Friday, May 29, 2015
The Wall Street Journal
May 27, 2015
Antitrust Lawsuits Target Blue Cross and Blue Shield
By Anna Wilde Mathews
Blue Cross and Blue Shield health insurers cover about a third of
Americans, through a national network that dates back decades. Now,
antitrust lawsuits advancing in a federal court in Alabama allege that
the 37 independently owned companies are functioning as an illegal cartel.
A federal judicial panel has consolidated the claims against the
insurers into two lawsuits that represent plaintiffs from around the
country. One is on behalf of health-care providers and the other is for
individual and small-employer customers.
The antitrust suits allege that the insurers are conspiring to divvy up
markets and avoid competing against one another, driving up customers'
prices and pushing down the amounts paid to doctors and other
The suits, which name all of the Blue Cross and Blue Shield companies as
defendants as well as the Blue Cross Blue Shield Association, have
already survived the insurers' first major legal challenge.
The Blue Cross and Blue Shield companies trace their roots to the 1930s,
when hospital and doctor groups started insurance plans to help people
pay for medical care. Hospital plans used the Blue Cross name, and the
physician plans were sold under the Blue Shield banner. Eventually, the
names were trademarked.
Today, the Blue Cross Blue Shield Association licenses the brands to the
insurers that use them. Companies typically hold exclusive rights to the
Blue Cross and Blue Shield names within a certain territory.
Most of the 37 Blue Cross and Blue Shield companies are not-for-profit.
Many do business in a single state. The biggest Blue Cross and Blue
Shield company is publicly traded Anthem Inc., which operates the plans
in 14 states. In a few places, Blue-branded plans compete directly
against one another, as in California, where Anthem Blue Cross battles
Blue Shield of California.
"This is a model that has withstood scrutiny over our entire history,"
said Scott Nehs, general counsel of the Blue association. "There's no
smoky room involved, there's no dividing up." Also, he said, the
insurers' rates are closely watched by state regulators.
The plaintiffs, however, allege that the Blue association is controlled
by its members, who use it to engage in "illegal market division." The
customer suit says the association also limits the amount of insurance
business insurers can do under non-Blue brands. The suit also alleges
that the Blue agreements result in "inflated premiums."
"You have less competition in a market, so prices are higher," said
William Isaacson, an attorney with Boies, Schiller & Flexner LLP, which
represents the customer plaintiffs. "That's one of the basics of
The plaintiffs have "some surprisingly strong claims," said Mark Hall, a
professor at Wake Forest University School of Law. "It's sort of
antitrust law 101 that direct competitors can't agree to divvy up their
Comment by Don McCanne
Although this lawsuit is basically over whether or not the Blue Cross
Blue Shield Association and its 37 licensees are functioning as an
illegal cartel, its significance for those of us interested in health
care reform is much deeper. Even the best of the private insurers can
become corrupted when they operate under the rules of the free
marketplace, which is quite a contrast to the rules under which a public
program such as Medicare operates, or should operate.
This is not to say that government bureaucrats are never corrupt. Rather
the point is that, whereas corrupt bureaucrats would be ferreted out and
prosecuted for their illegal acts, the business world thrives on
manipulating markets to serve their own interests. A government
bureaucrat whose function it is to help citizens obtain and finance
their health care is guided by an ethic that places the patient first,
whereas an intermediary that creates a business entity designed to
manage the money that flows within the health care system functions
under an amoral business ethic.
The executives of the Blue Cross Blue Shield entities are not crooks.
But look at the largest one of all - Anthem Blue Cross. Read any of its
annual reports and the emphasis is primarily on enhancing investor
value. Though most Blue Cross Blue Shield plans are nonprofit, they
adopt the same innovations as the for-profits that are trying to gain an
advantage in the competitive markets. In California, it is difficult to
see any differences between the innovative leader - for-profit Anthem
Blue Cross - and nonprofit Blue Shield of California that has adopted
the same business innovations.
What about Medicare? The traditional Medicare program is subject to
abuses by the health care providers - abuses which occur with private
plans as well - but these abuses are prosecuted in the public sector
whereas the private sector seems to consider them to be business as usual.
An example is the approach to current outrageous drug prices. Public
programs such as Medicaid and the VA demand fair pricing in contrast to
the modest marketplace discounts that protect the excessive profits of
not only the pharmaceutical firms but also the intermediary pharmacy
benefit managers. The latter is good business whereas the former is good
governance. There is a difference.
Yet there is a serious problem that has crept into our Medicare program,
and that is the expanding privatization of Medicare through the private
Medicare Advantage plans. We have recited repeatedly the abuses of this
industry stemming largely from their adherence to "good business
practices" - behavior that covertly shortchanges the taxpayers who
finance Medicare while enhancing profits for their passive investors.
It will be interesting to see if the courts determine the prohibition of
geographic overlapping of the Blue Cross Blue Shield trademarks to be
anticompetitive behavior. But do we really care? If we were to establish
one uniform public program that covered everyone, this issue goes away.
at 9:40 AM
Thursday, May 28, 2015
Capital New York
May 27, 2015
Assembly passes universal health care bill
By Dan Goldberg
The state Assembly on Wednesday voted for a single-payer health bill,
the first time in more than two decades the chamber has taken up the
The vote was 89-47, an overwhelming but largely symbolic step toward
universal health insurance. The bill now heads to the
Republican-controlled Senate where it is not expected to pass.
Assemblyman Richard Gottfried, chair of the health committee, gave an
impassioned speech on the floor in support of the New York Health Act,
arguing that it was long past time for New Yorkers to rid themselves of
the intrusive insurance companies whose goal is to deny claims rather
than provide care.
The plan's benefits, Gottfried said, would be more generous than any
plan on the current market, and there would be no co-pays or deductibles.
One problem, pointed out by Republicans, is that the offering, while
generous, is the opposite of what public health officials are pushing,
including those in the Cuomo administration, who have professed that
insurance systems, and high deductibles and co-pays help ensure people
use the health system judiciously instead of opting for more, often
"There is a role for insurance companies," state health commissioner Dr.
Howard Zucker said Wednesday before the debate.
The passing of the Affordable Care Act, which subsidizes private
insurance for people below a certain income level, was a valid effort,
Gottfried said, but ultimately served to highlight why the system needs
to be entirely scrapped.
"I think the A.C.A. has made it clear to people ... there are profound
problems in our health care system that cannot be addressed by
incremental change in that system," Gottfried said.
Comment by Don McCanne
Although there remains considerable political resistance to the concept
of a universal public health insurance program, the fact that Richard
Gottfried's New York Health Act passed the Assembly by such a wide
margin, 89-47, shows that there is very strong support for single payer
reform amongst many politicians and the voters who support them.
The policies incorporated in a publicly-administered and
publicly-financed single payer model of health care financing are vastly
more efficient and effective than a fragmented, multi-payer model such
as that perpetuated by the Affordable Care Act. But better policy alone
does not equate with an improved understanding of the models. That is
why coalitions, education, and grassroots support is so important. These
activities in New York undoubtedly contributed to moving the bill
through the Assembly.
In an email message, Mark Dunlea, co-founder of Single Payer New York,
listed coalition members supporting the New York Health Act:
"New York Health has been endorsed by the NYS Academy of Family
Physicians, NYS American Academy of Pediatrics, NYS Nurses Association,
Committee of Interns and Residents, Doctors Council SEIU, NY chapter of
Physicians for a National Health Program, SEIU 1199, NYS AFL-CIO,
Communications Workers of America, Amalgamated Transit Union Local 1056
and 1179, United Auto Workers 9 & 9A, UFCW Local 1500, Capital District
Area Labor Federation, Local 32BJ SEIU, NYSUT, United Federation of
Teachers, Working Families Party, Green Party, Citizen Action, StateWide
Senior Action Council, NYPIRG, League of Women Voters, and others."
Those of us at Physicians for a National Health Program are particularly
proud of the contribution of the New York Metro chapter of PNHP.
