Monday, August 31, 2015
Technology Science (Harvard University)
August 11, 2015
Larger Issuers, Larger Premium Increases: Health insurance issuer
By Eugene Wang and Grace Gee
The Patient Protection and Affordable Care Act (ACA) has substantially
reformed the health insurance industry in the United States by
establishing health insurance marketplaces, also called health
exchanges, to facilitate the purchase of health insurance. The ACA has
increased transparency in insurance pricing and in issuer pricing
behavior. Using 2014 and 2015 Unified Rate Review (URR) data, this study
examines changes in health insurance premiums made by individual health
insurance issuers in 34 federally facilitated and state-partnership
health insurance exchanges.
Results summary: Our study shows that the largest issuer in each
marketplace had a 75% higher premium increase from 2014 to 2015 compared
to other same-state issuers. On average, the largest issuers raised
rates by 23.9%, while the other issuers only raised rates by 13.7%.
Moreover, the largest issuers' premium increase affects a larger
proportion of plans and do not seem justified from the standpoint of
incurred claims-to-premium ratio. Projected Index Rate from the rate
review process is used as a summary of an issuer's premiums across
different plans and Projected Member Months as a proxy for on-exchange
market share. Our findings suggest that even after the Affordable Care
Act, the largest on-exchange issuers may be in a better position to
practice anti-competitive pricing compared to their same-state counterparts.
From the Results
But can the largest issuers justify their higher premium increases in
2015 by claiming that they had higher incurred claims relative to
collected premiums in 2014, compared to other issuers? To test this
hypothesis… (technical details available at link)…
Note that this is very similar to the Medical Loss Ratio (MLR) as
formulated in 45 CFR §158.221, which is used to calculate the MLR
rebates issuers have to give to consumers if the MLR falls below 0.80
(i.e. they spent too little on medical expenses) in the experience
period. But the MLR calculation would require the denominator to include
only premiums collected in the experience period net of taxes, licensing
and regulatory fees, which data is unavailable in the URR (Unified Rate
Review public use files).
To test if the largest issuers in each state have higher incurred claims
relative to premiums in 2014, the following null hypothesis was tested…
(technical details available at link)…
After omitting states where data on the largest issuer was not available
(the largest issuers having only joined the exchange in 2015) and
omitting issuers without experience data (issuers can choose not to
input experience period claims and premiums data if they deem that the
data they have collected is not substantially representative), the test
statistic is eventually calculated… (technical details available at link)…
… with a mean of 0.02, which means that the largest issuer has a higher
claims ratio of only 0.02. Figure 9 shows that the claims-to-premium
ratio for the largest issuers is 0.85 while that for the other issuers
is 0.83. Since the test statistic is 0.50139 with a one-tailed p value
of 0.31092, we conclude at 5% significance level that there is
insufficient evidence to reject the null hypothesis in states where this
ratio could be calculated. The claims-to-premium ratio of the largest
issuer is not statistically significantly higher than other same-state
issuers. Even if it were significant, a 2.5% higher claims-to-premium
ratio is unlikely to be sufficient to justify the 75% higher premiums
increase that the largest issuer incurred.
From the Discussion
Overall, this study is important in light of recent market consolidation
efforts in the health insurance industry. This paper provides evidence
that even after ACA, the largest on-exchange issuers may be in a better
position to practice anti-competitive pricing compared to their
same-state counterparts. This evidence should be prudently considered in
any antitrust debate.
AMA Morning Rounds
August 31, 2015
CMS seeks emergency review of request for more insurance information
Congressional Quarterly (8/29, Subscription Publication) reported that
the Centers for Medicare and Medicaid Services "is seeking an emergency
review of its request to collect more information from health insurance
companies in connection with the medical-loss-ratio data and risk
corridor regulations, which both are part of the agency's effort to
fully implement the 2010 health law." The agency said it found a "number
of significant discrepancies in the 2014 benefit year submissions that
insurers made." CMS officials said in a filing with the Federal Register
"that they are concerned that the agency 'will be unable to verify the
accuracy of the submission and validate the data needed to operate the
MLR or risk corridors programs' if it doesn't get additional information."
Comment by Don McCanne
This is scandalous. The co-authors of this article, Eugene Wang and
Grace Gee (with Harvard degrees in Applied Mathematics), have shown that
the largest insurance issuer in each federally-facilitated and
state-partnered ACA insurance exchange had a 75% higher premium increase
this past year than did other insurers in the same states. But what is
really shocking is that they have shown that, based on claims-to-premium
ratios, these excess premium increases are in no way warranted.
