Tuesday, December 29, 2015

qotd: Value-based pricing: another medical-industrial con job

The New York Times
December 29, 2015
Payment for Medical Care

To the Editor:

I take issue with the "value-based payment models" for medical care
promoted by John H. Noseworthy, the president of the Mayo Clinic, in his
letter to the editor ("Value in Medical Care," Dec. 22).

When he says, "It is essential to differentiate locally provided care
from complex specialty care best provided by destination medical
centers," is he suggesting that his destination medical center should be
paid more than local care providers for the same work?

It is my understanding that all doctors are being evaluated equally on
the accuracy of their diagnoses, the appropriateness of their treatments
and the quality of their results. They should be paid accordingly.

Value-based payment models are used by the pharmaceutical industry to
justify a drug price many times greater than the cost to bring it to
market and manufacture it. The drug company decides how much "value" its
drug provides to the patient who takes it.

Let's not allow major destination medical centers to follow the same
model. Better yet, let's reverse the trend entirely.

Robert D. Schrock Jr.

Chapel Hill, N.C.

The writer is a retired orthopedic surgeon.



Comment by Don McCanne

It seems that the current policy fixation in health care reform is on
paying for value instead of volume. This really plays into the hands of
the medical-industrial complex.

Currently the pharmaceutical industry is leading the way. A prime
example is the new, outrageously priced drugs for hepatitis C. In
explaining why the prices are so high, representatives of the industry
indicated that the new standard for drug pricing should not be simply
the usual costs such as research and marketing, but rather they should
be priced on the value provided - the value of preserving quality of
life that would be lost with progression of disease, and the value in
preventing expensive care in the future, such as liver transplants.
These executives have to gall to claim that the monetary value of the
preservation of quality of life and the aborted potential future health
care costs should accrue to them and their shareholders.

By that same reasoning, many of the high priced cancer therapy drugs
should be repriced at pennies on the dollar since they have an almost
negligible benefit on the quality of life, and they actually increase
the cost of cancer care simply because of the very high prices of the
drugs themselves along with the costs of administering and monitoring
them. Of course, then instead of pricing based on value, they resort to
their fallback position of the high cost of drug research and other
corporate expenses, like executive compensation (plus an extra bonus
because this is CANCER, after all).

Of great concern, the pharmaceutical industry was successful in
including in the Trans-Pacific Partnership Agreement (TPP) this concept
that "value" be included as a legitimate basis for determining the price
of drugs - pocketing greater profits for this nebulous add-on to the
drug itself. This is one more reason that TPP should not be approved in
its current form.

Now the president and CEO of Mayo tells us that the complex specialty
care provided by "destination medical centers" implicitly is of higher
value and thus presumably should be rewarded more highly through
value-based payment models. If they offer unique specialty care that is
not offered at other centers, then payment based on costs plus a fair
margin would be appropriate. But care that duplicates quality care
available in the community should not command higher prices.

We cannot underestimate the uncanny ability of the medical-industrial
complex to innovate with policy concepts to further their own pecuniary

This concept of rewarding value instead of volume has led to the
implementation of numerous payment models that are backed by not much
more than "wish-it-would-work" concepts from the policy community; the
initial evidence of benefit is extremely limited. We know single payer
works. That's what we should be implementing instead.

If you wish more information, yesterday's message, "No more SGR, but…
here you go!," discusses some of these wish-it-would-work concepts such
as Merit-based Incentive Payment System (MIPS) and Alternative Payment
Models (APMs) supposedly rewarding value instead of volume:


Monday, December 28, 2015

qotd: No more SGR, but… here you go!

December 18, 2015
CMS Quality Measure Development Plan: Supporting the Transition to the
Merit-based Incentive Payment System (MIPS) and Alternative Payment
Models (APMs) (DRAFT)

Building on the principles and foundation of the Affordable Care Act,
the Administration announced a clear timeline for targeting 30 percent
of Medicare payments tied to quality or value through alternative
payment models by the end of 2016 and 50 percent by the end of 2018.
These are measurable goals to move the Medicare program and our
healthcare system at large toward paying providers based on quality,
rather than quantity, of care.

The passage of the Medicare Access and Children's Health Insurance
Program (CHIP) Reauthorization Act of 2015 (MACRA) supports the ongoing
transformation of healthcare delivery by furthering the development of
new Medicare payment and delivery models for physicians and other
clinicians. Section 102 of MACRA requires that the Secretary of Health
and Human Services develop and post on the CMS.gov website "a draft plan
for the development of quality measures" by January 1, 2016, for
application under certain applicable provisions related to the new
Medicare Merit-based Incentive Payment System (MIPS) and to certain
Medicare alternative payment models (APMs).

Merit-Based Incentive Payment System

Measures for use in the quality performance category are a specific
focus of the MDP. MIPS will build upon existing quality measure sets
from the Physician Quality Reporting System (PQRS), Value-based Payment
Modifier (VM), and Medicare EHR Incentive Program for Eligible
Professionals (EPs), commonly referred to as Meaningful Use.

To fill identified measure and performance gap areas, CMS will expand
and enhance existing measures to promote alignment and harmonization in
the selection of measures and specifications, while concurrently
developing new (de novo) measures according to priorities described in
Section IV.

To accelerate the alignment of quality measurement and program policies,
MACRA sunsets payment adjustments for PQRS, VM, and the EHR Incentive
Program and establishes MIPS.

Alternative Payment Models

MACRA establishes incentive payments for EPs participating in certain
types of APMs. MACRA requires quality measures used in APMs to be
comparable to the quality measures used in MIPS; therefore applicability
of candidate measures to support a variety of future APMs is an
important element of this MDP.

From the Conclusion

CMS is committed to reducing provider burden through the use of measures
aligned across federal and private-payer quality reporting programs. We
stress harmonization of data elements and specifications among measure
developers, whose cooperation and sharing are essential to creating
aligned measures. Toward that end, we also intend to leverage the
optional pre-rulemaking process and MAP review for MIPS and to
participate with other stakeholders in efforts that promote measure
alignment. This draft MDP acknowledges the associated challenges and
identifies opportunities for measure developers to share information to
reduce duplication of efforts.

CMS Quality Measure Development Plan (MDP) - 61 pages:

MACRA, MIPS, APMs, MDP, and request for public comment:


Comment by Don McCanne

Physicians celebrated the passage of the Medicare Access and Children's
Health Insurance Program (CHIP) Reauthorization Act of 2015 (MACRA)
since it brought an end to the much despised SGR (Sustainable Growth
Rate) method of adjusting Medicare payment rates. Though SGR was rarely
implemented, it carried forward a massive deficit that would have
required major reductions in Medicare payment rates. Besides, MACRA
included the reauthorization of the Children's Health Insurance Program.
The trade-off, which was largely ignored, was the requirement to
establish the Merit-based Incentive Payment System (MIPS) and
Alternative Payment Models (APMs). CMS has now released a draft of the
Quality Measure Development Plan for transitioning to MIPS and APMs.

Perhaps the main reason that physicians, who happened to be aware of
MIPS and APMs, were not concerned is that they replaced the Physician
Quality Reporting System (PQRS), Value-based Payment Modifier (VM), and
Medicare EHR Incentive Program for Eligible Professionals (EPs),
commonly referred to as Meaningful Use. Many thought that this would
bring efficiency to existing programs by coordinating them under MIPS.

There are three reasons that physicians should be concerned. The first
is that these programs are not simply now coordinated, they are expanded
and enhanced with the development of new de novo measures. Think of what
that means for new administrative burdens added to existing ones.

Second, some physicians no doubt thought that they could escape the MIPS
burdens since MACRA would allow physicians to move into Alternative
Payment Models (APMs) - accountable care organizations, patient centered
medical homes, or whatever. Don't celebrate yet. MACRA requires that the
quality measures used in APMs to be comparable to the quality measures
used in MIPS. MIPS is now an obligation no matter where you turn.

Third, and most important of all, is that the PQRS, VM, and the EHR
Incentive Program were highly flawed programs adding significantly to
the excessive administrative burden that characterizes the U.S. health
care system, while having a relatively negligible impact on improving
health care quality. The proper policy step should have been to send
these programs back to the drawing boards, and then when it became
obvious that there was no there there, locking them in storage forever.
The worst policy decision would be to expand these programs and force
them on everyone, but that is precisely what they did.

