Thursday, May 31, 2012

qotd: PwC predicts medical cost increases

PwC (PricewaterhouseCoopers)
Health Research Institute
May 2012
Medical Cost Trend: Behind the Numbers 2013

Healthcare spending growth in the United States has slowed considerably over the past three years. And despite expectations that the trend would bounce back up in 2012, it did not. In fact, we see no major change on the horizon for 2013.

Medical cost trend measures spending growth on health services and products—a critical factor in calculating insurance premiums for employers and consumers. For 2013 PwC's Health Research Institute projects a medical cost trend of 7.5%. Perhaps most notably, the historically large gap between healthcare growth and overall inflation has closed slightly.

As a result, the United States finds itself at a crossroads with respect to medical inflation. History suggests that the current slowdown is merely a dip mirroring broader economic trends and that medical cost growth will return to "normal" when the rest of the economy recovers fully. Looking even further out, if the Affordable Care Act is fully implemented, tens of millions of newly-insured Americans receiving care for the first time in years could cause a spike in spending in 2014 and beyond.

But across the healthcare landscape behaviors are beginning to change. Employers are pushing wellness programs with real enforcement muscle. Healthcare providers and drug makers are embracing the quest for value. And patients are becoming more cost-conscious medical consumers.

It is always dangerous to predict that medical cost trend could be approaching a more sustainable level. Yet if the structural forces in the industry take hold, the U.S. health system may be entering a "new normal."

Executive summary

The focus on medical cost containment strategies is continuing, aided by the sluggish economy, reforms in the healthcare industry, and efforts by employers to hold down costs.

More than half of the employers surveyed by HRI are considering increasing employees' share of health benefit cost and expanding health and wellness programs in 2013.

In estimating the medical cost trend growth for 2013, HRI relied on multiple sources including interviews with health plan actuaries and industry leaders, a review of available surveys and analyst reports, and PwC's own 2012 Health and Well-Being Touchstone Survey of 1,400 employers from more than 30 industries. In this year's report, we identified:

Four factors that will deflate medical cost trend in 2013:

* Medical supply and equipment costs abate under market pressure. Supplies can account for more than 40% of the cost of certain procedures. Recent hospital consolidation and physician employment are enabling administrators to move away from "physician preference" purchasing and negotiate for significant savings. In addition, insurers are pressuring hospitals to hold down these expenses.

* New methods to deliver primary care gain popularity. One of the slowest areas of cost growth has been in physician services, and this trend is expected to continue in 2013 as consumers choose alternatives to the traditional doctor's office visit. Lower-cost options such as workplace and retail health clinics, telemedicine, and mobile health tools continue to gain market share because employers and consumers view them as cost effective and convenient.

* Price transparency exerts pressure. As comparative cost information becomes more readily available, purchasers such as employers and individual patients can shop for non-emergency services such as tests and elective procedures. Providers meanwhile are under pressure to justify prices. More than 30 states require some reporting of hospital charges and reimbursement rates. Congress is considering legislation that would prohibit cost confidentiality clauses in insurance and hospital contracting.

* The pharmaceutical patent cliff continues to foster the use of cost-saving generics. Many blockbuster drugs have recently gone off patent, which will have a major effect on lowering drug spending in 2013.

Two factors that will inflate medical cost trend in 2013:

* Uptick in utilization trend is expected in 2013. The recession of 2007–2009 contributed to a significant slowing in healthcare consumption, as many people who lost jobs or were afraid of losing employment delayed care. As the economy continues to strengthen, utilization is expected to rebound.

* Medical and technological advances accelerate growth of higher-cost care. Remarkable new discoveries and technological advances let many in society live much longer—but often at a significantly higher cost. New technologies, such as robotic surgery and positron emission tomography services, have grown rapidly, with 36% of hospitals performing robotic surgery in 2010. Several health plans reported an uptick in high-cost cases, many surpassing the million-dollar mark.

What this means for your business

Employers and insurers will want to capitalize on the recent slowdown, while doctors, hospitals, and pharmaceutical companies will need to retool their business models to succeed in the new environment.

Comment:  This annual PwC projection of medical cost trends with employer-sponsored health programs seems to celebrate the slowing of cost trends at the 7.5 percent level for 2013. Yet that is well in excess of the rate of inflation. Our nation's employers and their private insurer partners have remained ineffective in controlling health care cost escalation.

PwC discusses four factors that they say should deflate the medical cost trend, but when you look closer at them, they would barely tweak costs.

* Hospital consolidation may place administrators in a better negotiating position for purchasing supplies and equipment, but since these are not services but rather products with relatively fixed production costs, negotiable margins will be quite narrow. Very little savings will be reflected in the bottom line of total costs.

* Retail health clinics might charge lower fees than primary care practices, but not much lower. Also, most health care still needs to be delivered within the traditional system of primary care professionals, specialists, and hospital and outpatient services. A discount on flu shots and exams for common colds in a convenience clinic will not make much of a dent in spending on the 80 percent who are relatively healthy, yet still receive most of their care through traditional health care professionals and facilities. It won't have any impact at all on the 80 percent of health care that is consumed by those with more significant health care problems.

* There is much discussion of price transparency, as if patient/consumers are going to drive down prices through health care shopping. Most prices paid are determined not by price checks but by administered rates of government programs or negotiated rates through third party payers, including private insurers and employers with self-insured programs. Ubiquitous price shopping is merely a dream of ideologues.

* It is true that many blockbuster drugs are coming off of patent and will be much less expensive as generics. But when you look at some of the newer agents and the research that is down the line, the quest of the pharmaceutical and biotech industry is for drugs and biologicals with five and six digit prices, or maybe four digits for products with low production costs and higher utilization. The PwC report mentions $300,000 and $400,000 drugs that are already on the market. The industry has no interest in producing new $20 drugs.

The report also mentions factors that will inflate health care costs, including increased utilization as the economy recovers, and increased spending on newer expensive technology. Also spending increases will occur if the states are successful in enrolling significant numbers of previously uninsured individuals in their insurance exchanges, and if employers increase coverage to avoid penalties should the Affordable Care Act survive its challenges.

Until we are ready to change to a much more efficient single payer national health program, we can anticipate that intolerable health care inflation rates will stay with us. As more of us suffer from the results - impaired access and financial hardship - we may finally reach a threshold wherein we are ready to act. Until then, don't get sick.

