Friday, June 28, 2013

Fwd: qotd: Why are health insurance premiums higher for public employers?

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-------- Original Message --------
Subject: qotd: Why are health insurance premiums higher for public
Date: Fri, 28 Jun 2013 04:10:04 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

2013 Annual Research Meeting
June 23-25, 2013
Why are Health Insurance Premiums So Much Higher for Public Employers
Compared to Private Employers?
Co-author: Tom Buchmueller
Presenter: Alice Zawacki, Ph.D., Senior Economist, Center for Economic
Studies, Bureau of the Census

Research Objective:

The Great Recession of 2007-2009, which took a major toll on the U.S.
economy, was especially hard on state and local governments. The fiscal
crises have led to increased scrutiny of public sector compensation
practices and renewed debate about how the compensation of public sector
employees compares to that of private sector workers. Employer-sponsored
health insurance represents a substantial share of non-wage compensation
and rising health care costs are a pressing concern for both public and
private employers. According to data from the Medical Expenditure Panel
Survey-Insurance Component (MEPS-IC), average health insurance premiums
in the late 1990s until 2000 were similar for public and private
employers. In subsequent years, public sector premiums grew more than
private sector premiums. In 2000, premiums for large public sector plans
were $705 or 22% higher than premiums for large private sector plans. By
2009, this difference grew to $1580 or 35%. This paper examines changes
in employee demographics, plan type and plan benefit design with the
goal of explaining why premiums in the private and public sectors have
diverged over the past decade.

Study Design:

To study the premium differences between sectors, we conduct regression
analyses on plan-level data from the 1996-2009 MEPS-IC augmented with
additional worker demographic characteristics we impute from the 2000
Decennial Census and the 2009 American Community Survey. Population
Studied: Health insurance plans offered by state and local governments
and private sector employers with at least 100 employees.

Principal Findings:

Early work shows that over 40 percent of the premium difference for all
plans in 2009 is attributable to demographic factors: public workers are
older, more likely to be female and are more educated than workers in
the private sector. Some of the gap is also explained by the fact that
cost sharing increased more in the private than the public sector.


These findings are consistent with the idea that private employers were
more aggressive in increasing cost sharing in the health plans offered
to employees. Increases in cost sharing can lead to lower utilization of
services for which benefit is low relative to the cost, implying an
increase in economic welfare. Alternatively, if utilization is not
significantly affected, increases in deductibles, co-payments and
co-insurance will merely shift costs from low risk employees who use
relatively little care (but pay premiums in the form of reduced wages)
to higher risk employees who use more care.

Implications for Policy, Delivery or Practice:

While the growing gap in health benefits spending in the public and
private sector does not necessarily imply that public sector benefits
are excessive, it is natural for policy makers to look to health
insurance costs as a potential area for reform and savings. It is
important that efforts in this area be guided by a clear and detailed
understanding of the health benefits that are provided to public sector
employees and how those benefits compare to those in the private sector.

Comment: In the past decade, health insurance premiums for state and
local government employers have grown more than premiums for employers
in the private sector. Although some of this is due to demographic
characteristics, a significant portion has been due to an increase in
the use of cost sharing in the private sector. Plans for public
employers have maintained the same level of benefits, whereas the
coverage in plans for private sector employers has deteriorated.

The policy implications of this should have us concerned. As explained
in a message earlier this week, the trend in the private sector has been
to expand the use of cost sharing, especially high-deductible plans,
with a detrimental impact on employees. It is highly unlikely that
private employers would support a reversal of this trend.

State and local governments have faced difficult budget decisions, so it
is logical that they would look at the high costs of their employee
health benefit programs as a source for reducing budget deficits. Many
have already tapped into their programs for retirees. Although unions
for public employees have been more effective in protecting benefits,
there will be considerable pressure to follow the lead of the private
sector and expand the use of cost sharing.

There is a far better option other than simply trying to adjust the
differences in plans for public and private employees. Instead of
thinking about traditional private insurance design options, especially
those that emphasize catastrophic coverage, we should consider changing
everyone to a prepaid health care system in which financial barriers to
care are removed - a single payer system.

Not only is single payer coverage much better, it also provides the
greatest value in health care. If we adopted a single payer system, both
public and private employers would no longer be placed in the role of
trying to control their budgets by hacking away at employees' well
earned health benefit programs.

Thursday, June 27, 2013

Fwd: qotd: Large employers moving en masse to high deductibles

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: Large employers moving en masse to high deductibles
Date: Wed, 26 Jun 2013 14:25:20 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

PwC Health Research Institute
June 2013
Medical Cost Trend: Behind the Numbers 2014

Each year, HRI issues its projection for the following year's medical
cost trend based on activity in the market that serves employer-based

Consumer-driven health plans - insurance coverage with a high-deductible
- are set to go mainstream in 2014. According to the 2013 PwC Touchstone
Survey of major US companies, 44% of employers are considering offering
high-deductible health plans as the only benefit option to their
employees in 2014. Already, 17% of employers offer high-deductible plans
as their only option in 2013, a 31% increase over 2012.

High-deductible health plans, which place greater responsibility on
consumers, are designed to promote cost-conscious decisions. A recent
study reported families that switched from a traditional health plan to
a high-deductible plan spent an average of 21% less on healthcare in the
first year.

The ACA, with its new insurance marketplaces, accelerates the move to
consumer-driven plans. Many of the newly insured say they are willing to
accept plan features such as higher deductibles in return for lower
monthly premiums - as found in the new bronze and silver plans.

2013 - Average deductibles

$1,230 - In-network
$2,110 - Out-of-network

Comment: The forces supporting consumer-driven health care (CDHC) have
incessantly asserted emphatically that the answer to our health care
spending problem is to place the consumer (i.e., patient) in charge of
health care spending. Although some of us have been trying to explain
the horrible consequences of this approach, the mainstream media
disseminated the message of the CDHC advocates so effectively that it
has now become a meme. The CDHC camp has won the policy battle.

How can we say this? CDHC has now become virtually synonymous with
high-deductible health plans (HDHP). Whether or not the deductible
passes through a health savings account or is paid directly really
doesn't make much difference since the designated cash account is simply
a matter of tax policy rather than health policy. Let's look at a very
brief history of HDHPs to see if we can understand why we lost.

Large employer-sponsored group plans have been the mainstay of health
coverage in the United States for decades. They have provided
comprehensive coverage through high actuarial value plans which required
only modest cost sharing by the patient. As health care costs increased,
large employers depended more on controlling spending by creating
networks of providers with contracted rates. In contrast, individuals,
and to a certain extent smaller employers, were unable to afford the
premiums for high actuarial value plans and so the insurers heavily
marketed high-deductible plans that had much more competitive premiums;
so that's what people bought.

When the Affordable Care Act was written, it was recognized that high
actuarial value plans would be unaffordable unless the government
subsidies were much larger than members of Congress were willing to
budget. Thus the decision was made to make the benchmark plan for the
insurance exchanges a low actuarial value plan (silver), made possible
only by using high deductibles.

Large employers have been looking for relief from the very high costs of
their employee health benefit programs. It looks like they've found it,
now that HDHPs are becoming the new standard set by our government for
the plans in the exchanges. This report from PwC shows that 12 percent
of employers used HDHPs as their only option in 2012, and that may
increase to 44 percent next year! That is a phenomenal shift in such a
short period, and is the basis for saying that the CDHC (HDHP) camp has
won the policy battle.

Not only are patients assessed a significant financial penalty for
seeking health care (an average $1,230 deductible), that penalty is
almost doubled if the patient obtains care out of network ($2,110
deductible) - a greater likelihood as narrower networks become more

HDHPs have become popular for one reason only, and that is not because
they make patients better shoppers. It is only because the premium to
purchase the health plans is more affordable (or for self-insured
employers the amount paid out in benefits is less).

There are two important trade-offs for the lower premiums. One is that
people will decline to obtain appropriate health care since they will
have to pay full fees until the deductible is met. A properly designed
financing system should make it easier for people to obtain the care
they need, not more difficult. The other is that far too many people
have little or no discretionary income, and high deductibles create a
financial hardship for them. The health care financing system should
reduce or eliminate financial hardship, not create it.

And the out-of-network penalties? A financing system should increase
health care choices for patients, not reduce them.

This boat is not going to turn around. Within two or three years, HDHPs
will be the standard for employer-sponsored coverage. More people will
suffer. The media knew that this change had to come, but only because
they didn't listen to us. They simply dismissed single payer because of
another meme - "it isn't feasible."

