qotd: Victor Fuchs on the solution for high health care costs in U.S.

The Atlantic
July 23, 2014
Why Do Other Rich Nations Spend So Much Less on Healthcare?
By Victor R. Fuchs

Despite the news last week that America's healthcare spending will not
be rising at the sky-high rate that was once predicted, the fact remains
that the U.S. far outspends its peer nations when it comes to healthcare
costs per capita. This year the United States will spend almost 18
percent of the gross domestic product (GDP) on healthcare.

Why does the United States spend so much more?

The biggest reason is that U.S. healthcare delivers a more expensive mix
of services. For example, a much larger proportion of physician visits
in the U.S. are to specialists who get higher fees and usually order
more high-tech diagnostic and therapeutic procedures than primary care
physicians.

A second important reason for higher healthcare spending in the U.S. is
higher prices for inputs such as drugs and the services of specialist
physicians. The prices of branded prescription drugs in the U.S. are, on
average, about double those in other countries. The fees of specialist
physicians are typically two to three times as high as in other
countries. The lower prices and fees abroad are achieved by negotiation
and controls by governments who typically pay for about 75 percent of
all medical care. Government in the U.S. pays about 50 percent, which
would still confer considerable bargaining power, but the government is
kept from exerting it by legislation and a Congress sensitive to
interest-group lobbying.

The third and last important reason for higher spending in the U.S. is
high administrative costs of insurance. Many of our peer countries have
lower administrative costs through more coordination, standardization,
and in some countries a single national system or several regional
healthcare-insurance systems, even when the provision of care is
primarily a private-sector responsibility.

The complexity of private-sector insurance is not in the public
interest. Each company offers many plans that differ in coverage,
deductibles, co-pays, premiums, and other features that make it
difficult for buyers to compare the prices of different policies.

If we turn the question around and ask why healthcare costs so much less
in other high-income countries, the answer nearly always points to a
larger, stronger role for government. Governments usually eliminate much
of the high administrative costs of insurance, obtain lower prices for
inputs, and influence the mix of healthcare outputs by arranging for
large supplies of primary-care physicians and hospital beds while
keeping tight control on the number of specialist physicians and
expensive technology. In the United States, the political system creates
many "choke points" for diverse interest groups to block or modify
government's role in these areas.

For those who would like to limit government control, there is an
alternative route to more efficient healthcare through "managed
competition," proposed by Alain Enthoven, a Stanford University Business
School Professor, more than 25 years ago. It is based on integrated
group practice, which brings the insurance function, physicians,
hospital, drugs, and other elements of care into a single organization
that takes responsibility for the health of a defined population for an
annual risk-adjusted per capita payment. Examples include the Group
Health Cooperative of Puget Sound in Seattle and the Kaiser Permanente
organizations in California.

With regard to healthcare, the United States is at a crossroads. Whether
the Affordable Care Act will significantly control costs is uncertain;
its main thrust is to reduce the number of uninsured. The alternatives
seem to be a larger role for government or a larger role for managed
competition in the private sector. Even if the latter route is pursued,
government is the only logical choice if the country wants to have
universal coverage. There are two necessary and sufficient conditions to
cover everyone for health insurance: Subsidies for the poor and the sick
and compulsory participation by everyone. Only government can create
those conditions.

http://www.theatlantic.com/business/archive/2014/07/why-do-other-rich-nations-spend-so-much-less-on-healthcare/374576/

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Comment by Don McCanne

Highly respected Stanford economist Victor Fuchs has long supported
private solutions to universal coverage, such as Alain Enthoven's
managed competition. Although there is much to be said for establishing
integrated health care delivery systems within the community, the
logistics of providing all care through competing integrated delivery
systems have proven to be insurmountable, as witness the managed care
revolution that reduced this concept to competition between inefficient,
expensive and intrusive third party insurer money managers.

Fuchs now notes that "the complexity of private-sector insurance is not
in the public interest." He acknowledges the crucial role of government
in other nations. He states that we are now at a crossroads between "a
larger role for government or a larger role for managed competition in
the private sector." Even if private managed competition is selected,
"government is the only logical choice if the country wants to have
universal coverage."

But look at the government requirement he would impose if the private
managed competition option were selected: "Subsidies for the poor and
the sick and compulsory participation by everyone." We already have that
in the Affordable Care Act, and yet we will be left with 31 million
uninsured.

At least Fuchs is right when he says, "Only government can create those
conditions." But the vehicle has to be functional. That's why we need to
do it through a single payer national health program. We can still have
our integrated health care delivery systems that Arnold Relman also
supported, but in addition we will need the other components that make
the system work efficiently for all of us.

qotd: David Dranove and Craig Garthwaite warn of a system without narrow networks

Code Red: Two Economists Examine the U.S. Healthcare System
July 29, 2014
Narrow Networks Redux
By David Dranove and Craig Garthwaite

The Affordable Care Act is premised, at least in part, on the notion
that competition can be harnessed to reduce healthcare costs and improve
quality.

When most people think about the benefits of competition, they tend to
think about prices. Monopolies charge high prices; competitors charge
low prices. There is nothing wrong with this perspective, but it misses
a more fundamental point. In the long run, the greatest benefit of
competition is that it has the potential to fuel innovation.

This is as true, in theory, for health insurers as it is for
telecommunications and consumer electronics. It hasn't always been true
in practice; for several decades after the IRS made employer-sponsored
health insurance tax deductible, insurers tended to offer the same
costly indemnity products. But consumers eventually demanded lower
premiums, and insurers responded with managed care. After the backlash,
insurers developed high deductible health plans and value based
insurance design. Insurers are now moving towards reference pricing.
These plans offer consumers reimbursement up to a pre-specified level
for treatments that can be easily broken into a treatment episode such
as hip replacements or MRIs.

High deductibles and reference pricing are fine, but do not always work
in practice. Chronically ill patients quickly exhaust their deductibles,
and reference pricing does not work well for chronic diseases. In order
to complement these tactics, some insurers are once again offering
narrow network plans. We commented in earlier blog posts that the ACA
would catalyze the return of these narrow networks and also warned that
this might fuel another backlash. Unfortunately, a recent New York Times
article shows, the backlash is well underway.

Make no mistake, restrictive networks are essential to cost containment.
Through narrow networks, insurers can negotiate lower prices. More
importantly, they can direct enrollees to providers who have lower
overall costs and higher quality. Dranove has written two books about
this. Don't take his word for it. The independent Robert Wood Johnson
Foundation has published two comprehensive studies showing that the
competition triggered by networks has been successful in reducing costs
and improving quality.

By definition, some providers are excluded from narrow networks, and
this is where the trouble begins. Excluded providers who have lost out
in the cauldron of competition always complain the loudest. We should
have no sympathy for them.

What about patients? Some patients knowingly choose health plans with
narrow networks in order to save money, and should not be surprised to
find that some of their favorite providers are excluded. Others may be
in the dark about their networks. The solution isn't to regulate narrow
networks out of existence; it is to shine some light on network structure.

Another concern may be that low income enrollees who cannot afford
broader networks might be at a disadvantage. But if we want to provide
big enough subsidies so that all enrollees have broad networks, we will
have to either (a) raise taxes further, or (b) limit the number of
uninsured we can enroll. Neither choice seems better than the status quo.

Now, this does not mean that we think there is no place for regulation
of narrow network plans. We don't think that the newly formed ACA
exchanges, or any market, should be the proverbial Wild West. For
example, if we want consumers to make educated choices across insurance
plans, then they require timely and accurate information about which
providers are in which networks. We would think this would be more than
feasible, though healthcare.gov <http://healthcare.gov> was somehow
unable to provide this information to many of the initial enrollees. We
understand that providers go in and out of networks all the time and it
would be burdensome for insurers to inform enrollees of all network
changes in real time. But insurers could provide regular updates. We
also wonder if insurers have the capability of identifying, through
billing records, when a particular patient's provider has gone out of
network, and sending that patient an immediate update. In these
situations, patients should be allowed to change their choice of plans
outside of the open enrollment period in the same way they might be able
to if they had another qualifying event such as the birth of a child.

In addition, narrow network plans are only effective if there are
multiple high quality providers offering services in an area. Given the
recent wave of provider consolidations, it is critical that anti-trust
authorities carefully monitor these mergers. After all, competition can
only work in truly competitive markets.

But what we must avoid is mandating broader access. This would spell the
end of market-based health reform. If insurers cannot exclude some
providers, then providers have little incentive to lower prices and
become more efficient.

Many states have already attempted to mandate minimum access through Any
Willing Provider laws. These laws require insurers who have come to
terms with a specific provider to accept all providers who agree to
those same terms. This may sound fair, but the economic implications of
AWP for patients are anything but fair. Under AWP, no providers need
negotiate with insurers or accede to an insurer's request for discounts.
Providers can bide their time, knowing that they can always force their
way into the network. Having lost all their leverage, insurers can no
longer demand discounts, and prices invariably rise.