This should not have happened since the Affordable Care Act requires
that at least 80% of the premiums be spent on health benefits (the
medical-loss ratio). Now we learn that the Centers for Medicare and
Medicaid Services found a "number of significant discrepancies in the
2014 benefit year submissions that insurers made" regarding
medical-loss-ratio data. CMS is seeking an emergency review of its
request to collect more information from the health insurers.
With the current merger activity of the nation's largest insurers, we
should be very concerned about their too-big-to-follow-the-rules
attitude. The insurers contend that they need higher premiums because of
their claims experience, yet they have failed to provide CMS with
adequate, accurate data to show that they are spending at least 80% of
the premiums on health care. This study strongly suggests that they are not.
It's time to throw out the crooks and establish our own single payer
national health program - one owned by the people. We aren't going to
at 3:17 PM
Friday, August 28, 2015
Moody's Investors Service
August 26, 2015
Moody's revises US not-for-profit healthcare outlook to stable from
negative as cash flows increase
Moody's Investors Service has revised the outlook for the US
not-for-profit and public healthcare sector to stable from negative due
to improvement across the industry's fundamental business, financial and
economic conditions. The outlook had been negative since 2008.
Following several years of flat growth, operating cash flow growth
increased to 12.3% in 2014 from 0.3% in 2013.
Moody's says factors driving the stronger operating cash flow are
increases in the number of insured individuals and a reduction in bad
debt, particularly in states which expanded Medicaid eligibility.
The outlook change to stable from negative expresses Moody's views for
the sector will neither erode nor significantly improve materially for
the 12 to 18 months. Looking beyond that horizon, pressures linger.
"The not-for-profit and public healthcare sector industry faces
long-term challenges stemming from who pays for care, how providers are
reimbursed, and changes in patient behavior. These risks may weigh on
profitability and growth," says (Moody's Vice President -- Senior
Analyst Daniel Steingart ).
Comment by Don McCanne
It seems ironic to celebrate profits in the not-for-profit and public
health care sector, but at least this Moody's report does show that the
not-for-profit/public sector has moved from negative to stable as cash
flows increase. That is reassuring.
Nevertheless this industry still faces long-term challenges, especially
based on uncertainties of future funding.
This sector is particularly important since it serves as the primary
safety net for those who have impaired access for reasons such as being
uninsured. So it is essential that a reliable source of adequate funding
is always available.
How can we do that? Simple. Establish a single payer national health
program which will fund the entire health care delivery system
equitably. Part of that process involves converting the investor-owned,
for-profit delivery system to not-for-profit status. Why? The primary
mission of non-profits is patient service whereas the primary mission of
for-profits is creating wealth by achieving a maximum return on
investment. The former works better for patients than does the latter.
Although it is nice that the not-for-profit/public sector has
temporarily stabilized, we could be assured of more funds in the future
if the administrative waste of our entire system were eliminated. Single
payer would ensure stability in our system well into the indefinite
future… and beyond.
at 3:42 PM
Thursday, August 27, 2015
Health Affairs Blog
August 27, 2015
Quality Improvement: 'Become Good At Cheating And You Never Need To
Become Good At Anything Else'
By David Himmelstein and Steffie Woolhandler
The Centers for Medicare and Medicaid Services (CMS) has trumpeted the
recent drop in hospital readmissions among Medicare patients as a major
advance for patient safety. But lost amidst the celebration is the fact
that hospitals are increasingly "observing" patients (or treating
returning patients in the emergency department) rather than
"readmitting" them. But while re-labeling helps hospitals meet CMS'
quality standards (and avoid costly fines), it probably signals little
real quality gain and often leaves patients worse off financially.
In most cases, observation patients receive care in a regular inpatient
unit, and get treated just like other inpatients. And in many cases,
observation stays stretch out to several days: in 2012, 26 percent
lasted two nights and 11 percent at least three. But from Medicare's
point of view, this is outpatient care, which leaves patients
responsible for more of the bill, and ineligible for Medicare-paid rehab
or skilled nursing care.
Hospitals started designating more stays as "observation" after
Medicare's auditors began disallowing the entire payment for some brief
hospital "admissions." Even though "observation stays" pay less than
inpatient admissions, hospitals took a better safe than sorry approach,
classifying many brief stays as "observation." Between 2006 and 2013,
observation stays increased by 96 percent, accounting for more than half
of the apparent decline in total Medicare admissions during that
Medicare's recent adoption of penalties for readmissions offered
hospitals a new incentive to shift some patients returning within 30
days of their discharge to observation status. A patient stay labeled
"observation" doesn't count as a readmission, allowing hospitals that
might otherwise be fined for having too many readmissions to skirt the
About 10 percent of all hospital stays occurring within 30 days of
discharge are now classified as "observation;" a quarter of hospitals
classified 14.3 percent or more of all repeat stays as "observation."