I'm not a violent person, but the next time I hear, "skin in the ...,"
watch out!

Tuesday, June 25, 2013

Fwd: qotd: Swiss support single payer

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: Swiss support single payer
Date: Tue, 25 Jun 2013 09:47:07 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Swiss Broadcasting Corporation <>
June 24, 2013
Swiss voters back single-payer health insurance

The proposal of creating a single fund for health insurance would be
accepted by voters if the ballot for the initiative were held today,
according to a poll commissioned by the pharmaceutical lobby group

About 65 per cent of the population would approve the proposal and 28
per cent would reject it, according to the first poll conducted on the
issue. The result is still not very conclusive, as only about 31 per
cent of people surveyed said they would actually participate in the vote.
In 2014 or 2015, the initiative for public health insurance will be put
to a nationwide vote, which if accepted will see current providers of
basic cover replaced by a single public fund. Under Swiss law, health
insurance is compulsory, and residents currently may choose between
offerings of about 60 companies which provide coverage.

The initiative – supported by the centre-left Social Democrats and by
the Greens as well as by patient and consumer organisations – would
leave only supplemental insurance in the hands of private companies.
The survey was conducted as part of the 2013 Health Monitor by GfS Bern
research and polling institute. The Health Monitor also showed that
three out of four people in Switzerland view the health system in
Switzerland positively, the highest share ever. <>
April 19, 2013

According to the 2012 Health Monitor of the GfS Bern research and
polling institute, 40 per cent of those questioned were in favour of a
change, while 45 per cent preferred to stick with the current system.

Comment: Whereas last year 40 percent of Swiss voters supported change
in the health insurance system, the same poll this year shows that 65
percent support a single fund for health insurance - single payer. It is
difficult to know if this support is malleable, and whether it would
hold up under the political rhetoric of campaigns. A similar measure in
2007 was rejected by 70 percent of their voters.

Nevertheless, it should make us challenge those who keep telling us that
we need a system just like the Swiss have - a mandate to purchase plans
from a market in which about 60 insurers participate. Clearly, though
they view their system positively, there is very strong support for a
single public health insurance program.

CMS's new website ( promotes the "Health
Insurance Marketplace." Sounds sort of like the Swiss system. If we're
going copy the Swiss, why don't we skip their mistakes and go directly
to single payer?

Monday, June 24, 2013

Fwd: qotd: The good news on reference pricing isn't all good

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: The good news on reference pricing isn't all good
Date: Mon, 24 Jun 2013 13:12:27 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Press Release
June 23, 2013
CalPERS Members Had Similar to Better Outcomes at Facilities Charging
Less for Hip and Knee Replacements

A pilot program for the California Public Employees' Retirement System
lowered the price of members' hip and knee replacement surgeries by 19
percent in one year while also demonstrating similar to better outcomes
at lower-cost hospitals.

The analysis, conducted by HealthCore, WellPoint's outcomes research
company, will be presented at the AcademyHealth Annual Research Meeting
today in Baltimore. The study is based on findings for the
referenced-based purchasing design program for CalPERS members developed
by CalPERS and WellPoint's affiliated health plan in California.

As part of the CalPERS intervention program, members of the California
Public Employees' Retirement System were given a list of designated
facilities that charged less than $30,000 for in-patient costs
associated with each knee and hip replacement surgery.

To qualify for the list, hospitals had to have already contracted with
the network of WellPoint's California affiliated health plan, which
manages a robust credentialing process.

Members were able to either choose from 46 facilities on the list that
would result in them paying little to no out-of-pocket costs beyond
deductible or co-insurance or pay the difference if they used another
facility that charged more than $30,000.

The result was that CalPERS health plan costs dropped significantly – by
19 percent from $35,408 to $28,695, per surgical-related admission.


Los Angeles Times
June 13, 2013
Hospitals cut some surgery prices after CalPERS caps reimbursements
By Chad Terhune

When the California Public Employees' Retirement System told its Anthem
Blue Cross members it would pay only up to $30,000 for a knee or hip
replacement surgery, some patients shopped around for a cheaper hospital.

What may be more surprising is that about 40 higher-priced hospitals in
the state cut their surgery prices significantly to avoid losing
patients. That response accounted for about 85% of the $5.5 million
CalPERS saved over two years, researchers at UC Berkeley found, with the
rest of the savings coming from patients opting for lower-cost hospitals.

It works essentially as a reverse deductible for employees and their
families. Their employer will pay up to a certain amount for a surgery,
colonoscopy or lab test and anything above that amount comes out of the
patient's pocket.,0,6571991.story


2013 Annual Research Meeting
June 23-25, 2013
Effects of a Reference-Based Purchasing Design Program on Healthcare
Utilization and Outcomes of Knee and Hip Replacement Surgeries
Co-authors: Sze-jung Wu, HealthCore, Inc.; Michael Belman, Anthem Blue
Cross; Andrea DeVries, HealthCore, Inc.
Presenter: Chia-hsuan Li, M.S., Senior Research Analyst, Health Plan
Research, HealthCore, Inc.

Research Objective:

Controlling healthcare expenditure while ensuring the delivery of
high-quality care is a priority for payers. Recognizing the wide
discrepancies in cost for joint replacement procedures, a large employer
group in California implemented a RBPD program (Reference-Based
Purchasing Design program) beginning in 2011 for total knee replacement
(TKR) and total hip replacement (THR) based on a threshold facility
payment of $30,000. Members were given a list of designated facilities
meeting the threshold and were told that they would be responsible for
cost differences above the threshold if they chose non-designated
facilities. This study is aimed at evaluating the impact of the RBPD
program on utilization and patients' health outcomes, relative to a
comparison population.

Study Design:

A retrospective observational study was conducted using administrative
claims. We compared TKR and THR rates at RBPD-designated facilities in
the intervention group to a comparison group without the RBPD program at
baseline year (2010) and intervention year (2011). The change in average
cost per procedure was measured. We also compared postsurgery infection,
complication, and hospital readmission rates between two cohorts. The
difference in utilization and health outcomes between groups were
examined by ANOVA and chi-square tests. Multinomial logistic models were
fitted to examine the likelihood of unfavorable health outcomes between
groups adjusted for age, gender, and comorbid conditions.

Population Studied:

Adults under age 65 diagnosed with osteoarthritis and receiving a
unilateral TKR or THR. The intervention cohort consisted of members of
the employer group where the RBPD program was implemented (N=799),
whereas the comparison cohort contained individuals not covered by the
employer health plan but living in the same geographic area (N= 5,279).
Each patient was followed for 30 and 90 days following the surgery or
until their health plan eligibility ended.

Principal Findings:

Use of RBPD-designated facilities rose 21% among the intervention group
(from 45.7% in 2010 to 55.5% in 2011, p<.01) while decreasing 24% among
the comparison group (46.5% & 35.4%, p<.01). Average allowed cost (sum
of plan paid and patient out-of-pocket) decreased 20.6% for TKR (p<.01)
and 13% for THR (p=.01) for the entire intervention group. Patients in
the intervention group using RBPD-designated facilities experienced
reductions in allowed cost, so did those using non-designated
facilities. The reductions were greater for non-designated facilities
users (p<.01 both procedures). Out-of-pocket cost remained unchanged
(p>.5 both). RBPD-designated facilities were associated with lower
adjusted likelihood of 30-day general infection and complication (OR:
0.47, 95% C.I.: 0.24 – 0.94 infection; 0.68, (0.47, 0.98) complication),
and a statistical insignificant adjusted rate of 90-day hospital
readmission (1, (0.58,1.77) ).


The RBPD program increased the use of designated facilities by 21% for
the entire intervention group, achieving allowed cost reductions of 18%
per procedure while out-of-pocket cost to members remained relatively
flat. The quality was unaffected. Implications for Policy, Delivery or
Practice: Traditional cost-sharing strategies have shown little effect
on member's choice in providers, most likely because members are
insensitive to procedure costs and unaware of cost variation. RBPD
addresses these barriers. This study suggests that a RBPD program can
engage members to choose high-value services with lower cost but
unaffected quality.

Funding Source(s): WellPoint, Inc.