The lesson is clear. The health policies enacted through the Affordable
Care Act, though of some limited benefit, are grossly inadequate when
considering the need that exists. When people understand that there is a
far better option, they will support it. Obviously we have much more
work to do, so it is imperative that we step up our efforts in educating
the public and in mobilizing grassroots efforts through coalition
at 10:56 AM
Wednesday, May 27, 2015
Health Affairs Blog
May 27, 2015
The Post-Launch Problem: The Affordable Care Act's Persistently High
By David Himmelstein and Steffie Woolhandler
Last year we, and many others, drew attention to the chaotic and costly
roll out of the Affordable Care Act's (ACA) exchanges. The chaos is
mostly over (unless King prevails over Burwell), but the costs will
linger on. The roughly $6 billion in exchange start-up costs pale in
comparison to the ongoing insurance overhead that the ACA has added to
our health care system — more than a quarter of a trillion dollars
Bloated Administrative Costs
Between 2014 and 2022, CMS projects $2.757 trillion in spending for
private insurance overhead and administering government health programs
(mostly Medicare and Medicaid), including $273.6 billion in new
administrative costs attributable to the ACA. Nearly two-thirds of this
new overhead — $172.2 billion — will go for increased private insurance
Most of this soaring private insurance overhead is attributable to
rising enrollment in private plans which carry high costs for
administration and profits. The rest reflects the costs of running the
exchanges, which serve as brokers for the new private coverage and will
be funded (after initial startup costs) by surcharges on exchange plans'
Government programs — primarily Medicaid — account for the remaining
$101.4 billion increase in overhead. But even the added dollars to
administer Medicaid will flow mostly to private Medicaid HMOs, which
will account for 59 percent of total Medicaid administrative costs in
2022. (The subcontracting of Medicaid coverage to private HMOs has
nearly doubled Medicaid's administrative overhead, which has risen from
5.1 percent of total Medicaid expenditure in 1980 to 9.2 percent this year).
The $273.6 billion in added insurance overhead under the ACA averages
out to $1,375 per newly insured person per year, or 22.5 percent of the
total federal government expenditures for the program.
Insuring 25 million additional Americans, as the CBO projects the ACA
will do, is surely worthwhile. But the administrative cost of doing so
seem awfully steep, particularly when much cheaper alternatives are
Traditional Medicare runs for 2 percent overhead, somewhat higher than
insurance overhead in universal single payer systems like Taiwan's or
Canada's. Yet traditional Medicare is a bargain compared to the ACA
strategy of filtering most of the new dollars through private insurers
and private HMOs that subcontract for much of the new Medicaid coverage.
Indeed, dropping the overhead figure from 22.5 percent to traditional
Medicare's 2 percent would save $249.3 billion by 2022.
The ACA isn't the first time we've seen bloated administrative costs
from a federal program that subcontracts for coverage through private
insurers. Medicare Advantage plans' overhead averaged 13.7 percent in
2011, about $1,355 per enrollee. But rather than learn from that
mistake, both Democrats and Republicans seem intent on tossing more
federal dollars to private insurers. Indeed, the House Republicans'
initial budget would have voucherized Medicare, eventually diverting
almost the entire Medicare budget to private insurers (the measure
passed by the House on April 30 dropped the "premium support" voucher
In contrast, a universal single payer system would pare down both
insurers' and providers' overhead, yielding huge administrative
savings — $375 billion in 2012 according to one recent estimate.
In health care, public insurance gives much more bang for each buck.
Comment by Don McCanne
Although there are innumerable major problems with having used the
Affordable Care Act to reform health care, one of the more significant
deficiencies that we pointed out well in advance was that the design
would add significantly to the excessive administrative burden that
already characterized the U.S. health care system. This study quantifies
that additional burden.
These additional administrative costs amount to $1,375 per newly insured
person per year, an astonishing 22.5 percent of the total federal
government expenditures for the program. Between 2014 and 2022, $273.6
billion in new administrative costs will be attributable to ACA.
The two primary goals of those involved in reforming health care were to
expand coverage to everyone (well, almost everyone) and to control
health care spending. Because of design defects, tens of millions will
be left uninsured, and tens of millions more will be have inadequate
coverage, leaving them vulnerable to health care costs — certainly
falling short of what should have been our goals in expanding coverage.
Regarding controlling spending, the experimental innovations to date
have had little impact in reducing wasteful spending but rather seem to
have slowed health care costs by erecting financial barriers to
beneficial health care services. Not only did the designers fail to use
this opportunity to reduce the profound administrative waste unique to
the U.S. health care financing system, they added significantly to this
waste, as this study demonstrates.
Single payer would fix these problems. Administrative waste would be
dramatically reduced and the savings would be used to expand coverage to
absolutely everyone while eliminating financial barriers to care. We
simply need the political resolve to do it.
at 11:17 AM
Tuesday, May 26, 2015
Health, Medicine and Justice
Designing a Fair and Equitable Healthcare System
By Joshua Freeman, M.D.
I hope that this book complements the others (by Donohoe, Geyman, Young,
and others), offering a perspective that combines a physician's
knowledge of medical care and how it is delivered, a scholar's
understanding of the organization of the health system, social
determinants of of health and health disparities, a caring person's
commitment to justice and equity, and an activists's desire to change
the world. I hope it is of some value.
Chapter 1: Why Do We Have a Healthcare System?
Chapter 2: The U.S. Healthcare System: Best in the World?
Chapter 3: The Social Determinants of Health and Health Inequities
Chapter 4: Impact of the U.S. Health System on the Health of the Public
Chapter 5: Primary Care: The Essential Basis for an Effective
Chapter 6: The Role of Medical Education in Perpetuating the Health System
Chapter 7: Graduate Medical Education
Chapter 8: Assessing Appropriate Healthcare: Sometimes the Best Thing
to Do Is Nothing
Chapter 9: The Role of Profit in U.S. Health Care
Chapter 10: Solutions and Projected Outcomes
Health, Medicine and Justice, by Joshua Freeman:
Josh Freeman's Blog: Medicine and Social Justice:
Comment by Don McCanne
Many books have been written about the problems and potential solutions
for our health care system. This one stands out because it represents
the informed views of a noted physician educator who is also a health
and social justice activist. He hopes the book is "of some value," and
it assuredly is.
Joshua Freeman is a leader in primary care, both as a practitioner and
as an academic, being the Chair of the Department of Family Medicine at
the University of Kansas Medical Center. He has an excellent
understanding of our disorganized health care system and of the social
determinants of health and health inequities. He has studied extensively
medicine and social justice, and shares his views through his blog. This
book brings to print the basis of his passionate activism in support of
equitable health care for all.
As the nation meanders on with implementation of the well-meaning but
intolerably deficient policies of the Affordable Care Act, this book can
give us renewal in our efforts to educate the nation on the policies
that actually would work to bring affordable and equitable health care
at 9:39 AM
Friday, May 22, 2015
The New Yorker
May 11, 2015
An avalanche of unnecessary medical care is harming patients physically
and financially. What can we do about it?
By Atul Gawande
Could pointless medical care really be that widespread? Six years ago, I
wrote an article for this magazine, titled "The Cost Conundrum," which
explored the problem of unnecessary care in McAllen, Texas, a community
with some of the highest per-capita costs for Medicare in the nation.
But was McAllen an anomaly or did it represent an emerging norm? In
2010, the Institute of Medicine issued a report stating that waste
accounted for thirty per cent of health-care spending, or some seven
hundred and fifty billion dollars a year, which was more than our
nation's entire budget for K-12 education. The report found that higher
prices, administrative expenses, and fraud accounted for almost half of
this waste. Bigger than any of those, however, was the amount spent on
unnecessary health-care services. Now a far more detailed study
confirmed that such waste was pervasive.
I decided to do a crude check. I am a general surgeon with a specialty
in tumors of the thyroid and other endocrine organs. In my clinic that
afternoon, I saw eight new patients with records complete enough that I
could review their past medical history in detail. One saw me about a
hernia, one about a fatty lump growing in her arm, one about a
hormone-secreting mass in her chest, and five about thyroid cancer. To
my surprise, it appeared that seven of those eight had received
Virtually every family in the country, the research indicates, has been
subject to overtesting and overtreatment in one form or another.
Another powerful force toward unnecessary care…: the phenomenon of
overtesting, which is a by-product of all the new technologies we have
for peering into the human body.
Overtesting has also created a new, unanticipated problem:
overdiagnosis. This isn't misdiagnosis—the erroneous diagnosis of a
disease. This is the correct diagnosis of a disease that is never going
to bother you in your lifetime.
My last patient in clinic that day, Mrs. E., a woman in her fifties, had
been found to have a thyroid lump. A surgeon removed it, and a biopsy
was done. The lump was benign. But, under the microscope, the
pathologist found a pinpoint "microcarcinoma" next to it, just five
millimetres in size. Anything with the term "carcinoma" in it is bound
to be alarming—"carcinoma" means cancer, however "micro" it might be. So
when the surgeon told Mrs. E. that a cancer had been found in her
thyroid, which was not exactly wrong, she believed he'd saved her life,
which was not exactly right. More than a third of the population turns
out to have these tiny cancers in their thyroid, but fewer than one in a
hundred thousand people die from thyroid cancer a year. Only the rare
microcarcinoma develops the capacity to behave like a dangerous,
invasive cancer. (Indeed, some experts argue that we should stop calling
them "cancers" at all.) That's why expert guidelines recommend no
further treatment when microcarcinomas are found.