Moreover, analysis of time trends in observation stays makes it clear
that they account for a significant chunk of the reduction in
readmissions. Between 2010 and 2013, 36 percent of the claimed decrease
in readmissions was actually just a shift to observation stays.
Emergency Department Use
And it's not just observation stays that have been on the increase. More
of the recently discharged patients are being treated in emergency
departments (EDs) — without being admitted — as well.
Factoring in the 0.4 percent increase in ED visits within 30 days of
discharge, the fall in the percent of discharged patients returning to
hospitals for urgent problems is only 0.3 percent over the past three
years — less than one-third of the improvement that CMS claims. And even
this 0.3 percent overall fall may be partly an artifact of hospitals'
"upcoding" (exaggerating the severity of patients' illnesses), which
boosts diagnosis-related group (DRG) payments, and could also corrupt
the formula used to risk-adjust expected readmission rates.
Medicare's readmission penalties are among the growing number of
pay-for-performance (P4P) and value-based purchasing initiatives that
offer bonuses to high performers and/or penalize the laggards. We
previously pointed out that the evidence for this carrot and stick
approach is unconvincing. More recently, a long-term follow-up of the
English hospital P4P program found that P4P generated no improvement in
patient outcomes, damping the enthusiasm generated by the rosy
short-term findings, and reinforcing the need for skepticism.
Adopting unproven everywhere P4P strategies that have been proven
nowhere risks quality failure on a monumental scale. It pressures
hospitals to cheat, saps doctors' and nurses' intrinsic motivation to do
good work even when no one is looking, and corrupts the data vital for
As the graffiti artist Banksy once said: "Become good at cheating and
you never need to become good at anything else."
Comment by Don McCanne
In lieu of adopting comprehensive health car financing that actually
would improve value - a single payer system - our national leaders have
elected to continue with our current dysfunctional system and try to
make it work. One measure that has been introduced is the assessment of
penalties for patients who are readmitted within 30 days of being
discharged from a hospital - on the theory that the patients should be
fully stabilized at discharge with followup arranged that would prevent
the need for readmission.
Physician and hospital administrators do not want patients readmitted
soon after discharge. Their efforts are directed at providing the best
care appropriate to improve patient outcomes. But there are some
clinical conditions that are inherently unstable, or that can have
unavoidable complications, that can result in the need for readmission.
Also, in spite of outreach efforts, socioeconomic variables can result
in destabilization of the patient's condition. Some readmissions are
This report is important because it shows that the improvement in
lowering readmission rates that occurred after the introduction of
penalties is not so much due to improved inpatient and post-discharge
management, but rather is due to gaming rules that are characteristic of
pay-for-performance (P4P) schemes.
Specifically, there has been a dramatic increase in placing patients on
observation status instead of formally admitting them to the hospital.
The care may be identical - provided in the inpatient service
departments - but by not certifying the patient as being a formal
readmission within 30 days of the last admission, the penalty is
avoided. Medicare comes out ahead since outpatient services are priced
lower than inpatient services, even if they are identical services -
thus the trumpeting by CMS of another success in their reform efforts.
But the patient loses since the cost sharing requirements for outpatient
services are much higher than they are for inpatient. But then who ever
said that health care reform was to benefit patients?
A variation of this gaming is to manage the followup hospitalization
completely within the emergency department, perhaps even holding the
patient overnight. The result is essentially the same as holding them on
This P4P-type gamesmanship is really a form of cheating. But it works.
Instead of shifting to a much more efficient financing infrastructure -
a single payer system - we can continue to follow the Banksy dictum -
"Become good at cheating and you never need to become good at anything
Maybe we should start to think about becoming good at financing health
at 12:06 PM
Tuesday, August 25, 2015
Kaiser Family Foundation
August 25, 2015
How Many Employers Could be Affected by the Cadillac Plan Tax?
By Gary Claxton and Larry Levitt
As fall approaches, we can expect to hear more about how employers are
adapting their health plans for 2016 open enrollments. One topic likely
to garner a good deal of attention is how the Affordable Care Act's
high-cost plan tax (HCPT), sometimes called the "Cadillac plan" tax, is
affecting employer decisions about their health benefits. The tax takes
effect in 2018.
