family incomes

  • 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.

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.

http://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf

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).

Narrow networks reduce specialized care for the sickest patients

Wed, 2014-09-10 09:29
Controlling Health Care Costs Through Limited Network Insurance Plans: Evidence from Massachusetts State Employees

By Jonathan Gruber, Robin McKnight
The National Bureau of Economic Research, NBER Working Paper No. 20462, September 2014

Abstract

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

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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.”

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NYT Reader Comments:

Don McCanne 
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?

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Kate 
Portland OR

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.

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sfdphd
San Francisco

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…

http://www.nytimes.com/2014/09/10/upshot/narrow-health-networks-maybe-th…

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.

U.S. far out in front again – in hospital administrative waste

Mon, 2014-09-08 09:45
A Comparison Of Hospital Administrative Costs In Eight Nations: US Costs Exceed All Others By Far

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

Abstract

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.

http://content.healthaffairs.org/content/33/9/1586.abstract

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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.’”

http://www.pnhp.org/news/2014/september/bureaucracy-consumes-one-quarter-of-us-hospitals’-budgets-twice-as-much-as-in-ot

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.

Urban Institute and Bankrate on high deductibles

Fri, 2014-09-05 16:44
QuickTake: Nonelderly Workers with ESI Are Satisfied with Nonfinancial Aspects of Their Coverage but Less Satisfied with Financial Aspects

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.

http://hrms.urban.org/quicktakes/Nonelderly-workers-with-ESI.html

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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.

http://www.nytimes.com/2014/09/05/upshot/how-people-feel-about-their-emp…

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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.”

http://www.bankrate.com/finance/insurance/health-insurance-poll-0814.aspx

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.

What do health care cost trends mean for us?

Thu, 2014-09-04 16:44
National Health Expenditure Projections, 2013–23: Faster Growth Expected With Expanded Coverage And Improving Economy

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

Abstract

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.

Conclusion

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.

http://content.healthaffairs.org/content/early/2014/08/27/hlthaff.2014.0…

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.

Instruction sheets for completing ACA tax forms – a proxy for ACA complexity

Wed, 2014-09-03 16:45
Implementing Health Reform: Tax Form Instructions

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.”

Single payer.

Big data: The latest fad in health policy

Wed, 2014-09-03 09:19
Can big data cure cancer?

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.

http://fortune.com/2014/07/24/can-big-data-cure-cancer/

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.

Timothy Jost analyzes Avik Roy’s “Transcending Obamacare”

Tue, 2014-09-02 16:39
Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency

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.

http://www.manhattan-institute.org/pdf/mpr_17.pdf

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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.”

http://www.forbes.com/sites/theapothecary/2014/08/13/transcending-obamac…

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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.

http://healthaffairs.org/blog/2014/09/02/transcending-obamacare-analyzin…

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.”

and

“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.

Compensation for health insurance executives

Thu, 2014-08-28 15:25
Report: Health Law Ups Taxes On Insurers With Big Pay Packages

By Julie Appleby
Kaiser Health News, August 27, 2014

While average compensation for top health insurance executives hit $5.4 million each last year (up from $5.1 million in 2012), a little-noticed provision in the federal health law sharply reduced insurers’ ability to shield much of that pay from corporate taxes.

As a result, insurers owed at least $72 million more to the U.S. Treasury last year, said the Institute for Policy Studies, a liberal think tank in Washington D.C.

Researchers analyzed the compensation of 57 executives at the 10 largest publicly traded health plans, finding they earned a combined $300 million in 2013. Insurers were able to deduct 27 percent of that from their taxes as a business expense, estimates the report. Before the health law, 96 percent would have been deductible.

UnitedHealth Group, which paid CEO and President Stephen Hemsley about $28 million in pay and stock options in 2013, had the biggest tax bill among the 10 companies, the report found. Hemsley’s compensation accounted for nearly $6 million of the firm’s estimated $19 million in taxes that the report says it owed on  pay packages for five executives under the health law.

“They’re paying more in taxes just to protect these pay packages,” said Sarah Anderson, global economy project director at the institute.

Under the 2010 law, insurers can deduct only the first $500,000 of annual compensation per employee from corporate taxes, down from $1 million allowed before the law’s passage.  The law also requires insurers to include so-called “performance pay,” such as stock options, which often represent a hefty portion of an executive’s pay.

http://capsules.kaiserhealthnews.org/index.php/2014/08/report-health-law…

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Covered California’s Peter Lee nets bonus, Obamacare site nets 1.2 million enrollees

By Chris Rauber
San Francisco Business Times, August 22, 2014

Covered California’s executive director, Peter Lee, has won a one-time $52,528 bonus for his role in launching the Obamacare exchange in the Golden State, which apparently netted 1.2 million enrollees all told during its first open enrollment period.

Lee’s one-time bonus is his first pay increase in three years… “excepting general state increases,” and represents a 20 percent “incentive award” based on his annual $262,644 salary.

http://www.bizjournals.com/sanfrancisco/blog/2014/08/covered-californias…

There are a great many reasons that health care reform activists believe that private, investor-owned insurers should be eliminated from our health care financing, but one reason that is particularly offensive is the outrageous compensation packages for their executives. For that reason, the Affordable Care Act (ACA) included a provision prohibiting insurers from writing off for tax purposes more than $500,000 per executive, as a means to discourage the excessive executive pay.

Well, it didn’t work. Instead of taking those taxes out of the excessive salaries, executives were given pay increases averaging $300,000, raising their incomes to an average of $5.4 million. Although more corporate taxes were paid, those funds were recovered through higher premiums charged to the purchasers of health plans.