AcademyHealth Podium Presentation Abstracts (page 33 for this report):

Comment: Reference pricing controls spending by setting a price near
the low end of market prices for a given health care service or bundled
service, and then requiring the patient to pay any amount over the
reference price. It is a reversal of charging the patient a deductible,
in that the patient pays any excess at the top, rather than a set amount
at the bottom. It is a form of defined contribution, and as such could
expose the patient to potentially much higher costs above the reference

California Public Employees' Retirement System (CalPERS) and WellPoint's
Anthem Blue Cross joined together in this pilot program on reference
pricing. Prices for the services covered were reduced - 13% for total
hip replacement and and 21 percent for total knee replacement - and
out-of-pocket costs did not change for patients. It worked. Facilities
reduced their prices to reference levels, and patients used facilities
that adhered to reference prices, and therefore they were not penalized

The primary trade off appeared to be that 21 percent of patients
switched to facilities that were not their initial choices. This has a
potential of disrupting established, integrated care patterns, though
this was not evaluated in the study. An example might be of a reference
price for diagnostic imaging that is available only in an institution
not associated with your usual sources of care, leading you to either
disrupt your care or suffer higher out-of-pocket spending.

There also can be a problem establishing a reference price. The insurer
may set a price available only in distant urban regions - a price that
is not available in your community. You could have a $50,000 procedure
that might cost you $1,000 under a high-deductible PPO, but have a price
of $30,000 under reference pricing, leaving you stuck with a bill of
$20,000 if you find that a reference-based institution is not readily
accessible. Reference pricing is not a perfect solution.

There is a much more fundamental problem with reference pricing that is
not so obvious. In a September 2012 Health Affairs article on reference
pricing (in centers of excellence), James Robinson and Kimberly
MacPherson write, "Both reference pricing and centers-of-excellence
contracting can be used by Medicare Advantage health plans because they
have the ability to impose differential cost-sharing requirements and
exclude providers altogether from their contractual networks. However,
the new benefit designs will be applicable to traditional Medicare only
if the program becomes willing and able to use consumer cost sharing to
channel patients to particular providers based on quality and efficiency."

From this comment, it is obvious that reference pricing is a creation
of those who believe that the consumer (patient) should be in charge of
making purchasing decisions based on price. It is the obsession of the
policy community with this market concept of health care purchasing that
has led to the highly dysfunctional, egregiously expensive, and poorly
allocated health care system that we have today.

Think about it. The traditional Medicare program has been far more
effective than the private insurers at getting health care priced
appropriately, and yet they say that we should abandon that approach and
"use consumer cost sharing to channel patients." That is, we should
shift risk to the patients - exposing them to financial penalties should
they not make perfect decisions in their health care purchasing, even as
the private insurers create yet more barriers to perfectly priced health

Forget reference pricing. Let's let our public administrators obtain the
best value for us through global budgeting of our hospitals and
negotiated rates for professional services and products, as we would
have with a single payer system. A "reference price" wouldn't make any
sense in such a logical system. There would be only one price, paid by
our public administrator, based on legitimate costs and fair margins.

Friday, June 21, 2013

Fwd: qotd: AcademyHealth's ill-judged choice of the 2013 Article-Of-The-Year

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: AcademyHealth's ill-judged choice of the 2013
Date: Fri, 21 Jun 2013 06:12:53 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

email message
From: Health Affairs <
Date: Thu, Jun 20, 2013 at 4:37 PM
Subject: Health Affairs Wins AcademyHealth's 'Article-of-the-Year' Award

AcademyHealth has chosen a Health Affairs article as its
2013 Article-Of-The-Year!

The 'Alternative Quality Contract,' Based On A Global Budget, Lowered
Medical Spending And Improved Quality
By Zirui Song, Dana Gelb Safran, Bruce E. Landon, Mary Beth Landrum,
Yulei He, Robert E. Mechanic, Matthew P. Day and Michael E. Chernew
Web First July 11, 2012; print August 2012


Health Affairs
August 2012
The 'Alternative Quality Contract,' Based On A Global Budget, Lowered
Medical Spending And Improved Quality
By Zirui Song, Dana Gelb Safran, Bruce E. Landon, Mary Beth Landrum,
Yulei He, Robert E. Mechanic, Matthew P. Day and Michael E. Chernew


Seven provider organizations in Massachusetts entered the Blue Cross
Blue Shield Alternative Quality Contract in 2009, followed by four more
organizations in 2010. This contract, based on a global budget and
pay-for-performance for achieving certain quality benchmarks, places
providers at risk for excessive spending and rewards them for quality,
similar to the new Pioneer Accountable Care Organizations in Medicare.
We analyzed changes in spending and quality associated with the
Alternative Quality Contract and found that the rate of increase in
spending slowed compared to control groups, more so in the second year
than in the first. Overall, participation in the contract over two years
led to savings of 2.8 percent (1.9 percent in year 1 and 3.3 percent in
year 2) compared to spending in nonparticipating groups. Savings were
accounted for by lower prices achieved through shifting procedures,
imaging, and tests to facilities with lower fees, as well as reduced
utilization among some groups. Quality of care also improved compared to
control organizations, with chronic care management, adult preventive
care, and pediatric care within the contracting groups improving more in
year 2 than in year 1. These results suggest that global budgets with
pay-for-performance can begin to slow underlying growth in medical
spending while improving quality of care.

From the Discussion

In year 1, total Blue Cross Blue Shield payouts to groups in the
contract probably exceeded savings under the global budget. In year 2,
savings achieved by the intervention group were generally larger than
the surplus payments received. However, total payments to groups from
Blue Cross Blue Shield of Massachusetts, including surplus sharing,
quality bonuses, and infrastructure support, probably exceeded the
savings achieved by most groups that year. This outcome reflects the
design of the contract, which set targets based on actuarial projections
to save money over its five-year duration, accounting for anticipated
quality bonuses and other payments.

In addition, health care spending growth in Massachusetts slowed in this
period as a result of general economic factors.

This model is informative for the broader movement toward accountable
care organizations.

Published response:

Misleading Title And Abstract
By Kip Sullivan

In this article about the effect of the Alternative Quality Contract
(AQC) administered by Blue Cross Blue Shield of Massachusetts (BCBS),
the authors reported savings in what they variously referred to as
"medical spending" and just "spending," but they also reported that
non-medical payments to providers ("surplus sharing, quality bonuses,
and infrastructure support") "probably" exceeded the savings in medical
spending. They concluded: "Our findings do not imply that overall
spending fell" (p. 1891).

In an earlier paper published in the New England Journal of Medicine,
these authors offered the identical caveat.

Despite the authors' warnings, Health Affairs' editors permitted the
phrase "lowered medical spending" to appear in the title of the paper,
they permitted the unadorned word "spending" to appear numerous times in
the abstract and text, and they failed to include in the title or the
abstract the warning that "overall spending" (medical plus nonmedical
costs) probably rose. This combination of errors was extremely misleading.

Health Affairs' editors compounded these errors by permitting authors of
two papers published in the next edition (the September edition) to make
misleading statements about Song and colleagues' article. Citing them,
Markovich asserted that the AQC "slowed the...growth in medical
spending" (p. 1974), and Sood and Higgins claimed the AQC has
"demonstrated...a slowdown in the growth rate of health care spending"
(p. 2043). Neither paper warned readers that medical spending is not
synonymous with total spending, and that BCBS's total spending may have
gone up.

In a letter to the editor published in the November edition of Health
Affairs, Rachel Nardin et al. criticized Song et al. for inserting
"lowered medical spending" into the title when in fact total spending
probably rose. In their reply, Song and Chernew agreed that "total
payments are important" and that they probably rose. But rather than
simply conceding that their title and abstract were misleading and that
a few simple edits would have fixed the problem, Song and Chernew
presented an illogical justification for confusing readers about the
difference between medical and total spending. They argued that the need
to know how providers respond to the AQC somehow justifies conflating
medical with total spending. There is no justification for such an
easily avoidable error.

Finally, I note that Song et al. made no effort to measure the cost to
the providers of participating in the AQC, or if they did, they did not
inform their readers of the outcome of this effort.

The three Health Affairs articles I have cited here are not isolated
examples of scholars and editors downplaying or totally ignoring
administrative or intervention costs and blurring the distinction
between medical and total spending. This problem has plagued the health
policy literature for four decades. It reached epidemic proportions in
the 1990s.

There is an illogical but widespread assumption within the health policy
community that if an intervention, such as the AQC, lowers medical
spending, it must also have lowered total spending. But interventions
designed to change provider behavior, be they HMOs, pay-for-performance
schemes, electronic medical records, utilization review, or "medical
homes," are not free. They create new costs for both insurers and
providers. Ignoring these costs, or obscuring them by celebrating
reductions in medical spending and saying little or nothing about
increases in total spending, should be no more acceptable than ignoring
the side effects of drugs and procedures.