Quality is not achieved by playing the alphabet games, with nominal
penalties and rewards. It is achieved by instilling efficiency and
equity into our health care delivery system. A well-designed single
payer system does that. A paper written by a team led by Gordon Schiff,
and published in JAMA two decades ago, defines quality and describes how
it can be achieved by implementing a single payer national health program:

A Better-Quality Alternative: Single-Payer National Health System Reform
JAMA, September 14, 1994, Volume 272 Copyright 1994, American Medical


Thursday, December 24, 2015

qotd: ACA-compliant plans not providing adequate financial protection

Urban Institute
December 2015
How Much Do Marketplace and Other Nongroup Enrollees TSpend on Health
Care Relative to Their Incomes?
By Linda J. Blumberg, John Holahan, and Matthew Buettgens

In this paper, we examine premiums and out-of-pocket costs, as well as
total financial burdens for individuals with different characteristics
enrolled in ACA-compliant nongroup coverage. We show that despite the
additional assistance available, individuals across the income
distribution who are ineligible for Medicaid can still face very high
expenditures. At the median, financial burdens can be reasonably high,
particularly for those with incomes between 300 and 400 percent of FPL
(Figure 1). As medical care needs increase, however, financial burdens
grow appreciably across the income distribution. Even with federal
financial assistance, 10 percent of 2016 nongroup marketplace enrollees
with incomes below 200 percent of FPL will pay at least 18.5 percent of
their income toward premiums and out-of-pocket medical costs. Ten
percent of marketplace enrollees with incomes between 200 and 500
percent of FPL will spend more than 21 percent of their income on health
care costs. Those in fair or poor health and those over age 45 are most
likely to face high median financial burdens.



Comment by Don McCanne

This is just one more study that shows that far too many individuals who
need health care still face excessive financial burdens in spite of
being insured. Instead of merely trying to tweak our dysfunctional
system, we should go ahead and replace it with one that works - a single
payer national health program.

Wednesday, December 23, 2015

qotd: Generic drug pricing confirms that markets are not working

The CMS Blog
December 21, 2015
Medicare Drug Spending Dashboard
By Andy Slavitt, Acting CMS Administrator and Niall Brennan, CMS Chief
Data Officer

Today, CMS is releasing a new online dashboard to provide information on
Medicare spending on prescription drugs, for both Part B (drugs
administered in doctors' offices and other outpatient settings) and Part
D (drugs patients administer themselves) to provide additional
information and increase transparency.

In today's announcement, the topline findings include:

* The diversity, growth, and impact of drug spending in the Medicare
program – while the high-cost drugs include brand name Hepatitis C and
cancer therapies, some generic drugs are seeing large price increases.



Politico Pulse
December 23, 2015
Competition Not Stopping Drug Price Hikes, Medicare Data Shows
By Brianna Ehley

If you think a marketplace monopoly is behind all massive drug price
hikes you might want to take a look at the new CMS drug spending
dashboard. Eight of the 10 drugs that had big cost increases between
2013 and 2014 were made by multiple manufactures. Among them were five
drugs that more than doubled in price during that time. If you expand to
taking a look at the 15 drugs with the largest increases, nearly
two-thirds or 9 of the 15, were made by multiple manufacturers. This
data may throw a wrench in a popular solution proposed by Congress to
deal with exponential drug price hikes — have FDA review faster the
generic applications for drugs with a market monopoly but no patent or
exclusivity protection. Furthermore, only one drug in the top 15 for the
biggest price hikes was listed on the FDA's drug shortage list during
2013-2014, which means we can't blame companies taking advantage of a
limited supply either. Take another look at the drug spending dashboard
released this week and play around with the information yourself:



Comment by Don McCanne

Only Rip Van Winkle would not know that drug prices are totally out of
control, yet the pharmaceutical industry tells us that there is no
problem since the market will price drugs appropriately. But instead of
competition bringing down prices, their concept of market dynamics is to
push up the prices to the maximum that will be tolerated by patients who
are partially insulated by various public and private payers.

If there is an area in pharmaceutical pricing in which competition
should work, that would be the competition between generic products that
are no longer under patent. But looking at the Medicare drug spending
dashboard, it is obvious that the pharmaceutical firms have been able to
push pricing of several generic drugs well above the levels that would
be expected in a well functioning free market.

When the Republicans passed the Part D Medicare drug program, they
prohibited Medicare from negotiating drug prices, instead insisting that
the markets would be more effective in bringing drugs prices down. But
instead the insurance and pharmaceutical industries have been allowed
the freedom to essentially establish their own rules on how markets
work. Their rules allow them to maximize their revenues while patients
are being gouged, either directly or through taxes and higher insurance
premiums. Adam Smith would agree that this corrupted version of markets
is no market at all. They are using their control of essential
medications to extort us. Extortion is not a tool of normal markets -
quite the opposite.

We do not need to recite again the work by Nobel laureate Kenneth Arrow
on why health care markets do not work. We have already proven that our
reliance on markets is not effective by the mere fact that we spend, per
capita, over two and one-half times as much on health care as the
average of other wealthy nations.

We simply need to push the ideologues aside and put into place public
policies that other nations have used to obtain value in their health
care purchasing. The model most suitable for us would be a single payer
national health program - an improved Medicare for all.

Tuesday, December 22, 2015

qotd: Republicans and Democrats concerned about health care costs

December 21, 2015
Healthcare costs a top concern for Republican and Democratic voters
By Jilian Mincer and Erin McPike

Americans want to know what the next U.S. president will do to lower
their rising healthcare costs, a priority shared by Republican and
Democratic voters and second only to keeping the country safe, according
to a recent Reuters/Ipsos poll.

In all, 62 percent of people surveyed said they would want to know about
a presidential candidate's plan for reducing healthcare costs, according
to the online poll conducted Dec. 14-18.

While Republican and Democratic candidates are worlds apart on how to
address healthcare, poll results show roughly the same proportion of
Republican voters, or 62 percent, view it as a priority compared with 67
percent of Democrats, highlighting their frustration with rising drug
prices, insurance premiums and deductibles ahead of the 2016 vote.

The only topic that attracted more interest was national security, as 67
percent wanted to know more about how presidential candidates planned to
keep the country safe.

U.S. employers have been shifting more health coverage costs onto
workers, particularly through high deductible health insurance plans,
which can reach $6,600 in out of pocket costs for an individual and
$13,200 for a family before insurance kicks in. Many of these changes
have been ushered in with President Barack Obama's signature healthcare
law, as well as recent sharp increases in some prescription drug costs.

Republican strategists said party candidates are more focused on
national security and the economy as dominant issues, noting they have
little to gain by offering a detailed plan to tackle healthcare costs
that could run up against major business interests, including the
pharmaceutical industry.

"I'm on Obamacare, and it's a horrible situation," said Fred Voeltner,
64, who was laid off in 2009 and now pays for his own insurance. He is
frustrated by how far he has to travel for care and how much more he has
to pay each visit. "I'm open-minded," he said. "But I expect to vote for
a Republican."



Comment by Don McCanne

Unhappiness over the high costs of health care is not a partisan issue.
Both Republicans and Democrats want to know the presidential candidates'
proposals to lower health care costs - a priority almost as great as
their concern about national security.

Lest Democrats be smug over the introduction of the Affordable Care Act,
it is ACA's higher deductibles and narrower networks actually brought to
us by the Democrats that have further infuriated voters over runaway
health care costs.

Republicans keep promising us their replacement plan - the latest
promise being by House Speaker Paul Ryan - but they fail to deliver.
They actually prefer a "trust us" approach instead of providing
specifics, since their telegraphed preferences would worsen patient
affordability and access.

In the Reuters article, Fred Voeltner says that he is "frustrated by how
far he has to travel for care and how much more he has to pay each
visit" - consequences of narrow networks and high deductibles. But he is
"open-minded" and expects "to vote for a Republican." People are having
trouble giving the Democrats credit for reform when they can't see their
own doctor and can't pay their deductibles.

Democrats are now gathering around a candidate that would perpetuate our
highly flawed financing system. On the other hand, another candidate - a
democratic socialist running for the Democratic nomination - advocates
for an affordable model that is supported by a majority of Americans - a
single payer Medicare for all.

Unfortunately, presidential politics are complex. When you ask people
why they are supporting a given candidate, you will only rarely hear
single payer mentioned. Even though they want our next president to fix
the health care cost problem, the answers you will hear are meaningless
sound bites such as, he will "Make America Great Again." When final
ballots are cast, they will be based more on political personalities
rather than public policy.

This brings to mind a quote of Winston Churchill, "It has been said that
democracy is the worst form of Government except for all those other
forms that have been tried from time to time." (House of Commons,
November 11, 1947).