Compare the executive pay of the private insurers to that of Peter Lee, the head of California’s ACA insurance exchange – by far the largest and most successful ACA exchange in the nation. With his performance bonus, his income was only about one-twentieth of the average income of the executives of the largest publicly-traded health plans. In fact, Stephen Hemsley of UnitedHealth Group received almost 100 times as much as Lee.

These differences reflect the priorities of invested-owned corporations as opposed to quasi-public agencies. One is about making the most money possible, and the other is about serving the needs of the people.

Make no mistake. The ACA exchanges are still the wrong model because they contract with these same private insurers that perpetuate their abusive practices, such as overpaying their executives. Under a single payer system, administrators such as Peter Lee would be providing us with much greater value for their services since single payer systems eliminate much of the administrative waste while spending appropriate amounts for health care, and, yes, spending appropriate amounts for our public administrators.

Insurers shoving “advanced illness counselors” on us

Wed, 2014-08-27 16:24
Operator? Business, Insurer Take On End-of-Life Issues By Phone

By Elana Gordon, WHYY
Kaiser Health News, August 27, 2014

Kate Schleicher, 27,  is a licensed clinical social worker, who knows almost as little about you as you do about her. Except she knows your phone number, your insurance provider and that you are pretty sick.

Schleicher is one of 50 social workers at a company called Vital Decisions. After sending a letter (people rarely respond) counselors essentially cold-call to offer what they describe as “nondirected” end-of-life counseling.

The hope of this program, she says, is to build a relationship over the phone, so (the patient) might be comfortable discussing his situation and his goals. Then he’ll be empowered to communicate those things with others, including his family and his doctors. He could also choose to allow the counselor to talk to his doctors or family directly. It’s paid for by insurers and federal privacy rules permit this for business purposes.

And when these conversations do happen, there’s can be another byproduct: reduced costs. Research is finding that when patients fully understand aggressive care, many choose less of it.

But some people are wary of the company’s approach. Dr. Lauris Kaldjian, professor of bioethics at the University of Iowa, has concerns about the social worker, patient and family never actually meeting. “Because if you don’t have enough knowledge about what’s actually going on with the patient, it would actually be irresponsible to pretend to have discussion that depends upon such knowledge.”

http://www.kaiserhealthnews.org/Stories/2014/August/27/insurers-new-busi…

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Vital Decisions

Vital Decisions is an innovative organization that assists patients and families dealing with advanced illness. We help patients clarify their values and preferences and then communicate with their family and care team to actualize those preferences. Our clients include several leading national, regional, and local health care plans which offer our service free of charge to appropriate individuals within their member populations.

We are a privately held company located in the Metropark business complex in Edison, NJ. The Company is profitable, and cash flow-positive, and is a leader in the growing field of advanced illness counseling.

The Company is a portfolio company of MTS Health Investors, the New York-based healthcare private equity firm.

http://www.vitaldecisions.net/careers.asp

HHS.gov: Health Information Privacy: “Business Associates”:http://www.hhs.gov/ocr/privacy/hipaa/understanding/coveredentities/busin…

When you are faced with advanced illness, perhaps nearing the end of life, where would you want to turn for medical advice on how to get through this difficult time? Your personal physician and health care team? Private health insurers, always looking for more administrative innovations to sell us, are now using high pressure tactics to force “advanced illness counselors” into the management of your care.

Who are these counselors? In the example given, they are employees of Vital Decisions, a private, for-profit corporation that sells its services to private insurance companies. They use your confidential medical diagnoses that have been provided to them by the private insurers to market to you an advisory service on negotiating the health care system. After an introductory letter that is routinely ignored, the counselors cold-call to try to convince you to accept their end-of-life counseling. Of course, this is “at no cost to you” since your insurer pays for this service. The services are provided over the phone from offices in New Jersey – a definition of personal care that only the insurers can understand. The clients of Vital Decisions are the private insurers, not the patients, nor the physicians, nor any other members of the health care team.

With today’s emphasis on privacy, how could unrelated business entities gain enough information about you to make a contact? In another concession to the private insurers, HHS allows them to share this confidential information with “business associates” – basically any business entity that might interact with the insurer as the insurer carries out its business functions. It is the private insurers that sic on you these end-of-life-care marketeers just at a time that you do not want any more extrinsic intrusions since you are suffering enough already.

Although the insurers say that they are paying for these services, they are actually paid by plan enrollees in the form of higher premiums. What is worse, these services are classified as health care related services and can be included in the insurers’ medical loss ratios. They do not apply to the 15% or 20% limit on administrative costs. In fact, since they are counted as medical losses, it allows the insurers even more leeway in adding on yet more administrative services. Since the percentages are fixed, more medical losses allow more administrative services – the primary product that the private insurers are selling us.

As a portfolio company of MTS Health Investors, the New York-based healthcare private equity firm, Vital Decisions is taking very good care of Wall Street, while intruding in our most difficult time of life and then walking away with our health care dollars.

Regular readers know what a single payer national health program would do with these parasites. They’d be out the door, right now.

Jonathan Bernstein: “Public opinion is an incoherent mess”

Tue, 2014-08-26 13:53
Loving and Hating Obamacare With One Muddled Mind

By Jonathan Bernstein
Bloomberg View, August 25, 2014

E.J. Dionne has a nice column pointing out that while “Obamacare” remains unpopular, most of the provisions are well-liked, and thus Democrats should run on the issue. As regular readers know, I certainly agree that the individual components of reform are far more popular than reform overall. Actually, support for key provisions of the law, including coverage of pre-existing conditions, health-insurance exchanges offering subsidies to middle-income policy holders and Obamacare’s Medicaid expansion, have always polled well.

