Thursday, April 30, 2015

qotd: The BlueCross BlueShield Association is privatizing Medicare

BlueCross BlueShield Association
April 24, 2015
Blue Cross and Blue Shield Companies to Launch Retiree Health Insurance

Blue Cross and Blue Shield (BCBS) companies will launch a health
insurance exchange this summer that will support employers' efforts to
help retirees transition from group health benefits to individual
Medicare coverage that starts Jan. 1, 2016.

BCBS Marketplace will offer Blue Cross and Blue Shield Medicare
Supplement Insurance (Medigap), Medicare Advantage Plans and Medicare
Part D prescription drug coverage in more than 45 states and Washington,


Comment by Don McCanne

The BlueCross BlueShield Association is a national federation of 37
independent, community-based and locally-operated Blue Cross and Blue
Shield companies that collectively provide health care coverage for
nearly 105 million members – one-in-three Americans. They now intend to
establish a health insurance exchange that will promote transition of
employer-sponsored plans to Blue Cross and Blue Shield Medicare
Supplement Insurance (Medigap), Medicare Advantage Plans and Medicare
Part D prescription drug coverage.

Some employers are already transitioning to private insurance exchanges
(similar to but separate from ACA exchanges), converting their
employer-sponsored plans into defined contribution plans. As employees
retire and become eligible for Medicare coverage, the BlueCross
BlueShield retiree health insurance exchange will simplify the
transition from employer sponsored group plans to individual Medicare
coverage, but doing it with private plans. Since employer-sponsored
plans are the largest sector of health care coverage, this transition
could cause a massive influx of plans into the private Medicare
insurance market.

The retiree exchanges will offer Medigap plans, Medicare Advantage plans
and Part D drug plans.

Medicare Advantage plans (Part C plans) are able to offer greater
benefits with minimal or no premiums, and thus they continue to grow in
popularity. Enrollees are not concerned that taxpayers are providing
greater subsidies for these plans, even if CMS is using accounting
gimmicks to do so. Plan beneficiaries will always place their own
interests above the collective interests of us all.

As Medicare Advantage enrollment is increasing, enrollment in Medigap
plans is declining. The Medigap premiums are relatively high considering
the limited benefits. The decline in Medigap enrollment may accelerate
even more once the Medigap plans are prohibited from covering Part B
deductibles (a provision of the recently enacted Medicare SGR fix).

Medicare Advantage plans frequently include the Medicare Part D drug
benefits, obviating the need to purchase a separate Part D plan as
Medigap enrollees would have to do if they wanted drug coverage.

You can see where this is headed. Employers will be enabling BlueCross
BlueShield to enroll retirees into the private BlueCross BlueShield
Medicare plans wherein the Medicare Advantage plans (Part C) will
experience preferential enrollment. Thus enrollment in the traditional
Medicare program (Part A and Part B) will decline substantially. Once
the private Medicare Advantage plans become the dominant player (and
they are well on their way already), the traditional Medicare program
will lose political support and will be converted to a chronically
underfunded welfare program, if it survives at all.

Although the establishment of the BlueCross BlueShield Medicare
exchanges will likely be lost in the fog of all of the innovative
changes taking place under the Affordable Care Act, they are coming.
They will be here in only eight months. As the political and policy
communities continue to fiddle with other aspects of implementing the
Affordable Care Act, the privatization of Medicare will have taken place
right before our eyes, and they do not even need Paul Ryan's premium
support vouchers to do it. (In fact, the Republicans just struck premium
support from the budget proposal they agreed to this week.)

Just try to stop this one.

Wednesday, April 29, 2015

qotd: CMS passively rejects any government role in reducing Part D drug costs

Department of Health and Human Services
Office of Inspector General
April 2015
Medicaid Rebates for Brand-Name Drugs Exceeded Part D Rebates by a
Substantial Margin


Drug rebates reduce the program costs of both Medicare Part D and
Medicaid. Medicaid rebates are defined by statute and include additional
rebates when prices for brand-name drugs increase faster than inflation.
In contrast, Part D sponsors (or contractors acting on their behalf)
negotiate rebates with drug manufacturers, and there are no statutory
requirements regarding the amounts of these rebates. In fact, the law
establishing the Part D program expressly prohibits the Government from
instituting a price structure for the reimbursement of covered Part D drugs.

We found that Part D sponsors and State Medicaid agencies paid
pharmacies similar amounts for most brand-name drugs under review.
However, Medicaid rebates for brand-name drugs exceeded Part D rebates
by a substantial margin. Additionally, Medicaid's net unit costs (i.e.,
pharmacy reimbursement minus rebates) were much lower than net unit
costs under Part D in 2012 for nearly all selected drugs. Also, more
than half of Medicaid rebates owed by manufacturers for selected
brand-name drugs were attributed to the inflation-based add-on rebates.

A major driver of the higher Medicaid rebates was the additional amount
owed when prices for brand-name drugs increase faster than inflation.
This rebate not only produces additional Medicaid rebates, but also
helps protect the program from increased costs when manufacturers raise
prices. The Part D program does not contain a similar provision.

This is the second OIG evaluation that demonstrates the substantial
difference in rebates collected under Medicaid and Medicare Part D.
While we recognize the statutory limitations surrounding rebate
collection under Part D, we encourage CMS and Congress to explore the
costs and benefits of obtaining additional rebates under Part D.



Agency Comments

To: Daniel Levinson, Inspector General

From: Marilyn Tavenner, Administrator, CMS

Subject: Office of Inspector General (OIG) Draft Report: "Update:
Higher Drug Rebates Result in Lower Costs for Medicaid Compared to
Medicare Part D" (OEI-03-13-00650)

The Centers for Medicare and Medicaid Services appreciates the
opportunity to review and comment on the OIG's draft report. The Part D
program has significantly outperformed cost estimates, resulting in
lower than expected premium levels since the inception of the program.
Additionally, starting in 2011, brand drug manufacturers provide a 50
percent discount for their products to beneficiaries in the Part D
coverage gap phase o f the benefit.

As this report discussed, minimum drug manufacturer rebates under the
Medicaid program are defined by statute whereas similar rebates under
the Medicare Part D program are determined solely through negotiations
between drug manufacturers and Part D sponsors. However, Section
!8600-ll(i)(1) of the Social Security Act states that CMS "may not
interfere with the negotiations between drug manufacturers and
pharmacies and PDP sponsors." Consequently, absent new legislative
authority, CMS cannot interfere in the rebate negotiations between Part
D sponsors and drug manufacturers to secure additional rebates.

The Part D program has significantly outperformed cost estimates,
resulting in lower than expected premium levels since the inception of
the program. Additionally, starting in 20 II, brand drug manufacturers
provide a 50 percent discount for their products to beneficiaries in the
Part D coverage gap phase of the benefit.

Thank you for the opportunity to review and comment on this draft OIG


Comment by Don McCanne

Patient advocates were rightfully upset when Congress included a
prohibition in the Medicare Part D drug program preventing the
government from instituting a price structure for the reimbursement of
covered drugs. The OIG has now released another report showing that the
net cost of drugs under the Part D program, which relies on private
sector negotiations, are much higher than the net cost of drugs under
the government-administered Medicaid program.

CMS administrator Marilyn Tavenner has provided a response which is
included in the appendix to this report. Whereas her comment
appropriately concurs with the OIG observation that CMS cannot interfere
in the rebate negotiations between Part D sponsors and drug
manufacturers, her unsolicited comment praising the performance of the
Part D program warrants concern. (The fact that the "cut and paste"
error of including the comment twice shows the importance they place in
including this diversionary concept in their response.)

Whenever CMS is challenged on the higher drug costs through the Part D
program, their routine response is to report that "The Part D program
has significantly outperformed cost estimates, resulting in lower than
expected premium levels since the inception of the program." They never
suggest that CMS should be granted the authority to negotiate lower Part
D costs, as they already do with Medicaid. Thus, passively, they
continue to be supportive of the pharmaceutical industry and the private
Part D insurers and pharmacy benefit managers.

This is part of the pattern of CMS supporting the private sector, which
includes their devious innovations to increase payments to private
Medicare Advantage plans when the unequivocal intent of the law was to
reduce their overpayments.

It is clear that CMS, with the full support of President Obama, is
providing extra financial support, directly or indirectly, to the
private sector administrators of our health care dollars, when the
evidence is overwhelming that the public sector would obtain for us much
greater value in our health care purchasing. The Obama administration
appears to be permeated with industry shills.

It is no wonder that they reject any consideration of single payer. That
would ruin the corrupt relationship that they have with the private sector.