The push for broad access seems to be especially strong in sparsely
populated states such as Montana. But proposals to assure access, which
often take the form "At least X% of enrollees must live within Y miles
of a provider" do more to drive up costs than any other rules we can
imagine, because they grant effective monopoly rights to rural
providers. Insurers facing such rules have two options (a) accede to the
pricing demands of the local monopolies, or (b) drop coverage in areas
where providers have been granted local monopolies. Montanans may as
well have nationalized healthcare.

http://dranove.wordpress.com/2014/07/29/narrow-networks-redux/

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Comment by Don McCanne

This blog entry by David Dranove and Craig Garthwaite is another
example, like yesterday's, where economists from "the other side"
clearly understand the policy issues, but are guided by an ideological
preference for market solutions as opposed to more effective government
solutions.

Narrow networks do terrible things. As these authors state, narrow
networks provoke backlashes from patients who are unhappy with the
restrictions. Healthy individuals select their plans primarily based on
price but then are disappointed when they find that the networks are
unable to meet either their needs or their choices. The narrow networks
become anti-competitive when excluded providers leave the community and
are not available for the next year of provider contracting. The authors
point out that requiring the providers to be within a reason distance
from patients drives up costs, as if cost containment is far more
important than access. With the inevitable changes in patient plan
enrollment and in provider network enrollment, narrow networks can be
highly disruptive because of the need to leave your established care and
enter new narrow networks. Perhaps worst of all, the authors state that
"low income enrollees who cannot afford broader networks might be at a
disadvantage." But then they state that if we are to broaden the
networks we must "either (a) raise taxes further, or (b) limit the
number of uninsured we can enroll," as if there were absolutely no other
option for containing costs that did not involve narrow networks. They
seem to believe that the trade-off is worth the cost of disadvantaging
low income enrollees.

They contend that "restrictive networks are essential to cost
containment," after making the case that other market tools of
competition have been inadequate. But ideology dictates that market
competition must be the driving force for cost containment. They caution
that mandating broader access "would spell the end of market-based
health reform."

The case they make for Montana seems to be the clincher on why narrow
networks are such a highly flawed policy - a conclusion that they did
not intend. They complain that requiring reasonable distances to health
care creates a provider monopoly that will cause insurers to either
charge outrageous rates or simply drop coverage. They say that
"Montanans may as well have nationalized healthcare." Maybe they should,
as should the rest of us.

If the inadequacy of other tools of market competition have required
insurers to turn to perverse narrow networks maybe we should be
questioning whether market competition is the best policy for
controlling costs. Come to think of it, maybe we should listen to these
authors when they say that allowing broader access "would spell the end
of market-based health reform." Other national systems depending on
government administered pricing provide care for everyone at an average
of half of what we are spending per capita. Now that's effective cost
containment, and it's accomplished without kowtowing to the ideologues
who insist that health reform must be market based.

qotd: Kshama Sawant on single payer

Crosscut.com (Seattle)
July 23, 2014

Glimmers of healthcare politics at meeting of Western Washington docs

Tough talk from Kshama Sawant and others at annual gathering of Western
Washington Physicians for a National Health Program.

By Ted Van Dyk

Seattle City Council member Kshama Sawant also was critical of
Obamacare, arguing that the administration colluded with drug and
insurance companies in framing it. Sawant spoke longest and most avidly
at the meeting. She called on committed single-payer supporters to
follow the example of those who sought a $15 minimum wage in Seattle,
and bring tireless pressure to bear on Democratic officeholders in
particular. Sawant is a committed socialist who often referred to
"working class interests" and "corrupt corporations, banks, and hedge
fund operators."

Kshama Sawant (video at 4:45):

"Our discussion should be formulated not on the basis of whether or not
the ACA delivered something good. Maybe it did, but that's not the
point. The point is, what are we not getting from it, and why didn't we
win single payer health care? That's what I would like to focus on."

http://crosscut.com/2014/07/23/health-medicine/121125/western-wa-physicians-national-health-program/?page=single

****


Comment by Don McCanne

Socialist Kshama Sawant, a member of the Seattle City Council, came to
national attention by leading her fellow council members in passing a
$15/hour minimum wage for their city. Having shown that political
activism can still be effective, she has important advice for us in our
efforts to enact single payer reform.

Currently attention has been diverted from single payer, as most
progressives are celebrating the supposedly great successes in
implementation of the Affordable Care Act (ACA). Even the Republicans in
Congress who have voted several times to repeal ACA, are now suing
President Obama for not implementing it fast enough.

Those of us who continue to adamantly support single payer are facing
criticism for not joining the ACA bandwagon. This is where Sawant's
message is so important. Whether "ACA delivered something good" is not
the point. The point is, we have to inform the public on "what are we
not getting from it." And what we are not getting is most of the goals
of reform! The accomplishments are extremely modest compared to the
reform that we need.

What are we not getting from ACA that we would be getting from single payer?

* Truly universal coverage
* Dramatic reduction in administrative waste
* Removal of financial barriers to care
* Coverage of all essential health care services
* Free choice of hospitals and health care professionals
* Removal of the interventions and excesses of the private insurers
* Taxpayer financing based on ability to pay
* Infrastructure reform that would slow spending to sustainable levels

And what successes are the ACA supporters touting (though using
different rhetoric)?

* Coverage of only about half of the uninsured
* Shift to underinsurance products
* Guaranteed issue of these underinsurance products
* Deductibles that keep patients away from care by erecting financial
barriers
* Insurance subsidies that are inadequate
* Ultra-narrow networks that take away choice
* Insurance marketplaces that increase administrative complexity and waste
* Inadequate cost containment policies (except for perverse higher
deductibles)

Sawant delivers a very strong leftist message on social justice issues,
and includes in her comments the failures of the Democratic Party to
act. But this point on what we are not getting from ACA and why we need
single payer is not a leftist message. It is a call for all of us from
across the political spectrum who support single payer to take control
of the message. We can no longer allow ourselves to be a meek voice
silenced by those who, for noble and ignoble reasons, celebrate the
paltry successes of ACA.

Again, the something good that ACA did is not the point. The point is
what we are not getting from ACA and would be getting under a single
payer system. Let's drown out the message of the ACA supporters who
wimped out on real reform.

qotd: Arkansas - Poor people need to be taught how insurance works

Kaiser Health News
July 22, 2014
Arkansas Weighs Plan To Make Some Medicaid Enrollees Fund Savings Accounts
By Michelle Andrews

If all goes according to plan, next year many Arkansas Medicaid
beneficiaries will be required to make monthly contributions to
so-called Health Independence Accounts. Those that don't may have to pay
more of the cost of their medical services, and in some cases may be
refused services.

Supporters say it will help nudge beneficiaries toward becoming more
cost-conscious health care consumers. Patient advocates are skeptical,
pointing to studies showing that such financial "skin-in-the-game"
requirements discourage low-income people from getting care that they need.

Michigan and Indiana have already implemented health savings accounts
for their Medicaid programs, modeled after the accounts that are
increasingly popular in the private market. The funds, which may be
supplemented by the state, can be used to pay for services subject to
the plan deductible, for example, or to cover the cost of other medical
services.

The program particulars in each state differ. But both states – and the
Arkansas proposal -- require beneficiaries to make monthly contributions
into the accounts in order to reap certain benefits, such as avoiding
typical cost sharing for medical services. Funds in the accounts may
roll over from one year to the next, and participants may be able to use
them to cover their medical costs if they leave the Medicaid program.

"We believe in consumerism," says John Selig, director of the Arkansas
Department of Human Services. By requiring Medicaid beneficiaries to
make a monthly contribution to a Health Independence Account, "we think
they'll use care more appropriately and get a sense of how insurance works."

Under the health law, states can expand Medicaid coverage to adults with
incomes up to 138 percent of the federal poverty level (currently
$16,105 for an individual). So far, about half have done so. But some
conservatives have objected to the expansion of a government entitlement
program, preferring a private market approach that they say encourages
personal responsibility.

Arkansas and Iowa proposed and received approval from the federal
Department of Health and Human Services for premium assistance programs
that use federal funds to enroll the new Medicaid-eligible beneficiaries
in marketplace plans.

For 2015, Arkansas is proposing to expand its experiment by introducing
the Health Independence Accounts. Nearly all beneficiaries earning
between 50 and 138 percent of the poverty level ($5,835 to $16105 for an
individual) would have to participate through monthly contributions of
between $5 and $25, depending on their income, or face cost-sharing
requirements capped at 5 percent of income by Medicaid rules. In
addition, Medicaid enrollees with incomes over the poverty level could
be refused services if they don't make their monthly contribution and
don't make a copayment. (This year, those with incomes between 100 and
138 percent of poverty already have co-pays.)

Under the new program, any of the private option enrollees would be able
to avoid all cost sharing charges next year by making monthly
contributions to their HIA.

Each month that a beneficiary makes a payment to his or her account, the
state will contribute $15. Unused amounts will roll over from one year
to the next up to a maximum of $200, which can be used by the
beneficiary for health care costs if he or she leaves Medicaid for
private coverage.

Advocates say they're pleased that 175,000 Arkansans have gained
coverage under the Medicaid expansion. But the proposal for next year
gives them pause.