Nonetheless, it's difficult to do nothing. The patient's surgeon ordered
a series of ultrasounds, every few months, to monitor the remainder of
her thyroid. When the imaging revealed another five-millimetre nodule,
he recommended removing the rest of her thyroid, out of an abundance of
caution. The patient was seeing me only because the surgeon had to
cancel her operation, owing to his own medical issues. She simply wanted
me to fill in for the job—but it was a job, I advised her, that didn't
need doing in the first place. The surgery posed a greater risk of
causing harm than any microcarcinoma we might find, I explained. There
was a risk of vocal-cord paralysis and life-threatening bleeding.
Removing the thyroid would require that she take a daily
hormone-replacement pill for the rest of her life. We were better off
just checking her nodules in a year and acting only if there was
H. Gilbert Welch, a Dartmouth Medical School professor, is an expert on
overdiagnosis, and in his excellent new book, "Less Medicine, More
Health," he explains the phenomenon this way: we've assumed, he says,
that cancers are all like rabbits that you want to catch before they
escape the barnyard pen. But some are more like birds—the most
aggressive cancers have already taken flight before you can discover
them, which is why some people still die from cancer, despite early
detection. And lots are more like turtles. They aren't going anywhere.
Removing them won't make any difference.
We've learned these lessons the hard way. Over the past two decades,
we've tripled the number of thyroid cancers we detect and remove in the
United States, but we haven't reduced the death rate at all. In South
Korea, widespread ultrasound screening has led to a fifteen-fold
increase in detection of small thyroid cancers. Thyroid cancer is now
the No. 1 cancer diagnosed and treated in that country. But, as Welch
points out, the death rate hasn't dropped one iota there, either.
(Meanwhile, the number of people with permanent complications from
thyroid surgery has skyrocketed.) It's all over-diagnosis. We're just
What if I recommend not operating on a tiny tumor, saying that it is
just a turtle, and it turns out to be a rabbit that bounds out of control?
Mrs. E., my patient with a five-millimetre thyroid nodule that I
recommended leaving alone, feared doing too little. So one morning I
took her to the operating room, opened her neck, and, in the course of
an hour, removed her thyroid gland from its delicate nest of arteries
and veins and critical nerves. Given that the surgery posed a greater
likelihood of harm than of benefit, some people would argue that I
shouldn't have done it. I took her thyroid out because the idea of
tracking a cancer over time filled her with dread, as it does many
people. A decade from now, that may change. The idea that we are
overdiagnosing and overtreating many diseases, including cancer, will
surely become less contentious. That will make it easier to calm
people's worries. But the worries cannot be dismissed. Right now, even
doctors are still coming to terms with the evidence.
Two hours after the surgery, Mrs. E.'s nurse called me urgently to see
her in the recovery room. Her neck was swelling rapidly; she was
bleeding. We rushed her back to the operating room and reopened her neck
before accumulating blood cut off her airway. A small pumping artery had
opened up in a thin band of muscle I'd cauterized. I tied the vessel
off, washed the blood away, and took her back to the recovery room.
I saw her in my office a few weeks later, and was relieved to see she'd
suffered no permanent harm. The black and blue of her neck was fading.
Her voice was normal. And she hadn't needed the pain medication I'd
prescribed. I arranged for a blood test to check the level of her
thyroid hormone, which she now had to take by pill for the rest of her
life. Then I showed her the pathology report. She did have a thyroid
cancer, a microcarcinoma about the size of this "O," with no signs of
unusual invasion or spread. I wished we had a better word for this than
"cancer"—because what she had was not a danger to her life, and would
almost certainly never have bothered her if it had not been caught on a
Comment by Don McCanne
Yesterday's Quote of the Day discussed the harm done by our health care
reform agenda that overemphasizes attacking overutilization while
neglecting more compelling goals of reform. Atul Gawande has been one of
the more credible and outspoken voices in raising the alarm on
overutilization, especially with his widely referenced 2009 New Yorker
article on the excessive use of health care services in McAllen, Texas.
But where does Dr. Gawande stand when he is faced with health care
utilization questions regarding his own patients?
In his current New Yorker article, "Overkill," he describes the
overtesting and overdiagnosis of thyroid carcinoma, which, in turn,
results in overtreatment - all manifestations of overutilization of
health care. For his own patient with a very small thyroid nodule, he
recommended leaving it alone - a recommendation that is well supported
in the medical literature.
Yet, apparently because the patient wanted something done, he elected to
remove her thyroid gland. She did turn out to have a microcarcinoma, but
he reports that it "was not a danger to her life, and would almost
certainly never have bothered her." She manifested two common problems
of overutilization: 1) a post-operative complication (hemorrhage
requiring a second operation), and 2) significant costs that were
unnecessary but added to the very high costs of health care paid by all
of us through taxes or insurance premiums.
Thus Dr. Gawande is himself an overutilizer while preaching the evils of
overutilization. Our current policy priorities are to combat
overutilization. What should be done in Dr. Gawande's case? Should he
and the hospital be denied payment for the thyroidectomy? Should he be
assigned low quality scores that will reduce future payments for his
health care services? Should he be disciplined by the appropriate
medical staff committee? Was his violation serious enough to report him
to the state medical licensing board for consideration of disciplinary
No to all of these. He is a highly respected, ethical surgeon who
certainly tries to do the right thing. He did make a clinical decision
that could be challenged, especially in today's environment where
overutilization is the primary target in health care reform.
Most cases of supposed overutilization as reported in many studies, such
as those from Dartmouth, represent similar judgmental decisions in which
opinion as to the optimal way to proceed would vary amongst the best of
authorities, and Dr. Gawande's judgement in this case falls within the
realm of acceptable medical practices (she did have cancer!).
We do not have and likely never will have processes through which we can
identify, with certainty, medical care that should be aborted in advance
because it clearly would constitute overutilization. Complex clinical
settings defy clarity in health care utilization. (There are exceptions
in which clear guidelines can be established, and those guidelines
certainly should be enforced.)
As mentioned yesterday, designing health policy based on overutilization
has been detrimental because it results in concepts such as
patient-driven health care, especially high deductibles, that have
impaired patient access to beneficial medical care and have exposed
patients to financial hardship. It also has generated concepts such as
accountable care organizations that, to this date, have not accomplished
much more than to increase the profound administrative waste that
permeates the U.S. system.
Our efforts should not be directed to trying to ferret out reputable
physicians such as Dr. Gawande, accuse them of overutilization, and
chase them out of the profession. That could be all of us, and who then
would be left to care for patients? (This is not to say that we
shouldn't rein in blatant abusers.)
Instead we should turn our attention to policies that would would make
health care truly universal, comprehensive, equitable, accessible, and
priced appropriately, while increasing efficiencies through policies
that would actually be effective in recovering waste - the prime example
being the replacement of our expensive, fragmented system of financing
care with an efficient single payer national health program.
at 9:18 AM
Thursday, May 21, 2015
Journal of Health Politics, Policy and Law
By Deborah Levine and Jessica Mulligan
Overutilization is commonly blamed for escalating costs, compromising
quality, and limiting access to the US health care system. Recent
estimates suggest that nearly one-third of health care spending in the
United States is a result of unnecessary care. Despite the surge of
exposés that purport to uncover this "new" problem, narratives about
overutilization have been circulating in health policy debates since the
beginnings of the health insurance industry. This article traces how the
term overutilization has spread in popularity from a relatively small
community of mid-twentieth-century insurance experts to economists,
physicians, epidemiologists, and eventually the news media of the early
twenty-first century. A quick glimpse at the history of the term reveals
that there has been constant disagreement and debate over the meaning
and impact of overutilization. Moreover, the term has been put to very
different uses, from keeping socialism at bay to preserving the fiscal
integrity of Medicare to protecting the health of patients. The
overutilization narrative, seductive in its promise of cutting costs
without sacrificing access to quality care, too often drowns out other
difficult conversations about social welfare, health equity, prices, and
Conclusion: Overutilization Has Overreached
For sixty years, overutilization has been a key term in health policy
debates. The term emerged in literature about the potential demise of
voluntary insurance and then spread to new domains: first with inpatient
hospital stays and then eventually with almost every other form of care.
The audience for this narrative expanded as well: from industry insiders
to economists, physicians, public health researchers, the media, and
Utilization review and other techniques for curbing overutilization like
requiring prior authorization, capitated payments, and increasing
patient cost sharing have now been employed by insurers and providers
for decades. Yet the overall impact on health care costs appears
negligible; costs continue to rise. Moreover, some analysts point out
that the United States may be underutilizing a host of important
services relative to other countries, especially primary care.