Tuesday, April 28, 2015

qotd: Stuart Butler on Section 1332 waivers

The JAMA Forum
April 28, 2015
Why Section 1332 Could Solve the Obamacare Impasse
By Stuart Butler, PhD

Section 1332 of the ACA, known as "State Innovation Waivers," allows
states, starting in 2017, to apply to the federal government for 5-year
renewable waivers from key provisions of the legislation. For instance,
states could request changes to or exemptions from the individual and
employers mandate, the market exchanges, the exchange subsidies, the
Essential Health Benefits requirements, and other provisions. Moreover,
states can combine waivers from ACA provisions with waivers from
Medicaid provisions (so-called 1115 waivers), Medicare, the state
Children's Health Insurance Program, and waivers available through "any
other Federal law relating to the provision of health care items or

Section 1332, however, is not a blank check for states to ignore the
whole intent of the ACA, even assuming the White House or the next
administration were open to that. It has important fine print. To obtain
a waiver, a state's proposal must retain important protections, such as
guaranteeing that health plans accept an applicant regardless of their
health status or other factor. The proposal's coverage must be "at least
as comprehensive" and cover "at least a comparable number of its
residents" as the ACA, and insurance must be as affordable. Any state
plan must also be budget neutral for the federal government.

Even with these limitations on state plans, section 1332 could lead to
state health plans in the future that change the ACA beyond recognition.
A Republican state like Arkansas, Utah, or Texas, for instance, could
use the section to take the federal money for Medicaid expansion as a
block grant and turn it into subsidies for families to buy private
coverage. These or other states could also end the mandates on
individuals and employers, perhaps using government-encouraged
auto-enrollment for insurance to meet the ACA's coverage projections.
Meanwhile, states like Vermont, Oregon, and Hawaii could design waivers
to create a form of single-payer health system.

The political ramifications of this wide flexibility under section 1332
are immense. For instance, Republican opponents of the ACA, recognizing
that the foreseeable congressional makeup means outright repeal of the
ACA is not feasible even if Republicans win the White House in 2016,
would have a strategy for states to exit much of the ACA. Meanwhile
liberals in other states would have a tool to move closer to their dream
of a single-payer system. And the White House could claim that even in
the Republican states with sweeping waivers, the ACA had been fully
implemented. Moreover, the 1332 waivers would allow many of the
technical problems of the ACA to be fixed at the state level without
going to Congress.


Comment by Don McCanne

Stuart Butler's name may be familiar to you as he was the policy expert
that described the Heritage Foundation's model of health care reform
that was a counter proposal to the Clinton effort, and later became the
model that formed the basis of the Affordable Care Act. We should take
heed of his words on the potential of the state innovation waivers
authorized by Section 1332 of the Affordable Care Act.

After ultraconservative Sen. Jim DeMint became president of the Heritage
Foundation, Stuart Butler moved to the Brookings Institution and was
thus less handicapped than he had been with the extreme right-wing
political polarization at Heritage. His recent messages have been
directed toward solutions that supposedly defuse the politics so that we
can move forward on policy.

Without repeating any of his points made above, obviously he believes
that the states should move forward with their own concepts of reform
that would comply with their respective political climates. However,
most of the flexibility he suggests would appeal to conservatives,
though he mentions single payer to appease those in liberal states.

The problem is that Section 1332 is quite amenable to piecemeal measures
that would gradually move health care further in the direction of a
system that places more of the responsibility on the individual, making
health care less affordable and less accessible (as if it were not bad
enough already). Yet Section 1332 waivers cannot lead to single payer
without enabling comprehensive federal legislation. Section 1332 is a
setup for conservative policies, yet hardly opens the door for single
payer. Acting on a state level alone, liberals cannot expect much more
than tweaks to the Affordable Care Act.

Stuart Butler is now even better positioned to drive the dialogue on
reform. If the politicians continue to listen to him, forget the dream
of a more egalitarian system.

Monday, April 27, 2015

qotd: Pharmaceutical firms contribute to wealth inequity

The Wall Street Journal
April 26, 2015
Pharmaceutical Companies Buy Rivals' Drugs, Then Jack Up the Prices
By Jonathan D. Rockoff and Ed Silverman

On Feb. 10, Valeant Pharmaceuticals International Inc. bought the rights
to a pair of life-saving heart drugs. The same day, their list prices
rose by 525% and 212%.

Neither of the drugs, Nitropress or Isuprel, was improved as a result of
costly investment in lab work and human testing, Valeant said. Nor was
manufacture of the medicines shifted to an expensive new plant. The big
change: the drugs' ownership.

"Our duty is to our shareholders and to maximize the value" of the
products that Valeant sells, said Laurie Little, a company spokeswoman.

More pharmaceutical companies are buying drugs that they see as
undervalued, then raising the prices. It is one of a number of industry
tactics, along with companies regularly upping the prices of their own
older medicines and launching new treatments at once unheard of sums,
driving up the cost of drugs.

Since 2008, branded-drug prices have increased 127%, compared with an
11% rise in the consumer price index, according to drug-benefits manager
Express Scripts Holding Co.

Early last year, Mallinckrodt PLC paid $1.4 billion for Cadence
Pharmaceuticals, though the Ofirmev pain injections that were the crown
jewel of the deal were projected to have just $110.5 million in 2013
revenue, according to a Mallinckrodt conference call with analysts
discussing the deal. Three months later, the list price for a package of
24 Ofirmev vials jumped almost 2½ times to $1,019.52, according to
health-care data firm Truven Health Analytics.

"It seemed like highway robbery," said Erin Fox, who directs the
drug-information service at University of Utah Health Care.

The price increases can be very lucrative for companies. Horizon Pharma
PLC upped the price of Vimovo pain tablets after buying the rights from
AstraZeneca in late 2013. On Jan. 1, 2014, its first day selling Vimovo,
Horizon raised the list price for 60 tablets to $959.04, a 597%
increase. Horizon raised the price again on Jan. 1 this year to
$1,678.32 for the tablets.

After Valeant agreed to buy the drugs in early January, the company
hired a consultant to look at their prices. The consultant found the
prices didn't reflect the benefits of the drugs to patients and the
costs that hospitals save by using the medicines, the person said.
Valeant decided to raise the price. The list price of a one-milliliter
vial of Isuprel, a treatment for abnormal heart rhythms, jumped to
$1,346.62, up from $215.46, according to Truven. Meantime, a
two-milliliter vial of Nitropress, which combats dangerously high blood
pressure and acute heart failure, increased from $257.80 to $805.61.


Comment by Don McCanne

It seems that everywhere you turn these days there are articles covering
the skyrocketing prices of pharmaceuticals.

One factor used by the pharmaceutical firms to explain their price
increases is the benefit patients receive from the drugs - benefits that
the pharmaceutical firms claim are so valuable that the prices should be
much higher than their costs of doing business. When you have a superior
product, you sell it at a higher price, with the financial benefits
accruing to the owners of the firm. That's the way markets work.

This WSJ article describes an even more nefarious process of market
manipulations of drug prices. Pharmaceutical firms are buying the rights
to the products of other firms, often buying the firms themselves,
paying very high prices for these rights. There are several examples in
thus article, but an even more egregious example is the action of Gilead
Sciences in buying up the rights to the newer, more effective Hepatitis
C drugs, again paying outrageous prices for those rights. They are
recovering this capital cost by charging $1,000 or more for each pill
sold, when a course of treatment may be 84 pills.

Think about that. A massive amount of capital is paid out, requiring the
purchasing firm to charge much higher prices for those drugs to recover
the funds paid to acquire the drug rights. Who receives the capital paid
out? The wealthiest tier - the tier that holds by far the largest
percentage of shares in public and private corporations. Who is paying
higher prices to compensate for the capital purchase of the drug rights
at inflated prices? It is predominantly middle-income Americans in the
form of direct drug purchases or indirectly through insurance premiums,
taxes for public programs, or forgone wages to pay for
employer-sponsored benefits.

Thus the pharmaceutical firms are compounding the inequitable shift of
capital from the workers to the wealthy (described by Piketty, Saez and
others). This is being done through financial constructs for which Wall
Street is so infamous. As patients, we are powerless to impede this
process. It is the responsibility of government to provide the
appropriate oversight to correct these injustices. Yet what did they do?
Through the Affordable Care Act they handed more power and control over
to the insurers and the pharmaceutical firms, leaving us at their mercy,
even though mercy is not a quality found in amoral corporations.

These injustices would not be tolerated in a single payer system.

Friday, April 24, 2015

qotd: John McDonough on Vermont’s single payer lesson

The New England Journal of Medicine
April 23, 2015
The Demise of Vermont's Single-Payer Plan
John E. McDonough, Dr.P.H., M.P.A.

On December 17, 2014, Vermont Governor Peter Shumlin publicly ended his
administration's 4-year initiative to develop, enact, and implement a
single-payer health care system in his state.

In reality, the Vermont plan was abandoned because of legitimate
political considerations.

In many states, legislators continue filing bills to establish state
single-payer systems. Because of Vermont's failure, their path is both
clearer and more difficult. Any other state considering this path will
find obstacles similar to Vermont's.