Moreover caution is always in order with issue polling. When these kinds of polls show public opinion fractured, it’s tempting to believe that one side or the other represents voters’ “true” support. That’s the wrong way to interpret such polls. Yes, the ACA polls badly while most of its components poll well. But that doesn’t mean that the ACA is genuinely unpopular (as most opponents suggest) or that it’s genuinely popular (as most supporters contend). There is no underlying truth to be excavated from the results; the best we can do is say that public opinion is inconsistent.

Well, that’s the best we observers can do. Campaign operatives, in contrast, can counsel their candidates to stress whatever is popular. What those operatives shouldn’t do is to fall for their own spin, or let their candidates fall for it.

The broader point: We can measure public opinion, but sometimes – actually, quite often – public opinion is an incoherent mess. Voters have plenty of things other than politics going on in their lives; it’s not surprising that they should find the strongest selling points from both sides quite appealing and let it go at that. For those of us who pay close attention, it may seem weird that someone could hate Obamacare while loving almost every part of it. There must be one overriding opinion hidden in there — pro or con — that good research can isolate, no? Well, no. Sometimes, incoherence in the polls simply reflects incoherence among voters. We just have to live with that.

http://www.bloombergview.com/articles/2014-08-25/loving-and-hating-obama…

The public reaction to the Affordable Care Act (ACA) is very instructive as far as understanding public attitudes toward single payer reform.

Most of the specific policies in ACA have been supported for many years by those who are relatively well informed on the issues – a minority of our population. The negative views of the public have been formed in the hollow echo chamber filled with empty political rhetoric devoid of illuminating explanations – a message chamber that reaches most of our people. The political attack has been aimed at President Obama and the Democratic Party, but not at ACA’s beneficial policies. Thus many in the media have correctly reported that “Obamacare” continues to poll poorly – as a political construct – whereas the specific improvements in health care coverage – the health policies – have support of the majority.

Although the situation with the public attitude towards single payer is similar, it has not had nearly the same intensity of exposure has had ACA. More Americans have now heard the term “single payer,” but the majority still have a poor understanding of what a tremendous improvement it would be over our highly dysfunctional, wasteful, inefficient, and inequitable multi-payer system. That is, the public at large is still very poorly informed on single payer policies.

The hollow echo chamber of empty political rhetoric targeting single payer has been around much longer but has been maintaining a lower profile. As long as single payer reform does not seem to be imminent, the effort of opponents has been directed to building anti-government memes that can be rapidly brought to the front should a single payer reform effort gain traction.

Examples of this latter phenomenon include Proposition 186 in California and Measure 23 in Oregon. Both of these single payer measures polled favorably until close to the elections. In both instances, it took only a couple of weeks of mindless trashing of the measures to result in a tidal wave of opposition. They were defeated by empty rhetoric and not by opposition to beneficial health policies.

In today’s article, Jonathan Bernstein makes the important point that “quite often public opinion is an incoherent mess.” Look how much difficulty the supporters of ACA are having in getting the message out about the genuine benefits of ACA when the listeners are exposed to a background of meaningless cacophony generated in the hollow echo chamber.

When single payer is ready for its day, the cacophony will be almost unbearable. That is why it is so important now to pull all stops in educating the public on single payer benefits. They will need a much better understanding of the concept so that they can sort out the facts from the noise.

Bernstein says, “Sometimes, incoherence in the polls simply reflects incoherence among voters. We just have to live with that.” No, we don’t have to live with that. We simply need to build our own colossal echo chamber spewing out the facts. Education. Education. Education.

2014 National Strategy Conference for Single Payer

Mon, 2014-08-25 17:06

By Don McCanne
August 25, 2014

This weekend numerous organizations dedicated to single payer reform assembled in Oakland, California for the 2014 National Strategy Conference. Participating organizations included Healthcare NOW!, Labor Campaign for Single-Payer Healthcare, One Payer States, National Nurses United, Physicians for a National Health Program, Progressive Democrats of America, and many others. So what was accomplished?

Above all, just gathering dedicated single payer supporters together in a single weekend meeting provided renewed energy and passion amongst the attendees, confirming that the single payer movement is not only still alive, it is thriving. We have a future.

Did we develop a national strategy that will culminate in enactment of single payer reform with the installation of a new government after the 2016 elections? Well, not exactly, but nobody expected that. What we did accomplish was the sharing of ideas on strategy, policy, politics, single payer education, state and federal legislation, and innumerable other components of a social movement that would lead to single payer.

In both the formal sessions and in informal conversations there was a very broad spectrum of ideas discussed, though not all of the ideas mesh well. And this is from a solid core of single payer activists. But all views were expressed with the intent of advancing health care justice.

Others attending will certainly have different take-home points, but mine was that we each should continue to do what we are doing while helping to open new avenues in advancing the cause. Especially helpful would be efforts to educate others, expand grassroots efforts, and work to form coalitions with other social justice organizations.

There was a consensus that we should not waste time and squander energy by becoming divided over process. We need to direct that energy to making progress towards our goal of a single payer national health program – an improved Medicare for all.

CMMI blows a billion dollars on a flawed study

Fri, 2014-08-22 16:03
Project Evaluation Activity in Support of Partnership for Patients: Task 2 Evaluation Progress Report

Center for Medicare and Medicaid Innovation (CMMI)Submitted 7/10/2014

The Partnership for Patients (PfP) campaign was launched in April 2011 with the ambitious goals of reducing preventable hospital-acquired conditions (HACs) by 40 percent and 30-day hospital readmissions by 20 percent. To reduce harm at this level of magnitude, the campaign implemented a strategy to align all health care stakeholders, including federal and other public and private health care payors, providers, and patients, to focus on this issue concurrently. By influencing everyone to move in the same direction at the same time, the program strove to overcome the inherently limited reach of any single initiative operating in a complex environment. The three major components of the campaign, conceptualized as “engines,” are the Centers for Medicare & Medicaid Innovation (CMMI) investment engine, the federal partner alignment engine, and the outside partner engine. The program is national in scope, due to its level of implementation. For example, over 70 percent of general acute care hospitals in the United States (U.S.), representing over 80 percent of admissions, worked with PfP-funded Hospital Engagement Networks (HENs) during 2012-2013.

