Friday, May 28, 2010

qotd: Anthem Blue Cross has racked up 479 enforcement actions

Payers and Providers
May 27, 2010
Anthem Big Outlier In DMHC Actions

Since the California Department of Managed Health Care (DMHC) began its regulatory mission a decade ago, it has levied nearly 1,200 enforcement actions against health plans, providers and other entities for violating state laws and regulations. The DMHC typically issues penalties for not responding to member grievances or failing to pay claims in a timely fashion.

Among the 170 organizations that have been penalized by the DMHC, Anthem Blue Cross of California stands alone.

The Indianapolis-based Anthem has racked up a remarkable 479 enforcement actions, or more than 40% of the statewide total, according to DMHC records. Some 275 of those actions have been levied against Anthem since early 2009 – including a $2.5 million fine the agency issued last November but has yet to publicize.

Anthem's overall number is more than quadruple the 102 enforcement actions levied against San Francisco-based Blue Shield of California, the second-largest total.

Anthem Blue Cross equated the number of enforcement actions to its size: "As the state's largest health benefits company serving more than 8 million people in California each year, it is not surprising that we might have the largest number of inquiries from the DMHC," the insurer said in a prepared statement. Yet the only insurer of similar size to Anthem in California, Oakland-based Kaiser Foundation Health Plan, has received just 84 enforcement actions from the DMHC. It has 6.7 million enrollees statewide.

"The failure to timely respond to member grievances appears to be due to the lack of administrative capacity," stated (DMHC spokeswoman Lynne Randolph).

Comment:  A unique characteristic of the U.S. health care system is the profound administrative waste, in a large part due to the administrative excesses of the private insurers and the administrative burden that they place on the providers of health care. The administrative component of just the private insurers alone is so large that Congress has codified the policy that 15 to 20 percent of health insurance premiums will be allocated for the insurers to use for their own intrinsic administrative services.

Currently outrage is being expressed over the very high insurance premium increases which the insurers attribute to increased health care costs. But the insurers are retaining the same high percentages of these ever higher premiums even though their marginal costs for administrative services should not be increasing at the same rate as health care prices. The increased spending on health care has provided a windfall for the private insurers.

So what are we getting for the massive amount of dollars being retained by the private insurers? Administrative services, and in great excesses at that. Yet why has WellPoint's Anthem Blue Cross had so many enforcement actions levied against it? As the Department of Managed Care's spokeswoman states, "The failure to timely respond to member grievances appears to be due to the lack of administrative capacity."

Lack of administrative capacity?! With what we're paying them for their administrative services?! And President Obama and Congress want to keep this industry in charge?!

This is not the time to sit back and see how the reform plays out. PPACA cannot ever insure everyone, and it cannot control the intolerable increases in spending. Now, more than ever, is the time for activism! Let's demand a health care program that we can believe in - an improved Medicare for all!

Thursday, May 27, 2010

qotd: Will the temporary high-risk pool meet the needs for those who are uninsurable?

National Institute for Health Care Reform
May 27, 2010
Health Coverage for the High-Risk Uninsured: Policy Options for Design of the Temporary High-Risk Pool
By Mark Merlis

Among the first tasks required by the recently enacted health reform law is creation of a temporary national high-risk pool program to provide subsidized health coverage to people who are uninsured because of pre-existing medical conditions. While as many as 5.6-million to 7-million Americans may qualify for the program, the $5 billion allocated over four years will allow coverage of only a small fraction of those in need, potentially as few as 200,000 people a year. Policy makers will need to tailor eligibility rules, benefits and premiums to stretch the dollars as far as possible. Another consideration is how the new pool will fit with existing state high-risk pools or other state interventions in the private nongroup, or individual, health insurance market. Policy makers also will need to consider how to manage the transition of enrollees from high-risk pools to the new health insurance exchanges scheduled to be operational in 2014 to prevent adverse selection and encourage insurer participation.

Comment:  The Patient Protection and Affordable Care Act (PPACA) allocates $5 billion over four years for a temporary high-risk pool to insure those individuals who have problems obtaining coverage because of preexisting conditions. Although about 7 million Americans fall into this category, this report indicates that only about 200,000 people will be covered by this program, thereby meeting only about 3 percent of the need.

You need to read the full 14 page report to understand the multitude of policy interactions that will result in the failure of this one program. It serves as a proxy for the multitude of other policies contained in PPACA. We haven't seen anything yet.

This is what happens when members of Congress insist on building health care reform on our dysfunctional, inefficient, highly fragmented system of health care financing. By insisting that we give first priority to protecting and enhancing the role of private insurers, the policy compromises have resulted in a system that will cost more while leaving far too many with inadequate coverage or no coverage at all.

Again, it doesn't have to be this way. We can still enact a single payer national health program, ensuring all essential health care for everyone.

Wednesday, May 26, 2010

qotd: What will employers do under PPACA?

Towers Watson
May 25, 2010
The Impact of Health Care Reform on Employers

Although U.S. employers view controlling health care costs as their highest health care reform priority, few believe that the recently enacted Patient Protection and Affordable Care Act (PPACA) will stem the tide of rising costs, according to a May 2010 survey by Towers Watson.

In order to cope with anticipated cost increases, many employers plan on:

* Passing on increases to employees (88%)
* Reducing health benefits and programs (74% )
* Absorbing costs in the business (33%)
* Passing on increases to customers (20%)

More than three in four employers (85%) believe that health care reform will reduce the number of large organizations offering employer-sponsored retiree medical benefits. And 43% of employers that currently offer retiree medical plans plan to reduce or eliminate them.

Fifty-eight percent of employers surveyed believe health care reform will drive large employers to adopt total replacement consumer-driven health plans (CDHP) for their active employees.

Press release:

Key findings:

Report (8 pages):

Comment:  Although we have seen many employer surveys in the past, this one is especially important because it represents the views of employers' human resources professionals who face the reality that the Patient Protection and Affordable Care Act (PPACA) is now law. Since PPACA was designed to perpetuate the role of employer-sponsored health plans, we need to look at the likely responses of employers.

Most employers (90 percent) believe that PPACA will increase their organization's health care benefit costs. What is alarming is that employers do not intend to pass those cost increases on to their customers as they would with any other overhead increases, but instead they intend to pass them on to their employees in the form of increased premiums and cost sharing, and a reduction in benefits (which also results in higher out-of-pocket expenses for the employees).

More specifically, 58 percent of employers believe that large employers will adopt total replacement consumer-driven health plans (CDHP) for their active employees. "Total replacement" means that employees would be offered no option other then the high-deductible consumer-driven health plans. That could be disastrous for employees with modest incomes who develop significant health problems.