Overutilization of certain services probably is one of the many problems
in our health care system. But there are grave consequences to
considering overutilization the central problem. For one, the increased
patient cost sharing that is supposed to rein in overutilization has
contributed to a situation in which 31.7 million people with insurance
are considered underinsured because they dedicate such a high proportion
of their household income to medical bills. And as to the sizable
uninsured population, the prospect of expanding coverage has too often
been cast as a menace to the system rather than a laudable and socially
There is a need for a more critical conversation about who wins and
loses thanks to the present system setup. Some work is already happening
in this regard, but it has yet to reach the wide popular audiences and
become "common sense" in the way that overuse has. Academic researchers
have called attention to how much we pay for services and pointed out
that our high prices are largely to blame for runaway health care costs.
Others have argued that risk-pooling techniques need to be resocialized
by turning away from the highly segmented, experience-rated pools that
currently dominate insurance marketplaces. But it is too difficult for
these counternarratives to be heard above the seductive din about
overutilization and the attendant need for individual consumer restraint
that continues to dominate discussions of health care costs in the
Overutilization is a management neologism that has become an economistic
health policy fairy tale where costs can be cut, services denied, and
hospital days reduced with no harm — financial, physical, or otherwise —
to patients, providers, or payers. Curbing overutilization alone will
not redeem our health care system. And real people stand to lose when
reducing utilization and increasing efficiency is seen as the primary
goal of health policies.
Comment by Don McCanne
Yesterday's Quote of the Day message on the prevalence of underinsurance
and its consequences, largely caused by the increased use of high
deductibles designed to decrease utilization of health care, is a prime
example of the pervasiveness of the misguided concept that
"overutilization" needs to be the primary target of reform.
Hopefully this article, "Overutilization, Overutilized," will become a
landmark paper in the chronology of health care reform. The concept of
overutilization of health care has driven much of the political and
policy decisions in our reform efforts. This is tragic because it "too
often drowns out other difficult conversations about social welfare,
health equity, prices, and universal coverage," according to the authors.
The policies designed to correct alleged overutilization have not only
been relatively ineffective in reducing spending to a meaningful degree,
often they have also been harmful, impairing access to health care and
frequently creating financial hardships for those with health care needs.
This is particularly shameful when there remains disagreement on which
particular applications of health care are clearly excessive, and
whether they are truly as pervasive as is often claimed. Further, if
this waste is as common as is often claimed, most of it is not
recoverable because of the difficulty of establishing precise guidelines
that can be applied reliably to complex clinical settings.
We have a much greater problem with health care underutilization and its
adverse consequences which are compounded by policies designed to
The Abstract and Conclusion above describe the general theme of the
article, but the details are important if we are to turn the reform
process into one that aims to provide health care for everyone, and away
from our current processes that are blunt instruments designed to reduce
utilization while ignoring harm to the patient.
For those who do not have access to the current issue of the Journal of
Health Politics, Policy and Law, this article can be downloaded at the
link above for a fee of $15. It is unfortunate that this article is
behind a paywall, because it does need to be distributed widely.
We need to do all that we can to change the dialogue on reform. Instead
of imperiling our health care system with misguided policies to
haphazardly reduce utilization, we need to advance policies that would
make health care truly universal, comprehensive, equitable, accessible,
and priced appropriately, while increasing efficiencies through policies
that would actually be effective in recovering waste - the prime example
being the replacement of our expensive, fragmented system of financing
care with an efficient single payer national health program.
Let's change the narrative.
at 11:35 AM
Wednesday, May 20, 2015
The Commonwealth Fund
May 20, 2015
The Problem of Underinsurance and How Rising Deductibles Will Make It Worse
By Sara R. Collins, Petra W. Rasmussen, Sophie Beutel, Michelle M. Doty
New estimates from the Commonwealth Fund Biennial Health Insurance
Survey, 2014, indicate that 23 percent of 19-to-64-year-old adults who
were insured all year — or 31 million people — had such high
out-of-pocket costs or deductibles relative to their incomes that they
were underinsured. These estimates are statistically unchanged from 2010
and 2012, but nearly double those found in 2003 when the measure was
first introduced in the survey. The share of continuously insured adults
with high deductibles has tripled, rising from 3 percent in 2003 to 11
percent in 2014. Half (51%) of underinsured adults reported problems
with medical bills or debt and more than two of five (44%) reported not
getting needed care because of cost. Among adults who were paying off
medical bills, half of underinsured adults and 41 percent of privately
insured adults with high deductibles had debt loads of $4,000 or more.
Exhibit 2. Underinsured rates among adults ages 19-64 who were insured
all year, by source of coverage at the time of the 2014 survey
20% - Employer-provided coverage
37% - Individual coverage
22% - Medicaid
42% - Medicare (under age 65, disabled)
The rate of growth in medical costs and insurance premiums has slowed in
recent years. However, millions of consumers continue to be saddled with
high out-of-pocket health care costs. While the number of underinsured
people in the United States held constant in 2014, the steady growth in
the proliferation and size of deductibles threatens to increase
underinsurance in the years ahead.
The Affordable Care Act's coverage expansions and protections have
greatly improved the quality of insurance coverage available to people
who lack job-based health benefits. In addition, cost-sharing subsidies
significantly reduce deductibles for people with low incomes who buy
plans in the marketplaces. But those subsidies phase out quickly,
leaving families with deductibles that may be high relative to their
incomes. In addition, the law has only limited ability to improve the
cost protection of employer plans, which is the source of most
American's health insurance.
Reforms and new approaches are needed to improve the cost protection of
health plans. These could include innovations in benefit design that
slow growth in deductibles and emphasize incentives that encourage
people to utilize, rather than delay, timely health care. In addition,
policymakers should identify and address holes in health plans — like
out-of-network physicians in in-network hospitals — which are surprising
many families with unexpected costs. Finally, systemwide efforts to
lower the underlying rate of medical cost growth and share those savings
with consumers will be critical.
Comment by Don McCanne
This update of The Commonwealth Fund's continuing study of the rate of
underinsurance confirms that the problem persists, and the trend of
increasing deductibles may well make it worse.
It is alarming that, since 2003, the category with the most
comprehensive coverage - employer-provided coverage - has doubled the
rate of underinsurance increasing from 10% to 20%. The greatest
contributing factor has been the increase in the use of high deductibles.
Because this study was of individuals insured for a full year, and it
was completed before the end of 2014 - the first year of the ACA
exchanges - the underinsurance rate of enrollees in the exchanges could
not be separated out, and they were included in the category of
individual coverage. In total, 37% of those with individual coverage
were underinsured. This is no surprise since high deductibles have been
used in the individual market in an attempt to prevent premiums from
becoming even less affordable, but this has been at the cost of more
than doubling the rate of underinsurance.
Although we do not have the data yet, we can make some assumptions,
based on plan design, for the trends in underinsurance for those
enrolled in the exchanges. Because of the subsidies for out-of-pocket
expenses for those with the lowest incomes that qualify for the exchange
plans, it is possible that the rate of underinsurance is slightly
reduced for this group. However, for those with moderate incomes,
especially for those who do not qualify for cost-sharing subsidies, the
relatively low actuarial values (percent of costs that the plans cover)
that most exchange enrollees select will likely perpetuate and perhaps
even expand the prevalence of underinsurance. So middle-income Americans
do not escape the risk of being underinsured.
Although Medicaid provides more comprehensive benefits with fewer
out-of-pocket expenses, the very low incomes of Medicaid beneficiaries
leave many of them underinsured since the modest cost sharing that they
do have consumes an excessive percentage of their incomes.
Patients under 65 who receive Medicare do so because of major long-term
disabilities. Since most of them have very limited incomes and other
expenses, and Medicare's comprehensiveness is limited, this group has
the highest rates of underinsurance - 42%. Obviously, when we speak of
Medicare for all, it is imperative that we clarify that we mean an
improved Medicare that has much more comprehensive coverage.
Can this trend be reversed? Can we put in place policies that will
result in reducing or even eliminating the deductibles?
If the plans were to maintain the same actuarial values to keep the
premiums the same while reducing deductibles, the out-of-pocket costs
would shift to those with greater health care needs who already have
enough financial problems. That would defeat one of the most important
functions of health insurance - preventing financial hardship in the
face of medical need.
Another possibility would be to reduce the deductibles and shift the
actuarial values upward, but that would result in sharp increases in
insurance premiums. That would not be acceptable to employers, nor would
it be acceptable to politicians who would have to find revenue sources
to increase the premium subsidies for the exchange plans. It is easy to
cut spending for employers and for the budget hawks in Congress, but it
is almost impossible to reverse the cuts and restore or even expand that
Suppose we leave the higher deductibles in place, but provide enough
subsidies to eliminate underinsurance for everyone. The administrative
complexity alone would make this a very foolish idea. Also when you look
at who is underinsured, you would have to increase the amounts of the
subsidies and expand eligibility to cover many more of the moderate
income individuals in the exchanges, and you would also have to provide
subsidies for those enrolled in employer-provided plans to cover the
increase in deductibles and other cost sharing in those plans. This
would further compound the wasteful administrative excesses that already
characterize our health care financing system.