Findings

The PfP campaign focuses on 11 areas of patient harm. To date, the evaluation has found clear evidence for decreased rates of harms in five of the eleven areas, meaning the decreases are statistically significant, and/or meet statistical process control criteria for a special cause decrease, and/or (in cases where only aggregated data are available) are large in magnitude. These areas include obstetrical early elective deliveries (OB-EED), readmissions, adverse drug events (ADE), ventilator-associated pneumonia (VAP), and central line-associated bloodstream infection (CLABSI). In the other six areas, to date, the evaluation has found mixed evidence, meaning some datasets show decreases, while others show no change, or even worsening, including venous thromboembolism (VTE), catheter-associated urinary tract infection (CAUTI), other OB adverse events (OB-Other), pressure ulcers, surgical site infections (SSI), and falls.

The cost estimates available to date suggest cumulative savings of between $3.1 to $4 billion as a result of the decreases in harms since the baseline of 2010. Additionally, AHRQ has estimated 15,5001 deaths averted since 2010, based on mortality rate estimates associated with targeted harms. Tables 1 and 2 synthesize the evidence available to date for improvement in the rate of adverse events in each of the 11 areas, and Table 3 provides cost reduction estimates from the two available sources of estimates to date. Since hospital payment policies and other U.S. Department of Health & Human Services (HHS) programs that played an important role as part of the PfP campaign were in place and making changes over time, it is not possible at this time for the evaluation to identify the portion of these harm reductions and savings attributable to the PfP campaign’s direct work with hospitals versus alignment of forces for harm reduction versus other harm reduction work that would have continued with or without PfP.

http://innovation.cms.gov/Files/reports/PFPEvalProgRpt.pdf

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About the CMS Innovation Center

The Innovation Center was established by section 1115A of the Social Security Act (as added by section 3021 of the Affordable Care Act). Congress created the Innovation Center for the purpose of testing “innovative payment and service delivery models to reduce program expenditures …while preserving or enhancing the quality of care” for those individuals who receive Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) benefits.

http://innovation.cms.gov/about/index.html

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Did Hospital Engagement Networks Actually Improve Care?

By Peter Pronovost, M.D., Ph.D., and Ashish K. Jha, M.D., M.P.H.
The New England Journal of Medicine, August 21, 2014

Everyone with a role in health care wants to improve the quality and safety of our delivery system. Recently, the Centers for Medicare and Medicaid Services (CMS) released results of its Partnership for Patients Program (PPP) and celebrated large improvements in patient outcomes. But the PPP’s weak study design and methods, combined with a lack of transparency and rigor in evaluation, make it difficult to determine whether the program improved care. Such deficiencies result in a failure to learn from improvement efforts and stifle progress toward a safer, more effective health care system.

CMS launched the PPP in December 2011 as a collaborative comprising 26 “hospital engagement networks” (HENs) representing more than 3700 hospitals, in an effort to reduce the rates of 10 types of harms and readmissions. The HENs work to identify and disseminate effective quality-improvement and patient-safety initiatives by developing learning collaboratives for their member facilities, and they direct training programs to teach hospitals how to improve patient safety. In a February 2013 webcast, CMS announced that the rates of early elective deliveries had dropped 48% among 681 hospitals in 20 HENs and that the national rate of all-cause readmissions had decreased from 19% to 17.8%, though it is unclear which HENs were included for each measure and what time periods were the pre- and post-intervention periods.

These numbers appear impressive, but given the publicly available data and the approach CMS used, it’s nearly impossible to tell whether the PPP actually led to better care. Three problems with the agency’s evaluation and reporting of results raise concerns about the validity of its inferences: a weak design, a lack of valid metrics, and a lack of external peer review for its evaluation. Though the evaluation of many other CMS programs also lacks this basic level of rigor, given the large public investment in the PPP, estimated at $1 billion, and the strong public inferences about its impact, the lack of valid information about its effects is particularly troubling.

The design of a quality-improvement program influences our ability to make reasonable inferences about its benefits to patients. Although individual HENs may have used more rigorous methods, the overall PPP evaluation had three important weaknesses: it used a pre–post design with only single points in the pre and post periods, did not have concurrent controls, and did not specify the pre and post periods a priori. Such an approach is highly subject to bias.

There are alternatives available, including a randomized or even a cluster-randomized trial. If such trials were not feasible, CMS could have used other robust design approaches, such as an interrupted time-series study with concurrent controls. Rather than having a single pre time period and a single post time period, this design entails repeated measurements of the safety indicators before and after the intervention in both HEN and non-HEN hospitals. Such an approach would have provided more valid inferences about the effects of the program, with few additional costs.

Beyond using a poor design, CMS did not use standardized and validated performance measures across all participating hospitals — further hampering inferences about the program’s effects. To support engagement, CMS allowed each HEN to define its own performance measures, with little focus on data quality control.

CMS also required HENs and participating hospitals to submit a large number of process measures of unknown validity. It is essential to use validated measures — ideally those endorsed by the National Quality Forum — unless there is a compelling reason not to. In instances where validated measures are unavailable, instead of using poor quality metrics, CMS can have an agency such as the Agency for Healthcare Research and Quality (AHRQ) or the CDC develop measures rapidly.