And future retirees can pretty much forget about receiving any retiree health benefits. Employers indicate that they are likely to take advantage of the fact that retirees under age 65 will be able to purchase plans in the exchanges without being excluded because of preexisting conditions.

This is the insurance that President Obama, during his campaign, promised that you could keep if you wanted to. What he didn't tell you is that, in most instances, you will not be permitted to drop that plan and select another one in the state insurance exchanges. As long as the employer's plan has an actuarial value of 60 percent (you pay an average of 40 percent of the medical bills), you are prohibited from selecting a better plan in the exchanges.

Once again, we can still fix this. We can enact a single payer national health program - health care for everyone, without financial barriers. 

Tuesday, May 25, 2010

qotd: Bust trusts or bust phony competition?

American Bar Association/American Health Lawyers Association 
May 24, 2010
Antitrust and Healthcare
Remarks by Christine A. Varney, Assistant Attorney General, Antitrust Division, U.S. Department of Justice 


The Patient Protection and Affordable Care Act (the Affordable Care Act), called for by the President and enacted by Congress on March 21, relies, in part, on the belief that robust competition and expanded choice will expand coverage while containing cost. 

Yet, like many reforms driven by the power of competition to create consumer welfare, the success of these legislative and regulatory efforts will depend as much upon healthy competitive markets free from undue concentration and anticompetitive behavior as it will upon regulatory change. In short, enactment of the Affordable Care Act makes effective antitrust policy more important than ever. 

The repeal of the antitrust exemption in the McCarran-Ferguson Act as it applies to the health insurance industry would give American families and businesses, big and small, more control over their own health care choices by promoting greater insurance competition and outlawing anticompetitive health insurance practices like price fixing, bid rigging, and market allocation that drive up costs for all Americans.

Two significant aspects of the Affordable Care Act are the establishment of new competitive marketplaces — known as Exchanges — for individuals and small employers to purchase health insurance, and the formation of Accountable Care Organizations (ACOs) and other initiatives to provide for more efficient delivery and payment of Medicare services and Medicaid pediatric services. There can be no doubt that the success of the Exchanges and the ACOs will depend, in large part, on effective competition, both among health care insurers and providers.

The ultimate goal of health care reform is to harness the power of competition, together with regulation, to expand coverage, improve quality, and control the cost of health care for all Americans. The role of antitrust is to ensure that competition is preserved and protected, so that it is there to be harnessed.

I. Enforcement

The goals of health care reform cannot be achieved if mergers between significant insurers in a particular market substantially reduce competition; nor can those goals be realized if dominant insurers use exclusionary practices to blockade entry or expansion by alternative insurers. The same is true if health care providers use supposedly quality-improving or cost-reducing measures simply to raise prices.

Over the last ten years in numerous investigations across the country, the Division has found that many providers give the best discounts only to insurers with significant market share. Thus, new entrants cannot negotiate for competitive provider discounts because they have few enrollees, and they cannot win new enrollees because they do not have competitive discounts. This situation makes it difficult for insurers to enter new geographic areas or for insurers with small enrollment to expand within existing markets.

The Division is committed to vigorously, but responsibly, scrutinizing mergers in the health care industry that appear to present a competitive concern. If we determine that our initial concerns were well founded, we will not hesitate to block the merger or to require the settlement concessions necessary to protect consumers. On the other hand, if we find that the merger may not substantially lessen competition, we will promptly close the investigation and allow the parties to try to show, through the competitive process, that better business methods can deliver more efficient medical care and medical insurance to American consumers.

II. Competition Advocacy

It is important to keep in mind that successful antitrust enforcement also includes effective competition advocacy. (Examples of DOJ competition advocacy are given for Michigan and California.)

III. Entry Project

First, and foremost, we confirmed that the biggest obstacle to an insurer's entry or expansion in the small- or mid-sized-employer market is scale.  New insurers cannot compete with incumbents for enrollees without provider discounts, but they cannot negotiate for discounts without a large number of enrollees. This circularity problem makes entry risky and difficult, helping to secure the position of existing incumbents.

Second, we concluded that it may be easier to enter less concentrated markets, with competition between several large but relatively equal-sized insurers, than it is to enter a market with one or two dominant plans. This is a vitally important finding because it illustrates that a critical economic assumption in antitrust analysis — namely, that the higher profits often associated with concentrated markets will attract new entrants who will help restore competitive pricing — is sometimes made without an adequate evidentiary basis. Indeed, this assumption fails to account for barriers to entry, including barriers based on the inability of entrants to achieve economies of scale that will allow them to compete with incumbents.

One partial explanation for the presence of this phenomenon in health insurance markets comes from our third finding, which is that new entrants or niche players are more likely to receive provider discounts comparable to their competitors' in less concentrated markets than they are in markets dominated by one or two plans.

Finally, our interviews reconfirmed that brokers typically are reluctant to sell new health insurance plans, even if those plans have substantially reduced premiums, unless the plan has strong brand recognition or a good reputation in the geographic area where the broker operates.

IV. Innovation and Efficiency in Health Care Delivery

It is important to keep in mind that not all provider networks involve sufficient financial, clinical, or other economic integration to apply the rule of reason to joint price negotiations with payers. For example, an arrangement among competing providers simply to engage in joint billing, joint collection services, or even joint purchasing of medical supplies or services is generally not the type of economic integration needed to allow providers jointly to set their reimbursement rates under the rule of reason. Rather, such steps simply reflect an effort to coordinate and share some administrative expenses or to receive volume purchasing discounts. 

The economic integration that justifies application of the rule of reason to joint price negotiations with payers requires the sharing of some form of financial risk, such as an agreement by providers to accept a capitated rate, a predetermined percentage of revenue from a health plan, or sufficient clinical integration to induce the group's members to improve the quality and efficiency of the care they provide. While there is no particular formula that can cover all types of legitimate clinical integration, the key is that there must be sufficient clinical integration to motivate the kinds of changes that can achieve real cost-containment or other performance benchmarks.

The Affordable Care Act's development of ACOs is a good example of how providers might work together to deliver more efficient, high-quality care without inhibiting competition, so long as their collaborations are properly constructed. For example, the ACO encourages competing physicians, and possibly other providers, to coordinate care for a defined Medicare population through redesigning care protocols, utilizing health IT, investing in infrastructure, and meeting quality targets. If the ACO meets quality-of-care and cost targets, it can share the savings with HHS.