In the early 1990s, I served as a Massachusetts legislator who took a
turn as the state's leading single-payer advocate. After years of
failure, I reluctantly concluded that single payer is too heavy a
political lift for a state. Though the economic case is compelling, our
body politic cares about more than just economics. In 2011, many
observers thought that Vermont, a small and progressive state, was the
ideal locale in which to try single payer. No more.

At some point, perhaps 5 to 15 years from now, as the size and scope of
Medicare, Medicaid, and the ACA subsidy structure balloon far beyond
today's larger-than-life levels, our political leaders may discover the
inanity of running multiple complex systems to insure different classes
of Americans. If advanced by the right leaders at the right time, the
logic of consolidation may become glaringly evident and launch us on a
new path. If such consolidation is to occur, like it or not, I believe
it will happen federally and not in the states — and no time soon.

From the audio:

"People who like the state approach refer to how the Canadian health
care system started with the adoption of universal coverage for hospital
services in the province of Saskatchewan back in the 1940s, and that is
the idealized model. I just am unclear, unsure, doubtful how relevant
that model is in an advanced developed system like those in the United
States and the fifty states at this point."

(John McDonough is a professor of public health practice and director of
the Center for Executive and Continuing Professional Education at the
Harvard T.H. Chan School of Public Health.)

NEJM article and audio:


Comment by Don McCanne

Professor John McDonough, as an academic and as a legislator, has long
been in the trenches with single payer. He knows what he is talking about.

The problem with using Saskatchewan as a model for reform in the United
States is that Canada began with a clean slate whereas we have complex
federal and state financing systems that will need to be replaced.
States alone cannot do it without federal action.

Though we need federal reform, it will not happen in the immediate
future since the politics are not in alignment. We need to intensify our
efforts with the basics: education, coalitions, and grassroots organizing.

Until we get the politics aligned, activists should continue advocating
for whatever state reforms are possible that would move us closer to
health care justice. But do not let up in the least on the drumbeat for
a single payer national health program - an improved Medicare that would
cover everyone.

Wednesday, April 22, 2015

qotd: Why are the elderly reluctant to support health care for all?

The New York Times
April 22, 2015
Obamacare, Hands Off My Medicare
By Thomas B. Edsall

A number of factors underpin the anti-redistributionist shift in public
opinion that I wrote about last week.

First, and perhaps most important, is the emergence of significant
resistance to downward redistribution among the elderly, a major voting

The views of older voters deserve scrutiny. They "worry that
redistribution will come at their expense, in particular via cuts to
Medicare," Vivekinan Ashok, a Ph.D. candidate in political science at
Yale; Ilyana Kuziemko, a professor of economics at Princeton; and Ebonya
Washington, a professor of economics at Yale, write in a March 2015
Brookings Institution essay, "Support for Redistribution in an Age of
Rising Inequality"— an essay my Times colleague Neil Irwin also
discussed in a recent column that asked why Americans don't want to soak
the rich.

In the end, Ashok, Kuziemko and Washington conclude that "the elderly
have grown increasingly opposed to government provision of health
insurance and that controlling for this tendency explains roughly half
of their declining relative support of redistribution."

What the Brookings essay neglects to explore are the material
circumstances of over-65 voters that might affect their views on
redistribution. Over a third of retirees depend on Social Security for
90 percent or more of their annual income, according to the Social
Security Administration. In the zero-sum competition for federal
dollars, the cost of major spending programs like the Affordable Care
Act has to be made up by spending cuts elsewhere.

The Obama administration has reported that the Affordable Care Act will
be financed in part by $716 billion in Medicare cuts over 10 years.
Somewhat improbably, the administration also contends that cuts of this
magnitude will not reduce services to Medicare beneficiaries.

The decline in support among the elderly in the United States for
redistributive social spending stands in contrast to Britain, Germany,
Sweden and Australia where Ashok, Kuziemko and Washington found that
older people were more supportive of redistribution than those of
working age. In most European countries, health care is guaranteed
regardless of age, while in the United States, before the enactment of
the Affordable Care Act in 2010, only the elderly were guaranteed health
coverage through Medicare.

This lends support to the authors' conclusion that "seniors, a group
unique in having guaranteed health insurance during our sample period,
may increasingly feel that expansions of redistributive programs could
come at their expense."

Further increasing anxiety among the aged in the United States is the
shift from defined benefit pensions, which guarantee payments, to
defined contribution pensions, which do not.

"Our best assessment is that retirees are falling short and will fall
increasingly short over time," Alicia H. Munnell, Matthew S. Rutledge
and Anthony Webb, researchers at Boston College's Center for Retirement
Research, wrote in November 2014.

"The new demographic transition is a longevity transition: how will
individuals and societies respond to mortality decline when almost all
of the decline will occur late in life?" Karen N. Eggleston, director of
the Stanford Asia Health Policy Program, and Victor R. Fuchs, professor
emeritus of economics at Stanford write in a 2012 study. The combination
of longer lives and unreliable pension benefits increases retirees'
dependence "on transfers from the working population for living
expenses, including large consumption of medical care," Eggleston and
Fuchs note.

In his new book, "The Business of America Is Lobbying," Lee Drutman, a
senior fellow at the New America Foundation, provides insight into a
crucial element of this power shift.

Beginning in the early 1970s, just as support for redistribution began
to decline, "corporate America began to devote attention and meaningful
resources to politics," Drutman writes. "The 40-year trend has
overwhelmingly moved in one direction: growth. Corporate lobbying
expenditures now dwarf the comparable investments of unions" and public
interest or citizen groups.

From 1998 to 2012, the ratio of corporate/trade association lobbying
spending to union/public interest group spending went from 22 to one to
34 to one, Drutman found.

In a November 2014 article "The Ideological Asymmetry of the American
Party System," Yphtach Lelkes of the University of Amsterdam, and Paul
Sniderman of Stanford, both political scientists, develop an intriguing
argument on how Republicans have mobilized public opposition to
Democratic social policies that initially carried strong popular support.

The conservative strategy, they write, is to portray "social welfare
policies as benefiting particular interest groups rather than society as
a whole." The more the electorate sees a policy or program as
"particularistic" — as opposed to universalist — the less backing the
public will give the program.

On a broader scale, the political scientists Jacob Hacker and Paul
Pierson, in their chapter of the 2013 book "Representation: Elections
and Beyond," have sought to understand the logic of working-class white
"support for the G.O.P. in an era of runaway inequality."

Hacker and Pierson argue that not only has business mobilized for over
four decades now, but so, too, have conservative foundations, think
tanks and the religious right.

"There was a common theme linking these disparate trends: all of them
worked to diminish the presence of organized voices addressing the
economic concerns of ordinary Americans in Washington," Hacker and
Pierson write. "G.O.P. electoral inroads among less affluent voters have
occurred alongside declining public confidence in government and growing
perceptions that politicians are excessively responsive to 'special
interests.' "

The authors add, "In this context, calls for limited government and
self-reliance receive greater hearing, especially when there are few
contrary organizational signals pushing voters the other way."


Comment by Don McCanne

A half century ago, when the nation seemed ready to ensure health care
for everyone, it was decided instead to establish programs for the two
groups with the greatest needs: Medicare for retirees and Medicaid for
the poor. It was intended that Medicare eventually would be expanded to
include everyone.

As it turns out, these two programs have such strong political support
that they not only survived the half century, they will be perpetuated
indefinitely as a result of the decision to enact the the policies
contained in the Affordable Care Act rather than to expand Medicare, as
originally intended.

Thomas Edsall provides us with a background of understanding why our
seniors so passionately support Medicare while demanding that we keep
the government out of their Medicare. No matter how progressive a
person's views are, there is always an element of self-interest, and
quite appropriately so. Edsall, in expanding on his
anti-redistributionist article of last week, explains that seniors are
concerned that further redistribution to others risks reduction of
redistribution to themselves, though they might not think of it in those
terms. It is this fear that has contributed to declining support by our
seniors for health care for all.

Of course, conservatives, through massive lobbying efforts, have
leveraged this view to convert it into policy. Those who would suffer
the most through a reduction in redistribution have been particularly
tenacious in clinging to the idea that greater benefits for others would
reduce benefits for themselves. You know that's true because it's on Fox

In reality, a well designed system of redistribution would improve
benefits for everyone. The cost would be borne disproportionately by
those who are already spending massively to thwart programs of social

Thomas Piketty and others have shown us that disproportionate taxation
(progressive taxes) is precisely what we need, and the concentration of
income and wealth at the top is so great that the lifestyles of the rich
would not be impaired in the least. But just try to tell that to the
elderly lady carrying the picket sign stating, "KEEP GOVERNMENT HANDS

Tuesday, April 21, 2015

qotd: Price gouging by drug manufacturers

The Boston Globe
April 20, 2015
State questions rise in overdose drug price
By Brian MacQuarrie

Attorney General Maura Healey is demanding that companies selling
naloxone in Massachusetts explain why the cost of the drug, which is
used to reverse heroin overdoses, has skyrocketed since former governor
Deval Patrick declared a public health emergency a year ago.