Churchill also said, "At the bot­tom of all the trib­utes paid to
democ­racy is the lit­tle man, walk­ing into the lit­tle booth, with a
lit­tle pen­cil, mak­ing a lit­tle cross on a lit­tle bit of paper — no
amount of rhetoric or volu­mi­nous dis­cus­sion can pos­si­bly dimin­ish
the over­whelm­ing impor­tance of that point." (House of Com­mons,
Octo­ber 31, 1944)

Thursday, December 17, 2015

qotd: Kaiser Poll: 58% of Americans support Medicare for all

Kaiser Family Foundation
December 17, 2015
Kaiser Health Tracking Poll: December 2015
By Bianca DiJulio, Jamie Firth, and Mollyann Brodie

From the Tracking Poll:

As the presidential primaries inch closer and candidates begin to debate
the intricacies of their platforms, a long-discussed health policy
option has reemerged in debate between democratic candidates; the idea
of creating a national health plan in which all Americans would get
their insurance through an expanded, universal form of health insurance
called Medicare-for-all. When asked their opinion, nearly 6 in 10
Americans (58 percent) say they favor the idea of Medicare-for-all,
including 34 percent who say they strongly favor it. This is compared to
34 percent who say they oppose it, including 25 percent who strongly
oppose it. Opinions vary widely by political party identification, with
8 in 10 Democrats (81 percent) and 6 in 10 independents (60 percent)
saying they favor the idea, while 63 percent of Republicans say they
oppose it.

From the Press Release:

Recently Democratic presidential candidates Hillary Clinton and Bernie
Sanders debated the idea of "Medicare-for-all," which involves creating
a national health plan in which all Americans would get their insurance
through an expanded version of the Medicare program. A large majority of
Democrats (81%) support the idea of Medicare-for-all, as do most
independents (60%), while most Republicans (63%) oppose the idea. The
poll did not ask about details or tradeoffs.

At the same time, few Democrats say the issue will be the driving force
behind their vote: just 5 percent of Democrats say that it will be the
single most important factor in their presidential vote. A third of
Democrats (34%) say it will be very important, but not the most
important factor, while others say it will be one of many factors they
will consider (36%) or that it won't matter at all (5%). Future polls
may explore the issue in greater depth.

KFF December 2015 Tracking Poll:


Press Release:



Comment by Don McCanne

Many political insiders contend that a single payer national health
program - an improved Medicare for all - is off the table, so
essentially all current political efforts are directed to paring back or
modifying the Affordable Care Act - Obamacare. Bernie Sanders does not
agree and has injected Medicare for all back into the political arena.
So what do Americans think about Medicare for all?

This new poll shows that there has been no decline in support of
Medicare for all in that 58 percent of Americans still support the
concept, in spite of implementation of the Affordable Care Act. Although
there is a partisan divide - 81 percent of Democrats support it and 63
percent of Republicans are opposed - it should be noted that 60 percent
of independents also support the idea.

Although this poll did not identify reasons for the opinions, it is
likely that many who do not support the concept are simply ideologically
opposed to social solidarity, though they would likely use different
labels (freedom, markets, individual responsibility, etc.). Others may
be opposed because they believe the system is working for them and are
concerned about the uncertainties of change.

The poll asked Democrats who support Medicare for all whether this issue
might affect their vote in the 2016 presidential election. Although they
report that only 5 percent of all Democrats consider it to be the most
important factor in their vote, in fact most Democrats do consider it to
be a factor to some degree, with only 5 percent saying that it is not

So now that the Affordable Care Act has been implemented, Americans
still want something better. The majority of Americans, including the
majority of independents, support Medicare for all. Let's work on it.

Wednesday, December 16, 2015

qotd: Medi-Cal fails to provide adequate health care access for 7 million California Latinos


To: Office for Civil Rights, U.S. Department of Health & Human Services

December 15, 2015


Re: Inadequate Access to Health Care Violates Latino Civil Rights in
California's Medi-Cal Program



This administrative complaint challenges ongoing civil rights violations
in Medi-Cal, California's Medicaid program. The Medicaid Act is intended
to ensure that state programs like Medi-Cal provide access to medical
services equal to the access that other Americans have, notwithstanding
the low income of those who qualify for Medi-Cal.
Medi-Cal's inadequate, extremely low reimbursement rates—in both the fee
for service and managed care settings—and its failure to adequately
monitor access to medical care, effectively deny the full benefits of
the Medi-Cal program to the more than seven million Latino enrollees who
rely on Medi-Cal for their healthcare. Over the past fifteen years, the
level of Medi-Cal reimbursements has fallen in tandem with a rise in the
number and proportion of Latinos covered by the Medi-Cal program. Today,
no other type of health insurance in California covers a population that
is so heavily Latino. The separate and unequal system of healthcare thus
violates the protections of Title VI of the Civil Rights Act and the
Department of Health and Human Services' implementing regulations, as
well as Section 1557 of the Affordable Care Act, as described below.


B. Low Reimbursement Rates Limit Access to Care for Medi-Cal Enrollees.

1. Background on Medi-Cal Rate Setting in California.

Medi-Cal rates in California are set differently based on two payment
mechanisms: (1) fee for service; and (2) managed care.

In the fee for service mechanism, the State sets per-service
reimbursement rates for a particular procedure, treatment, or service.
These rates are near the lowest in the country relative to Medicare
rates. Medi-Cal's 2014 reimbursement rate for primary care was just 42
percent of Medicare's, ranking forty-ninth out of fifty Medicaid
programs in the United States. For all services, including both primary
and specialty care, the ratio of Medi-Cal fee for service reimbursement
to Medicare reimbursement in California was 14 percent below the
national average ratio. This ratio ranks forty-eighth out of fifty
Medicaid programs in the United States. Notably, these numbers have
likely only worsened in 2015, given reductions implemented this year.

In managed care, which now covers about 77 percent of the Medi-Cal
population, plans are reimbursed on a capitated basis with a set amount
per member per month regardless of the amount of services provided to
that individual. Pursuant to federal regulation, the State is required
to set capitation rates for MCOs sufficient to cover a minimum level of
services for the populations enrolled in each MCO. Once these capitation
rates are set, CMS reviews them to determine whether they are
"actuarially sound." In other words, it reviews them to determine
whether they are sufficient to provide the minimum level of services
predicted by a third-party actuarial contractor. Additionally, under the
Medicaid law, the MCO must also make services available to the same
extent as they would be available to Medi-Cal fee-for-service
beneficiaries (and thus to the same extent as required by § 30(a)). See
42 U.S.C. § 1396b(m)(1)(A)(i).

Although the rates paid to MCOs are proprietary, it is widely recognized
that they are set arbitrarily low due to the use of the low Medicaid
fee-for-service fee schedule as a benchmark, or another set of
benchmarks provided by plans that may be even lower than the Medicaid
fee-for-service fee schedule. Further, the evidence will show that the
State typically reverse engineers its capitation rates from budgetary
decisions, first deciding how much money to allot for Medi-Cal managed
care, then coming up with capitation rates within that budget by
manipulating the potential prices for services such that the predicted
utilization (from the actuaries) when combined with pricing information,
will be within budget. Finally, the State typically selects rates that
are at the lower of the range of rates recommended by the actuary.

2. Restricted Access for Medi-Cal Beneficiaries.

The data show that non-elderly adults enrolled in Medi-Cal have
substantially less access to health care than Medicare beneficiaries,
individuals covered by private insurance plans and/or other groups in
the general population.

In 2013, on the eve of the implementation of the Affordable Care Act,
the care available to non-elderly adult Medi-Cal enrollees was worse
than the care available to those covered by employer-sponsored insurance
plans. Medi-Cal enrollees faced disparities at levels that were
statistically significant for such measures of availability of care as
(a) not having a usual source of care other than an emergency room; (b)
not having a personal physician as the main medical provider; (c)
difficulty getting a needed doctor's appointment; (d) difficulty finding
a doctor who would see them or accept their health insurance; (e)
difficulty communicating with their doctors; (f) being less likely to
receive flu
vaccinations; (g) not having a doctor visit in the last year; and (h)
delaying medical care because of cost.

The ACA increased enrollment in Medi-Cal, but, as implemented by
California, the ACA did not resolve pre-existing access problems. As a
result of the Healthy Families transition, ongoing enrollment, and the
ACA, over 4 million people enrolled in Medi-Cal over the past two years.
A two-year, federally-funded increase in the Medi-Cal reimbursement for
primary care to 100 percent of the Medicare reimbursement rate during
2013 to 2014 was allowed to expire without Respondents maintaining the
increase through use of state funds (as done by fifteen other states).
The increase was applicable to both fee for service and managed care
populations and designed to improve access. This short-term investment
in increasing primary care provider rates did not result in a
sustainable increase in primary care access for Medi-Cal beneficiaries.
The State implemented it late (going into effect in 2014 and
retroactively reimbursing providers by paying the difference between the
Medicare and Medicaid fee schedules after the fact). And, the additional
investment of funds ended on December 31, 2014. Thus, regardless of
whatever minimal increase in services may have occurred in 2014, it is
likely that availability of primary care services for Medi-Cal enrollees
has returned to pre-2014 levels.

Indeed, the Medi-Cal provider to population ratio was already
substandard, but with the increase in enrollment and withdrawal of the
temporary rate increase the gap can be expected to widen even further.