Properly constructed, ACOs have the potential to improve health care delivery and drive down costs. Thus, as reform moves forward, the Justice Department will work closely with HHS and providers to offer whatever guidance may be needed to ensure that providers pursue beneficial integrated ACOs without running afoul of the antitrust laws.

In conclusion, let me say that I hope I have made clear that the Justice Department believes that antitrust has — and will continue to have — an essential role to play in health care. If health care reform is to harness the power of competitive markets to produce more and more efficient systems, then we must be up to the challenge of ensuring that our health care markets are, in fact, as competitive as possible — protected from undue concentration or anticompetitive conduct with vigorous but responsible enforcement and effective competition advocacy. In this dynamic environment, a successful effort will require more than "business as usual." It will require that we provide clear and accessible guidance to health care consumers, providers, and payers so that there is the predictability needed for health care reform to succeed. I think you will find the Department of Justice generally, and the Antitrust Division specifically, up to the task of ensuring that reform is achieved, competition is maintained, and consumers are benefited.

Comment:  According to Christine Varney, "The Patient Protection and Affordable Care Act (the Affordable Care Act), called for by the President and enacted by Congress on March 21, relies, in part, on the belief that robust competition and expanded choice will expand coverage while containing cost."

This is a remarkable statement. Think about it. The President and Congress believe that competition between private health plans will contain costs when decades of experience with the private insurance industry has proven that this is a false belief. Competing private plans have failed miserably in controlling costs. 

And the promise of competition within the state insurance exchanges? Private insurers currently have free rein of the markets with virtual unlimited ability to compete. Yet we've seen consolidation and concentration within markets, as less dominant companies withdraw. It is likely that only a few major players will be interested in participating in the exchanges. A small player would be unlikely to attract an adequate number of physicians and hospitals to be included in their networks, and consequently would be unable to attract enough individuals to sign up with a plan with such sparse networks. The belief that the state exchanges will promote robust competition between private insurers, which the free market hasn't done, is a pipe dream.

Now think about costs under the Medicare program. Although a non-competitive government program, Medicare has been far more effective in controlling costs than have the private insurance plans. In fact, the private insurance industry has often followed Medicare's lead in innovations in the financing of health care. 

The attempt to introduce private competition into the Medicare program has been a dismal failure. The care covered by the private plans (Medicare plus Choice, and then Medicare Advantage) has cost more than care provided in the traditional Medicare program for individuals with comparable health care needs. The private plans have been totally unsuccessful in their efforts to compete on a cost basis with our public program - Medicare.

Now back to that remarkable statement - the one that says that the President called for and Congress enacted the Affordable Care Act on the belief that robust competition would contain costs. What a sham! President Obama has known all along that the private insurance industry has failed and that it would take a single payer national health program to cover everyone while controlling costs. He has said as much. The members of Congress know that as well. Why else would they keep saying that if this doesn't work (which policy science tells us it can't) then we'll have single payer?

The last thing we need is the Department of Justice providing antitrust oversight of a dysfunctional private insurance market when the obvious solution is to establish our own public monopsony which controls costs through global budgeting and other proven single payer mechanisms. A monopsony eliminates the need for competition to control costs. That would be detrimental in the private sector, but it would be highly beneficial when it is our own public program. 

If we get rid of the private, anti-competitive insurance trusts, then we don't even need the Department of Justice trust busters on the scene.

Monday, May 24, 2010

qotd: UnitedHealthcare partners to cheat millions of restaurant workers out of decent health care

Nation's Restaurant News
May 21, 2010
NRA partners with UnitedHealthcare
By Paul Frumkin

The National Restaurant Association said it has partnered with insurance giant UnitedHealthcare in an effort to make health care coverage more accessible and affordable for foodservice operators and their employees.

The initiative, called "Restaurant Health Care Alliance," could help provide coverage for the 4 million to 6 million restaurant employees who currently are without insurance, according to Dawn Sweeney the NRA's president and chief executive. The industry employs about 13 million people.

While details of the plans have not been hammered out, the NRA and UnitedHealthcare said they intend to provide a range of options that will be tailored to the restaurant industry.

"We're looking at developing a continuum of products," Sweeney said Friday during a press conference in Chicago announcing the alliance. She said plans could range from discount cards for those employees "who aren't ready to purchase full health insurance all the way to comprehensive coverage." Prices could start as low as $100 a month, she added.

Mike Gibbons, the NRA's chairman of the board, noted that the partnership with UnitedHealthcare would help alleviate the financial burden that national health care reform will put on the restaurant industry.

"The cost of health care reform could be potentially devastating," he said. "The alliance will give lower cost health care alternatives."

Comment:  You would think that now that the Patient Protection and Affordable Care Act (PPACA) is law, UnitedHealthcare, the nation's largest insurer in terms of revenues, would shape up its act by offering expansions of coverage compliant with the alleged intent of the law to provide adequate health insurance for everyone. That's what you might think, but you'd be wrong.

The National Restaurant Association (NRA) actively opposed PPACA. It's not too difficult to understand why. There are close to a million businesses in the restaurant industry, most of which operate on fairly narrow profit margins. Because of their sensitivity to overhead expenses, they have left millions of their food services workers with out any health care coverage whatsoever.

Congress recognized that requiring small businesses to offer all employees insurance coverage would create a significant financial burden for many of them. Thus they exempted businesses with less than 50 employees from the penalty for not providing coverage. But those with 50 or more employees will have to provide "minimum essential coverage" to avoid the penalty. That is defined in the law as providing an actuarial value of 60 percent, though NRA is continuing to lobby for regulations that would keep the more specific requirements to a minimum.

With the potential of gaining millions of new insurance customers from the restaurant industry alone, UnitedHealthcare is quite willing to craft the inexpensive products that the restaurant industry is seeking in response to the requirements imposed by PPACA. But discount cards? That's not even insurance! The other "lower cost health care alternatives" at best would be underinsurance products that will not protect restaurant employees nor their families who may develop health problems. Junk insurance is what they're selling!

This is UnitedHealthcare in action after PPACA has become law. It is clear that they have no intent to follow any other path than business as usual. Let's not go that route, but instead let's blaze a path to a single payer national health program. Then all restaurant workers (and everyone else) would have the health care that they and their families might need.

Friday, May 21, 2010

qotd: Complex eligibility variables create inequities

Los Angeles Times
May 19, 2010
'Broad' health care tax cut for small business leaves out some companies
By Ricardo Alonso-Zaldivar

When the administration unveiled the small business tax credit earlier this week, officials touted its "broad eligibility" for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage. 

Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.