The drug, often marketed under the brand name Narcan, has become a
critical tool for emergency workers who use it to revive overdose
victims. Without Narcan, thousands of overdoses during the past few
years would have resulted in deaths, authorities have said.

To help ensure that distributors are not taking advantage of a sudden
surge in demand, Healey's office last week asked the distributors to
provide detailed records of all naloxone sales to public entities in
Massachusetts since April 1, 2014, less than a week after Patrick's
declaration made the drug available to all first responders.

Since then, price increases "have strained access to this life-saving
medication at exactly the moment when it is most needed," the companies
were told in certified letters. "Our office has heard regularly from
local law enforcement and public health workers worried about their
ability to maintain supplies."

Healey's office sent certified letters requesting answers by April 30 to
Moore Medical of Farmington, Conn.; Bound Tree Medical of Dublin, Ohio;
McKesson Corp. of San Francisco; and Southeastern Emergency Equipment of
Wake Forest, N.C.

Kristin Hunter, a spokeswoman for McKesson Corp., told the Globe that
the company "does not set wholesale prices or the retail drug prices
paid by consumers or health plans."

Those prices often are set by the manufacturer. Staff from Healey's
office identified Amphastar Pharmaceuticals of Rancho Cucamonga, Calif.,
as the producer of much of the naloxone used in Massachusetts, and said
they have been in discussions with the company about pricing since February.

Amphastar officials did not return repeated phone calls from the Globe
requesting comment.


Comment by Don McCanne

Drug manufacturers recently have been engaged in outrageous pricing
practices for essential drugs that they produce - the hepatitis C drugs
being an egregious example.

Narcan - a crucial life saving drug that reverses narcotic overdoses -
now has much wider distribution since it has become available to first
responders. The manufacturer - Amphastar Pharmaceuticals - in what has
to be more than a mere coincidence, chose this time to sharply increase
the price of this drug.

When the market is dysfunctional, it is the responsibility of government
to intervene. The United States has shirked its responsibility. We need
to revise our approach.

A single payer national health program functions as a monopsony - a
single purchaser of products and services. In private markets,
monopsonistic pricing can be as evil as monopolistic pricing like the
example of Narcan. The difference with a government monopsony is that it
gets pricing right - an adequate price to be sure that products and
services remain available, yet at a price that does not gouge the
taxpayers who fund the system.

Monday, April 20, 2015

qotd: Do Americans believe that health care is a right?

The New York Times
April 15, 2015
Has Obamacare Turned Voters Against Sharing the Wealth?
By Thomas B. Edsall

With the advent of the Affordable Care Act, the share of Americans
convinced that health care is a right shrank from a majority to a minority.

This shift in public opinion is a major victory for the Republican
Party. It is part of a larger trend: a steady decline in support for
redistributive government policies. Emmanuel Saez, an economics
professor at Berkeley and one of the nation's premier experts on
inequality, is a co-author of a study that confirms this trend, which
has been developing over the last four decades. A separate study, "The
Structure of Inequality and Americans' Attitudes Toward Redistribution,"
found that as inequality increases, so does ideological conservatism in
the electorate.

The erosion of the belief in health care as a government-protected right
is perhaps the most dramatic reflection of these trends. In 2006, by a
margin of more than two to one, 69-28, those surveyed by Gallup said
that the federal government should guarantee health care coverage for
all citizens of the United States. By late 2014, however, Gallup found
that this percentage had fallen 24 points to 45 percent, while the
percentage of respondents who said health care is not a federal
responsibility nearly doubled to 52 percent.

"The Structure of Inequality and Americans' Attitudes Toward
Redistribution," suggests that Democratic programs providing
tax-financed benefits to the poor are facing growing hostility. The
author of the paper, Matthew Luttig, a Ph.D. candidate in political
science at the University of Minnesota, found that while "numerous
political theorists suggest that rising inequality and the shift in the
distribution of income to those at the top should lead to increasing
support for liberal policies," in practice, "rising inequality in the
United States has largely promoted ideological conservatism."

I asked two experts, Jacob Hacker, a political scientist at Yale, and
Robert Frank, an economist at Cornell, if Luttig's conclusions are
consistent with their own research, and both said he is on target.

"The General Social Survey shows there has been a slight decrease in
stated support for redistribution in the US since the 1970s, even among
those who self-identify as having below-average income," according to
Saez and his three co-authors, Ilyana Kuziemko, a professor at Columbia
Business School, Michael I. Norton, a professor at Harvard Business
School, and Stefanie Stantcheva, a junior fellow at Harvard.

Even worse for Democrats, the Saez paper found that "information about
inequality also makes respondents trust government less," decreasing "by
nearly twenty percent the share of respondents who 'trust government'
most of the time."

The findings of the Saez group are consistent with Luttig's. Taken
together, they suggest that even if Democrats win the presidency and the
Senate in 2016, largely on the basis of favorable demographic trends,
the party will confront serious hurdles if it attempts to deliver
material support to working men and women and the very poor.
Redistribution is in trouble, and that is likely to tie American
politics in knots for many years to come.

Matthew Luttig: The Structure of Inequality and Americans' Attitudes
Toward Redistribution

Ilyana Kuziemko, Michael I. Norton, Emmanuel Saez, and Stefanie
Stantcheva: How Elastic Are Preferences for Redistribution? Evidence
from Randomized Survey Experiments


Comment by Don McCanne

Thomas Edsall states that, as income and wealth inequality have
expanded, the number of Americans who believe that health care is a
right has declined from a majority to a minority. Of particular concern
is Matthew Luttig's finding, supported by others, that "rising
inequality in the United States has largely promoted ideological

What mechanism might explain this? Gilens and Page have shown that the
very wealthy have control over the political process. Part of that
control is through the media and other forms of public communication.

Redistribution (or transfer) refers to the process of collecting taxes,
largely progressive, and distributing those funds based on public need.
Some public services benefit everyone, but other services
disproportionately benefit those with basic needs who do not otherwise
have the funds to pay for them.

Those who benefit from tax reduction have been successful in creating
the meme that government redistribution through tax and spending
policies is is an inappropriate role of government, a concept that,
ironically, is especially prevalent amongst the poor and relatively

Quoting from Kuziemko, Saez, et al (link above):

"About 5,000 respondents were randomized into treatments providing
interactive information on U.S. income inequality, the link between top
income tax rates and economic growth, and the estate tax. We find that
the informational treatment has very large effects on whether
respondents view inequality as an important problem. By contrast, we
find quantitatively small effects of the treatment on views about policy
and redistribution: support for taxing the rich increases slightly,
support for transfers to the poor does not, especially among those with
lower incomes and education."

Further, they state:

"An exception is the estate tax — we find that informing respondents
that it affects only the very richest families has an extremely large
positive effect on estate tax support, even increasing respondents'
willingness to write to their U.S. senator about the issue."

In addition:

"We also find that the treatment substantially decreases trust in
government, potentially mitigating respondents' willingness to translate
concerns about inequality into government action."

So what can we make of this?

The nation strongly supports Social Security and Medicare - both very
important programs that involve redistribution - yet the topic of
redistribution is rarely mentioned in discussions of these programs,
with the exception of those who would reduce redistribution by
privatizing these programs.

Although many have concerns about redistribution of income, that does
not seem to carry over to their views on redistribution of wealth. When
people understand the degree of wealth inequality and the selective
application of estate taxes, they become even more supportive of taxing
those large estates.

Just as people believe the meme that "the government can't do anything
right," even though they truly support most specific government
programs, people seem to be swayed by the newly implanted meme that
redistribution is a function of a government that cannot be trusted,
even though they support specific programs involving redistribution.
This seems to represent the phenomenon wherein empty rhetoric threatens
to spill over into policy positions.

Conservatives and libertarians do support catastrophic insurance plans -
clearly a private sector redistribution from those who do not experience
specific losses to those who do. So the opposition is not to the concept
of redistribution itself, but rather it is an ideological opposition to
the government role in redistribution.

A component of this opposition is the objection to being forced to
participate in a redistribution pool such as health insurance coverage.
Some individuals would prefer to accept the risk of personal financial
ruin even if their losses are passed onto their fellow Americans. It is
the latter reason that establishes the legitimacy of the government in
requiring participation of all - preventing individuals from electing to
be free riders at a cost to the rest of us. Nobody supports policies
requiring themselves to pay more to cover those who shirk their
responsibilities to pay their own share (ideally through equitable taxes).

So do Americans believe that health care is a right? The answer is
muddled by rhetorical memes, but, in general, they actually do believe
that the financing of health care is a collective responsibility.

Friday, April 17, 2015

qotd: Drew Altman on public versus private control of spending

The Wall Street Journal
April 16, 2015
Public vs. Private Health Insurance on Controlling Spending
By Drew Altman

The Federal Office of the Actuary in the Centers for Medicare and
Medicaid Services has charted the annual rate of increase in spending
for Medicare, Medicaid, and private health insurance. As the chart (at
the link below) shows, by cumulative growth in per capita spending,
Medicare and Medicaid have generally grown more slowly than private
insurance and are projected to continue doing so through 2023. Per
capita spending is an especially useful measure for comparing public and
private health insurance spending because it shows how much Medicare,
Medicaid, and private insurers spend on each person irrespective of the
number of people covered.