3. Evidence that Low Reimbursement Rates Limit Medi-Cal Beneficiaries'
Access to Care.

Both the fee-for-service and managed care rates fail to ensure equal
access to quality care for Medi-Cal enrollees, as the insufficient
reimbursements make it difficult to enlist Medi-Cal primary care and
specialty care providers.

C. Disparate Outcomes for Medi-Cal Patients.

As a result of the low access that Medi-Cal enrollees have to primary
care, many Medi-Cal recipients are not referred to specialists for
treatment of acute conditions and illnesses. Chronic conditions and
illnesses thus go untreated or are not adequately treated. Substantially
fewer physicians provide care to Medi-Cal enrollees than Medicare
beneficiaries in every major medical specialty except two. The two
exceptions are obstetrics/gynecology and pediatric care, specialties
that the Medicare population is unlikely to need to the same extent as
Medi-Cal beneficiaries.

E. Medi-Cal's Inadequate, Low Rates, Combined with the Lack of
Monitoring and Enforcement, Have a Disparate Impact on Latinos.

The low reimbursement rates described above—including within fee for
service and managed care—along with the lack of monitoring and
enforcement, have an adverse, disparate impact on Latinos because this
racial group is disproportionately represented among Medi-Cal enrollees.

F. There Is No Discernible Justification for the Disparate Impact Caused
by Low Medi-Cal Reimbursement Rates.

Under Title VI, the HHS Title VI regulations, and Section 1557, a
showing of disparate impact shifts the burden to Respondents to justify
the adverse disparate impact on Latino Medi-Cal enrollees as necessary
or legitimate under the Medicaid statute.

Complainants respectfully submit that Respondents are unable to justify
the adverse disparate impact of denial and delay of care and adverse
health consequences because a key purpose of the Medicaid Act is to
provide Medicaid enrollees with the access to health care afforded other
members of the general population irrespective of poverty.

G. The Record Also Demonstrates Intentional Discrimination.

The record demonstrates as well that Respondents engaged in intentional
discrimination. Where official action has a racially disparate impact,
and "a clear pattern, unexplainable on grounds other than race, emerges
from the effect of the state action even when the governing legislation
appears neutral on its face," that gives rise to a strong inference of
intentional discrimination. Village of Arlington Heights v.
Metropolitan, 429 U.S. 252, 266-67 (1977).

Here, intentional discrimination is evident in the stark differences in
reimbursement rates for Medi-Cal (a program overwhelmingly enrolling
low- income Latino people), as compared to the rates for Medicare and
employer- sponsored insurance plans (programs largely benefitting
higher-income, White people). Comparing the higher reimbursement rates
when Latinos were a smaller share of Medi-Cal enrollees further
demonstrates intentional discrimination. See Arlington Heights, 429 U.S.
at 266-68. Additional such evidence includes, as described above, the
failure to follow appropriate procedures to set rates for managed care
and fee-for-service care to provide equal access to medical care; and
the failure to follow legally-mandated monitoring and enforcement
procedures. See id. (substantive and procedural departures relevant to
intent inquiry).


Under 45 C.F.R. § 80.7(c), the Office for Civil Rights must undertake a
prompt investigation of this Complaint. Based on the evidence discussed
in this complaint and the attachments provided, the Office for Civil
Rights should find that Respondents have violated Title VI, the HHS
Title VI implementing regulations, and section 1557. The Office for
Civil Rights should order Respondents to raise primary care and certain
specialty care reimbursement rates to assure that Medi-Cal enrollees
have access to medical care to the same extent as care is available to
Medicare beneficiaries and individuals covered by employer- sponsored
health insurance plans.

Administrative Complaint (24 pages):



Comment by Don McCanne

There are over seven million Latinos enrolled in Medi-Cal - California's
Medicaid program. Although one of the most important features of the
Affordable Care Act was to expand the Medicaid program to cover many
more individuals and families who have incomes near or below the federal
poverty level, the chronic underfunding of this program demonstrates
"intentional discrimination" against low-income Latinos in California,
since it denies them "access to health care afforded other members of
the general population irrespective of poverty."

Medi-Cal has more comprehensive benefits than does Medicare. But
Medi-Cal beneficiaries frequently do not have near the same access to
care as do Medicare beneficiaries or privately insured patients, as this
Administrative Complaint describes. This is because of a lack of willing
Medi-Cal providers since Medi-Cal frequently pays less than the costs of
providing care. It is appalling that this then results in de facto
discrimination against seven million of California's low-income Latinos.

Imagine improving the benefits of Medicare so that they were at least
comparable to Medicaid. Then place everyone in the same program - an
improved Medicare for all. That certainly would not eliminate all
discrimination in our nation, but at least it would be a giant step
forward in our quest for equitable health care for all.

Over seven million! That's not right.

Tuesday, December 15, 2015

qotd: Differences in prices and spending under Medicare and private insurance

The New York Times
December 15, 2015
The Experts Were Wrong About the Best Places for Better and Cheaper
Health Care
By Kevin Quealy and Margot Sanger-Katz

GRAND JUNCTION, Colo. — As part of his push for the Affordable Care Act
in 2009, President Obama came to Central High School to laud this
community as a model of better, cheaper health care. "You're getting
better results while wasting less money," he told the crowd. His visit
had come amid similar praise from television broadcasts, a documentary
film and a much-read New Yorker article.

All of the attention stemmed from academic work showing that Grand
Junction spent far less money on Medicare treatments – with no apparent
detriment to people's health. The lesson seemed obvious: If the rest of
the country became more like Grand Junction, this nation's notoriously
high medical costs would fall.

But a new study casts doubt on that simple message.

The research looked not only at Medicare but also at a huge, new
database drawn from private-insurance plans – the sorts used by most
Americans for health care. And it shows that places that spend less on
Medicare do not necessarily spend less on health care over all. Grand
Junction, as it happens, is one of the most expensive health care
markets in the country for the privately insured – despite its unusually
low spending on Medicare.

Health care researchers who have seen the new findings say they are
likely to force a rethinking of some conventional wisdom about health
care. In particular, they cast doubt on the wisdom of encouraging
mergers among hospitals, as parts of the 2010 health care law did.

Larger, integrated hospital systems – like those in Grand Junction – can
often spend less money in Medicare, by avoiding duplicative treatments.
But those systems also tend to set higher prices in private markets,
because they face relatively little local competition.

"Price has been ignored in public policy," said Dr. Robert Berenson, a
fellow at the Urban Institute, who was unconnected with the research.
Dr. Berenson is a former vice chairman of the Medicare Payment Advisory
Commision, which recommends policies to Congress. "That has been

Just as in Grand Junction, the researchers found high private spending
in Rochester, Minn., and La Crosse, Wis., two other places that spent
relatively little on Medicare. But the paper found that spending in one
system doesn't predict spending in another. Some of the areas with the
most cost-effective Medicare providers also have lower-cost private
health care – but just as many places with relatively low Medicare costs
have high private insurance spending.

The prices insurance companies pay for medical care are a major factor
in which markets are expensive for private insurance and which are more
moderate. Consider a knee replacement – a common procedure for Americans
over 50. Private health insurers negotiate separate prices for those
operations with every hospital in their network. That's different from
Medicare, which sets relatively standard rates for knee replacements
around the country, with only slight adjustments for local conditions.
The prices paid by private insurers vary widely. The least costly price
in the study for the simplest type of knee replacement was only about
$3,400. The most expensive one was about $55,800.

In Medicare, regional differences in spending are driven mostly by the
amount of health care patients receive, not price per service.
Researchers at Dartmouth Medical School have studied these differences
extensively, creating an influential online map of Medicare spending
known as the Dartmouth Atlas of Health Care.

"The reason why health insurance for the privately insured is expensive
is because the prices from hospitals with a lot of market power are
higher," said Zack Cooper, an assistant professor of economics and
health policy at Yale University, and the paper's lead author.

Several prominent researchers who read the paper said they had become
convinced that policy makers needed to do more to address the high
prices charged by some health care providers.

Many of the changes pioneered by the Affordable Care Act have been
devised to reduce wasteful medical care, but few have been directly
concerned about price.