It's an example of how the early provisions of the health care law can create winners and losers among groups lawmakers intended to help — people with health problems, families with young adult children and small businesses. Because of the law's complexity, not everyone in a broadly similar situation will benefit.

Comment:  We could have had a health care financing system that automatically included everyone. Instead we enacted a complex, fragmented system with so many eligibility and payment variables for a large variety of plans and programs that it is impossible to fit everyone into a slot. Not only is this the most expensive way to pay for health care, it also ends up being inequitable since individuals with similar circumstances can end up having quite different financial obligations, or even end up with one covered and the other not.

It doesn't have to be this way. We can still enact a single payer national health program that would cost less and actually work for everyone.

Thursday, May 20, 2010

qotd: Non-profit Detroit Medical Center selling out to for-profit Vanguard

May 20, 2010
Can Health Care Save Detroit?
By Noah Ovshinsky

A few weeks ago, officials with the Detroit Medical Center, the city's largest health system, made an announcement that was as startling as it was welcome: that they intended to sell the nonprofit to an investor-owned company. As part of the deal, Nashville-based Vanguard Health Systems promised to spend $850 million on much-needed capital improvements.

The Detroit Medical Center, or the DMC as it's called locally, is the city's primary safety net, providing more uncompensated care than any other health system in the state. That commitment comes at a cost. While the DMC has turned a profit for six years in a row, officials say the health system's payer mix makes raising money on Wall Street all but impossible. As a result, the facilities are showing their age.

Without selling hospitals, turning away needy patients or cutting services, experts say they don't see how Vanguard will get a good return on its investment.


Vanguard Health Systems
March 19, 2010
Vanguard, DMC Announce Letter of Intent 

The Detroit Medical Center (DMC) Board of Trustees and Vanguard Health Systems Inc. announced today that they have signed a letter of intent for DMC to become part of the Vanguard system and for Vanguard to invest $850 million in capital improvements to DMC's eight-hospital system.

Charles N. Martin, chairman and chief executive officer of Vanguard Health Systems, said... "We are very excited about entering the Detroit market and look forward to working with the DMC management team, who has an outstanding record of delivering care and managing financial challenges." 

(Do not rely on any forward-looking statements as such statements are subject to numerous factors, risks and uncertainties that could cause Vanguard's actual outcomes, results, performance or achievements to be materially different from those projected. These factors, risks and uncertainties include, among others, Vanguard's ability to negotiate a definitive agreement for the acquisition of the DMC System and to successfully consummate the acquisition and integrate its operations; Vanguard's high degree of leverage and interest rate risk; Vanguard's ability to incur substantially more debt; operating and financial restrictions in Vanguard's debt agreements; Vanguard's ability to generate cash to service its debt; potential liability related to disclosures of relationships between physicians and Vanguard's hospitals; Vanguard's ability to grow its business and successfully implement its business strategies; Vanguard's ability to successfully integrate any future acquisitions; the potential that acquisitions could be costly, unsuccessful or subject Vanguard to unexpected liabilities; post-payment claims reviews by governmental agencies that could result in additional costs to Vanguard; conflicts of interest that may arise as a result of Vanguard's control by a small number of stockholders; the highly competitive nature of the healthcare business; governmental regulation of the industry including Medicare and Medicaid reimbursement levels; changes in Federal, state or local regulation affecting the healthcare industry; the possible enactment of Federal or state healthcare reform; pressures to contain costs by managed care organizations and other insurers and Vanguard's ability to negotiate acceptable terms with these third party payers; the ability to attract and retain qualified management and personnel, including physicians and nurses; claims and legal actions relating to professional liabilities or other matters; the impacts of weakened economic conditions and volatile capital markets on Vanguard's results of operations, financial position and cash flows; Vanguard's failure to adequately enhance its facilities with technologically advanced equipment could adversely affect its revenues and market position; Vanguard's exposure to the increased amounts of and collection risks associated with uninsured accounts and the co-pay and deductible portions of insured accounts; Vanguard's ability to maintain or increase patient membership and control costs of its managed healthcare plans; the geographic concentration of Vanguard's operations; the technological and pharmaceutical improvements that increase the cost of providing healthcare services or reduce the demand for such services; the timeliness of reimbursement payments received under government programs; the potential adverse impact of known and unknown government investigations; and those factors, risks and uncertainties detailed in Vanguard's filings from time to time with the Securities and Exchange Commission, including, among others, Vanguard's Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.)

Comment:  Non-profit Detroit Medical Center (DMC) is the city's primary safety net, providing more uncompensated care than any other health system in Michigan. In spite of difficult economic conditions, DMC has been profitable for the past six years. Even Vanguard's chairman states that the DMC management "has an outstanding record of delivering care and managing financial challenges." So why is DMC selling to an out-of-state, for-profit hospital chain?

The reason given is that highly-leveraged (i.e., debt laden) Vanguard intends to infuse funds for capital improvements. But why should DMC relinquish its tax-favored status that helps to ensure that retained profits can be moved to the capital budgets, as with other non-profits? With Vanguard ownership, not only will they lose revenue in taxes, they also will have to divert more revenue to servicing Vanguard's massive debt.

This says nothing about the fundamental business differences between non-profit hospitals with a sole mission to provide patient care and for-profit hospitals with an SEC-mandated mission to enhance investor value.

Nobody reads the fine print of the "forward-looking statements" disclaimers, but they are customized to provide the type of transparency that we clamor for today. If you think that transferring a major non-profit center that is successfully providing much needed safety-net services to a highly-leveraged, for-profit, out-of-state hospital chain is a good deal, then you should read the fine print of the "forward looking statements" above.

Congressman John Conyers' Medicare for All bill, H.R. 676, calls for conversion of the for-profit, investor-owned components of our health care system into non-profits. It would be sad indeed if this important center in his own home city of Detroit were to undergo the opposite conversion, placing the demands of rich investors ahead of the needs of low-income patients.

Wednesday, May 19, 2010

qotd: Hospitals abusing electronic patient data

The Dallas Morning News
May 18, 2010
Hospitals criticized over offers to earn or save money by sharing electronic patient data
By Jason Roberson

The $45 billion set aside for electronic health records in the federal government's 2009 stimulus package created a carrot-and-stick approach to lure providers into the electronic age. Physician practices could be paid up to $44,000 over five years, and hospitals could get a maximum of $15.9 million to install systems that comply with federal rules.

On the other hand, the government would penalize providers that don't participate, reducing their Medicare and Medicaid payments by 1 percent beginning in 2015. In later years, the penalty grows to 3 percent.