Do we really need to say it again? A well designed single payer system
would fix this.
at 2:11 PM
Tuesday, May 19, 2015
Health Care Blog
May 14, 2015
Health Plans Poised to Ask for Higher Premiums for 2016, Blue Cross
By Sara Hansard
Look for health plans to request higher rates for 2016, a Blue Cross and
Blue Shield Association (BCBSA) executive warned May 13.
Costs for health plans in 2014 were higher than expected due to fewer
young enrollees signing up for Affordable Care Act plans during the
first year that the major provisions of the law took effect requiring
people to have coverage or pay a fine, Kim Holland, BCBSA director for
state affairs, said at a conference on ACA health insurance exchanges.
That left health plans sold on the ACA exchanges with a high portion of
enrollees who had previously unmet medical needs, such as costly
transplants, Holland said. "Those plan costs were higher and those are
expected to play out in higher rates," she said. "We're starting to see
that now as plan filings are becoming public, and that is likely to
Moreover, she added, it's unlikely that plans will receive much of the
money they had expected from the ACA's risk corridors program, which was
intended to help cover insurers' losses in the event they ended up with
a sicker-than-average population. Too many plans had to cover high
medical bills, leaving too few plans to pay into the fund for the
program, she said.
Holland also warned that there are "unrealistic pressures" on insurers
to keep premiums down. "You cannot have every doctor in your network,
very low copays, broad benefits and lower costs. It just can't work that
way," she said.
Health Insurance Exchange Summit, May 11-13 2015, Washington, DC
Health Plan Strategic Response Roundtable, with Kim Holland (Video, fee
Quote of the Day
August 25, 2010
Affordable Care Act is wrong framework to fix adverse selection
Comment by Don McCanne
Any health care financing system that divides health care funds into
separate risk pools inevitably experiences adverse selection. In fact,
private insurers do all that they can to see that their own risk pools
contain low-cost healthier individuals while shifting higher-cost
individuals into other public or private risk pools.
Adverse selection was not simply an inconvenient policy problem that the
legislators had to fiddle with merely because they rejected the concept
of a single universal risk pool that eliminates the problem of adverse
selection. Far worse, it was a deliberate policy decision supported by
the leadership of the private insurance industry.
The Commonwealth Fund Blog
December 22, 2014
Analysis Finds No Nationwide Increase in Health Insurance Marketplace
A new analysis of the Affordable Care Act's health insurance marketplace
costs finds that, nationwide, marketplace premiums did not increase at
all from 2014 to 2015, though there were substantial average premium
increases in some states and declines in others.
While average premiums nationwide did not change from 2014 to 2015,
there were wide differences across states.
The risk stabilization programs, which include risk adjustment, risk
corridors, and reinsurance, diminish insurers' risk of financial losses
and allow them to price their plans more aggressively.
An outstanding question, however, is the long-term sustainability of
current trends in premiums.
Comment by Don McCanne
Supporters of the Affordable Care Act (ACA) tout the fact that premiums
for plans offered in the ACA exchanges did not increase in the second
year, showing that ACA has been effective in slowing the cost of health
care. Yet Kim Holland, Blue Cross Blue Shield Association director for
state affairs, warns that private insurers will be requesting higher
rates for 2016. How can we explain this?
We warned long ago that ACA would not eliminate adverse selection - the
concentration into insurance risk pools of patients with more expensive
According to Kim Holland, "costs for health plans in 2014 were higher
than expected due to fewer young enrollees signing up for Affordable
Care Act plans," and "that left health plans sold on the ACA exchanges
with a high portion of enrollees who had previously unmet medical needs,
such as costly transplants." Although private insurers have been masters
at gaming adverse selection, they have now become victims of it.
A couple things happened to cause this. First, although HHS claims that
healthier, younger individuals did sign up in large numbers, the
insurers' numbers show that this enrollment was inadequate to dilute the
ACA risk pools. Another factor is that there was a surge in enrollees
who had major unmet medical needs requiring expensive procedures such as
joint replacements or organ transplants. In addition, the risk corridor
program set up to compensate for these greater losses appears to be
inadequate since the the profits in the risk pools insuring healthier
individuals were not large enough to offset the greater losses in the
more expensive pools.
If this is the case, then why didn't the premiums increase for 2015?
That's simple. The insurers had only a few months of experience with
their first year enrollees when they had to submit their premium
requests for 2015. So they had to rely primarily on claims experiences
prior to 2014. Now they are in the process of submitting their requests
for 2016, and they now have a full year's experience demonstrating that
costs actually were higher, at least partly due to adverse selection.
The Commonwealth Fund's report showing that premium increases for 2015
were insignificant should not have been interpreted as showing that
costs did not go up. Costs did go up, but the premiums were based
primarily on the same data used to establish premiums for 2014.
Five years into ACA we now have the right to be in a "we told you so"
mode. We were not prescient. Health policy science is advanced enough to
predict quite accurately the consequences of these policy decisions.
Just think of the multitude of other adverse consequences we have
predicted, and we have not been wrong yet.
We have also predicted the benefits of a properly designed single payer
national health program. We cannot see the results of such a program
here in the United States since we don't have a single payer system (and
Medicare is not single payer because it is only one player in an
administratively inefficient, fragmented system). But other nations do
have single payer systems, and their beneficial results were fully
Ignore health policy science at your own risk, or maybe we should say at
the nation's risk.
at 4:23 PM
Monday, May 18, 2015
Health Research Institute
Money matters: Billing and payment for a New Health Economy
At a glance
The nation's healthcare billing and payment system is an artifact of an
earlier age. Much can be done to improve the system in the short term,
but in the long term, structural change is needed to compete in the New
Key findings include:
* Patients and affluent consumers are most dissatisfied with the
healthcare billing and payment system.
* Cost-conscious millennials are more likely than the general population
to judge healthcare organizations based on their billing practices.
* Consumers and new entrants are beginning to circumvent the
claims-based healthcare payment system, especially in primary care
services and chronic disease management.
* Four in five adults with commercial insurance paid less than $1,000 in
out-of-pocket expenses in a year, according to an HRI analysis.
What this means for your business
* Accelerate the move to digital.
* Embrace simplicity.
* Sidestep claims. The growth of high-deductible plans means more
consumers will pay for care out-of-pocket. New entrants are
reconsidering whether these cash payments require claims. Consumers are
interested, even though receiving credit toward deductibles is more
important than ever.
* Multiply payment options. Offering choices for payment, making payment
easy and helping consumers plan for costs can reduce bad debt and days
in accounts receivable.
Strategy: Sidestep claims
An HRI analysis of commercial claims for over 34 million Americans in
2012 found that 80% paid less than $1,000 in out-of-pocket expenses.
That year, the average annual deductible for an individual was about
$1,000. Nearly half of consumers with commercial insurance incurred less
than $1,000 in medical bills in a year. These consumers are ripe for
poaching by new entrants from the emerging claims-free healthcare economy.
Marcee Chmait, CEO of SpendWell, a new entrant direct-pay marketplace
for healthcare services, said she foresees a future when "cash is king"
in healthcare. Higher deductibles, real-time adjudication of claims and
transparency will phase-out negotiated rates and discounts.
These changes create a true retail shopping experience between buyer and
supplier (consumer and provider). When third party pricing arrangements
are eliminated, pricing falls as suppliers costs fall as suppliers set
their prices directly to their end buyers.
Even as companies targeting consumers with low annual medical expenses
forge a direct-pay economy, the majority of medical costs are borne by a
small percentage of people with serious and chronic illnesses. These
costs require different fixes.