"There are concerns with adding cost sharing to those below the poverty
level," says Anna Strong, health care policy director at Arkansas
Advocates for Children and Families.

Those concerns are well founded, say experts. "This is something that
researchers have looked at a lot," says MaryBeth Musumeci, associate
director at the Kaiser Commission on Medicaid and the Uninsured.
"Overarchingly, premiums and cost sharing have been shown to discourage
or impede folks from getting needed care."

Some experts note that at least 40 states already charge premiums or
cost sharing for at least some beneficiaries. Beneficiaries have skin in
the game already, they say, and they question the value of these special
accounts that add a whole new layer of complexity for people who may not
ever have had insurance before.

"We're creating these incredibly complicated administrative structures,
and I don't think people will understand them," says Judith Solomon,
vice president for health policy at the Center on Budget and Policy
Priorities.

http://www.kaiserhealthnews.org/Stories/2014/July/22/Michelle-Andrews-on-Arkansas-plan-for-Medicaid-savings-accounts.aspx

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Comment by Don McCanne

Arkansas is demonstrating to us the irrationality of basing reform on
ideological concepts divorced from health policy science. Let's look
closer at this proposal for "Health Independence Accounts," their
version of consumer directed health care for very low income
individuals, using the concept of health savings accounts.

* "Nearly all beneficiaries earning between 50 and 138 percent of the
poverty level ($5,835 to $16,105 for an individual) would have to
participate through monthly contributions of between $5 and $25."

* It seems to matter little that these individuals have no
discretionary income since they do not have enough revenues to meet
their basic needs, much less contribute to a savings account.

* If they are able to make their payments, then, according to this
article, cost sharing is eliminated. Wasn't a purpose of the savings
accounts to help pay for cost sharing?

* So what do they suggest is the purpose of the health savings
accounts? They "can be used by the beneficiary for health care costs if
he or she leaves Medicaid for private coverage." So this is a financing
plan for Medicaid that won't be used, but saved until after the person
leaves Medicaid? How does that help?

* For those with incomes between 100 and 138 percent of the federal
poverty level, failure to make a payment into the Health Independence
Account could result in being refused health care services. Is this
really a rational policy for trying to improve health care access for
these low income individuals?

No, it's not about improving health care access. According to John
Selig, director of the Arkansas Department of Human Services, "We
believe in consumerism. We think they'll use care more appropriately and
get a sense of how insurance works."

This is ideology that is totally divorced from health policy science.
Contrast that with ideology that is based on sound health policy science
that results in everyone receiving the health care that they need within
a system that is affordable for all. Of course, that would be a single
payer national health program.

This is sometimes presented as an ideological divide between the
"individual responsibility" and the "we're all in this together"
mindsets, but ideology cannot be divorced from policy science. Health
care should not simply be teaching poor people about how insurance
works. It should be about getting them the care that they need, when
they need it.

qotd: Paradox of health care spending slowdown but higher financial burden for patients

Dobson/DaVanzo
Report prepared for the Federation of American Hospitals
July 23, 2014
Health Care Spending Slowdown: The Consumer Paradox
By Al Dobson, Ph.D., Gregory Berger, M.P.P., Kevin Reuter, Phap-Hoa Luu,
M.B.A. and Joan E. DaVanzo, Ph.D., M.S.W.

In recent reports we have outlined the continuing historic slowdown in
the growth rate of health care spending driven in large part by emerging
structural changes in the health care system. Recent evidence suggests
that the cost curve has continued to bend, with health care spending
declining in the first quarter of 2014. Despite this continuing trend in
health care spending growth, consumers are increasingly concerned that
they are ever-more financially burdened by spending on their own health
care.

This consumer perception is largely a factor of the "new normal" being
established through health insurance, which includes:

• Benefit plan designs, used by employers and insurers to shift greater
financial risk to consumers through higher out-of- pocket spending
(i.e., deductibles, co-payments, and co- insurance); and

• Health insurance premiums, which continue to rise faster than the
average person's income.

This trend of growth in out-of-pocket spending combined with increases
in health insurance premiums that outpace increases in wages is not
sustainable over the long term, and harms both patients and providers.

Key Findings

• In the first quarter of 2014, consumer spending on health care
declined by 1.4%, representing the largest decline in over 30 years

• Almost 60% of Americans think that health care costs have been growing
faster than usual in recent years, and more than 70% of consumers
attribute responsibility for their perceived high and rising costs to
health insurance companies

• Total premiums have increased substantially over the past decade, from
14.9% to 21.6% of median household income between 2003 and 20126

• Employee contributions to premiums and out-of-pocket spending have
risen 23% faster than employee costs since 2009 (32% in cumulative
growth vs. 26%)

• Cumulative growth in workers' contributions to premiums between 2002
and 2013 was 114%, approximately four times higher than growth in
workers' average income (31%)

• Deductibles for family coverage increased more than 75% from 2006 and
2013 (from $1,034 to $1,854), while enrollment in plans with a
deductible increased to 81% in 2013

• The percentage of workers enrolled in high-deductible plans ($1,000 or
more) has increased more than five times over the past decade, from 4%
in 2006 to 26% in 2014

• Overall, employees' premium contributions and out-of-pocket expenses
per capita have grown by 42% over the past five years, from $6,824 in
2009 to $9,695 in 2014

Payers and providers are both adjusting to a "new normal" in the
marketplace through a variety of multi-year strategies aimed at
improving quality, reducing costs, and minimizing financial risk within
the evolving regulatory framework. Additional interventions or blunt
policymaking, rather than allowing the market to respond to current
reform efforts, could interfere with the system.

Both payers (including employers) and providers have prepared multi-year
transition plans to adjust their business models, and require some level
of predictability and capital reserves. Major disruptions to the
operating environment for providers, payers and/or employers may
generate uncertainty, which ultimately could flow down to consumers in
the form of higher premium contributions and out-of-pocket spending.

http://fahpolicy.org/wp-content/uploads/2014/07/Dobson-DaVanzo-Federation-Cost-Sharing-Executive-Summary.pdf

Report:
http://fahpolicy.org/wp-content/uploads/2014/07/Dobson-DaVanzo-Federation-Cost-Sharing-Report.pdf

****


Comment by Don McCanne

This report describes the paradox of the "new normal" in which increases
in health care costs have been slowing as payer/employers and providers
adjust their business models to the marketplace, while the financial
burden for health care on patient/consumers continues to increase. As
this report states, "this trend of growth in out-of-pocket spending
combined with increases in health insurance premiums that outpace
increases in wages is not sustainable."

This study was sponsored by the Federation of American Hospitals - the
lobby organization for America's private, investor-owned hospitals. To
no surprise, they recommend that the marketplace be allowed to work its
magic, avoiding disruptions or policy changes that could interfere with
the system. They caution that such interference "could flow down to
consumers in the form of higher premium contributions and out-of-pocket
spending."

What? They have just shown us how the market they want to protect is
taking care of payer/employers and providers (including for-profit
hospitals) while creating financial burdens for patient/consumers
through "higher premium contributions and out-of-pocket spending."

They haven't gotten reform right, and they won't as long as we allow the
medical/industrial complex to remain in charge. Reform needs to be
centered around the patient, yet it is the patient who is being dumped
on. Single payer would fix that.

qotd: KFF update on Medicare out-of-pocket spending

Kaiser Family Foundation
July 21, 2014
How Much Is Enough? Out-of-Pocket Spending Among Medicare Beneficiaries:
A Chartbook
By Julliette Cubanski, Christina Swoope, Anthony Damico and Tricia Neuman

As part of efforts to rein in the federal budget and constrain the
growth in Medicare spending, some policy leaders and experts have
proposed to increase Medicare premiums and cost-sharing obligations.
Today, 54 million people ages 65 and over and younger adults with
permanent disabilities rely on Medicare to help cover their health care
costs. With half of all people on Medicare having incomes of less than
$23,500 in 2013, and because the need for health care increases with
age, the cost of health care for the Medicare population is an important
issue.

Although Medicare helps to pay for many important health care services,
including hospitalizations, physician services, and prescription drugs,
people on Medicare generally pay monthly premiums for physician services
(Part B) and prescription drug coverage (Part D). Medicare has
relatively high cost-sharing requirements for covered benefits and,
unlike typical large employer plans, traditional Medicare does not limit
beneficiaries' annual out-of-pocket spending. Moreover, Medicare does
not cover some services and supplies that are often needed by the
elderly and younger beneficiaries with disabilities—most notably,
custodial long-term care services and supports, either at home or in an
institution; routine dental care and dentures; routine vision care or
eyeglasses; or hearing exams and hearing aids.

Many people who are covered under traditional Medicare obtain some type
of private supplemental insurance (such as Medigap or employer-sponsored
retiree coverage) to help cover their cost-sharing requirements.
Premiums for these policies can be costly, however, and even with
supplemental insurance, beneficiaries can face out-of-pocket expenses in
the form of copayments for services including physician visits and
prescription drugs as well as costs for services not covered by
Medicare. Although Medicaid supplements Medicare for many low-income
beneficiaries, not all beneficiaries with low incomes qualify for this
additional support because they do not meet the asset test.