Jonathan Skinner, a health economist who works on the Dartmouth Atlas,
said that there were still lessons to be learned from places like Grand
Junction, but he acknowledged that the new work showed the limitations
of studying Medicare in isolation. "This idea that if the entire country
turned into Grand Junction, that we'd suddenly save 20 percent on health
spending, maybe that's not totally true," he said. "Prices are a real



National Bureau of Economic Research
December 2015
The Price Ain't Right? Hospital Prices and Health Spending on the
Privately Insured
By Zack Cooper, Stuart Craig, Martin Gaynor, John Van Reenen


We use insurance claims data for 27.6 percent of individuals with
private employer-sponsored insurance in the US between 2007 and 2011 to
examine the variation in health spending and in hospitals' transaction
prices. We document the variation in hospital prices within and across
geographic areas, examine how hospital prices influence the variation in
health spending on the privately insured, and analyze the factors
associated with hospital price variation. Four key findings emerge.
First, health care spending per privately insured beneficiary varies by
a factor of three across the 306 Hospital Referral Regions (HRRs) in the
US. Moreover, the correlation between total spending per privately
insured beneficiary and total spending per Medicare beneficiary across
HRRs is only 0.14. Second, variation in providers' transaction prices
across HRRs is the primary driver of spending variation for the
privately insured, whereas variation in the quantity of care provided
across HRRs is the primary driver of Medicare spending variation.
Consequently, extrapolating lessons on health spending from Medicare to
the privately insured must be done with caution. Third, we document
large dispersion in overall inpatient hospital prices and in prices for
seven relatively homogenous procedures. For example, hospital prices for
lower-limb MRIs vary by a factor of twelve across the nation and, on
average, two-fold within HRRs. Finally, hospital prices are positively
associated with indicators of hospital market power. Even after
conditioning on many demand and cost factors, hospital prices in
monopoly markets are 15.3 percent higher than those in markets with four
or more hospitals.



Comment by Don McCanne

Much of health policy today is based on the landmark Dartmouth studies
demonstrating the regional variation in spending in the Medicare
program, with the concept that controlling total health care spending
would be possible by making physicians and hospitals more accountable
for higher levels of spending. Thus we have accountable care
organizations and other models of paying for quality instead of
quantity. But are these variations in Medicare spending duplicated in
the private insurance markets where more people receive their care? The
quick answer is no.

This new NBER study shows us that there is very little correlation
between variation in Medicare spending on hospital services, which is
primarily due to variation in the volume of services, and variation in
private insurer spending which is primarily due to varying effectiveness
of insurer price negotiation that relates to the market power of
hospitals as determined by their degree of market concentration. With
increasing concentration of hospital market power, prices and thus
private insurance payments escalate, whereas Medicare prices remain stable.

This is really important. Current policies are designed to cut back on
use of health care services more than on prices. Narrow provider
networks and high deductibles reduce access but actually have little
impact on prices since only a minuscule fragment of patient contacts
with the health care system are amenable to price negotiation, even with
health savings accounts. These policies are detrimental because they do
reduce access to beneficial health care services and they do expose
patients to financial hardship in the event of medical need. Also, the
experimentation with accountable care organizations to date has not
shown any significant benefit though they have added to the
administrative burden of our health care system.

Mind you, these are policies that have been sold to us as being
important to control high use of services, as demonstrated by the
Dartmouth data. But what we needed were policies to control high prices.
This study demonstrates, once again, that the private insurers have been
ineffective in controlling prices. In contrast, Medicare has been very
effective in maintaining steady prices.

Regarding reducing wasteful services, we actually have a greater problem
with providing inadequate services, especially to patients with
financial barriers. Much of the reported variations demonstrating areas
with greater utilization of health care services actually represent
normal Bell curve variations in intensity of medical disorders plus
various socioeconomic contributors to population health. For those
actual outliers, we can identify both overutilization and
underutilization and make appropriate corrections.

Other studies have shown that high prices are unique to the United
States and are responsible for a very large portion of the differences
between our national health expenditures and the average expenditures of
the OECD nations.

Many say that we need to be careful when we use blunt instruments to
reduce access to health care services. No. We should be improving access
to health care. That means that we should eliminate policies that impair

Instead, we should be introducing policies that control prices. The
market has certainly failed us. The recommended solution of higher
quality and lower prices through integration of health care services has
only led to market concentration of health care providers and higher
prices, and private insurers have proven that they cannot control health
care prices through the marketplace.

So how can we ensure access while controlling prices? Medicare is
already doing that. Medicare has some problems that can be easily fixed
as long as we have the political will to do so. With an improved
Medicare we would have better access to care that would be priced
appropriately for our publicly-funded universal risk pool. It's time to
get past lamenting over the dark-shaded areas in the Dartmouth Atlas.

Monday, December 14, 2015

qotd: Final rule on requirements for Section 1332 state waivers

Department of Health and Human Services
Department of the Treasury
To be published in the Federal Register 12/16/2015

Waivers for State Innovation


This guidance relates to Section 1332 of the Patient Protection and
Affordable Care Act (ACA) and its implementing regulations. Section 1332
provides the Secretary of Health and Human Services and the Secretary of
the Treasury with the discretion to approve a state's proposal to waive
specific provisions of the ACA (a State Innovation Waiver), provided the
proposal meets certain requirements. In particular, the Secretaries can
only exercise their discretion to approve a waiver if they find that the
waiver would provide coverage to a comparable number of residents of the
state as would be provided coverage absent the waiver, would provide
coverage that is at least as comprehensive and affordable as would be
provided absent the waiver, and would not increase the Federal deficit.
If the waiver is approved, the state may receive funding equal to the
amount of forgone Federal financial assistance that would have been
provided to its residents pursuant to specified ACA programs, known as
pass-through funding. State Innovation Waivers are available for
effective dates beginning on or after January 1, 2017. They may be
approved for periods up to 5 years and can be renewed. The Departments
promulgated implementing regulations in 2012. This document provides
additional information about the requirements that must be met, the
Secretaries' application review procedures, the amount of pass-through
funding, certain analytical requirements, and operational considerations.


I. Statutory Requirements

A. Coverage

To meet the coverage requirement, a comparable number of state residents
must be forecast to have coverage under the waiver as would have
coverage absent the waiver.

The impact on all state residents is considered, regardless of the type
of coverage they would have absent the waiver.

Assessment of whether the proposal covers a comparable number of
individuals also takes into account the effects across different groups
of state residents, and, in particular, vulnerable residents, including
low-income individuals, elderly individuals, and those with serious
health issues or who have a greater risk of developing serious health
issues. Reducing coverage for these types of vulnerable groups would
cause a waiver application to fail this requirement, even if the waiver
would provide coverage to a comparable number of residents overall.

B. Affordability

To meet the affordability requirement, health care coverage under the
waiver must be
forecast to be as affordable overall for state residents as coverage
absent the waiver.

Affordability refers to state residents' ability to pay for health care
and may generally be measured by comparing residents' net out-of-pocket
spending for health coverage and services to their incomes.
Out-of-pocket expenses include both premium contributions (or equivalent
costs for enrolling in coverage), and any cost sharing, such as
deductibles, co-pays, and co-insurance, associated with the coverage.

Waivers are evaluated not only based on how they affect affordability on
average, but also on how they affect the number of individuals with
large health care spending burdens relative to their incomes. Increasing
the number of state residents with large health care spending burdens
would cause a waiver to fail the affordability requirement, even if the
waiver would increase affordability for many other state residents.
Assessment of whether the proposal meets the affordability requirement
also takes into account the effects across different groups of state
residents, and, in particular, vulnerable residents, including
low-income individuals, elderly individuals, and those with serious
health issues or who have a greater risk of developing serious health
issues. Reducing affordability for these types of vulnerable groups
would cause a waiver to fail this requirement, even if the waiver
maintained affordability in the aggregate.

In addition, a waiver would fail the affordability requirement if it
would reduce the number of individuals with coverage that provides a
minimal level of protection against excessive cost sharing.

C. Comprehensiveness

To meet the comprehensiveness requirement, health care coverage under
the waiver must
be forecast to be at least as comprehensive overall for residents of the
state as coverage absent the waiver.

Comprehensiveness refers to the scope of benefits provided by the
coverage as measured by the extent to which coverage meets the
requirements for essential health benefits (EHBs) as defined in section
1302(b) of the ACA, or, as appropriate, Medicaid and/or CHIP standards.
The impact on all state residents is considered, regardless of the type
of coverage they would have absent the waiver.

A waiver cannot satisfy the comprehensiveness requirement if the waiver
decreases: 1) the number of residents with coverage that is at least as
comprehensive as the benchmark in all ten EHB categories; 2) for any of
the ten EHB categories, the number of residents with coverage that is at
least as comprehensive as the benchmark in that category; or 3) the
number of residents whose coverage includes the full set of services
that would be covered under the state's Medicaid and/or CHIP programs,
holding the state's Medicaid and CHIP policies constant. That is, the
waiver must not decrease the number of individuals with coverage that
satisfies EHB requirements, the number of individuals with coverage of
any particular category of EHB, or the number of individuals with
coverage that includes the services covered under the state's Medicaid
and/or CHIP programs.

Assessment of whether the proposal meets the comprehensiveness
requirement also takes into account the effects across different groups
of state residents, and, in particular, vulnerable residents, including
low-income individuals, elderly individuals, and those with serious
health issues or who have a greater risk of developing serious health
issues. A waiver would fail the comprehensiveness requirement if it
would reduce the comprehensiveness of coverage provided to these types
of vulnerable groups, even if the waiver maintained comprehensiveness in
the aggregate.