Wednesday, May 30, 2012

qotd: Tradeoff between risk protection and moral hazard

The National Bureau of Economic Research
May 2012
Estimating the Tradeoff Between Risk Protection and Moral Hazard with a Nonlinear Budget Set Model of Health Insurance
By Amanda E. Kowalski


Insurance induces a well-known tradeoff between the welfare gains from risk protection and the welfare losses from moral hazard. Empirical work traditionally estimates each side of the tradeoff separately, potentially yielding mutually inconsistent results. I develop a nonlinear budget set model of health insurance that allows for the calculation of both sides of the tradeoff simultaneously, allowing for a relationship between moral hazard and risk protection. An important feature of this model is that it considers nonlinearities in the consumer budget set that arise from deductibles, coinsurance rates, and stoplosses that alter moral hazard as well as risk protection relative to no insurance. I illustrate the properties of my model by estimating it using data on employer sponsored health insurance from a large firm. Within my empirical context, the average deadweight losses from moral hazard substantially outweigh the average welfare gains from risk protection. However, the welfare impact of moral hazard and risk protection are both small relative to transfers from the government through the tax preference for employer sponsored health insurance and transfers from some agents to other agents through a common premium.

4.3 The Estimated Tradeoff Between Moral Hazard and Risk Protection

The third panel of Table 10 gives the tradeoff between the welfare gain from risk protection and the deadweight loss from moral hazard. The distribution of the tradeoff at any quantile generally is not equal to the difference between DWL (deadweight loss) and RPP (risk protection premium) at those quantiles. However, as shown in the penultimate column, the mean tradeoff is equal to the mean DWL minus the mean RPP. For all offered and hypothetical plans considered, the results show that the average deadweight loss exceeds the gain from risk protection. The average net welfare loss in each of the offered plans is around $5, or 0.25% of money at stake.

We see that the welfare gains that we estimate from insurance in Table 11 are very similar to predicted insurer spending reported in Table 8; demographic groups with higher predicted insurer spending derive a larger welfare gain from insurance than demographic groups with lower predicted insurer spending. As we see in Table 12, demographic groups with larger predicted insurer spending also have larger deadweight losses. Risk protection does not appear to vary with predicted insurer spending because the magnitudes of the risk protection premium are so small, but there is also some variation in the risk protection premium across demographic groups. 


Full paper (highly technical):

Comment:  The mainstream policy community likely will take from this study the fact that it supports the prevailing notion that losses from insured patients using more health care than they otherwise would have (moral hazard) are greater than the gains in protecting personal finances in the face of medical need (risk protection). Such an interpretation would be unfortunate simply because it is inadequate and therefore misleading.

Most importantly, the net welfare loss of using more care when there is risk protection is so small that it is almost negligible. In fact, the population studied (employees of a large retail trade firm) did not have high health expenditures and therefore would be the most likely to respond to direct costs incurred below their deductibles. Yet the data show that mean value of the extra care obtained above the value of the risk protection premium was almost negligible. 

Most of health care spending is incurred by those with greater health care needs, a group that was not represented in this study of healthier individuals. People with greater health care needs exceed their deductibles and consequently do not experience consumer sensitivity to most of their health care prices.

Another important issue is that the extra health care accessed as a result of moral hazard should not be automatically dismissed as excess care. Half of it is not since it includes beneficial services, even though these services risk being dismissed merely because they are not reflected in improved mortality data. Even the care that might not seem to be beneficial still provides reassurance to concerned patients that their presenting complaints do not warrant further diagnostic or therapeutic intervention. Reassurance provided by health care professionals should not be considered to be a moral hazard.

The lesson to take home from this study is that the cost of trading up for more risk protection is almost negligible when the price paid is a very small increment in additional spending on largely beneficial health care that might otherwise have been foregone.

This is crucial in the continued debate over health care reform. There is considerable political pressure to shift price sensitivity to health care consumer/patients through consumer-directed high-deductible plans, health savings accounts, vouchers for Medicare plans, lower-tier plans in insurance exchanges, and other devious innovations that insurers will no doubt introduce in the future. These concepts are to deter the false bogeyman of moral hazard, but at the profound cost of threatening financial security for those of us with health care needs.

Regular readers already know how we can circumvent this nonsense - simply enact a single payer national health program that eliminates cost sharing. Countries that spend on average only half of what we do have shown that it can be done. The moral hazard is in not doing it.

Tuesday, May 29, 2012

qotd: Bankruptcy as implicit health insurance

The National Bureau of Economic Research
May 2012
Bankruptcy as Implicit Health Insurance
By Neale Mahoney


This paper examines the implicit health insurance households receive from the ability to declare bankruptcy. Exploiting cross-state and within-state variation in asset exemption law, I show that uninsured households with greater seizable assets make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth-at-risk are more likely to hold health insurance. The implicit insurance from bankruptcy distorts the insurance coverage decision. Using a microsimulation model, I calculate that the optimal Pigovian* penalties are similar on average to the penalties under the Affordable Care Act (ACA).

5.2 Effect on Costs

To summarize, I find a strong positive relationship between seizable assets and out-of-pocket payments for households with higher utilization, a slightly downwardly sloping relationship for households with lower utilization, and zero effect on the extensive margin. Thus the impact of bankruptcy on financial risk is exactly what you would expect from a high-deductible health plan.


Understanding why households are uninsured is fundamental to positive and normative analysis of health insurance policy—yet the insurance-coverage decision is not well understood. The objective of this paper is to examine how the implicit insurance from bankruptcy bears on this decision.

In the first part of the paper, I argue that the fact that most medical care is provided on credit coupled with the fact that this debt can be discharged for seizable assets in bankruptcy provides households with implicit high-deducible health insurance.

I next evaluated the quantitative importance of this mechanism. Exploiting cross-state and within-state variation in asset exemption law, I show that uninsured households with greater seizable assets make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth-at-risk are more likely to hold health insurance coverage. Health insurance is wealth insurance, to a certain degree, and is less valuable to those with fewer assets.

The final part of the paper examined ways in which the implicit insurance from bankruptcy might inform the design of health insurance policy. Because households do not pay for bankruptcy insurance, too many households choose to be uninsured on the margin. Using a utility-based, microsimulation model of insurance choice, I estimate that the optimal Pigovian* penalties are similar on average to the penalties under the ACA. 

* A Pigovian tax is a tax levied on a market activity that generates negative externalities. The tax is intended to correct the market outcome. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. A Pigovian tax equal to the negative externality is thought to correct the market outcome back to efficiency. In the presence of positive externalities, i.e., public benefits from a market activity, those who receive the benefit do not pay for it and the market may under-supply the product. Similar logic suggests the creation of Pigovian subsidies to make the users pay for the extra benefit and spur more production. (Wikipedia, accessed 5/29/12)


Full paper (highly technical):

Comment:  At the risk of oversimplification, this paper demonstrates that personal bankruptcy can serve as a form of health insurance in individuals who are otherwise uninsured and have negligible wealth that is at risk and negligible assets that can be seized in a bankruptcy proceeding.