Electronic records are expected to allow doctors to coordinate care for the sickest patients, eliminate paper-transcribing errors that lead to inaccurate prescriptions, and avoid duplicate lab and imaging tests.

But with the promises of efficiency come questions of privacy.

The vendor that Dallas-based Tenet Healthcare Corp. uses has been criticized for sharing patient data with drug companies. The vendor that Fort Worth's Cook Children's Health Care System uses is considering offering physician customers discounts for sharing patient data.

Texas Health Resources Inc., an Arlington-based hospital system, and Children's Medical Center Dallas announced April 27 that patients seen at one hospital will have their records available electronically at the other if they need to be admitted.

This summer, Parkland Health & Hospital System, which operates Dallas County's public hospital, is expected to join them. That means a patient's medical records will be seamlessly, electronically transferable to three of North Texas' largest hospitals.

Cerner Corp. – a Kansas City-based electronic health record vendor with 200 Texas customers, including Tenet Healthcare – shares unidentifiable patient records with drug companies and researchers looking for patients to participate in clinical trials, says a company spokeswoman.

Doctors long have made extra money by referring patients to clinical drug trials. Cerner says it simplifies and cleans up the process by acting as a middleman of sorts between doctors and drug companies. 

But Dr. Deborah Peel, an Austin psychiatrist and founder of the nonprofit advocacy group Patient Privacy Rights, questions whether a patient's most confidential information in their medical records, such as psychological treatment or HIV testing, will be secure at those hospitals.

Cook Children's electronic records system is different from most others in hospitals. Rather than pay $50 million to $120 million installing software for its 400 physicians in 55 locations, it paid less than $1 million for an online record-keeping service.

But the key difference, Peel said, is that the damage of illegally accessed electronic records is more extensive.

"Once your information is released, it's like a sex tape that lives in perpetuity in cyberspace," Peel said. "You can never get it back."

Comment:  "... a sex tape that lives in perpetuity in cyberspace..." Certainly very few if any readers of these comments have personal sex tapes that could live in perpetuity once released in cyberspace, but we all have personal medical data that we would just as soon not share with the world, even if we are revealed as living a perhaps boring life of relative purity. Even that is no one else's business.

Yet the federal government is going to penalize Medicare and Medicaid providers that do not covert their patient data into electronic form. Promises of system security provide little reassurance when people with other interests, whether for business purposes or for more nefarious intent, have access to those records. As mentioned in this article, hospitals are already taking liberties with private patient data.

How well does controlled access work? Rupert Murdoch controls Internet access to certain articles in The Wall Street Journal, limiting them to paid subscribers.

Try this experiment. Log onto The Wall Street Journal at Go to the section labeled subscriber content. Click on any article. You will see only the opening preview of the article, but then must subscribe to see the full article. But wait. Cut the precise title of the article and paste it into a Google search box. The first item that comes up in the Google search is likely a selection that lists the same title, with a WSJ link. Click on it and you have - voila - the full article, which already has been released into cyberspace.

Admittedly, electronic health systems vendors will use a higher level of security for patent records, but they are no more secure from hackers than are Murdoch's subscriber-only articles secure from theft by those of us with only the simplest of computer skills.

At this stage, infallible cybersecurity is only a wish, especially for a system that will eventually have over 300 million patient records with variable degrees of interconnectivity. It is premature for the government to start penalizing us for declining to expose patient data to this potential threat.

Looking for the magic in information systems has been yet one more unfortunate diversion from achieving the most consequential goal of all - affordable health care for everyone through an improved Medicare for All. Let's work on that first.

Tuesday, May 18, 2010

qotd: J.R. Slosar's "The Culture of Excess"

The Culture of Excess
How America Lost Self-Control and Why We Need to Redefine Success
By J.R. Slosar

From the Introduction

The first chapter provides a background of definition and symptoms of narcissism and its application to our culture and society. The complexity of the concept is presented from history, research, and application. Chapter 2 separates out the factors in the economic marketplace that contribute to cultural narcissism. Chapter 3 focuses on coping with the impact of the factors of cultural narcissism, and explores reality and loss, rigidity and self-destruction, and perfectionism and deception. The fourth chapter looks at our avoidance and anxiety of numbers, math or quantitative analysis, a cultural weakness that opens the door to faulty comparisons and poor decisions. A different perspective is offered in Chapter 5, as our health care system is offered as a primary example of how our society sanctions cultural narcissism and self-defeating behavior. Chapter 6 focuses upon changes in reality and hero images as representative of today's cultural narcissism. An analysis of sports as a dramatic seeking of reality is discussed. Chapter 7 discusses identity theory and development with the focus on today's youth and how they see and present themselves. Finally, the last chapter summarizes, integrates, and offers structural recommendations to help change directions and return to a more balanced and realistic appraisal of our economic system and our day-to-day lives and decisions.

From Chapter 5 - Health Care: Waste, Excess and Brokers

The dramatic insistence on free market principles and competition determines the way  health care is delivered today. The entire process exemplifies the culture of excess and cultural narcissism. The excess comes from the tremendous waste of money and resources. This is coupled with the ability of brokers and corporate entities to overcharge and take out money at everyone else's expense. These are the entitled "me" in the equation. The rest of us continue to pay more and more and even get less and less. Or, many just cannot afford health care at all. Facts and meaningful comparisons are dismissed and not considered by the fear of an alternative labeled as Socialism.

From Chapter 8 - Generation We

To address current trends, our culture must develop a new generation that will move toward a different concept and process of attaining success or "making it." This new concept is based on connectedness with culture and has a broader perspective of inclusiveness. It also involves having less sense of entitlement, more realistic expectations, and more willingness to regulate one's own behavior and the marketplace we live in. These are the components need to develop a Generation of We. To effect these changes will mean challenging basic economic assumptions and the elevated status of established economic theories and principles. In turn, we must challenge our current definition of success. The transition from a "me" society to a "we" society can be framed as the classic dichotomy of individualism versus collectivism. But it is a larger and more complex issue than that.

The literature in social psychology is extensive in arguing about the issue of what comes first in order to change. Is it necessary to change behavior first, for change to occur - or is it necessary to change attitude before behavior change can occur? The dichotomy of behavior versus attitude for individuals to change is also applicable to our culture. Changes in individual behavior will principally follow changes dictated by policy. Our mass consumption society will only redirect when forced to. Narcissistic entitlement is too high - self-control is pummeled and expectations of voluntary change are naive. The cycle and patterns  of the culture of excess are too ingrained. As a result, regulation in policy will be an important factor in the change process, and replace the conscious efforts of deregulation and no regulation. As discussed earlier, the cultural deregulation and no regulation movement has deregulated our inner mechanisms of individual self-control. Changes in attitude and thinking will also be related to policy; however, confrontation must occur between current attitudes and thinking that is "me based." Challenging some existing and entrenched beliefs about economics and economic growth will be necessary for change to occur.