The potential of facing an HCPT assessment as soon as 2018 is
encouraging employers to assess their current health benefits and
consider cost reductions to avoid triggering the tax. Some employers
announced that they made changes in 2014 in anticipation of the HCPT,
and more are likely to do so as the implementation date gets closer. By
making modifications now, employers can phase-in changes to avoid a
bigger disruption later on. Some of the things that employers can do to
reduce costs under the tax include:
* Increasing deductibles and other cost sharing;
* Eliminating covered services;
* Capping or eliminating tax-preferred savings accounts like Flexible
Spending Accounts (FSAs), Health Savings Accounts (HSAs), or Health
Reimbursement Arrangements (HRAs);
* Eliminating higher-cost health insurance options;
* Using less expensive (often narrower) provider networks; or
* Offering benefits through a private exchange (which can use all of
these tools to cap the value of plan choices to stay under the thresholds).
For the most part these changes will result in employees paying for a
greater share of their health care out-of-pocket.
Comment by Don McCanne
During the markup process for the Affordable Care Act it was common to
hear our legislators talk about patients demanding too much health care
as an explanation for why our health care spending was so high. They
blamed health plans that provided extra-rich benefits - plans they
labeled Cadillac plans. The problem is that their premise was wrong.
These supposedly extra-rich benefits were merely standard benefits
characteristic of the older employer-sponsored indemnity plans such as
Blue Cross and Blue Shield. These were not plans with Cadillac benefits
but rather they were plans with standard benefits, but benefits that are
now provided at Cadillac prices because of our failure to adopt a health
care financing system that would slow the rate of health care inflation.
In recent decades, plan purchasers in the individual market became less
able to afford the high premiums commanded by the ever-increasing health
care costs. In order to keep their premiums affordable, insurers reduced
benefits and increased patient cost sharing, making health care less
affordable even for those who were insured. Medical debt became a
significant contributor to personal bankruptcy and having insurance
often no longer prevented it.
Our legislators, after being spoon-fed by lobbyists and the policy
community, decided that these inferior plans on the individual market
would become the new standard, and the more traditional plans that
provided more effective coverage would suddenly become Cadillac plans.
Thus the advent of the high-cost plan tax (HCPT) - often referred to by
the misnomer, Cadillac plan tax - a 40 percent tax on plan costs above a
certain threshold. This tax was intended to disincentivize the selection
of full coverage plans. By having out-of-pocket money at stake with less
comprehensive coverage, patients would be forced to decide which of
their medical problems they would want managed and which they would
decide to live with (or die from). What a terrible way to reduce spending.
In retrospect, both Republicans and Democrats in Congress have decided
that this tax should be repealed, but for different reasons. Republicans
are simply opposed to any taxes, and Democrats are concerned about
additional tax burdens on lower income individuals with
employer-sponsored plans that provide reasonable coverage (assuming the
tax is paid by forgone wage increases). Hurdles to the repeal of this
tax include reluctance to compensate for the loss of these government
revenues by either assessing new taxes (Republicans opposed) or by
cutting spending on other programs (Democrats opposed), plus a
reluctance for a highly polarized Congress to work together on anything.
The important policy issue is not the tax, it is the decision to control
spending by erecting financial barriers to care through the design of
the insurance product - consumer-directed health care. This prevents
patients from getting care that they should have while exposing them to
financial hardship. Instead we should be providing everyone with prepaid
health care while controlling spending through more humane, proven
policies that are in use in many other nations. Of course, these are the
policies that are inherent in a well-designed single payer national
Forget the Cadillac imagery. Let's talk about providing affordable
health care for everyone.
at 2:45 PM
Friday, August 21, 2015
Kaiser Family Foundation
August 20, 2013
Kaiser Health Tracking Poll: August 2015
By Bianca DiJulio, Jamie Firth, and Mollyann Brodie
Financial Burden of Health Care Costs Among Insured
Among insured: Thinking about your own health care costs, which of the
following do you find to be the greatest financial burden?
17% The deductible you pay before insurance kicks in
14% Your health insurance premiums
11% Your prescription drugs
7% Your doctor visits
3% Some other health care cost
44% Paying for health care and health insurance is not a financial burden
(Note: "All equally" and "Don't know/Refused" responses not shown)
Comment by Don McCanne
It is nice to know that health insurance and paying for health care do
not create a financial burden for 44% of those who are insured. The
system is working well for the almost half of the insured who have
decent incomes who remain in good health. But what about the other half?