D. Deficit Neutrality

Under the deficit neutrality requirement, the projected Federal spending
net of Federal revenues under the State Innovation Waiver must be equal
to or lower than projected Federal spending net of Federal revenues in
the absence of the waiver.

The estimated effect on Federal revenue includes all changes in income,
payroll, or excise tax revenue, as well as any other forms of revenue
(including user fees), that would result from the proposed waiver.
Estimated effects would include, for example, changes in: the premium
tax credit and health coverage tax credit, individual shared
responsibility payments, employer shared responsibility payments, the
excise tax on high-cost employer-sponsored plans, the credit for small
businesses offering health insurance, and changes in income and payroll
taxes resulting from changes in tax exclusions for employer-sponsored
insurance and in deductions for medical expenses.

The effect on Federal spending includes all changes in Exchange
financial assistance and other direct spending, such as changes in
Medicaid spending (while holding the state's Medicaid policies constant)
that result from the changes made through the State Innovation Waiver.
Projected Federal spending under the waiver proposal also includes all
administrative costs to the Federal government, including any changes in
Internal Revenue Service administrative costs, Federal Exchange
administrative costs, or other administrative costs associated with the

V. Operational Considerations

A. Federally-Facilitated Exchanges

The Centers for Medicare & Medicaid Services (CMS) operates the
Federally-facilitated Exchange (FFE) platform. Certain changes that
affect FFE processes may make a waiver proposal not feasible to
implement at this time. Until further guidance is issued, the Federal
platform cannot accommodate different rules for different states.

B. Internal Revenue Service

Certain changes that affect Internal Revenue Service (IRS)
administrative processes may make a waiver proposal not feasible to
implement. At this time, the IRS is not generally able to administer
different sets of rules in different states.



Comment by Don McCanne

Section 1332 of the Affordable Care Act allows states to apply for
waivers to exempt them from some of the requirements of the legislation
so that they can introduce their own innovations that they believe would
better serve their respective states. This final federal rule on the
waivers provides guidance on how much flexibility will be allowed.

The good news is that those states that would use waivers to cut back on
benefits provided under the program will not have much flexibility to do
so under these rules. Particularly important is the fact that, not only
must overall average coverage, comprehensiveness and affordability be
maintained, the states are prohibited from adopting innovations that
would leave more vulnerable individuals worse off. As we have seen from
state responses to the Medicaid expansion, some governors are quite
willing to reduce or eliminate benefits for those most in need.

The bad news is that those who have held up hopes that Section 1332
would open the doors for a state-based single payer system will find
that these rules significantly limit flexibility. Also required by these
rules is extensive documentation that would confirm that the state is
fully compliant with the specific stipulations of the waivers. That
could very difficult with a state reform model that attempts to place
everyone in one program with a single risk pool funded by multiple
sources, including ACA premium credits and cost-sharing subsidies.

Regardless, these rules should not deter state activists from moving
full steam ahead in supporting every measure possible that would improve
health care access for the residents of their states. Until we have a
political climate that would support the requisite federal legislation,
we need to accomplish whatever we can on the state level.

That said, since isolated state efforts will inevitably fall short of
achieving health care nirvana, at the same time we must intensify our
efforts to change the political climate so that we can finally achieve
our goal of enacting a single payer national health program. That still
has to be our number one priority.

Friday, December 11, 2015

qotd: Influential conservative policy wonks present their health care reform proposal

Health Affairs Blog
December 9, 2015
Improving Health And Health Care: An Agenda For Reform
By Joseph Antos, James Capretta, Lanhee Chen, Scott Gottlieb, Yuval
Levin, Thomas Miller, Ramesh Ponnuru, Avik Roy, Gail R. Wilensky, and
David Wilson

We are among those who opposed the ACA because of its heavy emphasis on
federal control.

The plan we present is not confined to replacing the ACA. We propose
major reforms to the tax treatment of employer-sponsored health care,
Medicaid, Medicare, Health Savings Accounts, and other areas of existing
policy. The cumulative effect of this comprehensive plan would be to
decisively reorient health care policy away from bureaucratic regulation
and toward the preferences of patients and consumers.

Overall Principles:

* Government Subsidies Should Come In The Form Of Defined Contribution

* Reform Should Move Power And Control From The Federal Government To
The States And The Empowered Patient-Consumer

* Suppliers Of Medical Services Must Have Greater Freedom To Innovate
And Provide Better Services To Empowered Patient-Consumers

* Reform Must Improve The Federal Fiscal Outlook By Reducing Long-Term
Health Obligations (reduce federal spending)

Replacing The ACA:

* Retain The Tax Preference For Employer-Paid Premiums, With An Upper Limit

* Provide Refundable Tax Credits To Households Without Access To
Employer Coverage

* Allow States To Regulate Insurance Offerings And To Establish
Mechanisms For Consumer Choice Of Plans

* Provide 'Continuous Coverage Protection' For Persons With Preexisting
Conditions (lose guarantee after three months without coverage)

* Allow States To Adopt A Default Enrollment Program

* Allow For A Gradual Transition From ACA Subsidies (no new enrollees
for ACA subsidies or Medicaid)

Reforming Medicaid To Allow More State Control And Consumer Choice:

* Pursue Separate Reform Strategies For Medicaid's Two Distinct Parts
(healthy families vs. disabled and elderly)

* Finance Medicaid With Fixed Federal Funding (block grants)

* Empower The Disabled And Frail Elderly (let the states do it)

A Market-Based Reform Of The Medicare Program:

* Adopt The Premium Support Reform Model (vouchers for private plans)

* Promote Consumer Decision-Making

* Modernize Medicare's Benefits

* Reform Medigap And Other Supplemental Coverage (more cost sharing and
use limited networks)

* Reform Medicare's Payment Policies And Eliminate Unnecessary
Bureaucratic Controls (abolish IPAB and CMMI)

* Gradually Raise The Eligibility Age To 67

Lifelong Use Of Health Savings Accounts (HSAs):

* Provide A One-Time Federal Tax Credit Matching Enrollee Contributions
To HSAs (up to $1000 once in a lifetime)

* Eliminate The Minimum Deductible Requirement (no HDHP required)

* Allow Nontraditional Payment Methods (allow direct-pay, etc.)

* Include HSAs In Medicaid Reform (high-deductible plans for Medicaid)

* Integrate HSAs Into Medicare (high-deductible Medicare Advantage)

* Allow Withdrawals Tax-Free After Age 75 Above A Minimum Balance
(reward savers)

* Allow Tax-Free HSA Rollovers To Designated HSAs At Death

Additional Reforms:

* Reform Federal Funding Of Graduate Medical Education (cutting the
funding substantially)

* Reform The Federal Employees Health Benefits Program (defined

* Integrate Veterans Into Mainstream Coverage, And Refocus VA Health Care

* Improve The Transparency Of Useful Cost And Quality Data (stimulate
better decision-making by consumers)


Full report from AEI (70 pages):



Comment by Don McCanne

Why should we be interested in a comprehensive health reform proposal
from representatives of AEI and other conservative/libertarian
organizations? Simply because the authors are prominent in the health
policy arena and have considerable influence in crafting reform
proposals for Republican politicians.

Speaker of the House Paul Ryan has promised this next year a
comprehensive Republican plan to replace the Affordable Care Act.
Although President Obama would not approve legislation containing many
of the features listed in this proposal, nevertheless, the Republicans
do intend to gain greater control of the political arena, and would hope
to move forward with a Republican administration. It is important to
understand what they would do with our health care system. By having
this knowledge, we can more effectively inform the process.

Thursday, December 10, 2015

qotd: Widening gap between private and public payments for hospital care

Health Affairs
December 2015
The Growing Difference Between Public And Private Payment Rates For
Inpatient Hospital Care
By Thomas M. Selden, Zeynal Karaca, Patricia Keenan, Chapin White, and
Richard Kronick

Medicare's payment rate in 2012 for the average inpatient stay in that
year was, in inflation-adjusted dollars, similar to what Medicare would
have paid in 1996 for the average stay in that year.

During the period 1996–2001, differences in predicted standardized
payment rates were relatively small across primary payers, and payment
rate differences remained relatively constant. Since 2001, however,
payment rates for stays covered by private health insurance have
diverged sharply from payment rates for those covered by Medicare and

The predicted percentage difference between the rates of private
insurers and those of Medicare has increased substantially over time. In
1996 private insurers paid 106.1 percent of Medicare payment rates, a
payment rate difference of 6.1 percent. This payment difference rose to
64.1 percent in 2011 and 75.3 percent in 2012. Medicaid payment rates
averaged approximately 90 percent of Medicare payment rates throughout
the study period, with differences in most years that were not
significantly different from zero.