Conclusion: A roadmap
Many improvements can be made in the near-term, from offering consumers
cost and payment information before they arrive for service to
aggregating their medical bills on a simple online site. In the longer
term, the system will need to be re-engineered to accommodate the
millions of consumers paying cash for care. Here's a roadmap for
near-term pain relievers and longer-term fixes:
CURRENT STATE CLAIMS MODEL
* Eligibility verification
* Care delivery/charge capture
* Claim submission
* Claim adjudication
* Payment/advice delivery
NEW HEALTH ECONOMY
* Online shopping for care
* Cost estimates/discussion during scheduling
* Payment information capture upon scheduling
* Discussion of costs and choices
* Loyalty programs enrollment
* Enrollment in online bill management and payment tool
* Loyalty programs
* Subscriptions for primary care and chronic disease management
* Flat-fee services
* Flat-fee model
* Other models
* Loyalty program rewards
* Coverage verification through combined ID and payment card
* Estimates allow out-of-pocket collection
* Discussion of costs and choices
* Menu of prices
* Out-of-pocket payment due at service
Claim acquisition and submission
* Practice management software integrated with payments/claims network
* Capture and processing of claims data
* Eligibility for specific benefits verified prior to claims adjudication
* Determination of provider contract rules and fee schedules
* Capitation determination
* Accumulators updated automatically
* Real-time adjudication of claims
Consumer liability calculation
* Deductible and patient responsibility healthcare calculated at provider
Sophisticated patient payment options
* Consumer payment through multiple accounts
* Flexible payment plan options
* Financial counseling
* Amortization for some treatments
* Verification of funds availability
* Payment authorization
Payment information transmission
* Fund requests and payment transmission
* Payment of consumer liability (next day) • Payment of plan
deductible (1–5 days)
* Real time payment
* Integrated statements for all health related transactions
* Immediate updating of online accounts, web portal or app
Comment by Don McCanne
To better understand what this PwC report is all about, think about the
recent pervasive shift to high-deductible health plans and what that
means for the way the majority of us pay our health care bills, or at
least the way that many in the policy community believe that we should
be paying our bills.
Remember that about 20 percent of us have high health care expenses and
use about 80 percent of our health care dollars. That means that the
other 80 percent of us who are relatively healthy use only 20 percent of
health care funds.
This report confirms what we already knew: 80 percent of individuals
with commercial insurance paid less than $1000 out-of-pocket for medical
expenses. That means that the insurance companies essentially are paying
benefits for primarily the 20 percent with more serious medical
problems. The rest of us are essentially on a cash basis, though with
constraints such as provider networks and contracted provider rates.
If you read the full report, you will see that the medical-industrial
complex is introducing innumerable innovations to try to capture this
cash-and-carry business. Providers are attempting to circumvent
contracted rates so they can collect their full charges. Third party
money managers are coming out of the woodwork to sell us their various
services - whether they be traditional insurers with new innovations in
their products, or other third parties with innovative methods of
managing cash accounts. Whatever innovations they introduce, they are
clearly designed to capture as much of these cash payments as possible.
Now maybe you can make some sense out of this PwC report. Much of their
report describes how unsatisfactory the current billing and payment
system is, and especially the dissatisfaction of health care
"consumers," especially those who are wealthy or who are sick. So what
do they suggest? We should abandon the current claims model and switch
to a simplified, digital model that sidesteps the current claims
process. They call their model the "New Health Economy."
But look at the specifics of their recommendations. First they list the
five simple steps of the current claims system, but label this "an
artifact of an earlier age." Then they show us their "New Health
Economy" model. Are they kidding? Look at it! This is their "simplified"
method of processing the cash segment of health care financing. What is
ironic is that they convert the process of paying cash into expensive,
complex digital processes, in the name of simplification!
As long as we continue on the path of consumer-directed health care,
with its high deductibles and other cost sharing, we can anticipate many
more such innovations that serve the industry well, but at a cost of
shifting more of the burden onto patients. Look again at the "New Health
Economy" and try to explain to yourself exactly how their scheme makes
patients better health care shoppers.
Now think about how this would be handled through a single payer
national health program, with first dollar coverage (a highly successful
model used by several other nations). We would not need to shop for
health care bargains since not only would our own public stewards have
already obtained the best prices, but also we would not have to be
involved in payment decisions at all since our stewards would make the
payments directly through our single, equitably-funded, universal risk pool.
Really. Look again at the "New Health Economy." Do we really want to
proceed with this marketplace model of reform that works well for the
industry? Or do we want a public program that works well for all of us?
at 12:55 PM
Friday, May 15, 2015
International Foundation of Employee Benefit Plans
2015 Employer-Sponsored Health Care: ACA's Impact
On March 26, 2015, the International Foundation of Employee Benefit
Plans deployed its sixth survey in a series on how single employer plans
are being affected by the Affordable Care Act (ACA).
From the Key Findings
Health Insurance Exchanges
* Ninety-four percent of all surveyed organizations continue to provide
health care coverage for all full-time employees in 2015 and, among that
group, nearly all plan to continue coverage in 2016. Respondents
overwhelmingly chose three reasons for maintaining coverage: to attract
future talent, retain current employees and maintain/increase employee
satisfaction and loyalty.
* Less than 5% of organizations provide coverage to full- or part-time
employees through private health insurance exchanges. However, more than
one in ten organizations that provide coverage to retirees aged 65 and
older are doing so via private exchanges, and 17% more are considering
* More than one-third of organizations now have increased out-of-pocket
limits, in-network deductibles and/or participants' share of premium
costs in response to ACA. More than one in five organizations have
increased copayments or coinsurance for primary care, increased
participants' share of prescription drug costs and/or increased the
employee proportion of dependent coverage cost.
* One in five organizations has adopted or expanded wellness
initiatives because of ACA and another 17% plan to do so in the next 12
* Fifteen percent of organizations have adjusted hours so fewer
employees quality for full-time employee medical insurance.
* The excise tax on high-cost group health plans (a.k.a. Cadillac tax)
is considered the top ACA cost driver beyond 2015. Since 2011, a
steadily increasing percentage of organizations has taken action to
avoid triggering the excise tax — a trend likely to continue. More than
one in ten organizations already have adopted changes to prevent them
from triggering the tax, 21% are working on changes and 28% plan to act
sometime prior to 2018. Only one-quarter said changes were not necessary
either because they have no high-cost plans (23%) or because they plan
to pay the tax (2%).
* The most common action taken to avoid triggering the excise tax is
moving to a consumer-driven health plan (CDHP). In particular, more than
one-quarter of all responding organizations have increased emphasis or
added a high-deductible health plan (HDHP) with a health savings account
(HSA) because of ACA, and an additional 14% are considering doing so.
Nearly one in ten organizations has adopted a full-replacement HDHP
because of ACA.
* Two-thirds of organizations have conducted an analysis to determine
how ACA will affect 2015 health care plan costs. Among all
organizations, 82% expect the law will increase their organization's
health care costs this year, with most projecting a 1% to 6% increase.
The median cost increase is 3% among organizations that know their exact
2015 cost change because of ACA. However, ACA-related costs are hitting
smaller employers much harder than larger ones. General ACA
administrative costs and costs associated with reporting, disclosure and
notification requirements are the top ACA cost drivers for 2015.
Comment by Don McCanne
This is yet one more highly credible report that indicates that the
quintessence of health insurance coverage - employer-sponsored health
plans - is deteriorating.
Most of the changes are responses to the very high costs of health care.
Employers are shifting more of the costs to employees through much
higher deductibles, higher copayments and coinsurance, higher premium
contributions, higher shares of drug costs, and an increase in
contributions for dependent coverage. This trend began before the
Affordable Care Act (ACA) was implemented. ACA actually has very few
provisions that lead to major cost increases, except that most employers
complain of increased administrative costs associated with compliance
Another exception where ACA does play a consequential role for employers
is the excise tax that will be assessed on plans with higher premiums.
The tax will be significant, and so employers are already taking action
to keep insurance premiums below the threshold at which the tax will be
assessed. The most common action being taken is to move employees into
consumer-driven health plans - high deductible health plans with or
without health savings accounts.
Innumerable studies have confirmed that high-deductible health plans
both impair access and increase the risk of financial hardship, so they
have a negative impact on both the health security and the financial
security of the employees.
Some employers understand that an improved Medicare that covered
everyone - a single payer national health program - would ensure
accessible and affordable health care for all of their employees, while
eliminating the headache of having to administer their health benefit
programs. It is too bad they are not joining together to advocate for
single payer. It just seems like the logical thing to do.
at 4:00 PM
Thursday, May 14, 2015
Non-Group Health Insurance: Many Insured Americans with High
Out-of-Pocket Costs Forgo Needed Health Care
Our study examined adults who bought private health insurance in the
non-group market in 2014
* Just over one-quarter (25.2 percent) of adults who were insured for a
year went without needed medical care because they could not afford it
* Adults with lower to middle incomes were the most likely to forgo
needed medical care
* Adults with high deductibles were more likely to forgo needed medical
* In 2014, half (50.6 percent) of adults had high deductibles of $1,500
or more, and 30 percent had exceedingly high deductibles of $3,000 or more
Why are people still struggling with out-of-pocket costs?
1. Premium tax credits are tied to silver plans, which often have
cost-sharing that is too high for many consumers to be able to afford
2. Only a portion of the lower-income consumers who are eligible for
subsidies to reduce cost- sharing in silver plans receive substantial
help to also reduce their deductibles
3. Insurers are choosing to design silver plans with upfront
cost-sharing that is too high for lower- and middle-income consumers to
* Health insurers should offer more plans at the silver level that have
low or no cost-sharing for primary care, other outpatient services, and
* Policymakers at the state and federal levels should require health
insurers to sell silver plans with lower cost-sharing for primary care,
other outpatient services, and prescription drugs.