Overall… it appears that public programs control per capita spending
somewhat more effectively than private coverage does. That may be just
the opposite of what many would presume in a country where the private
market is generally expected to outperform the public sector.

Here's another way to think about it: While Medicare and Medicaid are
far from perfect, the purchasing power and policy levers available to
large public programs appear to give them an edge over our fragmented
private insurance system when it comes to controlling spending.

(Drew Altman is president and chief executive officer of the Kaiser
Family Foundation.)


Comment by Don McCanne

One of the primary purposes of the Affordable Care Act was to control
health care spending. After five years, the impact on spending appears
to be negligible except for a slight decline in use of beneficial
services as a result of higher deductibles and less accessible provider
networks - exactly the wrong way to control health care spending.

The data is right out front for all the world to see: large public
programs are clearly more effective than our fragmented private
insurance system when it comes to controlling spending.

The Affordable Care Act experiment has already failed. It's time for
single payer.

Wednesday, April 15, 2015

qotd: Florida and Texas should be ashamed, but what about New York and California?

The Commonwealth Fund
April 10, 2015
Health Care Coverage and Access in the Nation's Four Largest States
By Petra W. Rasmussen, Sara R. Collins, Michelle M. Doty, Sophie Beutel

In this brief we use data from the Biennial Survey to examine
differences in health insurance coverage, cost-related problems getting
needed care, and medical bill problems and debt among adults ages 19 to
64 in the nation's four largest states.

The four largest states in the U.S.—California, Florida, New York, and
Texas—fall into two distinct categories. The first group is represented
by California and New York, both of which are operating their own health
insurance marketplaces and have expanded eligibility for Medicaid to
adults who earn at or below 138 percent of the federal poverty
level—about $16,000 for an individual or $32,000 for a family of four.3
Florida and Texas, the second group, are using the federal marketplace
to enroll residents in health plans and have declined to expand Medicaid
eligibility. In this new analysis of data from the Commonwealth Fund
Biennial Health Insurance Survey, we find that, in 2014, there were
larger shares of uninsured adults in Florida and Texas compared with
California and New York. In addition, adults in Florida and Texas were
more likely to report not getting needed care because of cost and to
report having problems paying medical bills.

Percent of adults ages 19-64 who are uninsured

12% - New York
17% - California
21% - Florida
30% - Texas

Percent of adults ages 19-64 who experienced cost-related access problems

30% - New York
31% - California
43% - Florida
43% - Texas

Percent of adults 19-64 reporting medical bill problems or medical debt

29% - New York
24% - California
42% - Florida
41% - Texas


The analysis suggests that the health policy decisions made by state
leaders matter. Of the four states studied, New York has had the longest
history of legislation aimed at enhancing the availability of affordable
coverage. California also implemented an early expansion of Medicaid
eligibility and, based on federal survey data, both states began
achieving declines in their adult uninsured rate earlier than other
states. Both have taken advantage of opportunities granted by the
Affordable Care Act to further expand the reach of coverage and access.
Alternatively, Florida and Texas, while experiencing robust enrollment
in private plans through the federal health insurance marketplace, have
not expanded Medicaid eligibility and have made less headway in reducing
their uninsured populations.

While there have been significant declines in the number and share of
uninsured adults since the major provisions of the Affordable Care Act
went into effect in 2014, coverage gaps are leaving millions uninsured
and without access to affordable coverage. An estimated 3.7 million
people have fallen into the Medicaid coverage gap in states that have
not yet expanded eligibility for Medicaid.

In addition, the law does not provide access to any new coverage options
for unauthorized immigrants. They are ineligible for Medicaid coverage
and cannot purchase private plans through the marketplace, either
subsidized or unsubsidized. The Congressional Budget Office estimates
that by 2020, 30 percent of the remaining uninsured will be unauthorized
immigrants, or about 9 million people. Another part of the law that is
leaving people uninsured is the so-called "family coverage glitch,"
which defines affordability—and eligibility for subsidies—based on the
cost of individual, rather than family, coverage. Currently, an
estimated 2 million to 4 million people are uninsured because of this issue.

The analysis also indicates that expanded coverage is necessary to
improve access to care and reduce medical financial burdens among U.S.
families. But the quality and comprehensiveness of coverage across all
sources of insurance (marketplace plans, individual plans,
employer-provided coverage, and Medicaid), will ultimately determine the
degree to which these problems are lessened for U.S. families.


Comment by Don McCanne

New York and California have fully implemented the provisions of the
Affordable Care Act whereas Florida and Texas have not. As a result,
Florida and Texas have more people who are uninsured, more people who
experience cost-related access problems, and more people with medical
bill problems or medical debt.

Although the leaderships of Florida and Texas should be ashamed for
failing to implement the programs that would ensure that more residents
receive the health care that they need, the leaderships of New York and
California should be ashamed as well for not demanding changes in our
health care financing system that would ensure health care for everyone.
The numbers in the tables above for these two "exemplary" states are
disgraceful and would not be tolerated by any other wealthy nation.

Incremental patches are grossly inadequate. We need a single payer
national health program.

Tuesday, April 14, 2015

qotd: John Geyman: Why the private health insurance industry has to go

April 8, 2015
Why the Private Health Insurance Industry Has to Go
By John Geyman, MD

The private health insurance industry in the U.S. has had a long run
since shifting to medical underwriting and a for-profit status in the
early 1960s. It finds itself increasingly dependent on the government as
the costs and prices of health care have continued upward since the
1980s. Its many perks from government include tax exemptions for
employer-sponsored insurance (ESI), privatized Medicare and Medicaid
programs, and longstanding over-payments to Medicare Advantage programs.
The Affordable Care Act (ACA) has added to these perks since 2010 with
subsidized premiums through the exchanges, a "risk corridor system" to
protect insurers from losses, and allowing automatic self-renewal for
2015 plans.

Incremental attempts to contain health care costs and reform the system
since the 1990s have built upon our current multi-payer financing
system. After five years' experience with the ACA, we now know that
insurers themselves are a major barrier to achieving the kind of access
to affordable care that our population so desperately needs.

Here are some of the major reasons why private health insurers warrant
no further bailout by government and taxpayers.

1. Continued discrimination against the sick.

Despite the supposed consumer protections in the ACA, a 2014 letter from
more than 300 patient advocacy groups to the Secretary of Health and
Human Services described continuing ways that insurers still
discriminate against the sick, including benefit designs that limit
access, high cost-sharing, restrictive drug formularies, inadequate
provider networks, and deceptive marketing practices. A recent study by
Kaiser Family Foundation found that only one-third of households with
incomes between 100 percent and 250 percent of poverty have enough
liquid assets to pay their deductibles, while only about one-half can
meet out-of-pocket limits. As other examples, Wellpoint developed an
algorithm to search its database for patients with breast cancer with an
intent to cancel their policies, while many insurers place all drugs
used to treat such complex diseases as cancer, multiple sclerosis and
HIV in the highest drug formulary cost-sharing tiers, thereby reducing
insurers' costs but making the drugs unaffordable for many patients.

2. Fragmentation, inefficiency, and exorbitant administrative overhead.

There are some 1,300 private insurers still trying to maximize their
income by avoiding the costs of sicker patients. Their administrative
overhead is more than five times higher than that of the single-payer
program in two Canadian provinces; the overhead of private Medicare
Advantage plans averages 19 percent vs. the 1.5 percent for traditional
Medicare. Although the ACA set limits of 20 percent for overhead in the
individual market and 15 percent in large-group markets, a recent study
has found that those requirements had no effect on insurers' overhead
spending over the first three years of the ACA.

3. Increasing costs for less coverage

The ACA provided insurers with four levels of coverage—the so-called
"metals"—with actuarial values (what insurers pay vs. what patients pay)
ranging from 60 percent (bronze) 70 percent (silver) to 80 percent
(gold) and 90 percent (platinum). Not content with those levels of
coverage, the industry through its trade group, America's Health
Insurance Programs (AHIP), has been lobbying hard for copper plans with
only 50 percent actuarial value. Silver plans have been the most popular
on the exchanges, so that patients are left with almost one-third of
their costs, plus the cost-sharing that was required to get and maintain
their policies. All this has led to an epidemic of underinsurance,
whether the plans are purchased through the ACA exchanges or through the
private insurance markets. The ACA has made the mistake of focusing on
raising the numbers of Americans with "insurance", but has not been
effective in containing prices or costs of health care, with the result
that an increasing proportion of these costs are shifted to patients and
families. One-half of bronze plans in seven large U.S. cities require
enrollees to pay the deductible (often $5,000) before covering a
doctor's visit.