Comment:  When you look at different models of health care delivery and its financing, the logic of single payer prevails. President Obama has stated such, and even many conservatives agree, though ideologically opposed. So it has been difficult for those of us who support health care justice to understand why there has not been an adequate national grassroots uprising demanding the enactment of an improved Medicare for all. Dr. Slosar's book provides some insight as to why.

In "The Culture of Excess," Dr. Slosar gives us the perspective of the discipline of psychology, both as applied to individuals and as applied to our culture. He explains how cultural narcissism has permeated our society and has led to the culture of excess. As the "me" society has dominated over the "we" society, narcissism has suppressed the support for collective solutions to our social problems. Within that framing, it is easier to understand why a near-perfect "we" solution for health care reform - single payer Medicare for all - was rejected in favor of the highly-flawed "me" solution - the individual private insurance plans.

Although the process will not be easy, Dr. Slosar shows us why addressing our cultural narcissism must be an integral part of achieving health care justice for all. In a Generation We, everyone will have the health care that they need.

Monday, May 17, 2010

qotd: Gingrich predicts nationalized health care

The Washington Post
May 14, 2010
Gingrich in Va.: A Republican Congress could defund health care law
By Rosalind Helderman

(Former House Speaker Newt) Gingrich's comments came at a health-care industry sponsored conference held by Center for Health Transformation, a project of his consulting firm.

Gingrich argued the federal law has been intentionally designed to encourage businesses to drop health care for their employees, incurring a new fine in the law for not offering insurance. Employees will then enter new individual health exchanges, Gingrich argued, but find them so expensive that they will clamor for a nationalized health care system.

Comment:  Although we don't agree with Newt Gingrich's solution for our health system's problems (computerize and privatize the entire system), we do agree with him and the multitude of other conservatives who state that the intolerable costs of health care eventually will drive the nation to demand a nationalized health care system. It's just too bad that so much more suffering will take place before we arrive there.

Friday, May 14, 2010

qotd: British Medical Association opposes for-profit commercialization

British Medical Association (BMA)
Our Principles

The BMA is against the increasing commercialisation of patient care. We want to see the NHS restored as a public service working co-operatively for patients, not a market of commercial businesses competing with each other. That's why we're campaigning for an NHS which:

1. Provides high quality, comprehensive healthcare for all, free at the point of use

2. Is publicly funded through central taxes, publicly provided and publicly accountable

3. Significantly reduces commercial involvement

4. Uses public money for quality healthcare, not profits for shareholders

5. Cares for patients through co-operation, not competition

6. Is led by medical professionals working in partnership with patients and the public

7. Seeks value for money but puts the care of patients before financial targets

8. Is fully committed to training future generations of medical professionals

Comment:  Who could understand better the British National Health Service than the physicians of the British Medical Association? Their experience has led them to take a strong stand against for-profit commercialization of health care. Are physicians in the United States fundamentally that much different from those in Great Britain? Don't think so.

Thursday, May 13, 2010

qotd: Canadian private, for-profit hospital files for bankruptcy

May 11, 2010
Bankrupt beacon of privatized health-care
By Gillian Steward

A Calgary for-profit hospital, once a beacon of hope for medical entrepreneurs across the country, declared bankruptcy last week. And who will have to pick up the pieces? None other than the public health-care system and ultimately Alberta taxpayers.

For years, critics predicted that this experiment in privatized health care would prove unreliable and expensive. But no one imagined a scenario in which publicly funded Alberta Health Services would go to court in a bid to keep the lights on over the operating tables in an investor-owned hospital. No one imagined that AHS would be paying receivership fees in order to keep the doors open. But this is, in fact, what has happened because Calgary's public health-care system is so reliant on private partners.

The private hospital, Health Resource Centre, was once the focal point of premier Ralph Klein's health-care strategies. It was for the benefit of HRC and its bevy of investors and orthopedic surgeons that in 2000 the Alberta government passed the Health Care Protection Act, which allowed private surgical clinics to keep patients overnight, thus allowing HRC to perform hip and knee replacements that had previously been permitted only in public hospitals.

The Klein government had already closed three public hospitals in Calgary as it pared its budget in order to eliminate the deficit. So there was indeed a shortage of operating theatres, a shortage HRC was quite prepared to fill. It had taken over space in one of the hospitals that had been closed and sold off. And it had been lobbying government ministers and local health authority administrators in an effort to secure contracts to provide surgeries for publicly insured patients who could not be accommodated in the public hospitals.

In 2004, HRC finally hit pay dirt. The regional health authority awarded it a two-year contract worth $20 million for the provision of 2,500 hip and knee surgeries. The health authority acknowledged that it was paying 10 per cent more than what it would cost if the surgeries were done in a public hospital but, given the shortage of operating theatres, it didn't have much choice.

The contracts continued and HRC became so successful that it decided to expand and rent expensive space in a new development. That's when HRC ran into trouble. Before it had even moved in, the developer claimed HRC had defaulted on payments. HRC claimed that Alberta Health Services had cut back on promised contracts, and declared bankruptcy.

AHS then went to court to try and save HRC, for without it there are not enough operating theatres to accommodate all the patients scheduled for surgery.


Calgary Herald
May 12, 2010
Clinic rescue costs $2.8M
By Colette Derworiz

Alberta Health Services will spend at least $2.8 million to keep a financially troubled private surgical centre operating for the next eight months, sparking outrage the Stelmach government is using taxpayer money to prop up a for-profit enterprise.

Health Resource Centre -- a private facility owned by Networc Health Inc. -- will stay open to perform publicly funded knee and hip replacement surgeries after the Edmonton-based medical superboard took the unusual step of filing legal action to fend off a possible bankruptcy.

But the intervention comes with a price tag for taxpayers after AHS ended up buying $1.3 million of the company's outstanding bank loans (at full value) to bolster the superboard's legal standing in the case as a secured creditor.

In addition, AHS agreed to pay $600,000 in interim receivership costs and the clinic's monthly rent -- which will work out to nearly $960,000 from now until January -- to Northwest Healthcare Properties, the landlord

"You have to wonder how many times taxpayers have to pay for the same service," said Liberal MLA Kevin Taft. "Taxpayers seem to be on several hooks at once for this debt. It's expensive for the taxpayers, unnerving for the patients and it's gotta be difficult for the staff. This is just lose, lose, lose."