Health Affairs
November 2012
Medical Spending And Global Budgets
By Rachel Nardin, David Himmelstein and Steffie Woolhandler

The title of the article by Zirui Song and colleagues (Aug 2012) claims
that "The 'Alternative Quality Contract,' Based on a Global Budget,
Lowered Medical Spending and Improved Quality." But the Alternative
Quality Contract (AQC) only lowered spending if you accept the authors'
idiosyncratic definition of the term medical spending.

In calculating medical spending, the authors exclude three categories of
payments that Blue Cross Blue Shield of Massachusetts made to AQC
providers: "surplus payments" to providers who kept fee-for-service
billing below targets; bonuses for meeting quality goals; and special
payments to support providers' infrastructure to implement the AQC. The
authors note, in passing, that these extra payments probably exceeded
the "medical" savings. Unfortunately, they report no actual figures for
the extra payments (although these figures were presumably available to
the two coauthors who are executives at Blue Cross Blue Shield). In
other words, Blue Cross Blue Shield's total costs under the AQC went up
by some undisclosed amount, not down.

Global budget payment strategies are currently being promoted as a way
to lower total health care costs. The fact that the AQC failed to do
this was probably overlooked by many readers and was clearly lost in
media reports of these findings and hence in the policy debate.

The case for global budget payment strategies such as the AQC remains

Comment: The health policy community has hung its hat on accountable
care organizations as being the be-all and end-all for reducing spending
and improving quality in health care. Little does it matter that there
is a dearth of objective evidence for this concept; they have continued
to push it anyway in their support for the Affordable Care Act.

The ultimate gall of the policy community is shown in their selection of
this article by Song et al, trumpeting the savings of this Massachusetts
Blue Cross Blue Shield Alternative Quality Contract, when, buried in the
article, we learn that the savings were burnt up by "surplus sharing,
quality bonuses, and infrastructure support."

Although the program costs, including additional administration, wiped
out the medical savings, it is important to look at what the actual
medical savings were. These savings were primarily due to "lower prices
achieved through shifting procedures, imaging, and tests to facilities
with lower fees." There was virtually no accountable care magic here.
They merely extracted better prices from some of the providers. At that,
it was only 2.8 percent, a negligible amount when considering how much
more effective publicly administered pricing is than pricing through
private insurers. But, again, the all important bottom line is that this
savings was lost through the non-medical costs of the program.

This AcademyHealth award should serve as a proxy for the compromised
integrity that the policy community has shown in their efforts to push
the highly flawed Affordable Care Act.

These authors, along with the Health Affairs editors who approved the
misleading title, and the committee members who selected this article
for the award are no doubt good people, but they did not have the
courage to stand up and say, "This conclusion is (expletive deleted)!"

We know what they should have said: "Although we have shown that the
promise of the accountable care organization is not fulfilled,
nevertheless we do know how to control spending while improving quality
and that is through the enactment of a single payer national health
program." But, no, they didn't have the courage.

Thursday, June 20, 2013

Fwd: qotd: Redesigning Medicare cost sharing

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-------- Original Message --------
Subject: qotd: Redesigning Medicare cost sharing
Date: Thu, 20 Jun 2013 11:05:12 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Health Affairs
Health Policy Briefs
June 20, 2013
Restructuring Medicare

To reduce federal spending, advance entitlement reform, and simplify
benefits, policy makers have proposed redesigning Medicare cost sharing.

What's The Issue?

Some policy makers have recommended redesigning the program to protect
beneficiaries from high out-of-pocket spending, better align incentives
to reduce overuse of services, and potentially lower costs for the
federal government. Opponents of such reform efforts fear that, in
trying to reduce federal spending, reforms will shift costs onto
beneficiaries and could make them less likely to seek needed care.

What's The Debate?

Supporters of redesign believe that cost sharing under a redesigned
Medicare program will be more predictable and simpler for beneficiaries
to understand and better align incentives to reduce any overuse of
services. Others fear that, if designed to reduce federal spending,
restructuring the benefit design would likely shift costs onto many
Medicare beneficiaries. Critics note that Medicare beneficiaries already
spend three times as much of their income on health care as do people
under age 65. Critics believe most beneficiaries cannot afford to pay
more for their health care and are particularly concerned about
proposals that include even higher deductibles or out-of-pocket caps.

Reforms of supplemental coverage, particularly efforts to limit
first-dollar coverage, are also controversial. Opponents particularly
question the wisdom of Medigap reforms that would likely reduce
beneficiaries' use of both necessary as well as unnecessary services.

The National Association of Insurance Commissioners (NAIC) recently
recommended that the Department of Health and Human Services not add
cost sharing to Medigap plans. NAIC noted that supplemental plans have
little ability to change what care Medicare beneficiaries seek as well
as how effective it is: The Medicare program determines what services
are covered or not covered, and physicians guide individual
beneficiaries on what particular care they need. NAIC expects that
beneficiaries are unlikely to disagree with physicians about whether
specific care is necessary, regardless of financial incentives.

What's Next?

Medicare redesign remains a topic of interest on Capitol Hill. The House
Ways and Means and Energy and Commerce Health Subcommittees held
hearings on this subject on February 26 and April 11, respectively. Ways
and Means Subcommittee Chair Kevin Brady (R-TX) indicated that he
expected to hold more hearings on the future of Medicare and hoped to
forge a bipartisan approach to reforming the program.

Comment: The topic of "entitlement reform" doesn't go away. Regarding
Medicare, virtually all proposals under current consideration include
mechanisms of shifting more costs onto the beneficiaries. As this policy
brief states, "Medicare beneficiaries already spend three times as much
of their income on health care as do people under age 65." We cannot
place this additional burden on those who need health care the most.

The National Association of Insurance Commissioners agrees that cost
sharing should not be added to Medigap plans, for the reasons mentioned
above. Why should only those with Medigap plans be protected? The
Medigap benefits need to be folded into the traditional Medicare program
so that all can benefit by having financial barriers to care removed.

Sadly, the political momentum is moving in the opposite direction -
"saving" Medicare by making it less affordable and therefore less
accessible for those who need it. Do we simply sit back and watch it
happen? If so, "Improved Medicare for All" will continue to wither as a
health care justice goal for the nation.

Wednesday, June 19, 2013

Fwd: qotd: In-network providers are often not available

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-------- Original Message --------
Subject: qotd: In-network providers are often not available
Date: Wed, 19 Jun 2013 14:13:16 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

June 2013
Out-of-Network Physicians: How Prevalent Are Involuntary Use and Cost
By Kelly A. Kyanko M.D., M.H.S., Leslie A. Curry Ph.D., M.P.H., Susan H.
Busch Ph.D.


To determine the proportion of privately insured adults using an
out-of-network physician, the prevalence of involuntary out-of-network
use, and whether patients experienced problems with cost transparency
using out-of-network physicians.

Data Sources

Nationally representative internet panel survey conducted in February 2011.

Study Design

Screener questions identified a sample of 7,812 individuals in private
health insurance plans with provider networks who utilized health
services within the prior 12 months. Participants reported details of
their inpatient and outpatient contacts with out-of-network physicians.
An inpatient out-of-network contact was defined as involuntary if: (1)
it was due to a medical emergency; (2) the physician's out-of-network
status was unknown at the time of the contact; or (3) an attempt was
made to find an in-network physician in the hospital but none was
available. Outpatient contacts were only defined as involuntary if the
physician's out-of-network status was unknown at the time of the contact.

Principal Findings

Eight percent of respondents used an out-of-network physician.
Approximately 40 percent of individuals using out-of-network physicians
experienced involuntary out-of-network care. Among out-of-network
physician contacts, 58 percent of inpatient contacts and 15 percent of
outpatient contacts were involuntary. The majority of inpatient
involuntary contacts were due to medical emergencies (68 percent). In an
additional 31 percent, the physician's out-of-network status was unknown
at the time of the contact. Half (52 percent) of individuals using
out-of-network services experienced at least one contact with an
out-of-network physician where cost was not transparent at the time of care.


The frequency of involuntary out-of-network care is not inconsequential.
Policy interventions can increase receipt of cost information prior to
using out-of-network physician services, but they may be less helpful
when patients have constrained physician choice due to emergent problems
or limited in-hospital physician networks.

Comment: An important role of private health insurers is to control
prices through provider contracting. The current trend is to narrow
their networks of providers even more. This allows them to further
squeeze payments to the providers, in exchange for reducing the numbers
of their competitors. If that will slow the increase in insurance
premiums, then shouldn't patients be supportive? No, and here's why.