Finally, CMS made — and presented publicly — inferences about its program’s benefits without having subjected its work to independent evaluation or peer review. Peer review, though imperfect, is a powerful quality control.

The PPP involved an investment of nearly $1 billion to improve care — three times the annual budget of the AHRQ, the lead federal funding agency for implementation science, which often lacks resources for promising projects. With such a sizable investment, CMS could have supported a better evaluation. It could have randomized HENs or hospitals to receive interventions earlier or later; used standardized, validated measures across the HENs; built in basic data quality controls; and independently collected qualitative information alongside quantitative data to learn not just whether the interventions worked but also how and why they did, thereby advancing our understanding of the mechanisms and context of improvement science. These changes would have allowed the country to learn so much more.

The lack of a careful evaluation is symptomatic of a broader problem: some members of the quality-improvement community eschew even modestly rigorous methods, believing that one can simply “know” if an intervention worked. Though maintaining hope and optimism among clinicians is important, when untested interventions are implemented widely, they often fail to improve care. The confidence we can have in an intervention’s efficacy is directly related to the rigor with which it is designed, implemented, and evaluated. Given the strong desire to improve care and the conflicts of interest we all face in evaluating our own work, subjecting all evaluations to external examination is critical.

The field of improvement science is still in its infancy. Given the magnitude of the quality and cost problems in health care and the amount of money invested in mitigating these problems, the public, providers, and policymakers need to have confidence that money used to improve care is being well spent. It’s true that improvement science requires mixed methods and is difficult, but all good science is difficult. Failing to attend closely to issues of design, methods, and metrics leaves us with little confidence in an intervention. For the PPP, which required thousands of hours of clinicians’ time and large sums of money, that lack of confidence is particularly unfortunate. More important, the failure to generate valid, reliable information hampers our ability to improve future interventions, because we are no closer to understanding how to improve care than we were before the PPP. And that is the biggest cost of all.

http://www.nejm.org/doi/full/10.1056/NEJMp1405800?query=TOC#t=article

Another creation of the Affordable Care Act (ACA) is the Center for Medicare and Medicaid Innovation (CMMI) – an entity established to test innovations in payment and service delivery models designed to reduce costs and improve quality. How is it doing?

After spending almost a billion dollars on a study designed to reduce hospital-acquired conditions – a budget three times the total annual budget of AHRQ (Agency for Healthcare Research and Quality) – we have almost nothing to show for that effort and expense. As the CMMI report states, “Since hospital payment policies and other U.S. Department of Health & Human Services (HHS) programs that played an important role as part of the PfP campaign were in place and making changes over time, it is not possible at this time for the evaluation to identify the portion of these harm reductions and savings attributable to the PfP campaign’s direct work with hospitals versus alignment of forces for harm reduction versus other harm reduction work that would have continued with or without PfP.”

In their article on the flaws in this program, Peter Pronovost and Ashish Jha make an observation that typifies what has been wrong with the entire reform process centered on ACA. They state, “some members of the quality-improvement community eschew even modestly rigorous methods, believing that one can simply “know” if an intervention worked. Though maintaining hope and optimism among clinicians is important, when untested interventions are implemented widely, they often fail to improve care.”

Think of some of the prominent personalities involved in crafting and implementing ACA and how outspoken they were and continue to be on what they simply “know” will work – accountable care organizations, bundled payments, pay for performance, competing exchange plans bringing us higher quality at lower cost, placing the empowered consumer in charge through deductibles and other cost sensitivity, and improving payment policies through the Center for Medicare and Medicaid Innovation.

The tragedy is that much of this was to avoid adopting a program that every informed person knows really would work – an improved Medicare for all. It would have been far better to have directed that billion dollars towards implementing single payer.

Is Austin Frakt right that Medicare Advantage may be worth the extra cost?

Fri, 2014-08-22 15:56
Medicare Advantage Is More Expensive, but It May Be Worth It

By Austin Frakt
The New York Times, August 18, 2014

Medicare Advantage plans — private plans that serve as alternatives to the traditional, public program for those that qualify for it — underperform traditional Medicare in one respect: They cost 6 percent more.

But they outperform traditional Medicare in another way: They offer higher quality. That’s according to research summarized recently by the Harvard health economists Joseph Newhouse and Thomas McGuire, and it raises a difficult question: Is the extra quality worth the extra cost?

In contrast to studies in the 1990s, more recent work finds that Medicare Advantage is superior to traditional Medicare on a variety of quality measures. For example, according to a paper in Health Affairs by John Ayanian and colleagues, women enrolled in a Medicare Advantage H.M.O. are more likely to receive mammography screenings; those with diabetes are more likely to receive blood sugar testing and retinal exams; and those with diabetes or cardiovascular disease are more likely to receive cholesterol testing.

Contemplating these more recent findings on quality alongside the higher taxpayer cost of Medicare Advantage plans invites some cognitive dissonance. On the one hand, we shouldn’t pay more than we need to in order to provide the Medicare benefit; we should demand that taxpayer-financed benefits be provided as efficiently as possible. Medicare Advantage doesn’t look so good from this perspective.

On the other hand, we want Medicare beneficiaries — which we all hope to be someday, if we’re not already — to receive the highest quality of care. Here, as far as we know from research to date, Medicare Advantage shines, at least relative to traditional Medicare.

Is Medicare Advantage worth its extra cost? A decade ago when quality appeared poor, the answer was easy: No. Today one must think harder and weigh costs against program benefits, including its higher quality. The research base is still too thin to provide an objective answer. Mr. Newhouse and Mr. McGuire hedge but lean favorably toward Medicare Advantage, saying cuts in its “plan payments may be shortsighted.”

http://www.nytimes.com/2014/08/19/upshot/medicare-advantage-is-more-expe…

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How Successful Is Medicare Advantage?