Proponents of public health care said it's an expensive lesson.

"AHS paying $100,000 a month on a building they sold for a song just rubs salt in the wounds of the paying public," said David Eggen of Friends of Medicare.

Dr. Tom Noseworthy, a health policy expert at the University of Calgary, said the region "needed some breathing room" to continue delivering the surgeries.

"For practical purposes, that private enterprise has become an extension of their business, or shall we say, our business," he said. "Private health-care delivery is never cheaper, it's never of better quality and you don't get better outcomes. I don't know how many times we have to say that."


Calgary Herald
July and August 2005

Premier Ralph Klein:  "Let me be blunt. We have unacceptable waiting lists in our publicly funded, rationed health-care system, and all the money in the world is not going to eliminate them."

Don McCanne:  "Ralph Klein states that 'all the money in the world' is not going to eliminate waiting lists, unless the source of the funds is private instead of public. What nonsense."

Comment:  Right-wing ideologues, such as former premier Ralph Klein of Alberta, have continued to push for more privatization of Canada's health care system. They claim that the private sector provides greater access and higher quality at a lower cost. As if they didn't have enough contrary evidence from the United States, they have continued with their experiments in privatization.

The experience with Health Resource Centre - a private, for-profit hospital - reinforces the proponents of the public system who use health policy science to sound the alarms over the ill-advised march toward further privatization. 

The current saga began with Premier Klein's notion that public hospitals had to be shut down because the taxpayers couldn't afford them, yet private hospitals should position themselves to address the problem of excess queues which were further exacerbated by the failure of the government to appropriately adjust capacity in the system. He seems to imply that private funds manifest some sort of magical quality that public funds lack.

The results of this experiment would suggest the opposite. The for-profit Health Resource Center not only provided the same orthopedic services at a 10 percent greater cost, the center is now going to cost the taxpayers much more money in an effort to bail it out. This could have been prevented if Klein and others of his ilk had provided appropriate stewardship of the public program. Tweaking a public system is far less expensive than establishing a parallel private system.

Dr. Tom Noseworthy, health policy expert at the University of Calgary, states it well when he says, "Private health-care delivery is never cheaper, it's never of better quality and you don't get better outcomes. I don't know how many times we have to say that."

Wednesday, May 12, 2010

qotd: The MMI proves that PPACA is already a failure

Milliman, Inc.
May 2010
2010 Milliman Medical Index

The annual Milliman Medical Index (MMI) reports total annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program. The MMI represents the total cost of payments to healthcare providers, and excludes the non-medical administrative component of health plan premiums.

The total 2010 medical cost for a typical American family of four is $18,074.

This is an increase of 7.8%. This is the third year in a row that the annual rate of increase has been below 8%; however, the dollar increase of $1,303 is still the highest we have seen in the last 10 years and since the inception of this index.

Cost Implications of Healthcare Reform on Family of Four

While employers are making the immediate changes required to their benefit plans and adapting their longer-term benefit strategy to the new regulatory environment, healthcare costs continue to increase at rates exceeding most other costs of doing business. Debate continues on the extent to which the changes from healthcare reform have potential to bend the long-term cost curve; however, for the near term, the underlying drivers of increasing healthcare costs are not expected to immediately change.

Efforts to enforce insurance rate controls may have indirect impact on the growth in healthcare costs but still do not address the underlying cost of care. For now, the onus of control remains with insurers, who will attempt to put pressure of providers to lower costs to a level that approved premium rates can support. There may be more extensive shift in market dynamics in 2014, when the government takes on an even larger proportion of payment responsibility due to expansion in Medicaid, the creation of exchanges, and the availability of subsidies for certain lower-income individuals.

While underlying cost drivers as yet remain relatively unchanged, there are some changes that will have a predictable effect on cost. The most immediate changes, such as increasing dependent coverage up to age 26 and elimination of lifetime and annual benefit maximums, will cause a direct shift in costs from employees to employers. Other options that will be implemented later, such as federally-mandated state health exchange plans, require much deeper analysis before an employer can make an informed decision. Because the practical implementation of this new legislation has not yet been defined, many employers are choosing to delay changes to their benefit plans for future annual benefit cycles, although it is very possible that those changes could be dramatic.

Looking into the future for the "typical family of four" represented by this analysis, the cost implications of reform are unclear. Much depends on the underlying medical cost that is dissected in this report. When it comes to cost control, the status quo is not encouraging. If reform or some other factors can motivate a reduction in the underlying cost of care, it will have important implications for the future cost of care for American families.

Comment:  The Milliman Medical Index (MMI) is especially significant this year because it proves that the Patient Protection and Affordable Care Act (PPACA) is already a miserable failure even before the provisions of the act take place. The MMI for 2010 is $18,074. Let's look at what that means under the PPACA.

It's important to understand precisely what the MMI is. It is the average amount that is already being spent on actual health care for a typical family of four enrolled in an employer-sponsored Preferred Provider Organization (PPO) plan. It does not include any of the administrative expenses or profits of the private insurers.

Already there's a problem. Since the MMI represents the amounts being paid by PPOs, the discounts for network physicians and hospitals and other products and services are already built in. The MMI represents a lower level of spending made possible by contracting payment rates with the physicians and hospitals that are included in the networks. That means that families for whom the spending is at MMI levels have lost their right of free choice of physicians and hospitals unless they are willing and able to pay significant financial penalties for obtaining care outside of the networks. The plans that will be available in the state insurance exchanges will be network-restricted managed care plans - mostly PPOs with some HMOs. Health care reform that takes away choice is not the reform that we wanted.

One of the most important measures in PPACA attempts to address the problem of high costs and the poor coverage of the plans currently available in the individual and small group markets. Individuals and small employers who are having problems finding adequate affordable plans will be able to buy plans in the insurance exchanges that theoretically have the same benefits and cost efficiencies of the large group market currently available to larger employers. If these exchanges actually work as intended, then the MMI will represent the average cost of health care for a family of four enrolled through the exchanges. This assumes that the insurers will cooperate and not continue to use deceptive innovations that have resulted in lower-value products in the individual insurance markets.

Assuming that the exchanges work as intended, keep in mind that the insurers offering individual and small group plans within the exchanges will be required to maintain a medical loss ratio of 80 percent. That is the amount that must be spent on actual health care - the amount that is represented by the MMI, minus the out-of-pocket expenses. They will keep 20 percent for their own administrative costs and profits (or even more if they are successful in their current efforts to shove some of their administrative costs into the medical loss ratio by reclassifying these administrative costs as "health care).