When patients obtain their care outside of provider networks, they are
inflicted with severe financial penalties, sometimes receiving no
coverage at all, plus losing the controlled rates that the insurers have
negotiated. This study shows that using out-of-network providers is
frequently unavoidable. The problem is particularly severe with
in-hospital care, adding to the already burdensome expenditures for
high-deductibles and coinsurance.

This is a direct result of placing private insurers in the role of
financial intermediaries for our health care. They profit by selling us
an inordinate amount of administrative services that we don't want and
shouldn't need, while penalizing us for obtaining care that we need when
we are unable to access providers within their narrow networks.

The model is all wrong. We need to dump the intrusive and wasteful
private insurers who are forcing on us services that we don't want but
have to pay for - like taking away our choice under threat of financial
penalty. We need to replace them with our own public program that is
designed to ensure that we get the care we need, without penalizing us
for doing so.

Monday, June 17, 2013

Fwd: qotd: Replace volume with quality?

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-------- Original Message --------
Subject: qotd: Replace volume with quality?
Date: Mon, 17 Jun 2013 10:44:00 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

The Wall Street Journal
June 16, 2013
Should Physician Pay Be Tied to Performance?
No: The System Is Too Easy to Game—and Too Hard to Set Up
By Steffie Woolhandler

Paying doctors for better care—not just more of it—seems like a
no-brainer. Yet rigorous studies of pay-for-performance bonuses have
found no health benefits and some unintended harms.

An exhaustive analysis of pay-for-performance research by the Cochrane
Collaborative, an international group that reviews medical evidence,
unearthed "no evidence that financial incentives can improve patient

Consider these cases. In Britain's massive pay-for-performance program,
family doctors earned almost perfect scores (and big bonuses) for
hypertension treatment, but population surveys found no decrease in
blood pressure or its main complication, strokes. Meanwhile, aspects of
quality that didn't bring bonuses deteriorated.

The largest U.S. pay-for-performance experiment—Medicare's Premier
Demonstration—also flopped. The 200 hospitals that offered bonuses
scored slightly worse on patient death rates than other hospitals.

Proponents argue that programs like these were flawed in one way or
another, and that the next trial—or the one after—will certainly do
better. They also claim successes with other programs. But none of these
claims rest on rigorous science, and all those that have subsequently
been subjected to rigorous tests have failed.

No Easy Measurement

Why do these programs consistently fall short? Measurement is distorted
once you pay doctors based on the data they themselves create. High
scores may reflect real excellence, but can just as easily reflect
cherry-picking or gaming the measurement system.

One Boston-area hospital we observed improved its quality score 40% just
by getting doctors to change the words they wrote in patients' charts.
Medicare gives hospitals more credit for saving patients with "acute
respiratory decompensation" than those with "COPD exacerbations,"
although these terms are synonyms. That kind of practice is neither
illegal nor unusual.

Beyond that, it's devilishly difficult to quantify doctors' performance
in the first place. Hospital death rates seem, at first glance, an ideal
measure of medical quality. Yet, four widely used algorithms yield
completely different mortality rankings; a hospital rated outstanding in
one often looks downright dangerous in another.

Even if—as some proponents argue—we find performance measures that work
for one group of doctors, it's unlikely that they'll work for all
providers in all patient populations. Moreover, many providers interact
in providing care, and influence each other and patients' outcomes in
complex ways. It's hard to imagine that incentives could optimize this
as a system.

Ignoring Psychology

There's also psychology at work. Rewarding performance ignores the
complexity of human drive, particularly the role of intrinsic
motivation—the desire to perform an activity for its own inherent
rewards. Offering your dinner-party host a $10 reward for cooking a
wonderful meal isn't likely to motivate future invitations.

Studies have found that financial incentives often crowd out intrinsic
motivation. For instance, college students will spontaneously play with
interesting puzzles, but once they're paid to solve them, they lose
interest in playing for nothing. When day-care centers in Israel imposed
fines on parents for picking up children late, tardiness increased.
Promptness transformed from a moral duty to a market transaction.

Pay for performance undermines the mindset required for good
doctoring—the drive to do good work even when no one is looking.
Moreover, it forces doctors to shift their attention from patients to
computer screens—documenting trivial details useless for patient care
but essential for compliance.

None can doubt medicine's grave quality problems. As a remedy, pay for
performance suggests manipulating greed. This can certainly change
medicine, but not necessarily in the ways that we would plan, much less
hope for.

(Dr. Woolhandler is a physician and professor at the City University of
New York School of Public Health. David U. Himmelstein, also a physician
and professor at the School of Public Health, and Dan Ariely, the James
B. Duke professor of behavioral economics at Duke University's Fuqua
School of Business, contributed to this article.)

Comment: We keep hearing over and over that we are going to have to
quit paying physicians based on the volume of their services and pay on
the quality of those services instead. There are two problems with this.

The first problem is that there is a certain volume of health care that
needs to be delivered. If the physician is told that quality counts but
volume doesn't, then wouldn't that physician be motivated to cut back on
work done? Does anyone seriously suggest that sloth is fine - payment
would be the same regardless of the volume of work? Of course not.
Whether fee-for-service or salaried, the physician is going to have to

The second problem is that the abstract concept that physician pay
should be tied to quality does not translate into a practical model of
measuring and rewarding quality. Physicians already attempt to provide
the best quality they can under the given clinical circumstances.
Typical measures selected are only a infinitesimal sampling of the
entire work product of the physician. Today's article explains the
deficiencies of trying to come to any conclusion about quality based on
this process.

The counter opinion to the article above was written by François de
Brantes, executive director of the Health Care Incentives Improvement
Institute, and is available at the same link above. Some of his comments
are instructive: "show poor outcomes in some pay-for-performance
trials," "design flaws," "doctors were rewarded for results that were
actually poor," "it has worked, if not always as well as it should,"
and, "problems can be fixed by not letting providers set benchmarks." If
physicians, with their conflicts of interest, don't define quality, then
who does? The MBAs? Is that really better?

We definitely must address medicine's many quality problems, ideally
through beneficent public policies, but manipulating greed through pay
for performance schemes is not the way to get there.

Friday, June 14, 2013

Fwd: qotd: Would Syria benefit from a single payer system?

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: Would Syria benefit from a single payer system?
Date: Fri, 14 Jun 2013 10:35:49 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

May 23, 2013
Syria: An overview of MSF programmes in and around the country

The conflict in Syria is extremely intense. Frontlines continue to
shift. The medical system is reduced to tatters. An estimated 6.8
million people are in urgent need of humanitarian assistance inside
Syria and in the neighbouring countries. And people in enclaves are cut
off from assistance.

Despite the very real challenges of operating in the country, MSF is now
running five hospitals inside Syria and is increasing mobile clinic
activities around some of these hospitals. Simultaneously, MSF is
actively seeking to open new projects where it is safe to do so.

MSF is using only private donations for its work in Syria in order to
remain entirely independent of all political positioning around the crisis.

MSF is also working in the neighbouring countries: Iraq, Jordan, Lebanon
and Turkey where some 1.5 million Syrians have fled. These countries
have been overwhelmed by the influx of refugees and the humanitarian
response has so far been unable to meet their needs.


The New York Times
June 13, 2013
U.S. Is Said to Plan to Send Weapons to Syrian Rebels
By Mark Mazzetti, Michael R. Gordon and Mark Landler

The Obama administration, concluding that the troops of President Bashar
al-Assad of Syria have used chemical weapons against rebel forces in his
country's civil war, has decided to begin supplying the rebels for the
first time with small arms and ammunition, according to American officials.

Supplying weapons to the rebels has been a long-sought goal of advocates
of a more aggressive American response to the Syrian civil war.

But even with the decision to supply lethal aid, the Obama
administration remains deeply divided about whether to take more
forceful action to try to quell the fighting, which has killed more than
90,000 people over more than two years.

New York Times Reader Comment:

Don McCanne
San Juan Capistrano, CA

They have a tragic conflagration over there and we're helping by pouring
more gasoline on it?

Is "Peace on Earth" only for Christmas cards?

Comment: Syria needs their Mahatma Gandhi - someone who will be an
inspiration for non-violence and civil rights.

And single payer for Syria? We can't even get single payer in the United
States. Perhaps we need our own Mahatma Gandhi.

Wednesday, June 12, 2013

Fwd: qotd: Are physicians driven by profits or fear?