What a terrible thesis this is to study - suggesting that bankruptcy can suffice for health insurance in people with no wealth and no seizable assets. Maybe that is acceptable if impaired health care access due to lack of funds is not important, or if we accept that the costs of uninsured care should be shifted to insured individuals, or, above all, if we assume that the indignity of personal bankruptcy is small price to pay for this perverse form of "insurance."

Perhaps one of the most alarming sentences in this paper is the following: "Thus the impact of bankruptcy on financial risk is exactly what you would expect from a high-deductible health plan."

Wow! On financial risk, bankruptcy works as well as a high-deductible plan!

Instead of trying to figure out whether or not Pigovian penalties are similar to penalties under the Affordable Care Act, why don't we instead move forward with a health care financing system that doesn't ever involve bankruptcy, or Pigovian penalties for that matter - a single payer national health program. Not only would that be much simpler, we would all get the health care that we need.

Friday, May 25, 2012

qotd: Sneak preview of Jim McDermott's State-Based Universal Healthcare Act

Los Angeles Times
May 25, 2012
Legislation may enable states to offer universal healthcare
By David Lazarus

Universal coverage, Medicare for all, single payer — call it what you will. It's clear that conservative forces are determined to prevent such a system from ever being introduced at the national level. So it's up to the states.

The catch is that to make universal coverage work at the state level, you'd need some way to channel Medicare, Medicaid and other federal healthcare funds into the system. At the moment, that's difficult if not impossible.

But legislation quietly being drafted by Rep. Jim McDermott (D-Wash.) would change that. It would create a mechanism for states to request federal funds after establishing their own health insurance programs.

If passed into law — admittedly a long shot with Republicans controlling the House of Representatives — McDermott's State-Based Universal Healthcare Act would represent a game changer for medical coverage in the United States.

It would, for the first time, create a system under which a Medicare-for-all program could be rolled out on a state-by-state basis. In California's case, it would make coverage available to the roughly 7 million people now lacking health insurance.

"This is a huge deal," said Jamie Court, president of Consumer Watchdog, a Santa Monica advocacy group. "This is a lifeline for people who want to create a Medicare system at the state level."

I learned of McDermott's bill after getting my hands on documents he had sent to other members of Congress seeking support for the legislation.

McDermott's office confirmed that the documents and legislation are real but declined to make the congressman available for comment until the bill is formally introduced, which could happen as soon as next week.

Comment:  Rep. Jim McDermott's State-Based Universal Healthcare Act can indeed be a real game changer. Currently it is impossible for states to establish a bona fide single payer system because they would need to have full control of the funds delegated for current federally funded health care programs such as Medicare, Medicaid and CHIP, and they would need relief from federal regulations such as those in ERISA. As it is being developed, this legislation would grant states the freedom to establish their own relatively autonomous system as long as it met certain very basic federal standards (i.e., that it actually would achieve the goal of adequate health care coverage for essentially everyone).

Many conservatives such as Mitt Romney who are opposed to the Affordable Care Act ("Obamacare") have said that the states should be allowed to make their own decisions on health care reform. In fact, Gov. Romney supported and signed into law the Massachusetts reform plan ("Romneycare" which is a model very similar to that of the Affordable Care Act). He has stated repeatedly that, if elected President, he would support the repeal of "Obamacare," but that in its place he would support states in their efforts to enact their own reform. Rep. McDermott's legislation would provide the states with that opportunity. This legislation would allow conservatives in Congress to stand up for states' rights, while joining with progressives who would like to see better and more effective use of our health care funds.

When the bill is released in the next week or so, we will then have the details. In the meantime, we can be reassured that reform does not stop with the partial and inadequate measures of the Affordable Care Act, regardless of the pending decision of the Supreme Court on the constitutionality of the Affordable Care Act.

(At this point, I would like to publicly extend my apologies to Rep. McDermott and his staff since I was the source of the documents that were provided to David Lazarus. These documents were circulating within the single payer and the legislative communities, and, quite naively, I did not realize that they were under embargo, though I should have. I just didn't think about it. David Lazarus is a highly credible and exceptionally ethical reporter of health care and other consumer issues, and I thought that it would be great for him to cover this important legislation. Premature release of the preliminary documents was my error, and mine alone.)

Thursday, May 24, 2012

qotd: Half of individual plans fall below 60% actuarial value

Health Affairs
May 23, 2012
More Than Half Of Individual Health Plans Offer Coverage That Falls Short Of What Can Be Sold Through Exchanges As Of 2014
By Jon R. Gabel, Ryan Lore, Roland D. McDevitt, Jeremy D. Pickreign, Heidi Whitmore, Michael Slover and Ethan Levy-Forsythe


The Affordable Care Act creates state-based health exchanges that will begin acting as a market place for health insurance plans and consumers in 2014. This paper compares the financial protection offered by today's group and individual plans with the standards that will apply to insurance sold in state-based exchanges. Some states may apply these standards to all health insurance sold within the state. More than half of Americans who had individual insurance in 2010 were enrolled in plans that would not qualify as providing essential coverage under the rules of the exchanges in 2014. These people were enrolled in plans with an actuarial value below 60 percent, which means that the plans covered less than that proportion of the enrollees' health expenses. Many of today's individual health plans are below the "bronze" level, the lowest level of plan that can be sold through exchanges. In contrast, most group plans in 2010 had an actuarial benefit of 80–89 percent and would qualify as highly rated "gold" plans in the exchanges. To sell to ten million new buyers on the exchanges, insurers will need to redesign benefit packages. Combined with a ban on medical underwriting, the individual insurance market in a post–health reform world will sharply contrast with the market of past decades.

From the Discussion

Using simulated claim payments, we found that the average actuarial value of group plans in 2010 was 83 percent, and the average for individual plans was 60 percent. For an average family, annual out-of-pocket expenses were $1,765 with group coverage, compared to $4,127 with individual coverage. For people in poor health who incurred high medical expenses, the differences between the group and individual markets were even more dramatic.

Our findings have notable policy implications. First, the majority of Americans with individual insurance coverage today are enrolled in a plan whose actuarial value is too low to qualify for a state-based exchange. Insurance reforms that went into effect September 23, 2010, raised the financial protection offered by exchange plans. For example, lifetime maximum benefits were eliminated, effective preventive services must now be offered without cost sharing, and annual limits on insurance coverage were removed. But to qualify for exchanges, insurers will need to lower the average deductible level for individual tin plans, which today average nearly $3,900 for a single person.

Second, about two-thirds of today's employees are enrolled in a gold or platinum plan. Families with coverage through the exchanges are likely to have less financial protection than employees with employer-based coverage enjoy today. Employers choosing to buy insurance coverage for their employees through the small-employer exchange, which could eventually include employers with more than a hundred workers, will probably obtain less extensive coverage if they opt to buy a plan in the silver tier than if they now offer a plan typical of those provided in the employer-based market today.