Because people on Medicare can face out-of-pocket costs on three
fronts—cost sharing for Medicare-covered benefits, costs for non-covered
services, and premiums for Medicare and supplemental coverage—it is
important to take into account all of these amounts in assessing the
total out-of-pocket spending burden among Medicare beneficiaries. Our
prior research documented that many beneficiaries bear a considerable
burden for health care spending, even with Medicare and supplemental
insurance, and that health care spending is higher among older
households compared to younger households.

Key Findings

* Premiums for Medicare and supplemental insurance accounted for 42
percent of average total out-of-pocket spending among beneficiaries in
traditional Medicare in 2010

* Out-of-pocket spending rises with age among beneficiaries ages 65 and
older and is higher for women than men, especially among those ages 85
and older.

* As might be expected, beneficiaries in poorer health, who typically
need and use more medical and long-term care services, have higher
out-of-pocket costs, on average.

* Just as Medicare spends more on beneficiaries who use more
Medicare-covered services, more extensive use of services leads to
higher out-of-pocket spending.

* Among beneficiaries in traditional Medicare, those with a Medigap
supplemental insurance policy pay more in premiums for this additional
coverage, on average, than beneficiaries with employer-sponsored retiree
health benefits ($2,166 vs $1,335, on average, in 2010).

* Analysis of 'high out-of-pocket spenders' finds a disproportionate
share of certain groups, including older women, beneficiaries living in
long-term care facilities, those with Alzheimer's disease and ESRD, and
beneficiaries who were hospitalized, in the top quartile and top decile
of total out-of-pocket spending (including both services and premiums).

* Between 2000 and 2010, average total out-of-pocket spending among
beneficiaries in traditional Medicare increased from $3,293 to $4,734, a
44 percent increase.

Implications

The typical person on Medicare in 2010 paid about $4,700 out of pocket
in premiums, cost sharing for Medicare-covered benefits, and costs for
services not covered by Medicare. Even with financial protections
provided by Medicare and supplemental insurance, some groups of Medicare
beneficiaries incurred significantly higher out-of-pocket spending than
others, which could pose challenges for those living on fixed or modest
incomes. Out-of-pocket spending tends to rise with age and number of
chronic conditions and functional impairments, and is greater for
beneficiaries with one or more hospitalizations, particularly those who
receive post-acute care.

http://kff.org/medicare/report/how-much-is-enough-out-of-pocket-spending-among-medicare-beneficiaries-a-chartbook/

****


Comment by Don McCanne

This KFF update on the financial burden placed on Medicare beneficiaries
shows that average out-of-pocket costs are $4,734 when half of all
people on Medicare have incomes of less than $23,500. Although Medicaid
supplements Medicare for some low income beneficiaries, destitution is a
prerequisite for qualifying for Medicaid. The wealthy should have no
problems, but should affordable access to health care be granted only to
those with modest or low incomes who must give up what little fungible
assets they have been able to accumulate through life?

Another concern in this report is that those with a Medigap supplemental
insurance plan pay considerably more in premiums than do those with an
employer-sponsored retiree health benefit program. Although Medigap
benefits are quite modest, the premiums charged make them one of the
worst values in the health insurance market.

Medicare benefits need to be expanded to a level at which Medicare
becomes a prepaid health care program. When you need health care, you
get it.

qotd: A. W. Gaffney: “Malinsurance” may drive reform

New Politics
Summer 2014

Beyond Obamacare
Universalism and Health Care in the Twenty-first Century

By A. W. Gaffney

Among those working towards more fundamental health care change (for
instance, as I'll discuss below, a single-payer system), an assessment
of the overall impact of the ACA is a frequent cause for disagreement.
Is the law a (possibly wobbly) step in the right direction to be
embraced and expanded, a harmful compromise to be denounced and
discarded, or something in between? My own sense here is that global
assessments are problematic and not that helpful: the massive law does
many different things for many different people, and so is better
dissected (and criticized) with respect to its specific effects and
shortcomings rather than rejected or championed en toto.

Now if eliminating the problem of uninsurance was our only goal, it
seems that the ACA would be at least be a clear step in the right
direction. Unfortunately, however, there is another phenomenon that has
been evolving for some time, that the ACA neither created nor fixed but
to some extent codifies, and which confers a highly inegalitarian
element to our health care system: underinsurance. Underinsurance is
often defined as having insurance but still having substantial
out-of-pocket costs for medical care (i.e. greater than 10 percent of
family income after premiums); it's clearly a growing problem, and it is
by no means eliminated by the ACA. The plans on the exchanges, for
instance, incorporate high levels of cost sharing, or copays,
deductibles, and coinsurance. They are graded into four metallic tiers
based on their actuarial value (i.e. the percent of your health care
expenses that insurance covers), beginning at a paltry 60 percent for
the "bronze plans." Putting aside the deeply inegalitarian concept of
dividing a population into different grades of metal (the allusion to
Plato's Republic has somehow not yet been made), such plans fulfill the
long-held concern of health policy "experts" that patients need more
"skin in the game" (i.e. cost exposure), such that they don't
whimsically procure medically unnecessarily procedures and diagnostic
studies. Families will be subject to as much as $12,700 annually in
additional out-of-pocket costs for health care (after premiums are paid)
to keep the dreaded "moral hazard" of "free care" at bay.

Putting aside what happens to the level of strictly defined
"underinsurance," I would argue that there is a larger problem on the
rise, which one might call "malinsurance," namely insurance that
compromises the physical and economic health of the bearer. Malinsurance
encompasses an even broader scope of problematic insurance plans:
insurance where the price of the premiums impinges on a reasonable
standard of living; insurance with unequal and inferior coverage of
services, drugs, or procedures; insurance with "cost sharing" that
forces individuals to decide between health care and other necessities;
insurance with inadequate and inequitable access to providers or
facilities; and insurance that insufficiently protects against financial
strain in the case of illness.

Today, many (if not most) of us could in some ways be considered
underinsured, while most (or maybe all) of us might be considered
malinsured. This will, unfortunately, remain the case in coming years,
even with the full and unimpeded enforcement of the ACA.

Moving Forward: A Single-Payer Solution?

A "single-payer system" is probably the best-studied alternative for the
United States. Conceptually, it is quite simple: national health
insurance, with a single entity (the government) providing health
insurance for the country. Its core principles (as generally agreed upon
within the single-payer movement) can be briefly summarized. First,
everyone in the country would be covered by national health insurance.
Second, the system wouldn't impose "cost sharing," so health care would
be free at the point of care, with underinsurance thereby eliminated
(assuming an adequate level of funding). Third, it would drastically
reduce spending on health care administration and bureaucracy through
elimination of the fragmented multi-payer system, and also through the
global budgeting of hospitals. It would also contain costs through
health care capital planning, and through other measures like direct
negotiations with pharmaceutical companies over drug prices. Putting
this together, a single-payer system would constitute a markedly
egalitarian turn in American health care. Access to health care would be
made not only universal but also equal, with free choice of provider and
hospital to everyone in the country, provided as a right.

The confluence of several of the following dynamics (and many others)
may, for instance, create a political opening for such a project in the
coming years.

First, dissatisfaction with our health care system will almost certainly
rise, which I think will occur as we become more and more a "copay
country," with high-deductible, high-premium, and narrow-network health
plans becoming the new normal. One could imagine considerable public
outrage and mobilization against this new commodified status quo, just
as there was against corporatized HMOs in the 1990s.

Second, though politics at the federal level may remain inhospitable to
the cause for some time, single-payer campaigns at the state government
level may provide an opening for the construction of more limited
single-payer state systems, while also providing an opportunity for
grassroots organizing and movement building that would, in turn,
strengthen the larger national campaign.

Third, support for a single-payer system among physicians (which already
has majority support in some polls) might be translated into more vocal
outrage in coming years. In particular, as patients pay more and more
out-of-pocket at the time of care, physicians will increasingly be
forced into the role of "merchants of health," basing medical decisions
not only on clinical evidence, but on their patients' income and wealth.
I believe—and deeply hope—that such class-based medicine will be
rejected by the profession.

Fourth, and perhaps most important, a broader mobilization against the
politics of inequality now seems to be in the making. As it is perceived
that the excessive costs of American health care are actually
contributing to the problem of inequality—for instance, insofar as high
premiums indirectly reduce income or as cost sharing directly consumes a
greater portion of already stagnant wages—one can imagine that the drive
for a single-payer system might become closely linked with a much
larger, and more powerful, political mobilization.

http://newpol.org/content/beyond-obamacare

****


Comment by Don McCanne

As A. W. Gaffney points out in this article, underinsurance or
"malinsurance" may drive us to demand single payer as we mobilize
against the politics of inequality. The entire article is well worth
downloading and reading when you have a free moment.