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: Are physicians driven by profits or fear?
Date: Wed, 12 Jun 2013 12:04:37 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

JAMA Internal Medicine
June 10, 2013
Appropriate Use of Myocardial Perfusion Imaging in a Veteran Population
Profit Motives and Professional Liability Concerns
By David E. Winchester, MD, MS; Ryan Meral, BA; Scott Ryals, MD; Rebecca
J. Beyth, MD, MSc; Leslee J. Shaw, PhD

Myocardial perfusion imaging (MPI) is performed millions of times
annually in the United States to assess patients for coronary ischemia.
Some have expressed concern that MPI is being used inappropriately,
possibly because of self-referral profit motives and professional
liability fears. To inform clinicians about situations in which patients
are likely to benefit from MPI testing, appropriate use criteria (AUCs)
for MPI were developed, last revised in 2009. Prior investigations have
applied AUCs to describe the magnitude and patterns of inappropriate
testing. Rates of inappropriate testing have ranged from 7% to 24%. We
hypothesized that the single-payer environment of the Veterans Affairs
(VA) health system, which eliminates self-referral profit motive and
limits liability concern, will result in less inappropriate use of MPI.


For all but 4 patients (1%), an indication from the 2009 AUCs could be
identified. Study indications were 78% (n = 259) appropriate, 13% (n =
42) inappropriate, and 8% (n = 27) uncertain. The most common
inappropriate MPI indications included testing of patients with low
pretest probability who could have undergone treadmill electrocardiogram
testing (7 patients [16.7% of total inappropriate MPI]) and asymptomatic
patients with low coronary heart disease risk (7 patients [16.7% of
total inappropriate MPI]).


In this retrospective cross-sectional investigation regarding the
appropriate use of MPI in a VA health care setting, we observed that a
substantial portion of MPI tests were ordered for inappropriate
indications. The findings are in contrast to our initial hypothesis but
are similar to those of another VA-based investigation, the results of
which were published during our investigation.

Our hypothesis was based on unique characteristics of the VA patient
care environment. First, no self-referral or profit motives exist.
Second, whereas the Federal Tort Claims Act permits medical malpractice
lawsuits against federally employed physicians, the substantial majority
of claims are resolved through administrative processes.

We did not detect a significant reduction in inappropriate testing in
the VA environment, which suggests a lesser role of defensive medicine
and self-referral in the inappropriate use of MPI.

Reasons for the observed patterns of ordering MPI are unclear.
Conceivably, commonalities in medical training, independent of
postgraduate practice environment, could contribute to an exaggerated
perception of benefit of MPI in asymptomatic patients and those at low
risk of coronary heart disease.

Comment: This study has two important lessons for health reform
advocates - one obvious and the other not so obvious.

The obvious lesson is that "excessive" medical interventions occur even
in the absence of greed or fear. In this study, since VA physicians
receive no additional income with an increased volume of services - in
this case the ordering of myocardial perfusion imaging - the tests that
were inappropriate were not done to increase personal income. Also,
since most VA malpractice claims are resolved administratively, there is
a much lower fear factor that would cause physicians to order tests to
reduce the risk of liability lawsuits.

This is good news in the respect that we can dismiss any nefarious
motives on the part of most physicians who are recommending
interventions that seem to be excessive. Policy corrections should be
directed instead to the more important causes of excessive medical

This leads to the more subtle lesson of this study. What retrospectively
is considered to be inappropriate medical management was done by
physicians who, at the time, thought that they were doing the right
thing for the patient. The policy recommendation that should follow is
that we should continue to identify best practices and continue to
educate our health professionals on just what those best practices are.

We are already doing this in the form of medical research and continuing
medical education. The process can be enhanced by greater reliance on
organizations such NICE, Cochrane, and several others. If we want to
reduce unnecessary care, our resources should be directed to these
efforts rather than being wasted on administrative excesses such as
accountable care organizations that rely on feeble measurements that are
used to distribute nominal rewards and punishments - not really much of
a motivator but more of an insult for dedicated physicians.

Physicians appreciate receiving good information and will use that in
their practices. Let's make better use our public agencies, such as the
NIH, that are dedicated to the health of patients, rather than private
agencies that jerk our health care dollars around to conform to their
business models.

Single payer really would shift the motive from "money first" to
"patients and their health first."

Tuesday, June 11, 2013

Fwd: qotd: Does the nation support health care as a right?

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: Does the nation support health care as a right?
Date: Tue, 11 Jun 2013 12:30:06 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

The Morning Consult
June 11, 2013
Summary Memo on National Poll Findings of Public Opinion on U.S.
Healthcare System

This bipartisan poll included a national sample of 1,000 likely voters
and was conducted May 22 to May 26, 2013 by Republican pollster John
McLaughlin of McLaughlin & Associates and Democratic pollster Margie
Omero of Momentum Analysis.

Q6: In general, do you view health care as a right guaranteed to all
citizens or is it something that citizens should be primarily
responsible for providing for themselves?

44% - Guaranteed right
47% - Citizens responsibility
9% - DK/Refused

Q8: In your own personal opinion, which of the following do you see as
the biggest problem facing health care today?

58% - Too expensive
11% - Too many uninsured
17% - Not worth the price
5% - Accessing quality doctors
9% - DK/Refused

Q10: And who do you believe is most responsible for the cost of health
care coverage?

44% - Insurance companies
10% - Hospitals
4% - Doctors
12% - Drug companies
1% - Medical device companies
9% - Individuals
19% - DK/Refused

Q40: Currently, health care benefits provided by an employer are
tax-free for both employers and employees. On the other hand, health
insurance benefits are not tax-free for people who either buy insurance
themselves or do not receive benefits from their employers. Knowing
this, do you favor or oppose changing the law so health insurance
benefits provided by employers are taxed?

9% - Strongly favor
15% - Somewhat favor
20% - Somewhat oppose
43% - Strongly oppose
13% - Neither

Comment: Three-fourths of likely voters believe that the biggest
problem in health care today is that it is too expensive or not worth
the price. When allowed to select only one option as to who is
responsible for the costs, close to half blame the insurance companies,
with far less blame placed on others. It seems like the voters would
want something done about costs, but there is no voters' revolt in
sight. Maybe we have a problem with framing.

Although most outspoken supporters of a truly universal health program
claim that health care should be a right, just as many believe that it
should be an individual responsibility. The social justice argument is
not going to sway those who have views opposed. Shoving a "Health Care
Is a Right" placard in their faces only turns them off even more.
Framing health care as a right is too polarizing.

Regarding employer-sponsored health plans, only about one-fourth favor
ending the income tax exemption of the benefits, whereas about
two-thirds would oppose taxing these benefits. Just as with their views
on high health care costs, voters are also concerned about preserving an
existing government tax policy that helps give limited relief of their
costs - their own personal costs, that is.

When individuals have to buy their own insurance, they are very
concerned about unaffordable premiums, and they blame the insurers for
that. When they access health care, they are concerned about high
out-of-pocket expenses, especially the deductibles. Even when they
receive insurance through work, many realize that this insurance was
paid for by forgoing wage increases. The high costs of health care are a
personal matter for them, and they want relief.

Rather than talking about abstract health care rights, we should be
framing the problem as an intolerable personal financial burden - one
that is perpetuated through our reliance on expensive but ineffective
private insurance plans. We need to explain that they can get relief
from this burden on two fronts: 1) Free access to health care by
curtailing out-of-pocket expenses, and 2) Replacing unaffordable
premiums with equitable public funding.

The first point was covered yesterday with the brief from EPI titled,
"Increased health care cost sharing works as intended - It burdens
patients who need care the most." We can get rid of this burden. People
need to understand that many other nations provide care that is free at
the time of service - no deductibles, no copays. That's what they want
to hear, though for those who are dubious that this is possible, we can
explain that we can do this by replacing the private insurers with an
efficient Medicare-like program.

For the second point, we can explain that, under an equitable tax
system, individuals pay no more than they can afford, based on their
income, and for most individuals that would be less than they are
currently paying in both direct and hidden costs of health care.

So the framing needs to appeal to the individuals' concerns about their
personal high health care costs: Are you spending too much out-of-pocket
for your health care and for your insurance? Would like like to be able
to get rid of your private insurance and have health care free at the
time you need it? We can do this if we make some modest improvements in
Medicare and then provide it for everyone, paying for it through fair taxes.

You can work on the rhetoric. Just be sure that they hear that they will
not have their health care threatened simply because they cannot afford
to pay for it. Some may feel that it is their right, and some may not.
But they all want to hear that in the future they finally can have
relief from their own personal financial burdens of health care.