Third, very sick patients—those in the top 1 percent of medical spending—incur sizable out-of-pocket expenses regardless of coverage. For example, these top spenders face out-of-pocket expenses of nearly $3,800 in a group platinum plan. But there are substantial differences in out-of-pocket spending between plans with high actuarial value and plans with low value. A family in the top 1 percent of medical spenders with tin coverage in the individual market incurs annual out-of-pocket expenses of more than $27,000. ("Tin coverage" is a fifth tier created exclusively for this study. It is a level below the bronze tier - below 60 percent actuarial value - a level that will not be permitted in the state insurance exchanges.)

Comment:  Reports of this study likely will celebrate the fact that very low actuarial value plans which are commonplace in the individual market today - those below 60 percent value (plan pays less than 60 percent of covered health costs) - will have to reduce their deductibles and perhaps make other changes to qualify under the Affordable Care Act. But is this enough?

The study compared group plans with individual plans. Group plans have an average actuarial value of 83 percent, whereas the average actuarial value for individual plans is 60 percent, with 51 percent of them falling below that threshold. Only 14 percent were silver (70% AV) and 2 percent gold (80% AV), and there were no platinum (90% AV) plans in the individual market.

The lower half of all individual plans will have to either bring their value up to 60 percent or drop out of the exchange market. This means that average actuarial values of plans in the individual market - those available through the exchanges - will still be in the low 60s - far below group plans with their average actuarial value of 83.

Further, it is likely that smaller employers will rely on the exchanges to provide coverage for their employees - again with lower actuarial value plans than is typical of employer-sponsored group plans. The impact on patients will be significant.

Repeating a quote from above, "... very sick patients—those in the top 1 percent of medical spending—incur sizable out-of-pocket expenses regardless of coverage. For example, these top spenders face out-of-pocket expenses of nearly $3,800 in a group platinum plan (the very best coverage available). But there are substantial differences in out-of-pocket spending between plans with high actuarial value and plans with low value. A family in the top 1 percent of medical spenders with tin coverage in the individual market incurs annual out-of-pocket expenses of more than $27,000."

Although "tin coverage" (plans under 60% AV) will be prohibited in the exchanges, the financial burden on patients who need significant amounts of health care will still be great, even with the subsidies and the elimination of maximum lifetime benefits. Instead of adding to the burden of illness, we should be attempting to preserve the financial security of patients, as we would be if we had a single payer national health program - an improved Medicare for all.

Wednesday, May 23, 2012

qotd: Amartya Sen on government austerity

The New York Times
May 22,2012
The Crisis of European Democracy
By Amartya Sen

The worthy but narrow intentions of the European Union's policy makers have been inadequate for a sound European economy and have produced instead a world of misery, chaos and confusion.

There are two reasons for this.

First, intentions can be respectable without being clearheaded, and the foundations of the current austerity policy, combined with the rigidities of Europe's monetary union (in the absence of fiscal union), have hardly been a model of cogency and sagacity. Second, an intention that is fine on its own can conflict with a more urgent priority — in this case, the preservation of a democratic Europe that is concerned about societal well-being. These are values for which Europe has fought, over many decades.

The cause of reform, no matter how urgent, is not well served by the unilateral imposition of sudden and savage cuts in public services. Such indiscriminate cutting slashes demand — a counterproductive strategy, given huge unemployment and idle productive enterprises that have been decimated by the lack of market demand.

There is, in fact, plenty of historical evidence that the most effective way to cut deficits is to combine deficit reduction with rapid economic growth, which generates more revenue.

There are surely lessons here from John Maynard Keynes, who understood that the state and the market are interdependent. But Keynes had little to say about social justice, including the political commitments with which Europe emerged after World War II. These led to the birth of the modern welfare state and national health services — not to support a market economy but to protect human well-being.

Though these social issues did not engage Keynes deeply, there is an old tradition in economics of combining efficient markets with the provision of public services that the market may not be able to deliver. As Adam Smith (often seen simplistically as the first guru of free-market economics) wrote in "The Wealth of Nations," there are "two distinct objects" of an economy: "first, to provide a plentiful revenue or subsistence for the people, or, more properly, to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services."

Participatory public discussion — the "government by discussion" expounded by democratic theorists like John Stuart Mill and Walter Bagehot — could have identified appropriate reforms over a reasonable span of time, without threatening the foundations of Europe's system of social justice.

Europe cannot revive itself without addressing two areas of political legitimacy. First, Europe cannot hand itself over to the unilateral views — or good intentions — of experts without public reasoning and informed consent of its citizens.

Second, both democracy and the chance of creating good policy are undermined when ineffective and blatantly unjust policies are dictated by leaders. The obvious failure of the austerity mandates imposed so far has undermined not only public participation — a value in itself — but also the possibility of arriving at a sensible, and sensibly timed, solution.

This is a surely a far cry from the "united democratic Europe" that the pioneers of European unity sought.

(Amartya Sen is a Nobel laureate and a professor of economics and philosophy at Harvard.)

Comment:  Although Amartya Sen warns of the threat of unilateral austerity programs to the united democratic Europe, his words can also apply to the current political efforts in the United States to reduce the role of government through austerity measures. The current attack on Medicare exemplifies the fact that the austerity agenda does not spare our government health programs.

Perhaps the most important warning we should extract is implied by Professor Sen's concern about the undermining of public participation. We should take heed of the fact that a united democratic nation requires not only public involvement but also public awareness of the proposed policies and their ramifications. As he writes, political legitimacy of nations requires "public reasoning and informed consent of its citizens."

The public has to understand that the rhetoric of unilaterally "reducing taxes" equates with imposing government austerity. They then have to understand what government austerity truly means. It does not mean, "cut my taxes, but leave my Medicare alone."

Tuesday, May 22, 2012

qotd: GAO on the Small Employer Health Insurance Tax Credit

GAO (Government Accountability Office)
May 14, 2012
Small Employer Health Tax Credit
Factors Contributing to Low Use and Complexity

Fewer small employers claimed the Small Employer Health Insurance Tax Credit in tax year 2010 than were estimated to be eligible. While 170,300 small employers claimed it, estimates of the eligible pool by government agencies and small business advocacy groups ranged from 1.4 million to 4 million. The cost of credits claimed was $468 million. Most claims were limited to partial rather than full percentage credits (35 percent for small businesses) because of the average wage or full-time equivalent (FTE) requirements. 28,100 employers claimed the full credit percentage. In addition, 30 percent of claims had the base premium limited by the state premium average.