* At the federal level, Congress should: Provide cost-sharing reduction
subsidies to middle-income consumers (above 250% FPL) and increase the
generosity of this help.
* At the state level, lawmakers can also strengthen financial assistance.
Designing Silver Health Plans with Affordable Out-of-Pocket Costs for
Lower- and Moderate-Income Consumers
Silver plans have an actuarial value of 70 percent, meaning that they
are required to cover 70 percent of people's health care costs (on
Insurers have some flexibility in how they design plans to meet the
actuarial value requirements for silver plans. However, analyses of
current marketplace plans suggests that the majority of silver plans
have high deductibles.
When we say that silver plans must meet an actuarial value of 70
percent, we mean that a silver plan's cost-sharing must be designed so
that the plan pays for, on average, 70 percent of people's medical
expenses in a year. Consumers are expected to pay 30 percent of the cost
of care out of pocket (on average) through deductibles, copayments, and
Because silver plans must stay within the bounds of a 70 percent
actuarial value, they can never completely protect consumers from having
to pay higher out-of-pocket costs if they need expensive care.
Insurers must make trade-offs when deciding how to distribute the
cost-sharing in their silver plans to meet the required 70 percent
actuarial value. Silver plans that set higher deductibles are able to
charge relatively lower copayments for care received after a consumer
meets the deductible. On the other hand, silver plans that set low
deductibles, or that exempt coverage for certain services from the
deductible and instead charge copayments for those exempted services,
may have to charge relatively higher copayments or co- insurance for
other health care services.
Actuarial value considers only the costs of covered services that are
delivered by in-network health care providers. A plan's actuarial value
does not consider out-of-pocket costs that consumers must pay if they
need services that are not included in the plan's covered benefits or if
they receive care out of network.
Trade-Offs in Plan Design
The featured plan designs show that, because silver plans must meet
specific actuarial value requirements, the plans are limited in how low
they can keep cost- sharing overall. This is evident in the trade-offs
that these plan designs make: Since the plans keep cost-sharing for some
services more affordable, the plans must charge relatively higher
cost-sharing for other services.
Many of the plan designs with affordable cost-sharing for routine and
minor care charge higher cost-sharing for more expensive services, such
as inpatient and emergency care, outpatient surgeries, imaging, and
When silver plans have relatively affordable cost-sharing, consumers
with greater health care needs will likely still face high out-
of-pocket costs. For example, consumers who need expensive medications
or more complex care (such as surgery) will still have to pay high
out-of-pocket costs in many of these plans until they reach their
out-of- pocket spending limit.
Potentially Problematic Cost-Sharing Designs
* Three-Tiered Provider Networks
* Four-Tiered Drug Formularies
* Potentially Discriminatory Cost-Sharing for Select Treatments
The findings of our analysis prove that it is possible to design silver
plans that don't have high deductibles and that do have more affordable
copayments, at least for routine care and care for minor health
problems. Putting policies in place that require or encourage insurers
to offer these types of plans in the marketplace will help make sure
that lower- and moderate-income consumers can afford routine care.
By design, silver plans cannot necessarily shield consumers who need
expensive care from high out- of-pocket costs. That is why, over the
longer term, efforts to get marketplaces to offer more diverse silver
plans must be part of a larger initiative to identify and implement
state and federal solutions that will prevent lower- and moderate-income
consumers from being underinsured. Examples of such solutions include
policies to ensure that this population receiving greater financial
assistance to help them afford more comprehensive coverage, or policies
to expand cost-sharing assistance to more moderate-income consumers.
Comment by Don McCanne
Today Families USA released their report that confirms, once again, that
many adults insured with high-deductible health plans are likely to
forgo needed medical care, especially if they have lower to middle
incomes. So what are their recommendations?
In order to remove financial barriers to care, they recommend that more
plans offered at the silver level - the benchmark plans - have lower or
no cost-sharing for primary care, other outpatient services, and
prescription drugs. This has the advantage of increasing access to
primary care services, which most agree would significantly improve the
performance of our health care system.
The problem is that the barely affordable silver plans must have an
actuarial value of 70 percent (the patient pays 30 percent of health
care costs, up to a given maximum). Higher deductibles are used in most
of these plans in order to meet this actuarial value. But in a report
that Families USA released last year, they explain that if the
deductibles and copayments were reduced to more affordable levels, then
the required 30 percent of out-of-pocket costs must be shifted to more
So this scheme would help the majority who simply need primary care
services, but it would make care less affordable, even catastrophic, for
those who have greater health care needs. As long as our benchmark plans
are set at an actuarial value of 70 percent, this trade-off cannot be
Families USA also suggests the obvious. We should increase federal
and/or state subsidies for both the purchase of plans and for cost
sharing for low and middle income individuals and families.
But if you are going to make care affordable for everyone, why continue
with this highly inefficient, administratively complex system that
wastes so many of our health care dollars. Surely by now Families USA
should acknowledge that our dysfunctional system should be replaced by a
much more efficient single payer national health program - an improved
Medicare for all. We've experimented extensively with their preferred
model, and it didn't work.
at 3:38 PM
Wednesday, May 13, 2015
The Center for Public Integrity
May 11, 2015
Court case shows how health insurers rip off you and your employer
By Wendell Potter
It turns out that one of the reasons workers have been paying more for
their coverage is allegedly a common practice among insurers: charging
their employer customers unlawful hidden fees.
The fees came to light when Hi-Lex Controls, an automotive technology
company, took Blue Cross Blue Shield of Michigan (BCBSM) to court in
2013 after becoming suspicious that the company had been systematically
cheating it over 19 years. After reviewing evidence in the case, a judge
ordered that BCBSM stop charging the hidden fees and pay Hi-Lex $6.1
Documents filed in the case showed that in 1993 BCBSM implemented a
scheme through which it would collect additional revenue by adding
certain mark-ups to hospital claims paid by its self-insured customers.
Self-insured companies hire firms like BCBSM to do the paperwork. It is
the employer's money—not the insurance company's—that is "at risk" in
After suing and getting documentation from BCBSM, attorneys for Hi-Lex
were able to show the court that BCBSM marked up hospital claims by as
much as 22 percent. BCBSM didn't disclose the markups, however. As part
of the scheme, regardless of the amount BCBSM was required to pay a
hospital for a given service, it reported a higher amount to Hi-Lex and
pocketed the difference.
The hidden fees were listed in internal BCBSM documents under a variety
of names: provider network fees, contingency/risk fees, retiree
surcharges, and—my personal favorite—other-than-group subsidy fees.
Internal company emails showed that BCBSM knew customers were unaware of
the markups and that the company actually trained its employees to
downplay the hidden fees should customers suspect they were being gouged.
After rumors began circulating in the early 2000s that BCBSM was
charging hidden fees, the company told insurance brokers, falsely, that
its customers got 100 percent of the hospital discounts it negotiated.
The Court of Appeals affirmed the $6.1 million fraud judgment, agreeing
with the lower court that "BCBSM committed fraud by knowingly
misrepresenting and omitting information about the disputed feeds in
BCBSM hoped the U.S. Supreme Court would take the case but the high
court refused, meaning the lower courts' rulings stand. As a
consequence, as many as 50 of BCBSM's other customers also filed suit.
Lest you think this scheme was something BCBSM dreamed up on its own, an
actuary from the consulting firm Milliman Inc. testified under oath that
many other insurers engaged in the same practices.
Comment by Don McCanne
Wasteful administrative services are the private insurers' primary
product that they are selling us, and the only product when they
administer the plans of our nation's large, self-insured employers. The
insurers have devised many devious methods of diverting risk pool funds
into their own coffers, but this report shows us that they are truly
nefarious to the core when they are fraudulently padding the bill for
their administrative services alone.
Not only does this report show that the supposedly cleanest of the
insurers - Blue Cross Blue Shield of Michigan - engages in this
thievery, many other insurers engage in the same practices, according to
the sworn testimony of a Milliman actuary.
Had enough? Time for our own publicly-administered single payer program.
at 4:34 PM
Tuesday, May 12, 2015
National Bureau of Economic Research
NBER Working Paper No. 21160
Do Individuals Make Sensible Health Insurance Decisions? Evidence from a
Menu with Dominated Options
By Saurabh Bhargava, George Loewenstein, and Justin Sydnor
The recent expansion of health-plan choice has been touted as increasing
competition and enabling people to choose plans that fit their needs.