By Joseph P. Newhouse and Thomas G. McGuire
The Milbank Quarterly, June 3, 2014 (online)

Quality of Care in TM (traditional Medicare) and MA (Medicare Advantage)

The plans’ medical management methods could, in principle, improve the quality of their care relative to that of TM. Unfortunately, it is difficult to compare the quality of care in TM and MA because the data necessary to do so are sparse (John Ayanian et al). A few comparisons can be made, however, from the data reported by beneficiaries in the Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys, although the beneficiaries’ ability to assess the technical quality of their care clearly is limited.

http://onlinelibrary.wiley.com/doi/10.1111/1468-0009.12061/full

Joseph P. Newhouse is a member of Aetna’s Board of Directors:
http://www.aetna.com/about-us/corporate-governance/board-of-directors.html

Thomas McGuire coauthored the paper, “Making Medicare advantage a middle-class program”:

http://www.hcp.med.harvard.edu/publications/making-medicare-advantage-a-…

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Medicare Beneficiaries More Likely To Receive Appropriate Ambulatory Services In HMOs Than In Traditional Medicare

By John Z. Ayanian, Bruce E. Landon, Alan M. Zaslavsky, Robert C. Saunders, L. Gregory Pawlson and Joseph P. Newhouse
Health Affairs, July 2013

Our results suggest that the positive effects of more-integrated delivery systems on the quality of ambulatory care in Medicare HMOs may outweigh the potential incentives to restrict care under capitated payments.

From the Conclusion

The Affordable Care Act authorized CMS to begin contracting with accountable care organizations that will share financial risk with CMS for the costs and quality of care received by the traditional Medicare beneficiaries they serve.23 Through the Medicare Pioneer Accountable Care Organizations and Shared Savings Programs, these organizations are eligible to receive bonus payments, initially related to reporting quality measures and subsequently to achieving higher quality of care.

These recent parallel expansions of financial incentives for achieving better quality of care in Medicare Advantage and traditional Medicare heighten the need for performance measures that can be compared between these two major components of the Medicare program. Such measures will enable policy makers, health care providers, and Medicare beneficiaries to assess whether the quality of care in Medicare Advantage health plans differs from that provided within accountable care organizations and from that provided outside these organizations in the traditional Medicare program.

http://content.healthaffairs.org/content/32/7/1228.full

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Pioneer Accountable Care Organizations disappoint

By Don McCanne
PNHP Blog, July 17, 2013

The Pioneer Accountable Care Organizations (ACOs) were already existing health care organizations that were selected as potentially exemplary models that could show the rest of the nation how well ACOs can work to achieve higher quality at lower costs. We now have a report from CMS of the initial “successes” of this model.

Considering the added administrative hassle, the savings were negligible, with only 13 of the 32 organizations saving enough to receive “shared savings” from CMS, and 2 actually lost money.

Even the supposed quality gains were unimpressive since they represented only 15 measurements which the organizations were told in advance would be used to determine whether or not they met quality standards. These teach-to-the-test gains can hardly represent the overall quality status of each organization.

http://pnhp.org/blog/2013/07/17/pioneer-accountable-care-organizations-d…

The private Medicare Advantage plans promised higher quality at lower cost. They clearly have failed on the promise of lower costs, but are they actually providing improved quality that is worth the extra cost?

Austin Frakt cites the Milbank Quarterly article by Joseph Newhouse and Thomas McGuire as providing the evidence for higher quality. In their article they state, “it is difficult to compare the quality of care in TM (traditional Medicare) and MA (Medicare Advantage) because the data necessary to do so are sparse.” They cite as their source a Health Affairs article by John Ayanian et al (Joseph Newhouse being a coauthor) which states, “These recent parallel expansions of financial incentives for achieving better quality of care in Medicare Advantage and traditional Medicare heighten the need for performance measures that can be compared between these two major components of the Medicare program.” Yes, performance measures that we do not have.

The ideological preferences of Newhouse and McGuire can be gleaned from the links above – a bias which shines through in their Milbank Quarterly article.

The point is that, other than for a few primitive teach-to-the-test measurements, measurement of quality is still in the dark ages. The Medicare Advantage plans would be expected to do better on these few measurements since they use them for marketing purposes (Medicare star ratings) and to gain bonuses. Even Austin Frakt writes, “The research base is still too thin to provide an objective answer.”

The case for higher quality in Medicare Advantage plans has not been made.

An excellent article that concurs with this view: “No, We Still Don’t Have Proof That Private Medicare Plans Are Better,” by Thomas Huelskoetter:

http://thinkprogress.org/health/2014/08/20/3473823/medicare-advantage-co…

Is Austin Frakt right that Medicare Advantage may be worth the extra cost?

Thu, 2014-08-21 16:03
Medicare Advantage Is More Expensive, but It May Be Worth It

By Austin Frakt
The New York Times, August 18, 2014

Medicare Advantage plans — private plans that serve as alternatives to the traditional, public program for those that qualify for it — underperform traditional Medicare in one respect: They cost 6 percent more.

But they outperform traditional Medicare in another way: They offer higher quality. That’s according to research summarized recently by the Harvard health economists Joseph Newhouse and Thomas McGuire, and it raises a difficult question: Is the extra quality worth the extra cost?

In contrast to studies in the 1990s, more recent work finds that Medicare Advantage is superior to traditional Medicare on a variety of quality measures. For example, according to a paper in Health Affairs by John Ayanian and colleagues, women enrolled in a Medicare Advantage H.M.O. are more likely to receive mammography screenings; those with diabetes are more likely to receive blood sugar testing and retinal exams; and those with diabetes or cardiovascular disease are more likely to receive cholesterol testing.