Monday, June 10, 2013

Fwd: qotd: Burdening patients who need care the most

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: Burdening patients who need care the most
Date: Mon, 10 Jun 2013 12:32:39 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Economic Policy Institute
May 8, 2013
Increased health care cost sharing works as intended
It burdens patients who need care the most
By Elise Gould

A number of different health care policy proposals that have emerged in
recent years share a common goal: make households directly pay for a
larger share of most health expenditures by encouraging higher
deductibles, higher copays, or higher co-insurance rates. The rationale
of such proposals is that too-generous insurance policies (either those
provided by employers or public insurance such as Medicare) distort the
prices consumers face, and that removing this distortion would allow
patients to choose their health care more wisely, hence slowing health
care cost growth.

This brief argues that this is a flawed strategy for health care cost
containment. The health care market is unlike other markets; thus,
forcing increased cost sharing on American households is a deeply
inefficient strategy for trying to contain health care costs. Forcing
Americans to pay a higher share of health costs will not induce them to
shop around and compare prices when they are experiencing chest pains or
their child is suffering from an asthma attack. Further, consumers of
health care are in no position to second-guess their doctor when she
tells them an MRI is better than an X-ray (and hence worth the higher
price) to diagnose a condition. Lastly, unlike other markets, prices of
health care services faced by consumers bear very little relation to
providers' cost to supply these services. Hence, these prices provide
little to no information for consumers looking to judge the relative
efficacy of various health care interventions.

In addition, increased health cost sharing is unlikely to make American
health care more affordable to those currently unable to afford it, and
will instead likely place the largest burdens on those who need care the

Most cost-sharing proposals lead to higher out-of-pocket medical costs,
hitting those who require a high degree of medical care especially hard.
The short-term cost savings achieved as patients respond to increasing
out-of-pocket burdens may be realized by reducing medically necessary
health care—a penny-wise, pound-foolish result.

Most cost-sharing proposals are poorly targeted for containing overall
system costs. They miss the expensive cost drivers. Any cost containment
would be driven by reduced medical care, not reduced prices.

* Not all moral hazard is inefficient

* Cost sharing can lead to medically and economically inefficient decisions

* Cost sharing is a poorly targeted cost-containment device

Comment: A major objective of health care reform was to slow the
intolerable escalation in health care spending. Most of the pilot
initiatives included in the Affordable Care Act (ACA), such as
accountable care organizations and bundled payments, will likely have
very little impact on our national health expenditures. But one
important policy approach - the subject of this EPI brief - began before
ACA was enacted and is probably responsible for most of the slowing in
health care spending that was not directly due to the recession.

That policy is placing a financial burden on individuals who need care,
especially through higher deductibles, but also through other forms of
cost sharing. The impact of this policy is expressed well in the title
of the brief: "Increased health care cost sharing works as intended - It
burdens patients who need care the most"

Talk about a flawed policy! We are attempting to cover as many people as
possible considering the limitations of ACA, and yet, at the same time,
we are expanding the use of policies that keep patients away from care
that they should have - by erecting these financial barriers. We are
increasing the spending on private insurance plans while reducing the
spending on health care by preventing insured people from getting the
care they need!

How many times do we have to say it? Many other nations provide first
dollar coverage - not charging any fees when health care is accessed -
yet they have been much more effective in slowing cost escalation. You
do not have to expose patients to potential financial hardship to bring
costs under control.

This is one of the most important flaws of ACA (and there are many of
them). It not only allows, but it actually encourages, through low
actuarial value plans, the expansion of these financial disincentives to
obtaining health care. If you read the full EPI brief, you will
understand better why we must abandon this approach. Unfortunately, the
author provides only a couple of feeble suggestions as to alternative
approaches, but you will not find in the brief what we really need to do.

It is astounding that when it comes down to the obvious - that we need a
well designed single payer national health program - so many
knowledgeable people in the policy community choke up. Let's let them
know that it is okay to say it: WE NEED A SINGLE PAYER NATIONAL HEALTH

I guess we really don't have to shout. But we should explain to our
colleagues and the public at large the reasons contained in this EPI
brief explaining why cost sharing is harmful to our health and how it
leads to financial insecurity. Then we can explain, in a calm voice, how
we can fix this by improving Medicare (partly by including first dollar
coverage) and then providing it for everyone. Naw. They're not
listening. We'd better shout.

Wednesday, June 5, 2013

Markets impact community rating

The Sacramento Bee
June 5, 2013
Geography affects premiums on California health insurance exchange
By Jim Sanders

For the same health coverage from the same insurer, a 40-year-old Sacramentan will pay $78 more per month than a Los Angeles County resident through the state's new insurance exchange.

In rural Mono County, the disparity will be even larger: $150 per month, nearly 60 percent higher than for identical benefits and co-pays offered in Los Angeles County.

The premiums provide relatively basic coverage from Anthem Blue Cross, but similar regional differences exist in plans proposed by other insurers. The numbers reflect new rate-setting standards: How sick you are no longer matters, but where you live does.

A 25-year-old can buy the least expensive level of coverage - bronze - at prices ranging from $147 to $274 per month, depending on location.

For the first time, Californians soon will be able to compare regional pricing because federal law requires insurers selling policies on state exchanges to offer identical benefits with rates based only on age, location and household size.

A key factor in premium price differences, within a region or in comparison to other California communities, is the provider network created by each insurer, officials said.

The willingness of doctors or hospitals to join a network can be affected by rates that insurers agree to pay them. Those are negotiated privately and tend to vary based on the number of health care providers within a region and the intensity of competition for patients.

Tom Epstein, vice president of public affairs for Blue Shield of California, said costs for medical care generally are higher in Northern California than in Southern California.

"There are a number of large hospital systems that dominate the Northern California market, whereas there are many smaller hospitals and hospital systems in Southern California that compete," Epstein said.

Comment:  Although, with guaranteed issue, health plans will no longer be able to adjust premiums based on the health status of the applicant, they will still be able to adjust them through community rating.
Insurers can charge higher premiums in communities that have a less healthy population enrolled in their plans. But market forces also play a major role. In communities in which physicians and hospitals have greater market clout, they can demand higher payment rates when contracting to become part of the insurers' networks. The differences can be very significant.

This is yet one more example of why it is irrational to try to fund our health care system through a specific premium assigned to each individual or family and administered by an expensive administrative intermediary - a private insurer.

As many other studies have shown, the private insurers have not been very effective in controlling health care spending anyway. Why would we want to keep them in charge?

We should replace these wasteful, ineffective intermediaries with a publicly-administered single payer program. Payments would be based on legitimate costs with fair margins, using global budgeting and various forms of administered pricing or capitation. Our public stewards would sit down with the health care professionals and administrators and see what they really need, and pay that - no more, no less.

For those who don't believe that would work, simply look at the other OECD nations. They all have government oversight through some form of social insurance and are able to provide health care to everyone at an average of half the price that we are paying for a system that leaves tens of millions out.

Who says this isn't feasible? It's the status quo under Obamacare that isn't feasible.

Tuesday, June 4, 2013

NHIS: Problems paying medical bills

National Center for Health Statistics
June 2013
Problems Paying Medical Bills: Early Release of Estimates From the National Health Interview Survey, January 2011–June 2012
by Robin A. Cohen, Ph.D.; Whitney K. Kirzinger, M.P.H.; and Renee M. Gindi, Ph.D.

The percentage of persons under age 65 who were in families having problems paying medical bills decreased from 21.7% (57.8 million) in the first 6 months of 2011 to 20.3% (54.2 million) in the first 6 months of 2012.

In the first 6 months of 2012, among persons under age 65, 36.3% of those who were uninsured, 14.0% of those who had private coverage, and 25.6% of those who had public coverage were in families having problems paying medical bills in the past 12 months. (Coverage status applies only to the day of the interview.)

The “private health insurance coverage” category includes persons who had any comprehensive private insurance plan (including health maintenance and preferred provider organizations).

The “public health plan coverage” category includes Medicaid, Children’s Health Insurance Program (CHIP), state-sponsored or other government-sponsored health plans, Medicare, and military plans.

Problems paying medical bills in past 12 months—Based on the following question: “In the past 12 months did [you/ anyone in the family] have problems paying or were unable to pay any medical bills? Include bills for doctors, dentists, hospitals, therapists, medication, equipment, nursing home or home care.”

Comment:  As we already knew, about one-fifth of people under 65 are in families that have problems paying medical bills. In the United States we are used to that. But why should people in public plans have greater problems than those with comprehensive private insurance?