Note on word usage: Gaffney's neologism, "malinsurance," is sometimes
used to refer to medical malpractice insurance. To avoid confusion, we
should continue to use the already established term, "underinsurance,"
as the label for the rapidly expanding menace of inadequate health care
coverage.

qotd: ACA and racial and ethnic disparities

Medical Care
August 2014
Barriers to Care in an Ethnically Diverse Publicly Insured Population:
Is Health Care Reform Enough?
By Call, Kathleen T. PhD; McAlpine, Donna D. PhD; Garcia, Carolyn M.
PhD, MPH, RN; Shippee, Nathan PhD; Beebe, Timothy PhD; Adeniyi, Titilope
Cole MS; Shippee, Tetyana PhD

Abstract

Background:

The Affordable Care Act provides for the expansion of Medicaid, which
may result in as many as 16 million people gaining health insurance
coverage. Yet it is unclear to what extent this coverage expansion will
meaningfully increase access to health care.

Objective:

The objective of the study was to identify barriers that may persist
even after individuals are moved to insurance and to explore
racial/ethnic variation in problems accessing health care services.

Research Design:

Data are from a 2008 cross-sectional mixed-mode survey (mail with
telephone follow-up in 4 languages), which is unique in measuring a
comprehensive set of barriers and in focusing on several select
understudied ethnic groups. We examine racial/ethnic variation in cost
and coverage, access, and provider-related barriers. The study adhered
to a community-based participatory research process.

Subjects:

Surveys were obtained from a stratified random sample of adults enrolled
in Minnesota Health Care Programs who self-report ethnicity as white,
African American, American Indian, Hispanic, Hmong, or Somali (n=1731).

Results:

All enrollees reported barriers to getting needed care; enrollees from
minority cultural groups (Hmong and American Indian in particular) were
more likely to experience problems than whites. Barriers associated with
cost and coverage were the most prevalent, with 72% of enrollees
reporting 1 or more of these problems. Approximately 63% of enrollees
reported 1 or more access barriers. Provider-related barriers were the
least prevalent (about 29%) yet revealed the most pervasive disparities.

Conclusions:

Many challenges to care persist for publicly insured adults,
particularly minority racial and ethnic groups. The ACA expansion of
Medicaid, although necessary, is not sufficient for achieving improved
and equitable access to care.

http://journals.lww.com/lww-medicalcare/Abstract/2014/08000/Barriers_to_Care_in_an_Ethnically_Diverse_Publicly.8.aspx

****


Comment by Don McCanne

This is yet one more study that shows that insurance alone will not
achieve equitable access to care, particularly for minority racial and
ethnic groups. Let's provide a little bit more perspective.

When we say that health care should be equitable, what do we mean? Does
that mean that we compromise the quality of care for those who are
receiving the very best in order to free up resources for those who are
experiencing barriers to access? No, it means that we should bring
everyone up to the same high standard. One important step is to improve
the performance of the financing system by eliminating much of the
administrative waste. That would free up resources that could be used to
reduce the barriers of cost, coverage and capacity - barriers that the
populations in this and other studies face.

Does equitable health care mean that we should prohibit allowing
individuals to buy their way to the front of the queue? No, it means
that we should use regional planning, capacity adjustment, and queue
management techniques so that we reduce excessive queues for everyone.

Often the claim is made that there are many other socioeconomic factors
besides insurance coverage that result in impaired access to care. That
is true. Merely providing optimal coverage will not in itself correct
all of the other factors. But in that claim is the implicit suggestion
that we should accept deficiencies in coverage and access because we
can't fix the access problems anyway. That view represents an
unacceptable ethical compromise in our current dialogue on reform.

Insurance systems that include financial barriers to care due to both
cost sharing and uncovered services, and that impair access due to
limitations of networks and limitations in regional capacity are a major
cause of inequitable access and coverage. Creating an equitable
financing system is the first and perhaps most important step in
improving access to high quality care for everyone. Society has an
obligation to address the other socioeconomic issues, but not by tossing
aside the assurance that health care will be there for those who need it.

qotd: Hobby Lobby unravels one more thread of our inequitable quilt

The New England Journal of Medicine
July 16, 2014
Money, Sex, and Religion — The Supreme Court's ACA Sequel
By George J. Annas, J.D., M.P.H., Theodore W. Ruger, J.D., and Jennifer
Prah Ruger, Ph.D., M.S.L.

The Supreme Court decision in the Hobby Lobby case is in many ways a
sequel to the Court's 2012 decision on the constitutionality of the
Affordable Care Act (ACA). Like the 2012 case, the decision was decided
by a 5-to-4 vote, but in the initial ACA decision, Chief Justice John
Roberts acted to "save" the ACA. Not this time. To simplify, the choice
facing the Court in the Hobby Lobby case was whether to favor the
exercise of religion by for-profit corporations (whose owners believe
contraceptives that may prevent fertilized eggs from implanting violate
their religious beliefs) over the federal government's attempt to create
a uniform set of health care insurance benefits.

(This article goes on to discuss the issues in the Hobby Lobby decision,
including the ACA and the Religious Freedom Restoration Act, religion
and birth control, and religion and women's health. The authors end with
the following section on medical care and the ACA.)

Medical Care and the ACA

In terms of health care, the reaction of the American College of
Obstetricians and Gynecologists (ACOG) to the Court's opinion seems just
about right to us: "This decision inappropriately allows employers to
interfere in women's health care decisions . . . [which] should be made
by a woman and her doctor, based on the patient's needs and her current
health." ACOG went on to underline that contraceptives and family
planning are mainstream medical care and should be treated as such. In
their words, "access to contraception is essential women's health care."

The Court's ruling can also be viewed as a direct consequence of our
fragmented health care system, in which fundamental duties are
incrementally delegated and imposed on a range of public and private
actors. The Court is correct on one dimension of its opinion: if
universal access to contraceptives is a compelling societal interest,
then the provision of such access ought to fall first and foremost on
the national government and only secondarily be transferred to private
parties. Our systemic reliance on health insurance that is based on
private employment provokes just this sort of clash between public and
private values.

Our incremental, fragmented, and incomplete health insurance system
means that different Americans have different access to health care on
the basis of their income, employment status, age, and sex. The decision
in Hobby Lobby unravels only one more thread, perhaps, but it tugs on a
quilt that is already inequitable and uneven. A central goal of the ACA
was to repair some of this incremental fragmentation by universalizing
certain basic health care entitlements. In ruling in favor of
idiosyncratic religious claims over such universality, the Court has
once again expressed its disagreement with this foundational
health-policy goal.

http://www.nejm.org/doi/full/10.1056/NEJMhle1408081?query=TOC#t=article

George Annas:
http://www.bu.edu/sph/profile/george-annas/

****


Comment by Don McCanne

The last paragraph says it all:

"Our incremental, fragmented, and incomplete health insurance system
means that different Americans have different access to health care on
the basis of their income, employment status, age, and sex. The decision
in Hobby Lobby unravels only one more thread, perhaps, but it tugs on a
quilt that is already inequitable and uneven. A central goal of the ACA
was to repair some of this incremental fragmentation by universalizing
certain basic health care entitlements. In ruling in favor of
idiosyncratic religious claims over such universality, the Court has
once again expressed its disagreement with this foundational
health-policy goal."

Need we say, single payer?

qotd: More on a business case for universal health care

American University
Health Law & Policy Brief
Spring 2014

A Business Case for Universal Healthcare:
Improving Economic Growth and Reducing Unemployment by Providing Access
for All
By David Sterret, Ashley Bender, David Palmer

From the Introduction

This report will illustrate that the United States economy is currently
hampered in numerous ways by having an inefficient, inequitable
healthcare system. The research on which we relied was completed before
the full implementation of the Patient Protection and Affordable Care
Act (ACA). However, we expect that even if the law works as intended, it
will not resolve the problems that we raise because the law largely
preserves our employment-based healthcare system. In Part I, we discuss
specific harms to the economy inflicted by our system's reliance on
employers to provide healthcare benefits. Part II examines how the
United States economy compares through the lens of several indices,
including some published by conservatives. These comparisons illustrate
that most countries with more vibrant economies than the United States
have government- directed, universal healthcare systems.

II. Implementing a Universal Care System Would Improve American
Competitiveness Internationally

A. The United States Trails Many of Its Competitors by Various Economic
Measures

B. How the Employer-Funded United States Healthcare System Harms Businesses

C. Why a Universal Care System Would Lessen Burdens on Businesses

No universal care systems, including pure single-payer systems, are a
free lunch for businesses. In one way or another, often through a
payroll tax, businesses end up providing at least some of the money to
finance the system.

There are several reasons to believe that a universal care system would
mitigate this impact on businesses. Primarily, such a system would cause
future costs to be lower, or at least stem the trend of cost-increases
far exceeding inflation. Secondly, businesses' overall share of
healthcare bills would likely be lower. Finally, a universal care system
would distribute costs far more equitably among businesses.

Conclusion

If the United States were to implement a system to ensure universal
care, American companies would no longer face a disadvantage in
competing with businesses from countries, such as Canada, that provide
national healthcare systems. Additionally, healthcare would cease to be
a large factor guiding individuals' career decisions. A national,
universal care system would level the playing field among domestic
businesses, and eradicate the free-rider problem. For all of the above
reasons, economic growth would likely improve, which would yield
additional self-perpetuating benefits.