One factor limiting the credit's use is that most very small employers, 83 percent by one estimate, do not offer health insurance. According to employer representatives, tax preparers, and insurance brokers that GAO met with, the credit was not large enough to incentivize employers to begin offering insurance. Complex rules on FTEs and average wages also limited use. In addition, tax preparer groups GAO met with generally said the time needed to calculate the credit deterred claims. Options to address these factors, such as expanded eligibility requirements, have trade-offs, including less precise targeting of employers and higher costs to the Federal government.

Comment:  One of the benefits of the Affordable Care Act is the tax credits offered to small businesses to help them obtain health insurance coverage for their employees. This evaluation by the GAO shows that, in 2010, 83 percent of small businesses eligible for the full credit did not even offer health insurance.

According to the report, "small employers do not likely view the credit as a big enough incentive to begin offering health insurance and to make a credit claim, according to employer representatives, tax preparers, and insurance brokers we met with."

Though the complexity of the rules and the modest amount of the credits are cited as causes for the low participation rates, the fundamental flaw is that this program was designed to comply with our fragmented, dysfunctional system of financing health care - a model that will always fall short of reform goals.

Instead of trying to patch our fragmented program of private plans and pubic programs, we need to replace it with a single payer national health program - an improved Medicare for all.

Monday, May 21, 2012

qotd: Private insurers blame health care prices

Health Care Cost Institute
May 2012
Health Care Cost and Utilization Report: 2010

The Health Care Cost Institute (HCCI) was created in September 2011 to provide comprehensive data on health care costs and promote independent, nonpartisan research and analysis on the causes of the rise in U.S. health spending.

HCCI's research activities are based on de-identified data voluntarily provided by Aetna, Humana, Kaiser Permanente, and UnitedHealthcare, four of the nation's largest insurers.

The 2010 HCCI Health Care Cost and Utilization Report is the first report of its kind to track changes in expenditures and utilization of health care services by those younger than 65 covered by employer sponsored, private health insurance (ESI).

$4,255 -
Average annual per capita health care spending for beneficiaries younger than 65 and covered by employer-sponsored group insurance in 2010. 

1.6% & 3.3% -
The consumer price index (CPI-U), a measure of price inflation, and the growth rate of average per capita spending on group ESI beneficiaries younger than 65 (2009-2010). Per capita spending outpaced overall price inflation in 2010. 
2.6% & 7.1% -
Growth rate of estimated per capita health care spending by insurers and beneficiaries, respectively, between 2009 and 2010.
Summary of the Executive Summary

We find continued growth in per capita and estimated aggregate health care spending in this population, although that growth is less than 4 percent. This is consistent with the Centers for Medicare & Medicaid Services' findings regarding national health expenditures. Patients' out-of-pocket share of prices paid went up, although the cost-sharing rate on a per capita basis (including beneficiaries who did not use services) did not change much. Prices increased across all categories of service, with outpatient services experiencing the fastest growth.  Unlike other recent reports on health care spending, we find that the increased spending is mostly due to unit price increases rather than changes in the quantity or intensity of services.  


S&P Healthcare Economic Indices
March 2012 Update

7.84% - S&P Healthcare Economic Commercial Index
2.41% - S&P Healthcare Economic Medicare Index

Comment:  Until now, much of our information on health care costs has been obtained from government sources - especially Medicare and Census data. The Health Care Cost Institute is an effort on the part of the private insurance industry to share their data in an effort to improve research and analysis on the causes of the rise in U.S. health care spending.

Cooperating in this effort are Aetna, Humana, Kaiser Permanente, and UnitedHealthcare. Conspicuously absent are Cigna, and especially WellPoint.

Many reasons are given for our very high health care costs, but this study adds to the evidence that price increases are the most important factor (except, of course, for the administrative waste that is usually ignored in studies like this). The excess increase in prices is a particularly relevant observation since this study was limited to individuals under 65 with employer-sponsored, private health insurance.

This report establishes beyond any doubt that the nation's largest private insurers have been ineffective in controlling health care prices (not to mention generating more administrative waste). In spite of the contracts that the private insurers have with health care providers, health care price increases continue to greatly exceed the rate of inflation. Also, the most recent S&P Healthcare Indices confirm, once again, that our government Medicare program has been far more effective in controlling per capita health care costs than have the private commercial insurers.

All other nations control health care prices. Medicare controls health care prices. Only our private insurers have been incompetent in slowing price escalation. This is yet more evidence that private insurer intermediaries functioning relatively autonomously in the health care marketplace are ineffective in bringing us better pricing of health care products and services. This is a job for government, not the marketplace.

We are often accused of being unfairly critical of the private insurers since it is not their fault that health care prices are so high. Do we really care whether or not it is their fault? Prices are high, and they haven't helped. They are a profoundly expensive administrative industry. We should continue to waste our vast sums on their ineffective model of price containment?

Look at the growth rates of per capita health spending that they report in this study of their own industry. The spending by the insurers increased at a rate of 2.6%, a feat that they were able to accomplish partly by increasing beneficiaries costs by 7.1%! Is that the kind of assistance that we need from this industry?

It's time to throw them out of the Temple (a biblical proxy for all religious and secular moralists).

Friday, May 18, 2012

qotd: Smiley and West - "The Rich and the Rest of Us"

The Rich and the Rest of Us
A Poverty Manifesto
By Tavis Smiley and Cornel West

With history as our guide, we can chart the moment Americans got addicted to credit cards and the quest for the American Dream became a shopping-mall like adventure. Spending a cold night camped out in a parking lot to be the first in line when a store opens and getting trampled by a crowd competing  for "the sale of the day" doesn't even seem to matter. But deep down we knew we'd never attain the lifestyles we saw on television. As brainwashed, robotic consumers armed with unending credit, we sought to transform our living-large fantasies into reality. Now, our supersized ambitions have been downsized.

The "new poor" find themselves standing shoulder to shoulder at the welfare office, food pantry, or thrift store with people they used to disregard. As the politicians they elected predict a doomed "entitlement nation" and boast of shredding the poor's safety nets, the former middle class tries to reconcile these contradictions by clinging to the belief that this is a temporary destination, that somehow "they" are still better than "those people."

How do we get folk to understand that there is no "they," there is no "them"? Too many American are falling through gaping holes scissored out of America's safety net. Income inequality is real. There is an institutionalized divide between the wealthy and the poor, so that what we now have are the rich and the rest of us.


The new poverty numbers are forcing middle class families to rely on services that traditionally impoverished Americans have depended on for years.

According to the U.S. Department of Agriculture's 2012 figures, over 46 million Americans (14 percent of the population) are now living on food stamps with the average recipient receiving $150 worth per month. Actually, "food stamps" have had a makeover in America. During the late 1990s, the government phased out the facsimile printed money for a specialized swipe-as-you-go debit-card system that can be processed for purchases in grocery stores and major retailers just like any other consumer.