Contemplating these more recent findings on quality alongside the higher taxpayer cost of Medicare Advantage plans invites some cognitive dissonance. On the one hand, we shouldn’t pay more than we need to in order to provide the Medicare benefit; we should demand that taxpayer-financed benefits be provided as efficiently as possible. Medicare Advantage doesn’t look so good from this perspective.

On the other hand, we want Medicare beneficiaries — which we all hope to be someday, if we’re not already — to receive the highest quality of care. Here, as far as we know from research to date, Medicare Advantage shines, at least relative to traditional Medicare.

Is Medicare Advantage worth its extra cost? A decade ago when quality appeared poor, the answer was easy: No. Today one must think harder and weigh costs against program benefits, including its higher quality. The research base is still too thin to provide an objective answer. Mr. Newhouse and Mr. McGuire hedge but lean favorably toward Medicare Advantage, saying cuts in its “plan payments may be shortsighted.”

http://www.nytimes.com/2014/08/19/upshot/medicare-advantage-is-more-expe…

****

How Successful Is Medicare Advantage?

By Joseph P. Newhouse and Thomas G. McGuire
The Milbank Quarterly, June 3, 2014 (online)

Quality of Care in TM (traditional Medicare) and MA (Medicare Advantage)

The plans’ medical management methods could, in principle, improve the quality of their care relative to that of TM. Unfortunately, it is difficult to compare the quality of care in TM and MA because the data necessary to do so are sparse (John Ayanian et al). A few comparisons can be made, however, from the data reported by beneficiaries in the Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys, although the beneficiaries’ ability to assess the technical quality of their care clearly is limited.

http://onlinelibrary.wiley.com/doi/10.1111/1468-0009.12061/full

Joseph P. Newhouse is a member of Aetna’s Board of Directors:http://www.aetna.com/about-us/corporate-governance/board-of-directors.html

Thomas McGuire coauthored the paper, “Making Medicare advantage a middle-class program”: http://www.hcp.med.harvard.edu/publications/making-medicare-advantage-a-…

****

Medicare Beneficiaries More Likely To Receive Appropriate Ambulatory Services In HMOs Than In Traditional Medicare

By John Z. Ayanian, Bruce E. Landon, Alan M. Zaslavsky, Robert C. Saunders, L. Gregory Pawlson and Joseph P. Newhouse
Health Affairs, July 2013

Our results suggest that the positive effects of more-integrated delivery systems on the quality of ambulatory care in Medicare HMOs may outweigh the potential incentives to restrict care under capitated payments.

From the Conclusion

The Affordable Care Act authorized CMS to begin contracting with accountable care organizations that will share financial risk with CMS for the costs and quality of care received by the traditional Medicare beneficiaries they serve.23 Through the Medicare Pioneer Accountable Care Organizations and Shared Savings Programs, these organizations are eligible to receive bonus payments, initially related to reporting quality measures and subsequently to achieving higher quality of care

These recent parallel expansions of financial incentives for achieving better quality of care in Medicare Advantage and traditional Medicare heighten the need for performance measures that can be compared between these two major components of the Medicare program. Such measures will enable policy makers, health care providers, and Medicare beneficiaries to assess whether the quality of care in Medicare Advantage health plans differs from that provided within accountable care organizations and from that provided outside these organizations in the traditional Medicare program.

http://content.healthaffairs.org/content/32/7/1228.full

****

Pioneer Accountable Care Organizations disappoint

By Don McCanne

PNHP Blog, July 17, 2013

The Pioneer Accountable Care Organizations (ACOs) were already existing health care organizations that were selected as potentially exemplary models that could show the rest of the nation how well ACOs can work to achieve higher quality at lower costs. We now have a report from CMS of the initial “successes” of this model.

Considering the added administrative hassle, the savings were negligible, with only 13 of the 32 organizations saving enough to receive “shared savings” from CMS, and 2 actually lost money.

Even the supposed quality gains were unimpressive since they represented only 15 measurements which the organizations were told in advance would be used to determine whether or not they met quality standards. These teach-to-the-test gains can hardly represent the overall quality status of each organization.

http://pnhp.org/blog/2013/07/17/pioneer-accountable-care-organizations-d…

The private Medicare Advantage plans promised higher quality at lower cost. They clearly have failed on the promise of lower costs, but are they actually providing improved quality that is worth the extra cost?

Austin Frakt cites the Milbank Quarterly article by Joseph Newhouse and Thomas McGuire as providing the evidence for higher quality. In their article they state, “it is difficult to compare the quality of care in TM (traditional Medicare) and MA (Medicare Advantage) because the data necessary to do so are sparse.” They cite as their source a Health Affairs article by John Ayanian et al (Joseph Newhouse being a coauthor) which states, “These recent parallel expansions of financial incentives for achieving better quality of care in Medicare Advantage and traditional Medicare heighten the need for performance measures that can be compared between these two major components of the Medicare program.” Yes, performance measures that we do not have.

The ideological preferences of Newhouse and McGuire can be gleaned from the links above – a bias which shines through in their Milbank Quarterly article.

The point is that, other than for a few primitive teach-to-the-test measurements, measurement of quality is still in the dark ages. The Medicare Advantage plans would be expected to do better on these few measurements since they use them for marketing purposes (Medicare star ratings) and to gain bonuses. Even Austin Frakt writes, “The research base is still too thin to provide an objective answer.”

The case for higher quality in Medicare Advantage plans has not been made.