There is an argument that the taxes to finance such a system would
constrain business. This claim is seriously undercut by examples from
around the world. For instance, Hong Kong, viewed by many as a "beacon
of capitalism," has universal healthcare. So does Denmark, which has
higher levels of entrepreneurship than the United States. What is
becoming increasingly clear now is that the current employer-sponsored
healthcare system in the United States does hurt business.

http://jts.hbp.com/pdf/design/135358_AU_HLP_3.pdf

****


Comment by Don McCanne

The majority of Americans obtain their insurance through their
employment. Business has a vital concern in the financing of health
care. This report adds to the plethora of evidence that business owners
would be better off if they were relieved of their responsibilities of
providing health benefit programs for their employees. So why is there
not an outcry to switch to a proven financing system that would serve
their employees well? Is it ideology?

The Affordable Care Act (ACA) calls for a financial penalty for larger
employers who do not provide health care coverage for their employees.
Could that be the reason? No, the resistance to change existed before
ACA was enacted. Further, there are now so many experts in the policy
community across the political spectrum who are calling for repeal of
the penalty that it is likely that it will be eliminated anyway.

If so, what are employers likely to do? We are already seeing much
interest in private health insurance exchanges. If ACA requirements on
employers were lifted, they may be willing to provide their employees
with a voucher to purchase plans in the private exchanges. Since that
converts the benefit into a defined contribution, that would pass on to
their employees the burden of future health care inflation.

Another possibility is that they might want to give their employees
raises and then let them select their own plans in the state-based ACA
exchanges. That would remove the employer entirely from the
responsibility of supporting a health benefit program.

A concern that employers might have is that health care costs are now
too high and income inequality has increased to the level such that
health care benefits must be progressively financed if people are to
receive the care they should have. Employers could be concerned that
their tax burden may be increased to pay for the higher subsidies that
will be needed for premiums and cost-sharing in the exchange programs.
Not knowing what that tax burden might be could cause some reluctance to
change from a system that at least they understand.

Most employers are well aware of the inefficiencies and high costs of
our private insurance-based system. Would employers be ready to embrace
a more efficient government-financed and government-administered single
payer system? This may be their greatest fear because the financing
would no doubt be through explicit progressive tax policies. Most
proposals would reduce total health spending for 95 percent of us, but
would increase it for those in the top 5 percent of income.

Although some in the business community might be opposed simply because
of ideology, for most it's the money. We've learned the lessons that
Thomas Piketty has for us, but we can't apply them until we are willing
to exercise democracy by changing the politics. That push for change
will not come from the business community.

qotd: The meme of interdependency of access, quality and cost

The New York Times
July 14, 2014
Why Improving Access to Health Care Does Not Save Money
By Aaron E. Carroll

One of the most important facts about health care overhaul, and one that
is often overlooked, is that all changes to the health care system
involve trade-offs among access, quality and cost. You can improve one
of these – maybe two – but it will almost always result in some other
aspect getting worse.

You can make the health care system achieve better outcomes. But that
will usually cost more or require some change in access. You can make it
cheaper, but access or quality may take a hit. And you can expand
access, but that will increase cost or result in some change in quality.

More people being able to get care was the point of the A.C.A. It's
possible that overall health care spending may remain flat or even
decrease because of other changes to the health care system, or economic
factors outside the system entirely. But with respect to emergency care,
prevention and procedures, we should expect that increasing access will
lead to more spending, not less.

It's understandable that supporters of the law want it to increase
access, increase quality and decrease spending all at the same time, but
that's very unlikely. Trade-offs occur; we need to be honest, and
prepared, for what's likely to happen.


Reader Comments:

Don McCanne
San Juan Capistrano, CA

The supposedly inevitable trade-offs between access, quality and cost
ignore one important intervention regarding cost. The health care
financing system in the United States is unique in its profound, costly
administrative waste due to the highly inefficient, fragmented financing
through a multitude private insurers and public programs (and no
programs at all for the uninsured).

Merely changing to a universal single payer program or a national health
service model dramatically reduces costs without having a negative
impact on access and quality. The future trajectory of cost increases
would be shifted downward - achieving that elusive bending of the cost
curve. That is one way other nations provide truly universal health care
at a per capita cost averaging only half of that of the United States.

In fact, the monopsonistic purchasing of a public program can actually
improve quality by obtaining greater value in health care purchasing.

Some of the savings that would accrue by changing to a universal program
such as an improved Medicare for all would be redirected to much needed
improvements in access.

The important bottom line is that we really can achieve improved access,
improved quality, and lower costs by structural reform of our highly
dysfunctional financing system - a system that was only expanded by the
Affordable Care Act.


Darlene
Albuquerque, NM

This author makes a compelling case that the ACA will not decrease costs
because there are trade-offs among access, quality and cost. What he
ignores is that we also have another system, Medicare, operating
simultaneously, that provides good access and quality and manages to
limit cost with little trade-off. In addition, it serves the population
that consumes the greatest share of health care. You, good reader, know
the difference. This article shows, once more, why we need a single
payer system for all.

http://www.nytimes.com/2014/07/15/upshot/why-improving-access-to-health-care-does-not-save-money.html

qotd: Urgent care centers - capitalism in action

The New York Times
July 9, 2014
Race Is On to Profit From Rise of Urgent Care
By Julie Creswell

NORWALK, Conn. — For more than eight hours a day, seven days a week, 52
weeks a year, an assortment of ailments is on display at the tidy
medical clinic on Main Avenue here. But all of the patients have one
thing in common: No one is being treated at a traditional doctor's
office or emergency room.

Instead, they have turned to one of the fastest-growing segments of
American health care: urgent care, a common category of walk-in clinics
with uncommon interest from Wall Street. Once derided as "Doc in a Box"
medicine, urgent care has mushroomed into an estimated $14.5 billion
business, as investors try to profit from the shifting landscape in
health care.

But what is happening here is also playing out across the nation, as
private equity investment firms, sensing opportunity, invest billions in
urgent care and related businesses. Since 2008, these investors have
sunk $2.3 billion into urgent care clinics. Commercial insurance
companies, regional health systems and local hospitals are also looking
to buy urgent care practices or form business relationships with them.

The business model is simple: Treat many patients as quickly as
possible. Urgent care is a low-margin, high-volume proposition.

Urgent care clinics also have a crucial business advantage over
traditional hospital emergency rooms in that they can cherry-pick
patients. Most of these centers do not accept Medicaid and turn away the
uninsured unless they pay upfront. Hospital E.R.s, by contrast, are
legally obligated to treat everyone.

Already, the race is on to build large chains with powerful, national
brands — a McDonald's or a Gap of health care. Wall Street money is
driving the growth, but so are other forces. Millions of newly insured
Americans are seeking care. Others are frustrated by long waits at
E.R.s, or by having to conform to regular doctor's hours.

The insurance giant Humana paid nearly $800 million in 2010 to buy
Concentra, the nation's largest group of urgent care centers, with about
300 currently. Two years later, Dignity Health, a San Francisco-based
health system, acquired U.S. HealthWorks, a group that today has 176
centers.

Even hospitals are embracing the trend. Florida Hospital in Orlando, for
example, has opened 24 Centra Care urgent care clinics.

But some of the most aggressive buyers have been private equity firms,
according to data from a research firm, PitchBook.

In 2010, General Atlantic, a private equity firm, and Sequoia Capital, a
giant in venture capital, acquired a stake in MedExpress Urgent Care,
which operated 47 clinics in four states. Today, MedExpress has 130
clinics in 10 states.

http://www.nytimes.com/2014/07/10/business/race-is-on-to-profit-from-rise-of-urgent-care.html

****


Comment by Don McCanne

The growing popularity of urgent care centers is understandable.
Patients can receive timely care with shorter waits, at a cost well
below that of hospital emergency departments. These centers are working
well for patients, for the health professionals who staff them, and for…
yes, passive investors who have learned how to divert to their own
coffers some of the $3 trillion that we are spending on health care.

That's the thing about capitalism. When there is an opening that can
provide a significant return on invested dollars, capitalists jump in,
while socialists stand back and observe, especially since the machinery
of government grinds very slowly.

In the case of urgent care centers, what approaches will provide the
best return for the capitalists? Above all, locate them in wealthy
communities. Do not ever consider placing them in communities with high
poverty levels, even though the medical need may be great. Cherry pick
your patients. You can turn away Medicaid and cashless uninsured
patients and give them instructions on how to get to the nearest
hospital emergency department, which is required by law to accept them.
But cater to the insurance companies that are quite willing to pay your
higher fees as long as they are lower that emergency department fees. In
fact, maybe the insurers will even be willing to pay a premium to buy
you out.

The record is in on for-profit health care facilities. Business
principles trump patient service principles every time. Make the most
money on insured patients that the market will bear, but avoid losses on
uninsured and welfare patients by turning them away.