4. Gaming the ACA for profits more than service to patients

There are many examples of this, starting with Medicare Advantage. Many
insurers have been cited by the Centers for Medicare & Medicaid Services
(CMS) for serious violations of Medicare's patient protection
requirements, including inappropriate denial of coverage and failure to
consider physicians' clinical information. Humana, one of the largest
Medicare Advantage insurers in the country, is facing scrutiny from the
U.S. Department of Justice for its risk-adjustment practices, which
"upcode" the severity of patients' illnesses in order to gain increased
reimbursement, even as they lobby Congress for continued high
over-payments. Meanwhile, some insurers are marketing short-term plans
that last less than 12 months, evading any of the ACA's requirements.

5. Private insurance has priced itself out of the market.

Premiums keep going up at rates much higher than the cost of living,
with little or no containment by regulators. As examples, MetroPlus, a
popular new entrant on the New York exchange in 2014, has requested rate
hikes of up to 28 percent in 2015 for some of its enrollees, while
Florida Blue, the state's largest insurer, has announced an average rate
increase of 17.8 percent for 2015. One can argue that the private
insurance industry should be regarded as obsolete and not worth saving.
However, the ACA has extended its life, including almost $2 trillion in
federal subsidies over the next ten years (if these subsidies survive a
U.S. Supreme Court ruling on their legality in coming months). Insurers
have focused on attracting enrollees with low premiums, high
cost-sharing, and low levels of actual coverage. Large insurers such as
Wellpoint (Anthem) and Humana expect to receive $5.5 billion in 2015
through the ACA's "risk corridor" provision that protects them from

6. As their business plan dictates, insurers are leaving unprofitable
markets without regard for patients' needs.

Private health insurers are all about making money, so they leave
unprofitable markets regardless of the public's needs. A recent example
is Blue Shield of California (which just lost its state tax-exempt
status with a surplus of more than $4 billion), which withdrew from 250
zip codes in California throughout the state in 2014.

Based on the above, the time has come for us to replace private health
insurers with a more efficient, not-for-profit single-payer financing
system—national health insurance (NHI)—which could be enacted by passage
of H. R. 676, Expanded and Improved Medicare for All.


Geyman, JP. How Obamacare Is Unsustainable: Why We Need a Single Payer
Solution for All Americans. Friday Harbor, WA, Copernicus Healthcare,

Other references are available at either link below.

PNHP Blog:

Huffington Post (Same article):


Comment by Don McCanne

Those supporting further implementation of the Affordable Care Act (ACA)
while rejecting more comprehensive reform are trying to make the
overpriced and inadequate private health plans work for us. John Geyman
reminds us of some of the reasons why the private plans are actually the
cause of several of the problems we face today. We need to replace them
with a single payer national health program.

Friday, April 10, 2015

qotd: Krugman: Government does health insurance better

The New York Times
April 10, 2015
Where Government Excels
By Paul Krugman

Like all advanced nations, America mainly relies on private markets and
private initiatives to provide its citizens with the things they want
and need, and hardly anyone in our political discourse would propose
changing that. The days when it sounded like a good idea to have the
government directly run large parts of the economy are long past.

Yet we also know that some things more or less must be done by
government. Every economics textbooks talks about "public goods" like
national defense and air traffic control that can't be made available to
anyone without being made available to everyone, and which
profit-seeking firms, therefore, have no incentive to provide. But are
public goods the only area where the government outperforms the private
sector? By no means.

One classic example of government doing it better is health insurance.
Yes, conservatives constantly agitate for more privatization — in
particular, they want to convert Medicare into nothing more than
vouchers for the purchase of private insurance — but all the evidence
says this would move us in precisely the wrong direction. Medicare and
Medicaid are substantially cheaper and more efficient than private
insurance; they even involve less bureaucracy. Internationally, the
American health system is unique in the extent to which it relies on the
private sector, and it's also unique in its incredible inefficiency and
high costs.


Comment by Don McCanne

Next week, when the Senate returns from its break, they will likely
approve House-passed H.R.2 - the "SGR fix" - a bill that is being used
as a vehicle to move Medicare closer to privatization by taking small
incremental steps in increasing Medicare premiums and deductibles -
features that are more characteristic of private individual plans than
public social insurance programs.

Paul Krugman reminds us that governments are better at providing health
insurance. So we should reject the current bipartisan efforts that are
moving us further in the direction of converting Medicare from a public
insurance program into a premium support model (defined contribution
vouchers) of a market of private health plans.

This week's taxpayer boost given by the Obama administration to the
private Medicare Advantage plans - the fourth such devious boost in the
past four years - enhances the private plans to set them up as a model
for privatized Medicare. Is there no stopping this?

Wednesday, April 8, 2015

qotd: A Cadillac tax for Chevy health care

April 6, 2015
'Cadillac tax' the next big Obamacare battle
By Brian Faler

A mix of business groups and labor unions are pushing to tee up the next
big Obamacare fight: killing its so-called Cadillac tax.

Though the nickname suggests it will apply to a select few, experts say
a majority of employers could eventually face the prospect of imposing
what will be the first-ever tax on health care benefits.

At issue is a 40 percent excise tax on the health benefits companies
provide their workers above a certain threshold. In 2018, the tax will
hit insurance and related perks valued at more than $10,200 for singles
and $27,500 for families. So for family benefits worth $30,000, the tax
would apply to the $2,500 that's above the limit.

Unions, which often have generous health benefits and have opposed the
tax since the law's inception, say the looming levy is already becoming
a factor in their contract negotiations.

"Employers are coming to the table asking for cuts in benefits based on
their preliminary projections around the tax," said Shaun O'Brien,
assistant policy director for health and retirement at the AFL-CIO,
which backs repeal.

The National Education Association, which is also demanding the tax be
rescinded, issued a report Thursday complaining it would
disproportionately hit women and older workers.

Congress pegged the tax threshold to a relatively slow measure of
inflation. It's linked to the consumer price index plus 1 percent, even
though medical costs typically grow much faster. Private health care
spending per enrollee will grow by an average of 5.6 percent annually
over the next decade, according to the Congressional Budget Office,
while inflation will increase by 2 percent per year.

About one-third of employers will be hit by the tax in 2018 if they do
nothing to change their plans, according to a March survey by Mercer, a
benefits consulting firm. By 2022, almost 60 percent will be facing the

"'Cadillac tax' is really a misnomer," said Beth Umland, Mercer's
director of research for health and benefits. "Potentially any employer
could be hit by this tax."

Former Obamacare adviser Jonathan Gruber, in one of the now-infamous
videos that emerged late last year, said rising medical costs ensure the
Cadillac tax will eventually all but eliminate the break companies get
for providing health insurance.

Economists in both parties have been pushing the idea for decades as a
way to slow health care costs, because it amounts to a cap on benefits.

That's a good thing, many say, because overly generous insurance shields
beneficiaries from costs, which encourages them to use more services,
driving up prices for everyone else. It's also a matter of fairness,
some say, because forgoing taxes on health care benefits amounts to a
major break for those with jobs offering coverage.

"Capping the tax benefit for employer-sponsored health insurance, I
think, is a great idea," said Len Burman, head of the nonpartisan Tax
Policy Center. "Providing an open-ended subsidy for health insurance,
which encourages people to get plans that do less to restrain spending,
contributes to rising health care costs. Most economists who've looked
at health care spending have concluded that."

Congress' independent budget scorekeepers have said Obamacare won't add
to the deficit, and why the tax will be tough to repeal. The levy, which
is projected to generate $87 billion over a decade, ramps up slowly, but
is estimated to eventually produce so much money that it alone will
cover the cost of providing insurance subsidies through the program's


National Education Association (NEA)
March 13, 2015
"What Does the ACA's Excise Tax on High-Cost Plans Actually Tax?"
An NEA-Commissioned Report by Milliman

Why Did NEA Commission an Actuarial Firm to Assess the Excise Tax on
High-Cost Plans?

Always suspecting the term "Cadillac Tax" to be highly misleading, NEA
hired the actuarial firm Milliman to determine whether the excise tax on
high-cost plans is really a tax on overly generous health plans. In
addition, NEA has a much higher percentage of older and female workers
than the national workforce, so we asked Milliman whether the tax
corrects for the impact of age and sex on premiums.

What Does the Excise Tax Really Tax?

The actuaries found that "although the excise tax is often referred to
as a tax on overgenerous health benefits, it is likely to be a tax based
on factors other than benefit richness and beyond the control of health
plan members."

For example, Milliman tested the relative impact on premiums of plan
benefits and other factors. The actuaries concluded that, compared to
their benchmark, geography had a potential 69.3 percent impact on
premiums, meaning that area-specific health care costs alone could boost
a $9,189 premium in 2018 to $15,556. Among their other findings:
Premiums could increase by as much as 15.7 percent for plans with
provider networks that have low negotiated discounts for doctors,
hospitals, and others. In contrast, plan benefits in the study only
increased premiums by as much as 6.2 percent.