An excellent article that concurs with this view: “No, We Still Don’t Have Proof That Private Medicare Plans Are Better,” by Thomas Huelskoetter:http://thinkprogress.org/health/2014/08/20/3473823/medicare-advantage-co…

Avalere study of proposed copper plans

Wed, 2014-08-20 15:59
Study Shows “Copper Plan” Would Lower Premiums by 18 Percent

Bill by Sen. Mark Begich (D-AK) would expand employer health coverage
Council for Affordable Health Coverage, August 18, 2014

The Council for Affordable Health Coverage today released an estimate by Avalere Health LLC showing that legislation to permit a new, less expensive tier of insurance coverage under the Affordable Care Act would lead to an additional 350,000 Americans keeping their employer sponsored health insurance in 2016. Because fewer people would lose their coverage, taxpayers would spend $5.8 billion less on exchange subsidies, while employers would pay about $5.5 billion less in penalties under the employer mandate.

http://cahc.net/press-release-study-shows-copper-plan-would-lower-premiu…

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Estimated Impact on the Federal Deficit and Insurance Premiums from Creating a New Health Plan Tier with an Actuarial Value Level of 50 Percent

Avalere, June 6, 2014

Summary

The Council for Affordable Health Coverage requested Avalere Health to estimate the impact on the federal deficit of a legislative proposal that would allow a new type of plan tier for consumers in the new health insurance marketplace as well as small employers. Plans on this new tier would have an actuarial value (AV) of 50 percent. As originally passed in the Affordable Care Cat (ACA), commercial health insurance plans in the individual and small group markets must cover at least 60 percent of the estimated health costs of enrollees starting in 2014.

We estimate that creating a new tier with an AV of 50 percent would reduce the federal deficit by $0.3 billion between FY 2015 and FY 2024. This estimate assumes that the new tier would be available to consumers starting in plan year 2016. The reduction is due to a net $5.8 billion decrease in subsidies paid by the federal government for individuals in the new health insurance marketplace, primarily due to an increase in the estimated number of employers who will offer affordable coverage to employees. Counteracting this reduction in federal spending is an estimated $5.5 billion decrease in revenues collected by the federal government, again primarily due to fewer employers paying the employer mandate penalty.

We also estimate that the premium for the new plan with a 50 percent AV would be nearly 18 percent lower than the premium for an average bronze tier plan in 2016. The lower premium would result in a slight increase in estimated enrollment in the new marketplace.

http://cahc.net/wp-content/uploads/2014/08/20140605-CAHC-New-50-AV-Tier-…

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‘Copper plans’ could cut subsidies, lower deficit, but would consumers bite?

By Paul Demko
Modern Healthcare, August 19, 2014

Allowing cheaper health plans designed to cover just half of medical costs to be sold on the exchanges would result in 350,000 additional individuals enrolling in coverage in the next decade, according to an analysis by Avalere Health.

The lower actuarial threshold also would convince some employers to maintain coverage, according to the Avalere analysis. The Society of Actuaries has predicted that 3% of employers will stop providing coverage under the ACA. But if the copper plan option existed, Avalere estimates that 4% of that group would continue offering coverage to workers. That increase represents just 0.1% of the current employer-sponsored market.

America’s Health Insurance Plans, the primary industry group, supports allowing what are often referred to as “copper plans” to be sold on the exchanges. The organization has argued that it would entice more people—particularly younger, healthier individuals – into the marketplaces.

http://www.modernhealthcare.com/article/20140819/BLOG/308199995

One of the major problems with the Affordable Care Act is that it has established underinsurance as a new standard. It was bad enough when the decision was made to allow insurers to offer products that covered an average of only 60 percent of estimated health care costs, but now there is a serious proposal to reduce that to 50 percent. What does this do?

From the insured’s perspective, it would fulfill the requirement to purchase insurance, while keeping premiums as low as possible, with a tradeoff that you must accept the risk of paying on average the other half of health care costs that the insurer does not pay for (plus all costs for services not covered and for the balance of charges for out-of-network services). For the majority, such costs would create a financial hardship should significant medical problems develop – the reason this is labeled underinsurance.

From the insurers’ perspective, while discounting the premium by only 18 percent below that of a 60 percent actuarial value bronze plan, they can attract healthier individuals who are more likely to be willing to gamble that they may not need much health care. This would be a great deal for the insurers.

A 50 percent actuarial value copper plan would be appealing to libertarian conservatives for a few reasons. It uses a consumer-directed approach to health care purchasing by exposing the patient to significant out-of-pocket costs, requiring the patient to became an informed price shopper (even though the out-of-pocket expenses may not be affordable). It also allows consumers to exercise choice over market originated insurance products, rather than defaulting to a more comprehensive single payer program administered by the government that would actually work. Furthermore, the Avalere study shows that adding a copper level choice would reduce the federal deficit by about 30 million dollars a year. Little does it matter that 30 million dollars would not even qualify as a footnote in our federal budget, it is fulfilling an ideological goal of reducing federal spending that is compelling to conservatives.

What about fulfilling the goal of advocates of health care justice? Obviously this proposal was not written for them. Creating a plan that exposes the sick to financial hardship is the opposite of what insurance should be doing.

Rather than talking about insurance, we should be talking about prepaid health care – removing the financial barriers to the health care that you need, when you need it. This is precisely what a single payer national health program would do.

I can’t wait to see their proposal for a health plan with a 10 percent actuarial value. You doubt it? If AHIP can get clearance for private insurers to produce such a plan and have it count as fulfilling the insurance requirement thereby avoiding the penalties for being uninsured, I guarantee you that they will find a market for it. It would be ideal for insurers since it would eliminate 90 percent of their risk while allowing them to continue to sell us a profusion of wasteful administrative services. And our bureaucrats? “If that’s a product that the people want…”