About those socialists who are standing back and observing, what are
they to do? How do they move urgent care services into communities with
high poverty? They know that the private investors want no part of that.
What about primary care practices? Isn't it unrealistic to expect
physician offices to be staffed 24 hours a day? What about community
health centers? On their tight budgets, can they provide 24hour/7day
urgent care services? What about emergency departments of hospitals? Of
course, they are already serving that function, but at very high fees
that are used to support other money-losing services of the hospital -
not to mention long delays at times other health care facilities are closed.

Under a single payer system, facilities would be established through
central planning based on the health care needs of the community, not on
what would be the most profitable. Passive investors would not be
involved and thus would play no role in those decisions, as they shouldn't.

Private sector investors move in rapidly at any opportunity, structuring
their investments to get the most dollars they can from us while
neglecting those without dollars. Government bureaucrats move much more
slowly, but at least they get it right, making sure that health care is
available for people when they need it. Single payer is what we need.

qotd: Exclusive Provider Organization (EPO) is an irreparably flawed concept

Los Angeles Times
July 9, 2014
Anthem Blue Cross faces another suit over Obamacare doctor networks
By Chad Terhune

Amid growing scrutiny statewide, insurance giant Anthem Blue Cross faces
another consumer lawsuit over its use of narrow networks in Obamacare
coverage.

A group of Anthem policyholders sued California's largest for-profit
health insurer Tuesday in state court, accusing the company of
misrepresenting the size of its physician networks and the insurance
benefits provided.

A similar suit seeking class-action status was filed June 20 against
Anthem, a unit of WellPoint Inc., The Times has reported.

In response to the two lawsuits, Anthem said "materials at the time of
enrollment and in members' explanation of benefits have clearly stated
that the plan was an EPO plan which may not have out of network benefits."

The company added that Blue Cross Blue Shield Assn. rules required the
PPO designation on EPO member cards because coverage for emergencies is
available in other states.

In May, two San Francisco residents sued Blue Shield in state court,
accusing the company of misrepresenting that their policies would cover
the full network.

Separately, California regulators are investigating whether Anthem and
Blue Shield of California violated state law in connection with
inaccurate provider lists and making it difficult for patients to obtain
timely care.

To hold down premiums under the health law, Anthem and Blue Shield cut
the number of doctors and hospitals available to patients in the state's
new health insurance market.

These exclusive-provider organization, or EPO, health plans have been
particularly troublesome for some consumers who were accustomed to
having more conventional preferred-provider organization, or PPO, policies.

One of the major differences is that patients with an EPO plan typically
have little or no coverage if they see an out-of-network medical
provider and they are often responsible for the full charges.

"EPOs will continue to play a role," said exchange spokeswoman Anne
Gonzales. "But we're going to have to do a better job educating people
about how these networks work. We recognize the EPO model can be confusing."

Some supporters of the Affordable Care Act say the smaller size of the
provider networks isn't the problem so much as clear information about
what doctors and hospitals are available.

"The problem has been the transparency and reliability of the networks,"
said Micah Weinberg, a health-policy analyst at the Bay Area Council, an
employer-backed group.

"That's the problem that we need to fix. If we focus on narrowness we
will be focusing on the wrong thing," Weinberg added.

http://www.latimes.com/business/healthcare/la-fi-anthem-narrow-networks-lawsuit-20140709-story.html

****


Comment by Don McCanne

Micah Weinberg, a health-policy analyst at the Bay Area Council, an
employer-backed group, says, "The problem (with exclusive provider
organizations - EPOs) has been the transparency and reliability of the
networks. That's the problem that we need to fix. If we focus on
narrowness we will be focusing on the wrong thing." Really? Narrow
networks are not the problem?

There is a general rule that when you are confronted with a problem you
should provide a solution that corrects the problem at its origin rather
than providing a solution that requires compliance by everyone else
involved. In the case of EPOs it would have been far better to simply
eliminate them and address cost issues by more effective policies rather
than to try to get each individual to understand EPOs and comply with
the restrictions on which health care providers will be covered -
compliance which is sometimes impossible to achieve.

Once private insurers began using networks of contracted physicians and
hospitals, compliance has been a problem for many reasons. The network
lists are difficult to access. They undergo continual revisions.
Frequently not all physicians providing coordinated health care services
are contracted with the insurer. EPOs tend to use narrower networks to
leverage more favorable contracts with those who do participate which
further limits patients' access and coverage. The individual's selection
of health plans often changes for a variety of reasons, and the networks
change accordingly. This often disrupts continuity of care.

The only rationale for EPOs is for the insurer to negotiate lower
prices. It is a terribly inefficient and disruptive way to do that. A
far more effective way of pricing health care services appropriately
would be to establish a single payer system. There would be no networks
involved.

Much the same applies to PPOs. They differ from EPOs primarily in that
they may cover a very modest portion of the charges outside of their
networks, but they do not protect the patient from prices that are
higher than the insurers' usual contracted rates. By the rule that a
problem should be corrected at its source, PPOs should be eliminated as
well.

In fact, single payer advocates know that this applies to all private
insurance plans. They should be eliminated and replaced with a single,
publicly-financed and publicly-administered health program. You have
eliminated the problem at its origin - the private insurers - and have
replaced it with a program in which patient compliance is totally
automatic - a single payer national health program.

qotd: Hospitals go where the money is

California Healthline
July 5, 2014
Inadequate State, Federal Payment Rates Forcing Hospital Closure,
Officials Say
By David Gore

Doctors Medical Center in San Pablo, about 10 miles north of Oakland, is
slated to shut its doors at the end of July, unless some kind of deal
can be worked out to keep it operating.

There are many contributing factors to the financial death spiral at
Doctors Medical Center, according to said Eric Zell, chair of the West
Contra Costa Healthcare District board of directors, which oversees
Doctors Medical Center. But there is one fundamental and underlying
reason it cannot remain economically viable:

"It's the Medi-Cal and Medicare reimbursement rates," Zell said. "The
rates are just too low."

Zell added, "The payer mix is 80% Medicare/Medi-Cal and about 10%
uninsured. There's only about 10% private pay, and that's not enough to
keep us going."

According to hospital officials, Doctors Medical Center is paid 60 cents
for every dollar it spends to treat each Medi-Cal patient and just 90
cents on the dollar for every Medicare patient.

When you're looking at 100 patients a day and you lose money on 90 of
them, the losses mount quickly, according to John Gioia, a longtime
district supervisor on the Contra Costa Board of Supervisors.

Most medical facilities have a payer mix with a much higher percentage
of people with commercial health insurance to mitigate the losses of
their Medi-Cal, Medicare and uninsured patients, Gioia said.

And when you have such a large population of people living at poverty
level, that also means the residents of western Contra Costa County
don't have much money to try to underwrite the hospital.

Doctors Medical Center is one of the few remaining stand-alone small
district hospitals left in the state, Gioia said. "There have been many
places like this, hospitals like this in similar circumstances," he
said. "Many have closed, dozens of them in California."

"This hospital represents a larger problem and issue," Gioia said,
referring to the access issue that would emerge in the west county if
Doctors does shut down. "This represents a larger problem and issue," he
said. "Is there a model that's more sustainable?"

"I think this is a failure of our health care system," (state Sen. Loni)
Hancock said. "We need to have a single payer health system."

But at its root, Hancock said, it shouldn't be up to hospitals in the
area to pick up the slack for low Medi-Cal and Medicare rates.

"Look, it's a great health care system for employed, insured people,"
Hancock said. "But this is not a health care system for people who are
poor."

http://www.californiahealthline.org/insight/2014/inadequate-state-fed-payment-rates-forcing-hospital-closure-officials-say

Doctors Medical Center is owned and operated by the West Contra Costa
Healthcare District.

http://www.wcchd.ca.gov

Doctors Medical Center Has an Emergency

If it doesn't get financial help in the next few months, it will close
its doors permanently. More than 40,000 people use Doctors Medical
Center for emergency room services every year. If you have a heart
attack or stroke, or you are in an accident, the ER at DMC is often the
first stop for an ambulance. Without it, an ambulance trip could take up
to an additional hour. That time could mean the difference between life
and death.

http://www.savedmc.org

****


Comment by Don McCanne

It does not take much intellect to understand that hospitals should be
located where they are needed and that they should be financed by a
system that would ensure that adequate funds would be available to pay
for appropriate health care services for the community. Based on our
current methods of hospital planning and financing, it may be intellect
that is in short supply.

Today a hospital that is located in a community with high levels of
poverty is dependent on income from Medicare and Medicaid. In California
these programs, especially Medicaid (Medi-Cal), pay rates below costs of
providing that care. Insolvency is inevitable. This is directly related
to our dysfunctional, fragmented system of financing health care through
a multitude of private insurers, public programs, and no programs at all.

With the private sector making decisions on hospital planning, areas
with assurance of revenues will be selected — usually areas with a high
percentage of privately insured patients plus Medicare patients with
higher regionally adjusted payment rates. The private planners do not
select areas with high poverty rates and high numbers of uninsured and
Medicaid beneficiaries. Private planning decisions are based on money,
not on local need.

Under a well designed single payer system, capital spending is budgeted
separately. Hospitals are built in areas of need. The hospital
operations are financed through global budgets, just as with our fire
and police departments. Public financing obviates the need to consider
wealth when establishing the location of health facilities.