For most of us, 46 million people poor enough to qualify for food-stamp debit cards is a depressing thought. But for banking and investment giant JPMorgan Chase, every time a new welfare debit card is issued, profits tick up a notch. The company is the largest, first, and only contracted processor of food-stamp benefit cards in America. In 2009, two years after the recession officially began, the company posted profits of $11.7 billion on revenues of $115.6 billion - a 109 percent jump and a 14 percent increase over the previous year. Christopher Paton, manager with JPMorgan's public-sector benefit payments division, described how the welfare card division contributed to company profits:

"Right now, volumes have gone through the roof in the past couple of years. The good news, from JPMorgan's perspective, is the infrastructure that we built has been able to cope with that increase in volume."


We recognize that the President's health care reform bill will make health care more available to millions of Americans in 2014, but we are also cognizant of the aggressive efforts, particularly from the Right, to overturn the bill. Regardless of partisan political machinations, no American should die because they lack health insurance or access to quality health care. Medical insurance with the single-payer option should become a reality for all Americans, and we must invest in publicly funded community health centers and hospitals. Then the poor and uninsured will have other options than emergency rooms as their only source for primary care or early death.

Comment:  Much has been written about the social justice topics addressed in this book by Tavis Smiley and Cornel West. "The Rich and the Rest of Us" is of particular value because it is written in a style that all of us, not just policy wonks, can easily understand and resonate with. It includes "The Poverty Manifesto" which hopefully will re-prioritize our thinking, moving us forward with an action plan to achieve social justice for all.

Single payer activists who are frustrated with the lack of progress in advancing a model of health care financing that is a moral imperative, will recognize a major hurdle touched upon in their book. There is no "they," and there is no "them." There's only "us," and that includes the 1 percent. We're going to have to do this together.

Thursday, May 17, 2012

qotd: Private equity investors moving into dentistry

May 16, 2012
Dental Abuse Seen Driven by Private Equity Investments
By Sydney P. Freedberg

Isaac Gagnon stepped off the school bus sobbing last October and opened his mouth to show his mother where it hurt. She saw steel crowns on two of the 4-year-old's back teeth.

"The dentist man got me," Gagnon remembers her son saying.

Isaac's dentist was dispatched to his school by ReachOut Healthcare America, a dental management services company that's in the portfolio of Morgan Stanley Private Equity, operates in 22 states and has dealt with 1.5 million patients. Management companies are at the center of a U.S. Senate inquiry, and audits, investigations and civil actions in six states over allegations of unnecessary procedures, low-quality treatment and the unlicensed practice of dentistry.

ReachOut is one of at least 25 dental management-services companies bought or backed by private-equity firms in the last decade. Dentists contract with the companies for marketing, scheduling, staff recruitment, supplies and other services. The companies account for about 12,000, or 8 percent, of U.S. dentists, according to Thomas A. Climo, a Las Vegas dental consultant.

Some of them have been riding a boom in Medicaid outlays on dentistry, which rose 63 percent to $7.4 billion between 2007 and 2010, outstripping the 4.9 percent growth in other dental spending. ReachOut and several of its private equity-backed rivals seek patients like Isaac Gagnon, who are covered by Medicaid, the federal-state insurance program for the poor and disabled.

On May 2, All Smiles Dental Center Inc., a management company owned by Chicago-based Valor Equity Partners, filed for bankruptcy protection. Its hand was forced in part by a Texas Medicaid action cutting off payment to some of its clinics because of allegedly "excessive" and "inappropriate" orthodontic care, according to an All Smiles executive's affidavit included in the filing. All Smiles was part of a state audit in which 90 percent of Medicaid claims for orthodontic braces were found to be invalid because they weren't medically needed, according to Christine Ellis, one of the auditors.

The All Smiles collapse followed another bankruptcy filing in February by Nashville-based Church Street Health Management LLC, which cited the costs of defending itself against lawsuits and investigations. Church Street is owned by Arcapita Inc., Carlyle Group LP (CG) and other private equity firms and affiliated with the Small Smiles network of dental clinics.

Dentistry is a fragmented, "cottage" industry ripe for management services, said Robert Fontana, chief executive officer of Aspen Dental Management, owned by Leonard Green & Partners, a Los Angeles private equity concern.

Management companies have "moved from being vendors of services," such as patient billing, "into increasingly complex arrangements under which some -- not all -- have embedded themselves deeply into every aspect of the dental practice," said Ken Burgess, an attorney for the North Carolina dental board.

Comment:  Although Isaac reported to his mother, "The dentist man got me," we should be concerned not only about the fate of Isaac and patients like him, but also about the fate of professionalism in dentistry and the fate of our tax dollars in this government-financed Medicaid program, now that private equity firms are moving "into increasingly complex arrangements under which some have embedded themselves deeply into every aspect of the dental practice."

This fairly long Bloomberg article (link above) provides many more details that should make us question the wisdom of passively allowing private equity firms to take control, when their mission is profit, and low-income children with dental problems are merely their means to profit.

Dentistry is not alone here. We are seeing a massive transfer of Medicaid patients, including dual-eligibles, from traditional fee-for-service physicians to managed care organizations. States are shifting from an emphasis on trying to obtain decent care for these low-income patients, to an emphasis on trying to control the Medicaid component of the state budgets.

The managed care organizations continue to promise higher quality at lower costs, though the historical record is certainly not particularly supportive of these alleged outcomes. Patient advocates have expressed concern about the disruption in care and questionable access to future care, especially for specialized services. State authorities seem to be ignoring access and quality issues and focusing on spending, as they move forward with a let's-try-this-and-we'll-see-if-it-works attitude, and if it doesn't, at least we've saved money.

A well designed single payer system would eliminate Medicaid - an underfunded program tainted with a welfare mentality - and would include everyone in a comprehensive program which would cover all appropriate dental services.

Under such a program Isaac would not have had to suffer torture and indignity "while several adults held him on the dental table," as he received an "excessive" number of x-rays and "unnecessary" root canals. He would have been treated like any other child would be in an uptown dental practice, even if in a downtown clinic.

We can do this.

Wednesday, May 16, 2012

qotd: Family health costs now over $20,000 (MMI)

Milliman Research Report
May 2012
2012 Milliman Medical Index

The annual Milliman Medical Index (MMI) measures the total cost of healthcare for a typical family of four covered by a preferred provider plan (PPO). The 2012 MMI cost is $20,728, an increase of $1,335, or 6.9% over 2011. This is the first year the average cost of healthcare for the typical American family of four has surpassed $20,000.

Of the $20,728 medical cost for a family of four, the employer pays about $12,144 in employer subsidy while the employee pays the remaining $8,584, consisting of $5,114 in employee contributions and $3,470 in employee out-of-pocket costs.