So let's look at the numbers. The standard Silver plans offered by the exchanges will have an actuarial value of 70 percent. That means that the plans will pay an average of 70 percent of the costs and the other 30 percent will be paid out-of-pocket by individuals and families, partially offset by subsidies for those who qualify. Using the 2010 MMI, the plans will pay for a family of four an average of $12,652 (70 percent of $18,074). The twenty percent for administrative costs and profits will add another $3,163 ($12,652 is 80 percent of the premium) which means that the premium that the insurer will have to charge will be $15,815 ($12,652 plus $3,163). The out-of-pocket portion for the family will be $5,422 (30 percent of $18,074). The the total average cost for the family for both the premium and out-of-pocket expenses combined will be $21,237 ($15,815 plus $5,422).

These are averages. To determine what each family actually would pay is more difficult because of several variables, including sliding scale subsidies for the premiums, sliding scale subsidies for the out-of-pocket expenses, opt-out eligibility based on the level of household income, and out-of-pocket spending, especially for those whose incomes exceed the eligibility thresholds for the subsidies.

Nevertheless, let's look at a family of four with an income at 400 percent of the federal poverty level - the threshold at which they qualify for neither the subsidies for premiums nor the subsidies for out-of-pocket costs. That income level is $88,200. That family would pay an average of $21,237, or 24 percent of their income, for health care, leaving them $66,963 for all of their other expenses. But since that is average, those with greater health care needs would face even larger out-of-pocket costs, which could be staggering. Even if the plan is promoted as having a stop-loss, private insurers are infamous for leaving patients stuck with charges for non-covered services and out-of-network providers. The bottom line is that PPACA has not ensured that the hard-working American family is protected from financial hardship or even personal bankruptcy should significant medical needs arise.

There are those who say that health care reform is done; we now have PPACA. They say that although it will likely require some adjustments along the way, our task now is to make it work. To those individuals I can only say, step back and look at the confounded mess! It will never insure everyone. It will never make health care affordable for each and every individual and family. It will never control administrative waste as it continues to add on more and more administrative complexity. 

We need to keep and build on some of the health system reforms in PPACA, such as the reinforcement of our primary care infrastructure. But we desperately need to dump the sick, fragmented financing system that wastes so much in resources and perpetuates the profound inequities and physical and financial suffering experienced in our system. We need to enact an improved Medicare for all, and do it ASAP!

Tuesday, May 11, 2010

qotd: Washington Post Discussion on America's New Health Care Law

Kaiser Foundation
May 10, 1010
Washington Post Discussion on America's New Health Care Law

Jackie Judd, vice president and senior advisor for communications, Kaiser Family Foundation:

"You wrote the... opening, overview chapter (of "Landmark" - a new book by the reporting staff of the Washington Post on the new health care law), and in there you said that while the law is complex, it's also moderate and incremental, and it's that very moderation that makes it complicated. What do you mean?" 

Alec MacGillis, reporter for the Washington Post:  

"Well, it's something I tried to say often during this whole debate. When people complained about the length of the bill - a two thousand page monstrosity, so complicated - and I wrote a piece back in the Fall that tried to address that argument and pointed out that, you know, if you really wanted a simple bill, then you could just blow this whole thing up.

"And, you know, single payer is very simple. You just, you know - government-run health insurance - get rid of all the health insurance companies, and there are a lot fewer rules to write. That's simpler, but, obviously, we were not going to do that.

"We were going to take a much more moderate, market-based approach to this. And that means preserving the foundations of our existing system. And that means ending up with something with a law that's much more complex, because you're sort of tweaking here and there. You're not just - it's not tabula rasa - you're not starting over.

"But in its main elements it really is a quite moderate and incremental approach. We are preserving the private health insurance system. It's modeled - no matter what Mitt Romney tells you now - this is modeled on the plan that he passed in 2006 as a Republican governor of Massachusetts; it's modeled on the Republican alternative to the Clinton plan in the early nineties; it's modeled on Richard Nixon's plan in the seventies; it's modeled on the idea put forward by the Heritage Foundation early last decade, although they're trying to distance themselves right now from that; but it really is an attempt to build on what we have now, and because you're doing it that way, you end up with this messy thing. But it's really not that... but the main elements are not that complicated. 

"What we basically have - the best way to think of it is kind of a three legged stool. We are expanding coverage by requiring that everyone get coverage. We're also telling the insurance companies that they have to provide everyone coverage who comes and asks for it. So they have to take you; you have to get it. That way you get the healthy people into the pool so that they can afford to take the sick people as well. And then to help people afford to get the coverage that they're required to get, you provide subsidies. But that's it, and you need all three legs of that stool. That's why you need have a mandate."

Comment:  So by pursuing a moderate, market-based, Republican-based approach, the health care law was made much more complicated. But the greater tragedy is that it wasn't only made more complicated, it failed in our goals of covering everyone with a financing system that we could afford. The complicated reform proposal that is now law is the most expensive model of reform ever devised, not to mention being one of the least effective.

As Alec MacGillis states, "... single payer is very simple. You just, you know - government-run health insurance - get rid of all the health insurance companies, and there are a lot fewer rules to write."

We still can "blow this whole thing up," and enact single payer. Not only would there be fewer rules, everyone would have the health care that they need, and we would be able to pay for it. That will never happen under the new law.

Monday, May 10, 2010

qotd: "Behavioral economics" and "choice architecture"
May 10, 2010
For good behavior
By Rebecca Vesely

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Friday, May 7, 2010

qotd: Did a split over health care divide the British?

May 5, 2010
Socialized healthcare: The 'untouchable' of UK politics
By Paul Armstrong

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, May 6, 2010

qotd: Will businesses drop their health benefit programs?

May 6, 2010
Documents reveal AT&T, Verizon, others, thought about dropping employer-sponsored benefits
By Shawn Tully

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

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

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

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

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

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

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

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

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

It's these analyses -- which show it's a lot cheaper to "pay" than to "play" -- that threaten to overthrow the traditional architecture of health care.

The full article contains links to documents supporting some of these assertions:

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

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

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

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

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

Wednesday, May 5, 2010

qotd: Mercer projects downgrading of employer-sponsored health plans

April 27, 2010
A third of employers may be penalized for health coverage deemed 'unaffordable'

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

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

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

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

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

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

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


May 3, 2010
Study: Many Health Plans Not Affordable

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

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

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

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

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

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

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

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

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