If Doctors Medical Center is closed down, the billionaire who is passing
through town and is critically injured in an accident may die if his
ambulance has to drive past a padlocked emergency department and
continue for another hour to a different facility. No amount of money
will buy your way to the front of that queue.

We need to adopt a system that will provide both appropriate planning
and appropriate financing. Our current fragmented system can't do that.

California State Senator Loni Hancock is right. "This is a failure of
our health care system. We need to have a single payer health system."

qotd: Private Medicare Part D insurers pay 69% more for brand drugs than does Medicaid

United States Government Accountability Office (GAO)
June 2014
Prescription Drugs
Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices

GAO found that Medicaid paid the lowest average net prices across a
sample of 78 high-utilization and high-expenditure brand-name and
generic drugs when compared to prices paid by the Department of Defense
(DOD) and Medicare Part D. Specifically, Medicaid's average net price
for the entire sample was $0.62 per unit, while Medicare Part D paid an
estimated 32 percent more ($0.82 per unit) and DOD paid 60 percent more
($0.99 per unit). Similarly, Medicaid paid the lowest net price for the
subset of brand-name drugs in the sample, while DOD paid 34 percent more
and Medicare Part D paid an estimated 69 percent more. Medicaid also
paid the lowest net price for the subset of generic drugs, while
Medicare Part D paid 4 percent more and DOD paid 50 percent more.

GAO found that multiple factors affected the net prices paid by each
program. Specifically, a key factor for the entire sample and the
brand-name subset was the amount of any post-purchase price adjustments,
which are the refunds, rebates, or price concessions received by each
program from drug manufacturers after drugs have been dispensed to
program beneficiaries. These price adjustments ranged from about 15
percent of the gross price for Medicare Part D to about 31 percent for
DOD, and nearly 53 percent for Medicaid across the entire sample. The
gross prices each program negotiated with pharmacies and the magnitude
of beneficiary-paid amounts also contributed to differences in net
prices paid by the three programs, but to a lesser degree.

In some cases, VA beneficiaries can obtain drugs on a fee-for-service
basis through non-VA facilities. These make up a very small proportion
of VA drug expenditures (less than 1 percent in fiscal year 2010).
Therefore we did not include VA in this report comparing prices paid to
retail pharmacies.

The statutory framework allowing each program to obtain post-purchase
price adjustments contributes to the wide range of percentages observed.
Medicaid's federally mandated rebates apply to virtually all drugs,
while DOD's refunds only apply to certain drugs (i.e., primarily
brand-name drugs). Furthermore, we found that even when DOD received a
refund for a given drug, DOD's per-unit refund amount was less than
Medicaid's per-unit rebate for most of the drugs in our sample even
though we applied only the federally mandated (i.e., URA-based) rebates
for the calculation of Medicaid net prices. If we had been able to
accurately apply the Medicaid state supplemental rebates, the per-unit
Medicaid rebate amounts would be even larger (i.e., a greater percentage
of the gross unit price) than we report. Finally, we found that Medicare
Part D obtained the lowest per-unit price adjustments among the three
programs. In contrast to the statutory authority allowing DOD and
Medicaid to collect specific refunds and rebates, Medicare Part D plan
sponsors rely on independent negotiations to obtain price concessions
from drug manufacturers. As we have previously reported, plan sponsors
have noted limitations on their ability to negotiate price concessions
for some drugs due to formulary requirements set by CMS, lack of
competitors for some drugs, or low utilization for some drugs that limit
incentives for manufacturers to provide price concessions.

http://www.gao.gov/assets/670/664521.pdf

****

United States Government Accountability Office (GAO)
Apr 19, 2013
Prescription Drugs
Comparison of DOD and VA Direct Purchase Prices

When GAO compared prices paid by the Department of Defense (DOD) and the
Department of Veterans Affairs (VA) for a sample of 83 drugs purchased
in the first calendar quarter of 2012, DOD's average unit price for the
entire sample was 31.8 percent ($0.11 per unit) higher than VA's average
price, and DOD's average unit price for the subset of 40 generic drugs
was 66.6 percent ($0.04 per unit) higher than VA's average price.
However, VA's average unit price for the subset of 43 brand-name drugs
was 136.9 percent ($1.01 per unit) higher than DOD's average price.
These results were consistent with each agency obtaining better prices
on the type of drugs that made up the majority of its utilization:
generic drugs accounted for 83 percent of VA's utilization of the sample
drugs and brand-name drugs accounted for 54 percent of DOD's utilization
of the sample drugs. DOD officials told GAO that in certain
circumstances they are able to obtain competitive prices for brand-name
drugs - even below the prices for generic equivalents - and therefore
will often preferentially purchase brand-name drugs.

http://www.gao.gov/assets/660/654019.pdf

****


Comment by Don McCanne

These two GAO reports explain prices that the federal government pays
for drugs and the mechanisms for pricing of those drugs within the
Department of Veterans Affairs, Medicaid, Department of Defense, and
Medicare Part D programs. The mechanisms are complex, and you have to
read the full reports to fully understand them.

The bottom line is that government agencies are far more effective in
negotiating optimal pricing than are the private insurers that
administer the Medicare Part D program. As an example, the Medicare Part
D insurers paid 69 percent more for brand-name drugs than did Medicaid.

The private Part D plan sponsors tout their effectiveness in using
market principles to obtain best prices - supposedly the reason for
their existence - yet they complain that they have not been as
effective as the government because of "formulary requirements set by
CMS, lack of competitors for some drugs, or low utilization for some
drugs that limit incentives for manufacturers to provide price concessions."

Formulary requirements? The government agencies include in their
formularies the drugs that patients need. The private insurers attempt
to exclude from their formularies drugs that do not provide optimal
profit opportunities. Complaining about "formulary requirements set by
CMS" does not explain their inability to to obtain best prices for the
government since the government has its own de facto formulary
requirements for the VA, DOD and Medicaid programs.

Lack of competitors for some drugs? The government agencies also
negotiate within the same pharmaceutical environment wherein there is a
lack of competitors for some drugs.

Low utilization for some drugs that limit incentives for manufacturers
to provide price concessions? The government agencies also include low
utilization drugs in their formularies.

Medicare Part D was designed based on the fraudulent contention that
private marketplace dynamics are more effective then government
negotiation in obtaining maximum value - a position that wastes
government/taxpayer funds by paying excessive prices in the private
sector compared to the price concessions that the government can obtain.
We would not be tolerating this fraud if we had a properly designed
single payer national health program.

qotd: Anthem Blue Cross punishing patients and providers for their own error

California Medical Association
CMA Alert
June 30,2014
Error on Anthem ID cards results in claim denials

In late March, the California Medical Association (CMA) began receiving
complaints from physicians in San Diego, Orange and Bay Area counties
about denials from Anthem Blue Cross. Practices reported that patients
presented to their offices with Anthem ID cards that indicated they had
a Covered California/mirror PPO product and subsequent eligibility
verification also indicated the patient had a PPO product.

However, Anthem later denied the claims stating the services were not
covered under the patients' benefit plans because they received services
from out-of-network providers.

CMA escalated the issue to Anthem and learned that while the Anthem ID
card and eligibility verification indicated these patients had purchased
PPO products, it was a mistake. These patients had actually purchased
EPO products, with no out-of-network benefits.

While Anthem is offering a PPO product for their Covered
California/mirror patients in most counties, they are only offering an
EPO product in San Francisco, Los Angeles, Orange and San Diego
counties. The Anthem EPO product does not provide any benefits if
patients receive services from out-of-network physicians/facilities.

At CMA's urging, Anthem corrected the affected patient ID cards and
reissued new cards to EPO patients in May. Anthem also confirmed they
have updated the information that displays when physicians verify
eligibility to accurately reflect the correct product type.

CMA requested that Anthem automatically reprocess affected claims at the
PPO rates, the product the ID card and eligibility information
reflected, but Anthem was unwilling to do so. Instead they are requiring
patients to appeal each individual claim to Anthem.

http://www.cmanet.org/cma-alert/archives/2014/june-30-2014

****


Comment by Don McCanne

Anthem Blue Cross made a mistake in that they provided ID cards and
eligibility verification for their EPO (exclusive provider) patients
that indicated they were PPO (preferred provider) patients. PPO patients
can obtain some care out-of-network but with reduced benefits. EPO
patients are not eligible for any benefits out-of-network.

The California Medical Association has requested that Anthem Blue Cross
reprocess those claims based on the PPO status that they had verified.
Anthem has refused to do so, insisting that each claim be appealed
individually. For an industry noted for administrative excesses and
placing an administrative burden on health care providers, they are
carrying it to an extreme wherein they are requiring much more
administrative excesses to rectify their own error - punishing patients
and providers for their own mistake.

How can this industry be so crass? Yet this industry, which should be
placing patient service above all else, places its own business
interests first. Such an insensitive response would never take place if
our health care financing system were to be managed by our own public
administrators. EPOs wouldn't even exist. It's time to replace the
private insurers with a publicly-admiinistered single payer system.