The excise tax was designed to push employers to cut employees' health
benefits, but with factors other than health plan generosity driving tax
liabilities, the resulting benefit reductions will be arbitrarily
damaging to millions of employees and their families.

What Role Does Geography Play in Generating Tax Liabilities?

Milliman concluded that geography-related premium differences will "lead
to much higher premiums and substantial taxable costs in many parts of
the country." When the actuaries tested benefits typical of gold- level
health insurance exchange plans, they found that plan members' location
alone would trigger the excise tax in many places, even when the same
gold-level benefits in other places would not.

They found, for example, that the premium for a gold-level plan in San
Francisco, California, would be 37 percent higher than the exact same
plan's premium if it were in Huntington, West Virginia. In fact, they
found striking disparities all over the country.

Does the "Age and Gender Adjustment" Correct for the Impact of Age and
Sex on Premiums?

Congress knew that the excise tax on high-cost plans could be unfair to
women and older workers, but Milliman concluded that the tax's attempt
to fix the problem "fails to compensate for the impact on premiums of
age and sex in many parts of the country." As a result, health plan
members' age and sex could contribute to excise tax liabilities. It also
means that women and older workers could be disproportionately hurt by
tax-spurred benefit cuts.

Milliman - Full report


Comment by Don McCanne

The Affordable Care Act's "Cadillac tax" is a 40 percent excise tax on
spending on employer-sponsored plans that falls above a given threshold.
It has three primary purposes:

1) As the revenues from this excise tax increase through the years, they
will eventually pay much of the costs of the subsidies provided through
the exchange plans,

2) The tax should eventually displace much of the current regressive tax
expenditures that subsidize employer-sponsored plans, and

3) The tax should incentivize employers to reduce health benefits
offered to their employees, thereby making employees better health care
shoppers by increasing their exposure to out-of-pocket costs when
accessing health care.

"Cadillac tax" is a label that creates the impression that the excise
tax is applied primarily to plans with exceedingly generous benefits
that only the wealthiest amongst us would purchase - a sector that could
easily afford the excise tax. That is not true. According to the
Milliman study commissioned by the NEA, the tax may apply to the
baseline Blue Cross and Blue Shield standard benefit option offered
through the Federal Employees Health Benefit Program.

What we have traditionally considered to be standard health plans -
"Chevy plans" - are now considered to be "Cadillac plans." These are
plans that union members have paid for through forgone wage increases -
wage concessions merely to maintain standard health care coverage, not
"Cadillac" coverage.

This attitude that standard coverage is somehow a "Cadillac" plan shows
how much the definition of standard coverage has deteriorated. Under the
Affordable Care Act, the benchmark plans in the exchanges are silver
plans with an actuarial value of 70 percent (patient pays 30 percent of
costs) whereas standard employer-sponsored plans formerly had an
actuarial value closer to 90 percent (patient pays 10 percent of costs).

What is particularly alarming about the Milliman study is that they show
the tax will be applied inequitably based not only on the generosity of
the benefits, but also based on factors over which employees have very
little control such as age, sex, geographical location, the size of the
risk pool, and the industry in which they work. Lower-income individuals
with lower actuarial value plans under these circumstances could still
be assessed the excise tax. That is really unfair. It is also possible
that these factors could allow high-income individuals with very
generous plans to escape the excise tax.

So let's look again at the three purposes of this excise tax:

1) An unfair tax is being used to fund administratively-complex
subsidies in exchanges that were designed to revitalize the private
insurance industry. Instead, the dysfunctional, inequitable, multi-payer
system should have been replaced with an equitably-financed, efficient,
publicly-administered single payer system.

2) The regressive tax expenditures that subsidize employer-sponsored
plans do need to be eliminated, but they need to be replaced with
equitable progressive financing - the type of financing that
characterizes a well designed single payer system.

3) Requiring individuals to assume control of health care spending as a
means of controlling costs has become a pathological obsession within
the policy and political communities. Requiring patients to spend money
that they do not have is a blunt instrument that prevents patients from
receiving beneficial services that they should have. Costs can be
controlled more effectively through an administratively efficient single
payer system that provides prepaid health care with first dollar coverage.

There is growing bipartisan support to eliminate this unfair tax, but
then what would happen? Both parties would search for new revenues to
replace the tax while leaving in place this overpriced system that
serves us so poorly that was perpetuated and expanded by the Affordable
Care Act. What we really need instead is a single payer national health

Tuesday, April 7, 2015

CMS gives another boost to Medicare Advantage plans

Centers for Medicare and Medicaid Services (CMS)
April 6, 2015
Fact Sheet: Moving Medicare Advantage and Part D Forward

On April 6, CMS released final updates to the Medicare Advantage and
Part D programs through the 2016 Rate Announcement and Call Letter. The
finalized policies will continue to strengthen the growing Medicare
Advantage program, and continue the successful implementation of the
Affordable Care Act's reforms that improve quality and provide greater
protections for beneficiaries and value for taxpayers.

Recent Trends in Medicare Advantage and Part D

* Enrollment continues to grow – MA enrollment has increased by 42
percent since passage of the Affordable Care Act in 2010 to an all-time
high of more than 16 million beneficiaries, with nearly 30 percent of
Medicare beneficiaries enrolled in an MA plan.

* Plan quality continues to improve – In 2015, 60 percent of MA
enrollees will be enrolled in a 4 or 5 star plan, compared to an
estimated 17 percent back in 2009.

* Premiums remain affordable – Average premiums today are lower than
before the Affordable Care Act went into effect, dropping 6 percent
between 2010 and 2015.

2016 Rate Announcement

Expected Average Change in Revenue

1.05% - 2016 Advance Notice
3.25% - 2016 Rate Announcement

Effective Growth Rate

1.7% - 2016 Advance Notice
4.2% - 2016 Rate Announcement

Updated Growth Rate

The 2016 rate announcement reflects an underlying per capita growth of
1.9 percentage points of additional FFS spending for 2014 and 2015 and
0.6 percent for 2016, and 0.1 percent for the assumption that Congress
will enact the pending legislation to permanently fix the SGR. The
updated growth rates reflect the Office of the Actuaries' best estimate
of Medicare spending and are not the product of discretionary CMS
policy. The underlying per capita FFS costs continue to demonstrate a
historically slow health care growth rate and that growth rate remains
below the per capita gross domestic product growth rate. Initial
information from Medicare actuaries suggests that contributing factors
behind the change from the preliminary growth rate include higher than
expected spending on inpatient hospitalizations and some intermediary
services such as therapy, rural health clinics and federally qualified
health centers. As always, when changes occur, we'll continue to watch
developments closely and work to understand these factors in greater detail.

Value-Based Contracting

In January 2015, the Secretary announced the Administration's vision for
moving the health care system toward paying providers based on quality
rather than the quantity of care they provide. In the Call Letter, CMS
continues to signal an intention to begin working with plans
participating in Medicare Advantage to better understand, through a
voluntary effort, the extent to which they use value-based payment
models to compensate providers offering services to their enrollees.


Morning Consult
March 30, 2015
Seniors Love Their Medicare (Advantage)
By Meghan McCarthy

Whether enrolled in traditional Medicare or Medicare Advantage, Morning
Consult polling shows Americans aged 65 and older expressing high levels
of satisfaction with their federal health benefits. But when asked about
individual pieces of their insurance—like prescription drug coverage,
the benefits that are covered, and preventive care—seniors using
Medicare Advantage reported higher satisfaction rates, sometimes by

The poll of 3,975 seniors found that 85 percent of seniors on
traditional Medicare said they were satisfied with their plan, compared
to 88 percent of seniors on Medicare Advantage.

Despite registering nearly identical satisfaction levels for the overall
programs, 80 percent of seniors on Medicare Advantage said they were
satisfied with the overall cost of their plans, compared to 68 percent
of traditional Medicare seniors. The gap in satisfaction appeared in
every individual measure, with Medicare Advantage proving more popular
every time.

Robert Berenson, a Medicare expert at the Urban Institute who previously
served on the Medicare Payment Advisory Commission, said seniors on
Medicare Advantage often get more benefits and have to pay less out of
pocket, because the federal government ends up paying more per
beneficiary when compared to traditional Medicare.

"Medicare Advantage plans provide better benefits, and overall costs are
less, but plans get paid more—with favorable selection—to be able to do
that," Berenson said in an interview. A March MedPAC report found that
Medicare Advantage plans would be paid 2 percentage points more than
traditional Medicare in 2015.

Berenson also noted that traditional Medicare often covers the sickest
and poorest seniors, and they might have a more negative view of their
insurance, and health care in general.

With more seniors signing up for the program, insurers are getting more
help from Congress to pressure the Obama administration to protect
payment rates from any reductions.


Comment by Don McCanne

CMS has done it again. For the fourth year in a row, CMS has used
innovative methods to boost the payment rates for Medicare Advantage
plans, more than compensating for the required reductions in
overpayments mandated by the Affordable Care Act.