This study provides new evidence challenging these proposed benefits of
expanded health-insurance choice. We examine health-insurance decisions
of employees at a large U.S. firm where a new plan menu included a large
share of financially dominated options. This menu offers a unique litmus
test for evaluating choice quality since standard risk preferences and
beliefs about one's health cannot rationalize enrollment into the
dominated plans. We find that a majority of employees – and in
particular, older workers, women, and low earners – chose dominated
options, resulting in substantial excess spending. Most employees would
have fared better had they instead been enrolled in the single
actuarially-best plan. In follow-up hypothetical-choice experiments, we
observe similar choices despite far simpler menus. We find these choices
reflect a severe deficit in health insurance literacy and naïve
considerations of health risk and price, rather than a sensible
comparison of plan value. Our results challenge the standard practice of
inferring risk attitudes and assessing welfare from insurance choices,
and raise doubts whether recent health reforms will deliver their
Our principle contribution is to document widespread and costly
violations of dominance in the health-insurance decisions of a large and
diverse sample of U.S. employees. Unlike most prior work, our paper is
able to transparently assess choice quality without making assumptions
about risk preferences or beliefs, by analyzing employee choice from a
standardized plan menu with a large share of financially dominated
options. For the majority of employees who chose dominated plans—a
disproportionate share of whom were of low income—the adverse financial
consequences of poor choice outweigh the estimated benefits of recent
policy measures (e.g., the effect of the exchange on insurance premiums,
or the penalty associated with the individual mandate) that have
attracted far more policy attention.
Our initial results prompted us to address the question of why employees
make such disadvantageous decisions. Through a series of online
experiments with hypothetical choices modeled on the firm's plan menu,
we find evidence for a modest role of search/menu complexity and much
larger role of low health literacy. Confirming other research, we find
widespread deficits in employee understanding of the insurance choices
they face. Even with simple menus with few options, we observed
significant errors in plan choice, suggesting that plan choice is
difficult to improve. The online studies suggest that poor choice may
partly reflect a heuristic understanding of health insurance such that
consumers sort into plans based on perceived health risk and inferences
about plan generosity from the rank-ordering of plan deductibles rather
than a careful assessment of financial plan value.
The promise of recent reforms that expand choice and aim to increase
provider competition is premised on the assumption—challenged by our
research—that enrollees will make sensible plan choices. While efforts
to improve choice through simplification, education, and other
modifications to the choice environment may improve the quality of
decisions, our results suggest value in shifting focus from helping
consumers navigate complicated insurance options to simplifying and
standardizing the options themselves. At the extreme, if all firms
offered identical products, then competition would be far more likely to
focus exclusively on price and quality. Beyond implications for policy,
our study asserts that traditional attempts to infer risk preferences
from health insurance choices may be misguided. Rather than reflecting
rational deliberations involving cost, need, and risk, many health plan
choices likely reflect heuristic choice strategies grounded in a
fundamental deficit of health plan literacy.
Comment by Don McCanne
Regarding whether or not individuals make sensible decisions when
purchasing health insurance, these authors conclude, "many health plan
choices likely reflect heuristic choice strategies grounded in a
fundamental deficit of health plan literacy." That is, individuals do
not understand health plan options well enough to make sensible choices
on their own.
So much for the political campaign that led to the Affordable Care Act -
you remember, the campaign that called for CHOICE, when by choice they
meant choosing exactly the health insurance you want. As the authors
state, "We find these choices reflect a severe deficit in health
insurance literacy and naïve considerations of health risk and price,
rather than a sensible comparison of plan value." This raises "doubts
whether recent health reforms will deliver their promised benefits."
The authors further state, "At the extreme, if all firms offered
identical products, then competition would be far more likely to focus
exclusively on price and quality."
But we can go them one better. Suppose we had one identical
comprehensive product for everyone, and removed price as an issue by
funding care through an equitably-funded, universal risk pool. Then we
would all get the care we need, and select our care based on quality.
It may be that the perception of quality would be based on "heuristic
choice strategies" with a "deficit of health (quality) literacy," but
limiting decision options to only that of perceived quality, whether or
not the perception is valid, would result in a vastly superior concept
of choice than that which applies to the health plan marketplace -
whether the individual insurance market, the ACA exchanges,
employer-sponsored plans, or Medicare Advantage and Part D plans.
Obviously, under a single-payer improved Medicare for all, the only
choice that we would have to make would be our health care professionals
and institutions, and that choice would be based on perceived quality -
a much better deal for us all.
at 2:40 PM
Monday, May 11, 2015
Health Affairs Blog
May 8, 2015
The Trans-Pacific Partnership: A Threat To Global Health?
By Deane Marchbein, President of the Doctors Without Borders USA Board
Lost in the political discussions over the passage of the Trans-Pacific
Partnership (TPP)—a trade agreement currently being negotiated in secret
between the U.S. and 11 other Pacific-Rim nations—is the very real
negative impact it would have on global health.
Doctors Without Borders/Médecins Sans Frontières (MSF) works in over 60
countries, and our medical teams rely on access to affordable medicines
and vaccines. We are deeply concerned that the TPP, in its current form,
will lock-in high, unsustainable drug prices, block or delay the
availability of affordable generic medicines, and price millions of
people out of much-needed medical care.
The public health repercussions of this deal could be massive. The
negotiating countries represent at least 700 million people, and U.S.
negotiators refer to the TPP as a "blueprint" for future trade deals.
The TPP attempts to rewrite existing global trade rules and would
dismantle legal flexibilities and protections afforded for public health.
We have concerns with several U.S. government demands in the TPP. For
example, the TPP would lower the standard for patentability of
medicines. It would force TPP governments to grant pharmaceutical
companies additional patents for changes to existing medicines, even
when the changes provide no therapeutic benefit to patients. These
provisions would facilitate "evergreening" and other forms of abuse of
the patent system by lengthening monopolies and delaying access to
Another concerning provision in the TPP involves so-called "data
exclusivity" for biologics, a new class of medicines that includes
vaccines and drugs used for cancer and multiple sclerosis treatment.
Data exclusivity blocks competing firms from using previously generated
clinical trial data to gain approval for generic versions of these drugs
and vaccines. If pharmaceutical companies have their way, the TPP will
block generic producers of biologics from entering the market for at
least 12 years, during which patients would be forced to endure
Twelve years of data exclusivity is not only unprecedented in any trade
agreement, it is not the law in any of the TPP negotiating countries
outside of the U.S., and it would keep lifesaving medicines out of reach
of millions of people.
Research And Development
As an organization caring for patients worldwide, Doctors Without
Borders understands that there should be incentives to recover research
and development investments and to promote innovation. Unfortunately,
the public is in the dark on what this research and development truly
costs. We are told that it costs billions to research and develop a new
medicine, although a significant amount of early research and
development actually happens at publicly funded centers and universities.
We are told that the only way to ensure that people receive the
medicines they need is by increasing intellectual property provisions,
such as those encapsulated in the TPP. In reality, the existing
monopoly-based innovation system that the TPP is attempting to
standardize has left us with more patents and fewer medical breakthroughs.
As TPP countries aim to conclude negotiations in the next few months, it
is essential that the United States and other negotiating countries work
to protect existing access to medicines' safeguards and to promote a
public-health driven biomedical innovation system.
Doctors Without Borders/Médecins Sans Frontières website:
"TPP: A Bad Deal for Medicine":
Coalition letter to President Obama:
Comment by Don McCanne
Doctors Without Borders/Médecins Sans Frontières, recipients of the
Nobel Peace Prize, are warning us of an imminent threat to global health.
The U.S. Senate is expected to act as soon as tomorrow on granting
President Obama fast track authority to approve the Trans-Pacific
Partnership Agreement (TPP) - an international trade agreement. Fast
track approval would prevent the agreement from being modified by
Congress, as it would limit their role to an up-or-down vote.
Although the TPP agreement is still secret, it is known that there are
many provisions that should be modified or removed. Amongst the more
important are the provisions that would allow the pharmaceutical and
biomedical industries to lock in high prices for their products, which
would price millions of people out of much needed medical care. Blanket
approval of TPP would precipitate a series of expensive and unnecessary
global medical crises.
This issue should be of direct concern for advocates of single payer
reform. A state or national program would have to comply with
international agreements, even if that meant perpetuating the outrageous
pricing policies of the pharmaceutical and biomedical industries -
policies that would impair access to much needed treatments.
President Obama is currently campaigning heavily for fast track
authority on behalf of the industries that would profit, while
criticizing advocates of social justice for their opposition. Sorry, but
we have to work with those who place the people first, including Doctors
Without Borders/Médecins Sans Frontières.
The most urgent task: Contact your Senators today and tell them to
REJECT fast track authority that would allow the President to
unilaterally set the terms for TPP.
NOTE: The issues are complex. Sen. Elizabeth Warren was specifically
cited by Pres. Obama as being "absolutely wrong" in her opposition to
fast track authority. Today, at the following link, she fires back at
REMEMBER, IF IN DOUBT, DON'T!
at 2:20 PM