Our findings can offer insights into policy prescriptions, including the
recent recommendation to cap private insurance payments at 125 percent
of Medicare rates. Our findings suggest that such a cap would affect far
more than just the most egregious cases.

Our findings also highlight the following important questions for
further research. To what extent, if at all, is the private-public
differential due to cost shifting from public to private payers, given
the growing body of evidence that challenges the existence of such cost
shifting? Or to what extent is the differential due to hospitals'
exploiting market concentration or engaging in a technological "arms
race," in which they invest heavily in expensive diagnostic and surgical
equipment? To what extent have the declines in private inpatient
hospital stays between 2008 and 2012 (from 13.6 million stays to 11.2
million) contributed to the widening differential? More important, what
are the impacts of the growing differential on consumers? Has the
differential had any effect on access to or quality of care for public
patients, or on private patients' financial burdens?



The Milbank Quarterly
March 2011
How Much Do Hospitals Cost Shift? A Review of the Evidence
By Austin B Frakt

From the Discussion

Cost shifting is just one of many possible responses to shortfalls in
public payments to hospitals (another is cost cutting). Moreover,
private payment-to-cost margins change for many reasons other than cost
shifting (another is changes in the balance between hospitals' and
health plans' market power). Indeed, the theoretical literature on the
subject shows that cost shifting can take place only if hospitals both
possess market power and have not fully exploited it. This limits both
the conditions under which cost shifting is possible and its extent.
Once market power is fully exploited, as it would be by a
profit-maximizing firm, there is no more room for cost shifting. The
theoretical literature also reveals the potential endogeneity of public
prices in models of private ones, the role of costs and that of
hospitals' and plans' market power.

Given these findings, what can be said about the likelihood of cost
shifting in the future? Relative to the period in which cost shifting is
most likely to have occurred at a relatively high rate (when indemnity
plans were the norm, from 1987 to 1992), plans now are better able to
resist price increases due to network-based contracting. Conversely,
relative to the period in which there was likely no cost shifting (when
tightly managed care dominated in the mid-1990s), price competition is
now weaker because consumers are less accepting of networks with the
same level of restrictions as existed then. To the extent that hospitals
still have some unexploited market power, perhaps some cost shifting is
possible, but given the results of papers I reviewed, it is likely to be
at a rate closer to twenty cents on the dollar than the
dollar-for-dollar rate suggested by industry-funded reports.

The exploitation of market power is the privilege of private industry,
subject to antitrust regulation, from which our market-based health
system is not immune. Plans' and hospitals' market power may shift again
with the new health reform law. The PPACA calls for pilot programs of
the accountable care organization (ACO) payment model, which will
compensate integrated groups of providers on a capitated basis for all
the care for a population (Gold 2010). This will encourage providers to
integrate, possibly increasing their market power (Frakt 2010b;
Reinhardt 2010). If plans' market power holds constant or is weakened,
it is likely that private prices will increase, even without changes in
public payments.



Comment by Don McCanne

Medicare has long been credited with being a more efficient purchaser of
health care than has the private insurance industry. Evidence of that
has been lower payments made by Medicare compared to the higher payments
made by private insurers.

Private insurers have claimed that lower Medicare payments have shifted
costs to the private insurers. But Austin Frakt and others have shown us
that it is primarily the market power of the hospitals and provider
groups that have driven up private insurer payments, while Medicare
payments have held steady independently of what private insurers are paying.

The report from the Agency for Healthcare Research and Quality (AHRQ),
published in the current issue of Health Affairs, confirms that Medicare
payments, adjusted for inflation, have held steady for the last two
decades, whereas private insurance payments have continued upwards at an
increasing rate, such that, as of 2012, private insurers pay 75 percent
more than Medicare.

Medicaid, another public payer, has maintained payment rates at about 90
percent of Medicare's, also at a steady rate adjusted for inflation.

Where should the balance be? Our public payers have been able to hold
rate increases at the level of inflation, and that benefits the
taxpayers. Our private insurers have been able to infuse more money into
the health care delivery system, and that benefits the providers of
health care. But private insurers pay higher rates at the cost of higher
premiums, benefit reductions, and greater patient cost sharing. The
private insurers have been much less effective in moderating the high
rate of health care inflation, and that harms patients financially.

We should be concerned about the movement on multiple fronts to further
privatize public health insurance programs. Medicaid is being shifted to
private managed care programs. Enrollment in private Medicare Advantage
plans continues to expand. Efforts to convert Medicare into a premium
support program (vouchers to purchase private plans) are intensifying.
Of course, private plans place a very costly administrative burden on
our health care system. Do we really went to do this when the private
insurers have already proven to us that they cannot adequately control
health care prices?

Health care providers do not think that they are being paid too much by
the private insurers. But when they see how much less the public
insurers - Medicare and Medicaid - are paying them, they are likely to
join the chorus of demanding that our public insurers be replaced with
private plans.

Under further privatization of our health care financing, it will be the
patients who are stuck with the public (tax) and private (premiums and
cost sharing) bills. The pain would be much less with a well designed
single payer national health program.

Wednesday, December 9, 2015

qotd: Since enactment of ACA more than half of physicians experiencing burnout

Mayo Clinic Proceedings
December 2015
Changes in Burnout and Satisfaction With Work-Life Balance in Physicians
and the General US Working Population Between 2011 and 2014
By Tait D. Shanafelt, MD; Omar Hasan, MBBS, MPH; Lotte N. Dyrbye, MD,
MHPE; Christine Sinsky, MD; Daniel Satele, MS; Jeff Sloan, PhD; and
Colin P. West, MD, PhD


Burnout and satisfaction with WLB (work-life balance) among US
physicians are getting worse. American medicine appears to be at a
tipping point with more than half of US physicians experiencing
professional burnout. Given the extensive evidence that burnout among
physicians has effects on quality of care, patient satisfaction,
turnover, and patient safety, these findings have important implications
for society at large. There is an urgent need for systematic application
of evidence-based interventions addressing the drivers of burnout among
physicians. These interventions must address contributing factors in the
practice environment rather than focusing exclusively on helping
physicians care for themselves and training them to be more resilient.



December 8, 2015
Prevalence of Depression and Depressive Symptoms Among Resident Physicians
A Systematic Review and Meta-analysis
By Douglas A. Mata, MD, MPH; Marco A. Ramos, MPhil, MSEd; Narinder
Bansal, PhD; Rida Khan, BS; Constance Guille, MD, MS; Emanuele Di
Angelantonio, MD, PhD; Srijan Sen, MD, PhD

Conclusions and Relevance

In this systematic review, the summary estimate of the prevalence of
depression or depressive symptoms among resident physicians was 28.8%,
ranging from 20.9% to 43.2% depending on the instrument used, and
increased with calendar year. Further research is needed to identify
effective strategies for preventing and treating depression among
physicians in training.



RAND Corporation
March 19, 2015
Effects of Health Care Payment Models on Physician Practice in the
United States
By Mark W. Friedberg, Peggy G. Chen, Chapin White, Olivia Jung, Laura
Raaen, Samuel Hirshman, Emily Hoch, Clare Stevens, Paul B. Ginsburg,
Lawrence P. Casalino, Michael Tutty, Carol Vargo, Lisa Lipinski

The project reported here, sponsored by the American Medical Association
(AMA), aimed to describe the effects that alternative health care
payment models (i.e., models other than fee-for-service payment) have on
physicians and physician practices in the United States. These payment
models included capitation, episode-based and bundled payment, shared
savings, pay for performance, and retainer-based practice. Accountable
care organizations and medical homes, which are two recently expanding
practice and organization models that feature combinations of these
alternative payment models, were also included.

Within our sample, alternative payment models had not substantially
changed how physicians delivered face-to-face patient care. However, the
overall quantity and intensity of physician work had increased because
of growing patient volume expectations and ongoing pressure for
physicians to practice at the "top of license" (e.g., by delegating less
intense patient encounters to allied health professionals), which was
described as a potential contributor to burnout because lower-intensity
patients could be an important source of respite for busy physicians.

Increased Stress and Time Pressure

New nonclinical work for physicians was almost universally disliked,
especially when there was no clear link to better patient care. For
example, frustration was common when physicians believed they were being
asked to spend more time on documentation solely to get credit for care
they had provided already. Overall, increased stress on physicians might
directly harm the quality of patient care and might also serve as a
marker that physicians are concerned about the quality of care they are
able to provide.



Comment by Don McCanne

Since enactment of the Affordable Care Act (ACA), physician burnout and
dissatisfaction with work-life balance have increased and now are
experienced by over half of US physicians. The prevalence of depression
or depressive symptoms amongst physicians in training is 29 percent and
increasing. Health care payment models, which have increased under ACA,
are contributing to physician burnout.

