Thursday, August 18, 2016

qotd: Medicare Advantage plans pay hospitals less than does traditional Medicare

Health Affairs
August 2016
Medicare Advantage Plans Pay Hospitals Less Than Traditional Medicare Pays
By Laurence C. Baker, M. Kate Bundorf, Aileen M. Devlin and Daniel P. Kessler


There is ongoing debate about how prices paid to providers by Medicare Advantage plans compare to prices paid by fee-for-service Medicare. We used data from Medicare and the Health Care Cost Institute to identify the prices paid for hospital services by fee-for-service (FFS) Medicare, Medicare Advantage plans, and commercial insurers in 2009 and 2012. We calculated the average price per admission, and its trend over time, in each of the three types of insurance for fixed baskets of hospital admissions across metropolitan areas. After accounting for differences in hospital networks, geographic areas, and case-mix between Medicare Advantage and FFS Medicare, we found that Medicare Advantage plans paid 5.6 percent less for hospital services than FFS Medicare did. Without taking into account the narrower networks of Medicare Advantage, the program paid 8.0 percent less than FFS Medicare. We also found that the rates paid by commercial plans were much higher than those of either Medicare Advantage or FFS Medicare, and growing. At least some of this difference comes from the much higher prices that commercial plans pay for profitable service lines.

From the Discussion

Knowing how Medicare Advantage prices compare to those of FFS Medicare is important for public policy. Health spending is the product of price and quantity. If Medicare Advantage prices are lower than those of FFS Medicare, then Medicare can obtain the same quantity of services for less money through Medicare Advantage than through FFS Medicare.

Contrary to conventional wisdom, we found that Medicare Advantage plans paid lower prices for hospital services than FFS Medicare — around 8 percent lower in both 2009 and 2012 — once the DRG and geographic-area mix of FFS Medicare was made comparable to those of Medicare Advantage.

If differences in hospital mix are also accounted for, Medicare Advantage's hospital prices are about 5.6 percent less than those of FFS Medicare. Thus, about a third of the 8 percent difference is attributable to the narrower hospital networks in Medicare Advantage, compared to FFS Medicare.

Our results also show how Medicare Advantage can be used to get a better deal (at least from hospitals) for the Medicare program as a whole, by adjusting administered prices across geographic areas and DRGs to better reflect the market.

Finally, consistent with previous research, we found that the rates commercial plans pay to hospitals are significantly higher than those of either Medicare Advantage or FFS Medicare and that they are rising.


Comment by Don McCanne

The pro-market authors of this study have shown that the private Medicare Advantage plans pay hospitals less than traditional Medicare pays, concluding that the private plans "get a better deal for the Medicare program." But that conclusion is not true if you look at the whole picture.

Because the private Medicare Advantage plans were being paid more than what was being paid for comparable care in the traditional Medicare program, Congress included in the Affordable Care Act adjustments to reduce the overpayments. However, the private plans have continued with their mastery of gaming the system to increase their payment rates, such as selective marketing to healthier populations and upcoding to receive greater payments through risk adjustment. This has been with the complicity of the people in HHS who have used innovative administrative tools and creative accounting to more than offset the required reductions. The private plans are still receiving greater payments than are being made for comparable patients in the traditional Medicare program.

Since the private plans are receiving larger payments, and, according to this study, are paying less for health care, the Medicare program is getting a worse deal, and it is the private insurers themselves who are getting a great deal, at a cost to taxpayers. This extra money that the insurers are siphoning out of the system is going to overpriced administrative services and, yes, to extra profits.

Although the private insurers are pulling out of the ACA exchanges because they cannot make their business model work there, they boast to their investors that their commercial accounts are highly profitable (employer-sponsored plans) and that their government accounts - especially the Medicare Advantage plans - are producing extraordinary returns for the investors (and humongous compensation packages for the corporate executives). We are paying for this through higher premiums for private plans and greater taxes for privately-managed government programs. A well designed single payer system should fix that.