Out-of-pocket costs are of particular significance given PPACA's focus on actuarial value, a concept predicated on the percentage of a plan's costs that is paid out of pocket by the insured. Figure 8 (link below) indicates how, as was the case last year, the MMI's plan remains slightly better than a gold plan as defined by PPACA. The MMI plan has maintained a relatively stable actuarial value over time because employers typically adjust their plan designs on an annual basis to keep pace with increases in the underlying medical trend. If no such adjustments were made and deductibles and copays remained static, the plan would become richer and would eventually exceed the platinum threshold. 

In addition to a typical PPO plan, many employers are providing employees an option that includes higher out-of-pocket cost sharing in exchange for employer contributions to a health savings account and lower payroll deductions. Along these lines, some plans that may become available through the state insurance exchanges may contain lower actuarial values than the type of plan exemplified by the MMI.

In the past year, the MMI plan did not undergo significant design changes. Long-term, employers may be looking for new design concepts that tackle the ongoing cost-control challenge. Design concepts under consideration may include a possible move toward increased use of defined contribution concepts and continued momentum toward high-deductible plans or plans leveraging accountable care organizations (ACOs).

Impact on MMI Family of Four

While several aspects of healthcare reform would have meaningful impact on the cost of insurance coverage, the effect on the total cost of care is very limited for our family of four. For example, medical loss ratio rules and stringent review of health insurance increases may reduce insurer profits and also put pressure on insurers to be as efficient and low-cost as possible. But the cost of care for this family of four is still $20,728, which excludes insurer profits and administrative expenses. 

While efforts to be more administratively efficient may lead to lower premiums, they do not directly affect the cost of delivering healthcare to the MMI family of four. 

Comment:  The 2012 Milliman Medical Index (MMI) shows that the average cost of health care for a family of four is now over $20,000 - actually pushing $21,000 ($20,728).

The MMI measures the average spending on health care for a family of four that is insured through an employer-sponsored PPO plan. It does not include the administrative costs or profits of the insurers nor the administrative costs of the employers to manage their health benefit programs. It includes only what is actually spent on health care.

Keep in mind that this represents spending on a relatively healthy component of our society - the healthy workforce and their young healthy families. It does not include those unable to work because of chronic disabilities, nor older, retired individuals who generally have greater health care needs. Thus if you pool everyone together in a universal risk pool, it can be anticipated that average costs would be even higher.

Median household income in 2010 was $49,445. This is not a family unit that is identical to an individual and his family of four with employer-sponsored insurance. Also this does not include the employer's contribution to the health insurance premium which most economists consider to be paid by foregone wage increases. Nevertheless, it does provide a rough perspective showing that health care costs are placing an unbearable strain on household budgets.

Current proposals are aimed at reducing the financial burden on employers, but, as this report indicates, actual health care costs are not reduced by these measures. Thus the financial burden is being shifted more to workers and their families. Since these plans are, on average, slightly better than the gold plans in the exchanges (80 percent medical loss ratio) and most participants in the exchanges will have lower-valued bronze or silver plans, the burden will be even greater for those in the PPACA state exchanges.

We desperately need a more efficient and more equitable health care financing system. It is only as far away as the enactment of an improved Medicare for all.

Tuesday, May 15, 2012

qotd: Should nurses assume the role of family physicians?

Annals of Family Medicine
May/June 2012
From the Association of Family Medicine Residency Directors

Education Gaps between Family Physicians and Licensed Nurse Practitioners

As millions of Americans gain coverage for medical care in the coming years and as the need for primary care in patient-centered medical home (PCMH) models increases, our medical homes will need to provide more access to care. One such method is through advanced physician extenders which include physician assistants and nurse practitioners. Many entities are talking about allowing Advanced Registered Nurse Practitioners (ARNPs) work more independently without physician involvement. However, the vast difference in clinical training between family physicians and ARNPs is significant. Also, an effective provider in a PCMH is expected to manage without consultation a broad spectrum of disease. Therefore, practices without physician counterparts could lead to a tier of primary care that is limited in its effectiveness. ARNPs are a tremendous asset in providing some primary care services, ideally partnered with physicians in group settings, but have significant limitations when independently evaluating and managing undifferentiated patients due to the superficial coverage of medical topics during their training. The skill sets are complementary to each other, but not equal.

ARNP schools exhibit a wide variation of training standards from school to school and from state to state. There is no national accreditation body like the Accreditation Counsel for Graduate Medical Education (ACGME) that monitors advanced nursing profession schools or creates national standards for clinical experiences. Without a similar structure to the ACGME, it is impossible to assess the quality of the education across these various schools.

The diagnostic challenges primary care physicians face on a daily basis require they have extensive clinical exposure in order to perform efficiently. The depth of knowledge required to filter undifferentiated patients' complaints and to understand the subtleties of management is vast. The average family medicine physician has 21,000 total hours of training, most of it with clear patient management responsibilities and decreasing levels of supervision. The total hours of training a nurse practitioner receives is 2,300 to 5,300 hours depending on the advanced nursing program, and much of the clinical training is observational. Many states only require a 30-day observation period of a licensed active physician before an ARNP can deliver care unsupervised. Grandfathering people into independent practice would be like grandfathering a family physician into a subspecialty after doing a month of observation in that specialty.

In the end, to practice independently, one should be judged by those who have the experience and background to make that assessment. Family physicians are the experts of primary care in this country and our understanding of what it takes to practice competently and independently is quite thorough. Family physician faculty that teach residents are skilled at making such assessments.

We believe there are excellent roles for physician extenders who work in collaborative settings with physicians, enabling more independence for the physician extenders. The medical team in the PCMH has key roles for Physician Assistants and ARNPs within its structure. Just as physicians gain greater skill with experience, these practitioners will gain great skill in many aspects of primary care as their experience develops over time. However, the underlying knowledge base and formative clinical experience cannot be shortcut. Not knowing what one doesn't know can be dangerous to the public. On the physician side, we would never allow a 2nd- or 3rd-year medical student (who would have the equivalent amount of training as an ARNP), to evaluate and manage patients independently. Though states may pass laws that allow other providers with less training to practice independently, it doesn't change the reality that without competent physician supervision, we are lowering the standard of acceptable primary care and creating a 2-tiered system of access for our community.

Todd Shaffer, MD, MBA, Michael Tuggy, MD, Stoney Abercrombie, MD, Sneha Chacko, MD, Joseph Gravel, MD, Karen Hall, MD, Grant Hoekzema, MD, Lisa Maxwell, MD, Michael Mazzone, MD and Martin Wieschhaus, MD


The New England Journal of Medicine
January 20, 2011
Broadening the Scope of Nursing Practice
By Julie A. Fairman, Ph.D., R.N., John W. Rowe, M.D., Susan Hassmiller, Ph.D., R.N., and Donna E. Shalala, Ph.D.