Do we really need to say it? ACA was the wrong model for reform.

We need to switch to a well designed single payer national health
program which will then free us up to reform the health care delivery
system so that we have contented health care professionals dedicated to
providing optimal patient care. It would work for everyone.

Monday, December 7, 2015

qotd: Information frictions - good for insurers, bad for patients

The National Bureau of Economic Research
November 2015
NBER Working Paper No. 21759
Information Frictions and Adverse Selection: Policy Interventions in
Health Insurance Markets
By Benjamin R. Handel, Jonathan T. Kolstad, Johannes Spinnewijn


A large literature has analyzed pricing inefficiencies in health
insurance markets due to adverse selection, typically assuming informed,
active consumers on the demand side of the market. However, recent
evidence suggests that many consumers have information frictions that
lead to suboptimal health plan choices. As a result, policies such as
information provision, plan recommendations, and smart defaults to
improve consumer choices are being implemented in many applied contexts.
In this paper we develop a general framework to study insurance market
equilibrium and evaluate policy interventions in the presence of choice
frictions. Friction-reducing policies can increase welfare by
facilitating better matches between consumers and plans, but can
decrease welfare by increasing the correlation between
willingness-to-pay and costs, exacerbating adverse selection. We
identify relationships between the underlying distributions of consumer
(i) costs (ii) surplus from risk protection and (iii) choice frictions
that determine whether friction-reducing policies will be on net welfare
increasing or reducing. We extend the analysis to study how policies to
improve consumer choices interact with the supply-side policy of
risk-adjustment transfers and show that the effectiveness of the latter
policy can have important implications for the effectiveness of the
former. We implement the model empirically using proprietary data on
insurance choices, utilization, and consumer information from a large
firm. We leverage structural estimates from prior work with these data
and highlight how the model's micro-foundations can be estimated in
practice. In our specific setting, we find that friction-reducing
policies exacerbate adverse selection, essentially leading to the market
fully unraveling, and reduce welfare. Risk-adjustment transfers are
complementary, substantially mitigating the negative impact of
friction-reducing policies, but having little effect in their absence.

From the Conclusion

After establishing that information frictions have a substantial impact
increasing demand for generous coverage, we investigate the implications
of a policy that reduces the impact of information frictions (e.g.
through information provision). We find that a policy that reduces the
impact of information frictions by 50% reduces the market share of
consumers enrolling in more generous coverage from 85% to 73%, and that
a policy that fully removes information friction further reduces the
market share in generous coverage to 9% (with corresponding welfare
reductions). We illustrate that this negative impact of reducing
frictions occurs because the mean and variance of surplus are low
relative to the mean and variance of costs. We also show that as
friction-reducing policies become stronger, effective insurer
risk-adjustment transfers are more important. When frictions are fully
present, fully effective risk-adjustment increases the market share in
generous insurance from 85% to 88%, but when there are no frictions that
same risk adjustment policy increases this share from 9% to 64% (with
corresponding welfare increases).



Comment by Don McCanne

At the risk of losing important subtleties in this technically complex
paper, I'll try to simplify it by saying that the more information that
a buyer has when deciding about the coverage of a plan (the goal of
transparency in the insurance markets), the greater the risk of adverse
selection (concentrating high cost patients in a plan), making
risk-adjustment transfers more imperative in order to shift costs from
plans enrolling more expensive high-risk patients to plans enrolling
less expensive low-risk patients. Without effective risk-adjustment
transfers, the market would unravel due to adverse selection.

Stated another way, information frictions (lack of information
provision, plan recommendations, and smart defaults that would improve
consumer choices) lead to suboptimal plan choices. More information
leads to better choices but increases adverse selection. Risk-adjustment
transfers have little impact when information frictions are fully
present (the insurance purchaser is in the dark), but risk-adjustment
transfers are essential when there are no frictions (fully informed
insurance purchaser).

What can we make of this? On the face of it, shopping in the dark is
bad. But the results of informed shopping require effective
risk-adjustment transfers to counter adverse selection. To date,
risk-adjustment processes (e.g., hierarchical condition categories) are
capable of correcting only about one-tenth to one-fifth of the
consequences of adverse selection. Since four-fifths or more of the
excess burden cannot be transferred by today's methods, we should be
concerned about the authors' finding that "friction-reducing policies
exacerbate adverse selection, essentially leading to the market fully
unraveling, and reduce welfare."

It is unlikely that risk-adjustment will improve significantly. The
insurers have already demonstrated how easy it is for them to game
risk-selection adjustments, and there is no end to their ability to

The problem is really very simple. The private insurers, for their own
benefit, continue to impair the functioning of our health plans, and
then inflict upon us outrageous administrative charges for doing so.

The solution is simple. Replace them with a single payer national health
program. Patients would not have to shop plans since everyone would be
covered by the same single comprehensive plan. Patients would not have
to worry about information frictions, whether or not they understood them.

Friday, December 4, 2015

qotd: PPOs further erode benefits by cutting back on out-of-network coverage

Robert Wood Johnson Foundation
December 3, 2015
This year's model: PPOs in 2016 offer less out-of-network coverage
By Katherine Hempstead, PhD

Preferred Provider Organization plans (PPOs) are health insurance
products that offer both a relatively "broad" provider network, along
with some coverage for use of out-of-network providers. Since last year
there has been a significant reduction in the number of PPOs offered in
the Affordable Care Act (ACA) marketplaces. A prior analysis showed that
of the 131 carriers offering silver PPO products in 2015, only about
one-third remained unchanged in 2016, while the rest were either reduced
in scope or eliminated.

Since changes in the generosity of out-of-network coverage don't affect
a plan's actuarial value (AV), carriers can adjust these features
without affecting the AV status. Plans new to the market in 2016 provide
less coverage for out-of-network providers as compared to those that are
continued from last year.

Fewer plans have a cap on out-of-pocket spending for out-of-network services

The out-of-network coverage offered in a PPO usually consists of some
kind of cost-sharing—most often co- insurance—for visits to
out-of-network providers. This benefit is usually subject to a separate
out-of-network deductible, in addition to which there may be an annual
out-of-network Maximum Out-Of-Pocket cost (MOOP). While an out-of-pocket
maximum is required by the Affordable Care Act (ACA) for in-network
coverage, there is no similar requirement with regard to out-of-network

There has been a sharp decline in the prevalence of out- of-network
MOOPs in PPOS in 2016. While only 14 percent of PPO plans offered in
2015 did not have an out-of-network MOOP, this is the case for 45
percent of plans newly offered in 2016. For the market as a whole, the
percent of PPOs with no MOOP doubled from 14 percent in 2015 to 30
percent in 2016.

Average MOOPs for out-of-network services have increased

For plans that have MOOPS, the annual cap has increased as well. Figure
2 shows the mean MOOP has increased to $16,700 in 2016 from $14,500 in
2015. Among plans new to the market in 2016, the average out-of-network
MOOP was $17,900. For 25 percent of plans on the market in 2016, the
MOOP was greater than $19,000. For plans that stayed in the market from
2015 to 2016, the average increase in the MOOP was approximately $1,000,
although six plans increased their MOOP by more than $10,000.

Both the reduction in the number of PPOs and this "skinnying" of
coverage within existing, and particularly new PPOs should be viewed as
part of a broader carrier trend designed to reduce exposure to higher
cost out-of-network providers. These changes are ostensibly being made
to preserve affordability for marketplace products, which consumers have
repeatedly indicated they value most. However, it remains to be seen to
what extent consumers will continue to be willing to trade access to
providers for lower premiums.



Comment by Don McCanne

After a few decades of experiencing insurance company innovations
designed to keep their premiums affordable, we should not be surprised
by their ingenuity in figuring out new ways to avoid paying for health
care. Now that networks are narrower and yet more prevalent, such that
more patients are inadvertently receiving care out-of-network, the PPO
plans are introducing further innovations to avoid paying for much of
the out-of-network care that is often unavoidable for many patients.

Plans are increasing the maximum out-of-pocket costs (MOOP) that
patients must pay for care obtained out-of-network. But an even more
alarming trend is that almost half of the newer PPO plans are totally
eliminating MOOP, which could expose patients to truly catastrophic
expenses. To add to the insult, these expenses do not apply to
in-network deductibles and MOOP.

We can anticipate that we will see continual erosion in health plan
benefits as the private insurers contrive to find ever new ways of
welshing on paying for our legitimate medical bills. This behavior is
inherent in their DNA. They are structured to optimize their
self-serving business model rather than to optimize patient service.
That's the nature of markets.

When markets fail us, we can turn to our own public entity, established
to serve all of us, and that is our government. We don't need a
government-owned health care delivery system since the private,
non-profit sector functions reasonably well for us, but we do need a
publicly-owned and publicly-administered health care financing system -
a single payer national health program dedicated to patient service.