Wednesday, August 17, 2016

qotd: Bernie Sanders is not giving up on Medicare for all

Senator Bernie Sanders
August 16, 2016
Sanders Statement on Aetna's Decision to Withdraw from Health Insurance Exchanges

U.S. Sen. Bernie Sanders (I-Vt.) issued the following statement Tuesday after Aetna announced plans to withdraw from Affordable Care Act health exchanges in 11 of 15 states where it currently operates:

"It is disappointing that Aetna has joined other large for-profit health insurance companies in pulling out of the insurance marketplace. Despite the Affordable Care Act bringing them millions more paying customers than ever before, these companies are more concerned with making huge profits than ensuring access to health care for all Americans.  

"In my view, the provision of health care cannot continue to be dependent upon the whims and market projections of large private insurance companies whose only goal is to make as much profit as possible. That is why we need to join every other major country on earth and guarantee health care to all as a right, not a privilege. That is also why we need to pass a Medicare-for-all single-payer system. I will reintroduce legislation to do that in the next session of Congress, hopefully as part of the Democratic Senate majority."


Comment by Don McCanne

Since the Clinton Camp was successful in keeping single payer out of the Democratic Party platform, much of the media seems to believe that it has completely gone away as an issue. The good news is that Bernie Sanders assures us that it hasn't. We need to do our part to be sure that the nation knows that.

Tuesday, August 16, 2016

qotd: Aetna, UnitedHealth and Humana provide important lesson on feasibility

NB:  Superficially this looks like the other 4000 plus Quote of the Day messages that have been distributed, but this one does seem to drive home the most fundamental flaw with our current health care financing system. See if you agree.

August 15, 2016
Aetna to Quit Most Obamacare Markets, Joining Major Insurers
By Zachary Tracer

Health insurer Aetna Inc. will stop selling individual Obamacare plans next year in 11 of the 15 states where it had been participating in the program, joining other major insurers that have pulled out of the government-run markets in the face of mounting losses.

While the Affordable Care Act, known as Obamacare, has brought coverage to millions, the new markets have proven volatile for some of the largest for-profit insurers. Aetna said earlier this year that it expected to lose $300 million on the plans. UnitedHealth Group Inc. and Humana Inc., which Aetna has agreed to buy for $37 billion, are also pulling out after posting hundreds of millions of dollars of losses.

"The vast majority of payers have experienced continued financial stress within their individual public exchange business," Aetna Chief Executive Officer Mark Bertolini said in the statement. "Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool."


The New York Times
August 16, 2016
Aetna to Pull Back From Public Health Care Exchanges By Robert Pear

Kevin J. Counihan, the chief executive of the federal insurance exchange, said the marketplace would remain strong and vibrant despite Aetna's decision.

"It's no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality, rather than by denying coverage to people with pre-existing conditions," Mr. Counihan said Monday.


Comment by Don McCanne

Three of the nation's largest insurers - Aetna, UnitedHealth and Humana - are pulling out of the ACA insurance exchanges because they have been unable to use their business model to make a profit. Although over fourth-fifths of enrollees are receiving government subsidies for these plans, that is not enough for the insurers. They also want the government to pay for those who need significant amounts of care (reinsurance). They want to abandon covering risk while they sell us wasteful administrative services.

The failure stems from the fact that our public administrators and legislators bent over backwards to try to make reform work for the private insurers, but health care is now so expensive that the insurers' model requires unaffordable premiums and unaffordable deductibles and other cost sharing. They pushed the limit on premiums and deductibles and that has resulted in tens of millions remaining uninsured or unable to pay their out-of-pocket costs.

And the government's response? The marketplace remains "strong and vibrant" because insurers compete on "cost and quality" rather than "denying coverage to those with pre-existing conditions." Yet the nation's largest insurers cannot compete on those terms.

It is difficult to believe that members of the administration and Congress are so dense that they cannot see that it is this model of health care financing that is creating so many of our problems. Mention a model that actually does work - single payer - and they plead that it is not feasible, that it is not capable of being done. But they have already proven that the fragmented system under ACA is not capable of covering everyone with affordable health care. It is not a feasible method of ensuring affordable health care for all. Single payer is.