Although this year's Advance Notice called for a 1.05% increase in
Medicare Advantage revenue, CMS has responded to an intensive campaign
orchestrated by AHIP - the insurance lobby organization - by increasing
revenue by 3.25% instead. Members of both parties in Congress were
involved in this lobbying function - 239 from the House and 53 from the

Although many factors are considered when determining payment increases
for Medicare Advantage plans, this year's surprise discovery of new
funds was predominantly in the updated effective growth rate of
fee-for-service (FFS) Medicare - a rate of 4.2% as opposed to their
Advanced Notice estimate of 1.7%. They explain that this is their "best
estimate" of FFS Medicare spending and "not the product of discretionary
CMS policy," though they say, "the underlying per capita FFS costs
continue to demonstrate a historically slow health care growth rate."

This continued overpayment to private Medicare Advantage plans has
allowed the insurers to offer greater benefits with lower out-of-pocket
costs, and that is what has made the plans popular - demonstrated by a
40 percent increase in enrollment between 2010 and 2015. Little is said
about the fact that the majority of the overpayments are retained by the
insurers for administrative costs and profits. Robert Berenson confirms
how these overpayments have made the plans more popular in polls such as
that from Morning Consult, whereas "traditional Medicare often covers
the sickest and poorest seniors, and they might have a more negative
view of their insurance, and health care in general." The Happy Healthy
are in the private plans, and the Sad Sick are in traditional Medicare.

The march to Medicare privatization moves forward, aided and abetted by
both Democrats and Republicans in Congress and in the Administration.
Enabling better benefits and lower beneficiary costs for private
Medicare Advantage plans, while leaving those in the traditional, less
expensive FFS Medicare program devoid of these additional benefits,
continues to incentivize the shift to private plans. Next week another
step forward will occur with the enactment of the "SGR fix" which will
expand somewhat the use of premiums and deductibles in the traditional
Medicare program, but not in the Medicare Advantage plans.

Where is citizen action on all of this? Are we headed to "Medicare for
None" with "Private Plans for All." Keep in mind that the purpose of
privatization is to shift the costs of health care from the government
(collectivism) to individuals (freedom). That surely cannot be what
Martin Luther King Jr meant when he dreamed of being "free at last."
What are we doing to his dream?

Thursday, April 2, 2015

What impact do consumer-directed health plans really have?

National Bureau of Economic Research
March 2015
NBER Working Paper 21031
Do "Consumer-Directed" Health Plans Bend the Cost Curve Over Time?
By Amelia M. Haviland, Matthew D. Eisenberg, Ateev Mehrotra, Peter J.
Huckfeldt, and Neeraj Sood


"Consumer-Directed" Health Plans (CDHPs) combine high deductibles with
personal medical accounts and are intended to reduce health care
spending through greater patient cost sharing. Prior research shows that
CDHPs reduce spending in the first year. However, there is little
research on the impact of CDHPs over the longer term. We add to this
literature by using data from 13 million individuals in 54 large US
firms to estimate the effects of a firm offering CDHPs on health care
spending up to three years post offer. We use a
difference-in-differences analysis and to further strengthen
identification, we balance observables within firm, over time by
developing weights through a machine learning algorithm. We find that
spending is reduced for those in firms offering CDHPs in all three years
post. The reductions are driven by spending decreases in outpatient care
and pharmaceuticals, with no evidence of increases in emergency
department or inpatient care.

From the Introduction

At the firm level, we find that CDHP offer is associated with an
approximately 5 percent reduction in total health care spending in each
of the three years after CDHPs were introduced relative to cost growth
observed for non-offering employers. The long term decreases in spending
are focused in outpatient care and drugs and there is little impact on
inpatient or emergency department spending. If these effects are due
only to changes in health care spending among those enrolled in CDHPs,
they imply local average treatment effects for those enrolled in CDHPs
of an approximately 15 percent reduction in total spending in each the
first three years. Differences in impacts by CDHP plan structure are not
statistically significant. However, consistent with our hypotheses, the
pattern of the point estimates suggests that the impact of CDHPs is
greater when paired with HSAs (versus HRAs) and when employers make
smaller account contributions.

From the Summary and Discussion

This study substantially adds to our knowledge on the long term cost
impacts of CDHPs. We estimated spending trends for three years across
over 13 million people across the country in an analysis estimating CDHP
impacts without the threat of individual level selection bias. We find
that health care cost growth among firms offering a CDHP is
significantly lower in each of the first three years after offer. This
result suggests that, at least at large employers, the impact of CDHPs
persists and is not just a one-time reduction in spending. However, an
important caveat is that the decrease in spending may be smaller in year
3 compared to year 1 post-offer. Recognizing that the differences are
not statistically significant, these results are suggestive and
consistent with a decreasing impact of CDHPs over time.

The decreases in total spending growth observed are primarily due to
reductions in spending on outpatient care and pharmaceuticals. In
contrast, by the third year there are no differences in either emergency
department or inpatient spending.

The results presented here are limited to large employers and therefore
may not extend to Medicaid beneficiaries, the individual or small group
market, or to the health insurance exchanges where, on average,
deductibles and out of pocket maximums are higher and/or enrollees have
fewer financial resources. While the firms in this study were
specifically selected to have lower income employees, all families had
at least one adult working full time with benefits so they are typically
better off than families not offered employer sponsored insurance.

In summary, in the first large multi-employer study to investigate long
term CDHP spending impacts we find reductions in health care cost growth
in all three years post CDHP offer and do not detect increases in any
component of health care spending. These findings do not support either
the concern that decreases in spending will be a one-time occurrence or
that short-term decreases in spending with a CDHP will result in
increases in spending in the long term due to complications of forgone
care. We cannot rule out either of these concerns developing over an
even longer time frame.


Comment by Don McCanne

This study will no doubt be used to claim that high deductible health
plans with health savings accounts (CDHPs - consumer-directed health
plans) are effective in reducing health care spending without causing
any harm. However, the conclusions that can be drawn are far more limited.

The observed reductions of spending by those offered CDHPs by their
employers were in outpatient care and drugs. The nature of these
services may enable shopping for lower prices, but they also are
services that frequently are used for medical problems of lower acuity
which enables patients to make decisions as to whether or not they will
forgo the medical services and/or prescriptions offered. These services
may be for important interventions that could improve quality of life or
even longevity, or they could be for interventions that would have no
significant impact on health, or they could be for interventions in
between these extremes that might have only a modest beneficial impact
such as transient symptom relief. From other studies it is known that
patients decline not only care that they perceive to be of little value,
but when faced with deductibles, they often do decline care that is
clearly beneficial.

Those who would claim that this study shows that no harm was done after
enrolling in a CDHP point to the observation that being in a CDHP did
not increase hospitalizations nor increase the use of emergency
departments during the first three years of enrollment.

The reason this conclusion should be challenged is based on the fact
that the population studied was the relatively healthy workforce and
their healthy families in healthy years of their lives. It is highly
unlikely that a very modest decline in outpatient visits and
prescriptions would have directly resulted in crisis care requiring
emergency department visits or hospitalizations during the first three
years on the program, and thus these outcomes were an insensitive
indicator of harm. The rate of these interventions in the relatively
healthy control group was the same, as would be expected. Also, by
limiting the outcomes studied to only these two, the study remained
insensitive to other potentially beneficial results of obtaining health
care, if nothing more than relief on receiving reassurance over concerns
that patients may have had about their health.

This study has the same limitation of the oft-cited RAND Health
Insurance Experiment which also studied a healthy population for a
limited time in healthy years of their lives. These studies may have
intrinsic validity for the populations studied, but they do not have
extrinsic validity, particularly for an older, sicker population that
also has been shown to forgo care when faced with deductibles.

This study asked if CDHPs bend the cost curve over time (title). The
study showed that spending by employers was reduced 5 percent in each of
the three years following the introduction of CDHPs. Since not all
employees were enrolled in CDHPs, they theorized that the reduction in
spending for those in CDHPs was about 15 percent. Even there, a 15
percent reduction in spending on a population that has minimal need for
hospitalization and emergency department visits - where much of our
total health care spending lies - certainly does not equate to anywhere
near a 15 percent reduction in our total health care spending.

Remember that 80 percent of health care is used by the 20 percent of
people with serious health problems. Almost all of that spending is well
in excess of the deductibles and thus is not sensitive to consumer shopping.

Further, since employers insure the healthiest and least costly sector
of our population, the 5 percent savings that they gained is only a drop
in the bucket of our total national health expenditures. You won't see
much bend in this cost curve, especially if you alter policies so that
patients do receive the beneficial services that they should have, but
might otherwise forgo.

If we are going to bend the cost curve, let's not do it through methods
that reduce beneficial health care services. Let's do it though ways
that eliminate wasteful spending, such as the administrative excesses
imposed on us by the private insurers and public payers operating in a
fragmented, dysfunctional system. Let's enact a single payer national
health program instead.