The critical factors limiting nurse practitioners' capacity to practice to the full extent of their education, training, and competence are state-based regulatory barriers. States vary in terms of what they allow nurse practitioners to do, and this variance appears not to be correlated with performance on any measure of quality or safety. There are no data to suggest that nurse practitioners in states that impose greater restrictions on their practice provide safer and better care than those in less restrictive states or that the role of physicians in less restrictive states has changed or deteriorated.

Sixteen states plus the District of Columbia have already liberalized and standardized their scope-of-practice regulations and allow nurse practitioners to practice and prescribe independently.

This is a critical time to support an expanded, standardized scope of practice for nurses. Economic forces, demographics, the gap between supply and demand, and the promised expansion of care necessitate changes in primary care delivery. A growing shortage of primary care providers seems to ensure that nurses will ultimately be required to practice to their fullest capacity. Fighting the expansion of nurse practitioners' scope of practice is no longer a defensible strategy. The challenge will be for all health care professionals to embrace these changes and come together to improve U.S. health care.

Comment:  Is there a difference between a nurse and a physician? More specifically, can advanced registered nurse practitioners replace family physicians in the independent practice of medicine? Or should they?

These are important questions. There is an urgent need to reinforce our primary care infrastructure. Should we do this by continuing to expand medical homes by including nurse practitioners as parts of teams led by primary care physicians? Or should we encourage the independent practice of nurse practitioners in competition with physician practices?

Since there is a shortage of family physicians, it seems that the proper solution would be to train more family physicians. Is it really logical to convert another category of health care professionals - nursing - into independent physicians?

Advanced nurse practitioners have much to contribute to the team comprising the medical home. But would it be proper for medical homes to be led by nurses while excluding physicians?

It's really all about the patient. Medical teams should be designed foremost to serve the patient. It seems like there should be a physician in there somewhere.

Friday, May 11, 2012

qotd: Are workplace wellness programs enough to make you sick?

Health Affairs
Health Policy Brief
May 10, 2012
Workplace Wellness Programs

The Affordable Care Act of 2010 will, as of 2014, expand employers'
ability to reward employees who meet health status goals by
participating in wellness programs--and, in effect, to require employees
who don't meet these goals to pay more for their employer-sponsored
health coverage. Some consumer advocates argue that this ability to
differentiate in health coverage costs among employees is unfair and
will amount to employers' policing workers' health.

Wellness program content

Typical features of wellness programs are health-risk assessments and
screenings for high blood pressure and cholesterol; behavior
modification programs, such as tobacco cessation, weight management, and
exercise; health education, including classes or referrals to online
sites for health advice; and changes in the work environment or
provision of special benefits to encourage exercise and healthy food
choices, such as subsidized health club memberships.

Inducements to participate

Although almost all workplace wellness programs are voluntary, employers
are increasingly using incentives to encourage employee participation.
These incentives range from such items as t-shirts or baseball caps to
cash or gifts of significant value

Employers are also linking participation in wellness programs to
employees' costs for health coverage--for example, by reducing premium
contributions for workers who are in wellness programs, or by reducing
the amounts they must pay in deductibles and copayments when they obtain
health services. Another trend among employers who offer multiple health
plans is to allow participation in a comprehensive plan only to those
employees who agree to participate in the wellness program. Those
employees who do not participate in a wellness program are offered a
less comprehensive plan, or one that requires them to pay more in
premiums or cost sharing.

What are the concerns?

There is widespread support for wellness initiatives in the workplace
among both employers and employees. At the same time, there is conflict
over programs that tie rewards or penalties to individuals achieving
standards related to health status--and especially over those
arrangements that affect employee health insurance premiums or
cost-sharing amounts.

In general, business groups want employers to have maximum flexibility
to design programs with rewards or penalties that will encourage
employees to not only participate but also to achieve and maintain
measurable health status goals, such as quitting tobacco use or reducing
body mass index. They argue that individuals should bear responsibility
for their health behavior and lifestyle choices and that it is unfair to
penalize an employer's entire workforce with the medical costs
associated with preventable health conditions as well as the costs of
reduced productivity.

Unions, consumer advocates, and voluntary organizations such as the
American Heart Association are generally wary of wellness initiatives
that provide rewards or penalties based on meeting health status goals.
They are concerned that, rather than improving health, such approaches
may simply shift heath care costs from the healthy to the sick,
undermining health insurance reforms that prohibit consideration of
health status factors in determining insurance premium rates.

They argue that such incentives are unfair because an individual's
health status is a result of a complex set of factors, not all of which
are completely under the individual's control. For example, genetic
predisposition plays a significant role in determining many health
status factors, including such attributes as excess weight, blood
pressure, blood sugar, and cholesterol levels. Consumer advocates also
caution that poorly designed and implemented wellness initiatives may
have unintended consequences, such as coercing an individual with a
health condition to participate in an activity without adequate medical

Another concern is that tying the cost of insurance to the ability to
meet certain health status goals could discriminate against low-income
individuals or racial and ethnic minorities. These individuals are more
likely to have the health conditions that wellness programs target and
also may face more difficult barriers to healthy living.

These barriers may include some that are work related, such as having
higher levels of job stress; job insecurity; and work scheduling issues,
including shift work. Barriers outside of work may include personal
issues, such as financial burdens, and environmental factors, such as
unsafe neighborhoods, poor public transportation, and lack of access to
healthy food.

In addition, some critics warn that wellness program requirements may be
used to discourage employees from participating in their employers'
health benefits plan by making their participation unaffordable.
Employers might use a system of rewards or penalties totaling thousands
of dollars annually to coerce employees who cannot meet health status
goals to seek coverage elsewhere, such as through a spouse's plan; a
public option, such as Medicaid; or a separate private plan purchased
through the new health insurance exchanges.

Comment: Altruistic employers who, out of the goodness of their hearts,
offer wellness programs to their employees, also theoretically benefit
by improving productivity through having a healthier work force. These
are admirable goals. But employers are now playing the blame game as
they use their programs to penalize employees who have medical needs, by
reducing their health care benefits and increasing financial barriers to

Employers can enhance employee health through work-sourced exercise and
nutrition programs, through work safety measures, and through programs
such as smoking cessation. In sharp contrast, disease screening should
be provided privately in an entirely separate primary care environment
where the screening is a part of a comprehensive, integrated health care
program that belongs to the patient, not the employer.

Above all, whereas the medical health status of employees should be
maintained through the health care delivery system, never, never should
the employer be allowed to reduce health care benefits because the
employee has greater needs.

This is yet one more reason why health insurance should be totally
dissociated from employment. If we had an improved Medicare that covered
everyone, health care access would be continuous throughout life, and
barriers to care could never be used to punish individuals unfortunate
enough to have manifested or contracted medical problems.