Most people under 65 with comprehensive private plans have incomes and can bear some limited out-of-pocket expenses for health care, though 14 percent still have problems paying medical bills.
Most people under 65 who have public health plan coverage qualify for those plans partly on the basis of having inadequate incomes. Their eligibility can vary throughout the year and many of them have intervals with no coverage at all and yet still face medical bills. Even when they have public coverage, they often face out-of-pocket expenses for services and products that may not be included such as medications, dental care, physical therapy, equipment, home care, or care obtained outside of networks (such as Medicaid managed care). These expenses are a problem for one-fourth of those with public coverage.

This demonstrates that it is not enough that we have public plans that serve as safety-nets. These are unstable, fragmented, and incomplete methods of financing health care. Even the private plans are as well, to some extent.

Imagine how this contrasts with a system that would cover everyone, throughout life, and with no deductibles nor coinsurance. You simply get the care you need when you need it. Why do we keep just imaging this? We can have such a system if enough of us demand it.

Monday, June 3, 2013

Obamacare: a fundamentally broken system

Campaign for America's Future
May 30, 2013
Our Continuing Healthcare Crisis, Part 3: The Obamacare Scorecard
By Richard Eskow

(This is Part 3 of a series on our ongoing – and worsening – national healthcare crisis.)


We’ll be updating this “scorecard” as its provisions take effect, but one thing’s already clear: While the law does some good things, it will only marginally improve upon a fundamentally broken system.

Comment:  In this article, Richard Eskow of Campaign for America's Future scores the effectiveness of several features of the Affordable Care Act (Obamacare) as it is being implemented. His take is that Obamacare provides only marginal improvements to a "fundamentally broken system."

The importance of this observation is that it comes from a prominent and respected organization that provides strategy for the progressive movement. They provided crucial support to Health Care for America Now! (HCAN), a coalition of over 1000 organizations dedicated to achieving quality, affordable health care for all.

HCAN was part of the massive shift of progressives away from single payer to the "politically feasible" Clinton/Obama/Edwards version of the conservative reform model of the Heritage Foundation. They were distracted by the concept that if we could just get a public option, we would be well on our way towards achieving a truly universal, affordable system. Little did it matter that the public option would not have been much different from a traditional Blue Cross/Blue Shield plan. It would have been only a marginal improvement, if that, on a "fundamentally broken system."

We can't back up history, but we can assess where we are now, where we are headed, and, most importantly, where we need to go instead. Now that more individuals in the progressive community are acknowledging that Obamacare can have no more than a marginal impact on a  "fundamentally broken system," we need to dump it and enact a single payer national health program - an improved Medicare for all.

Fwd: qotd: Why does Kaiser have the highest premiums in the California exchange?

Quote-of-the-day mailing list
-------- Original Message --------
Subject: qotd: Why does Kaiser have the highest premiums in the
California exchange?
Date: Thu, 13 Jun 2013 12:44:06 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Los Angeles Times
June 12, 2013
Kaiser's Obamacare rates surprise analysts
By Chad Terhune

In California's new state-run health insurance market, Kaiser Permanente
will cost you.

The healthcare giant has the highest rates in Southern California and
some other areas of the state, surpassing rivals such as Anthem Blue
Cross and other smaller competitors. The relatively high premiums from
such a strong supporter of the federal healthcare law surprised industry
analysts, and it has sparked considerable debate about the company's

Some experts say Kaiser intentionally bid high to avoid drawing too many
customers next year who are sick or who have been uninsured for years
and may be costlier to treat. Others suspect Kaiser was worried that
lower premiums would bring an influx of newly insured patients that
could overwhelm its in-house roster of doctors and hospitals.

"Kaiser is not as low cost as many people think," said Glenn Melnick, a
USC health policy professor. "They appear to be protecting themselves
because the people signing up in the first year are likely to be the
sickest ones."

Overall, Kaiser is the state's biggest health insurer with a 40% share
of the market.

(Marian) Mulkey of the California HealthCare Foundation said Kaiser has
regretted being the low-cost option at times in the past and being
overrun by too many members at one time. Other insurers may have more
flexibility to add doctors and hospitals to their network as enrollment

Kaiser, on the other hand, could face the costly decision to contract
with outside hospitals to absorb some of its overflow.

"We are focused on sustainable prices for the long haul," (Bill Wehrle,
Kaiser's vice president of health insurance exchanges) said. "If you
make a large mistake in this environment, it can be hard to recover.",0,7939146.story

Comment: Kaiser Permanente was the prototype health maintenance
organization (HMO) that sparked the managed care revolution, seeking
lower costs supposedly without compromising quality. So why should a low
cost leader come in with the highest premiums for Covered California -
California's new exchange that is being established under the Affordable
Care Act (ACA)?

The strategies and negotiations were secret, so we don't really know.
But there are a couple of possible explanations. Initial enrollment may
include more people with health problems who need insurance, whereas
healthier individuals may opt out since initial non-participation
penalties are very small, and they can always join later. By Kaiser
setting premiums higher, this initial influx of less healthy but more
expensive patients would be diverted to competing plans because of the
attraction of their lower premiums.

Another possible reason is that the current Kaiser patient population is
relatively stable at about 40 percent of the California insurance
market. When patients change their PPO or HMO plans that use provider
networks, they do not have as much disruption as they do when they move
into or out of Kaiser Permanente. Such a move always entails a complete
change of their physicians and hospitals. Since Kaiser realizes that
they have not only dominant market share but also a stable group of
satisfied patients who do not want any disruption in their care, they
know that they can charge a little bit more for their plans since
patients are willing to pay the modest differences to avoid such

There is another reason that is perhaps the most important of all.
Kaiser Permanente is a truly integrated health care delivery system with
its own hospitals, clinics, health care professionals and other
components of the health care delivery system. They can provide
virtually all services to every one of their plan members. Carefully
planning and executing system capacity is absolutely essential in the
Kaiser model.

Large, abrupt changes in enrollment can be catastrophic from a business
perspective. If they lose too many patients all at once they are sitting
there with expensive excess capacity that is not generating revenues. On
the other hand, if they have a sudden large influx of patients,
especially patients who would require greater amounts of health care,
they would strain their capacity, with overloads in their primary care
clinics, with patients destined for admission waiting in the hallways
because the hospital's beds are full, and with intolerably excessive
queues for patients waiting for high-tech and specialized services.
Obviously, they would have very unhappy patients.

Instead of making large, abrupt changes in their system capacity to
match large fluctuations in patient enrollment, Kaiser controls their
patient enrollment, keeping patients out if there are too many, or
increasing aggressive marketing if there are too few. Under our
fragmented, dysfunctional system of financing health care, it is only
natural that Kaiser would adjust its patient enrollment to fit its
business model rather than adjust its business model to better
accommodate patients.

This issue of capacity is important. The United States needs to improve
central planning since we have amongst the worse maldistribution of
capacity. We have too many regions with excess capacity, which causes
wasteful over-utilization, and other regions with deficient capacity,
which impairs access to needed care. As a major player, allowing Kaiser
to have autonomy in its planning takes good care of Kaiser but at a cost
of fragmenting the systemic planning that we need.

Most proposed single payer models include integrated health systems such
as Kaiser Permanente. Presumably Kaiser, like other players in the
system, would negotiate global budgets, fees and capitation rates, and
negotiate separate budgets for capital improvements.

But what about patient choice? The new accountable care organizations
(ACOs) would still ensure patient choice, especially since, under the
ACA rules, patients may not even know that they have been assigned to a
particular ACO. Should Kaiser, which, in essence, is a transparent
mega-ACO, be allowed to lock their patients into their own system when
other ACOs cannot?

Suppose their patients had the freedom to come and go as they please.
Would the patient choices be that be much different from choosing
another primary care entity that has well established referral patterns
for high-tech and specialized services, and established practice
relationships with other hospitals? Isn't the goal of expanded
information technology to provide a similar level of interconnectedness
between all providers that Kaiser has within its own system?

Instead of being a closed system, shouldn't Kaiser just be another
choice for patients within the health care delivery system? Under a
single payer system, that choice would not be based on price since
single payer eliminates the need to shop prices. Rather choice would be
based on perceived quality. Wouldn't it be better if the various
elements of the health care delivery system were knocking themselves out
to be sure that they have very contented, healthier patients?

(Changing the Kaiser Permanente model is controversial. Today's comment
should not be considered a specific recommendation, but should be used
to get people thinking about what type of structural reforms would best
serve the interests of patients - all patients, not just Kaiser's.)