Being insured is no assurance that you will not face significant
financial burdens. The most common are high deductibles, high insurance
premiums, high costs of prescription drugs, and, to some extent,
physician fees. But shouldn't the health care financing system be
designed to remove financial burdens whenever people need health care?
Our system is not working well for patients who have modest incomes and
current significant health care needs.
Under a single payer system, there is no need for deductibles to save
money by discouraging the use of beneficial health care services,
because spending is controlled though other less intrusive, more
patient-friendly economic measures. Physician fees are negotiated and
paid by the single payer administrator, and prescription drug spending
is controlled through negotiation and bulk purchasing. Insurance
premiums are eliminated and replaced with equitable, progressive taxes
that place a burden on no one. Instead of deliberately building
financial barriers into the system, shouldn't we eliminate them?
at 1:51 PM
Wednesday, August 19, 2015
August 18, 2015
Scott Walker, Marco Rubio Propose 'Plans' to Replace Obamacare
By Jonathan Chait
Today, Scott Walker and Marco Rubio have published plans — really, not
so much plans as skeletal descriptions of planlike concepts — to replace
Obamacare. Appealing to the general election requires them to promise
something to compensate the victims of repeal. How will they fund that
something? This is the basic problem that for decades has prevented
Republicans from offering a health-care plan. Rubio and Walker show that
they still have no answer.
The main reason people lacked insurance before Obamacare is that they
did not have enough money to afford it. Some of those uninsured people
had unusually high health costs. Some of them had unusually low incomes.
Boiled down, Obamacare transferred resources from people who are rich
and healthy to people who are poor and sick, so the poor and sick people
can afford insurance.
Walker and Rubio are fairly clear about their plans for regulating the
insurance market. They want to go back to the pre-Obamacare, deregulated
system. They'd eliminate the requirements that insurance plans cover
essential benefits, and let them charge higher prices to sicker
customers. That's good for people who have very limited medical needs
(as long as they never obtain a serious medical condition, or have a
family with somebody with a serious medical condition). It's bad for
people who have, or ever will have, higher medical needs.
Both Walker and Rubio promise to take care of people with preexisting
conditions by creating separate "high-risk pools." That is a special
kind of insurance market for people with expensive medical conditions.
As you may have guessed, insurance for people with expensive medical
needs is, well, expensive. Making that insurance affordable therefore
requires lots of subsidies from the government. Where would Walker and
Rubio get the money for that? They don't say.
Both Walker and Rubio propose to cut funding for Medicaid, but this
doesn't create much room to subsidize coverage, since Medicaid is
already much cheaper than Medicare or private insurance. Republicans are
willing to cut Medicaid because they're generally willing to cut
programs that focus on the very poor, but there's not much blood to be
drawn from this stone.
It is tempting to treat the lack of specifics in the Republican
health-care plans as a problem of details to be filled it. But it is not
a side problem. It is the entire problem. They will not finance real
insurance for the people who have gotten it under Obamacare, nor will
they face up to the actual costs they're willing to impose on people.
The party is doctrinally opposed to every available method to make
insurance available to people who can't afford it. They have spent six
years promising to come up with an alternative plan, and they haven't
done it, because they can't.
Comment by Don McCanne
Much has been written this week about the proposals of presidential
candidates Gov. Scott Walker and Sen. Marco Rubio for replacing the
Affordable Care Act (ACA or Obamacare) once it is repealed. Most
articles discuss the few specifics of their proposals that they have
provided, but Jonathan Chait's stands out because he describes the
underlying fundamental flaw common to all conservative proposals for
reform: for everyone to have affordable access to health care, there
must be a large transfer from the healthy to the sick and from the
wealthy to those with lower incomes, and the conservative proposals fall
far short on the size and direction of the transfers that are needed.
Chait exits the topic leaving ACA in place, but there is more to be
said. Although ACA actually did expand the necessary transfers, it still
falls short of what is needed, plus too many inequities are perpetuated.
Patches to ACA would still leave in place the fundamentally flawed
infrastructure, and the Republican replacements are even more
fundamentally flawed because they would worsen the financial barriers to
care, especially by failing to include adequate transfers in their models.
A much more efficient and equitable method of achieving the necessary
transfers would be to enact a single payer national health program. If
the Republicans really do want a better replacement for Obamacare, maybe
they should seriously consider single payer.
at 4:49 PM
Tuesday, August 18, 2015
Tampa Bay Times
August 16, 2015
Bernie Sanders repeats flawed claim about U.S. health care spending
compared to other countries
By Will Cabaniss
Democratic presidential candidate Bernie Sanders is on a campaign for
"Medicare for all" — or at least something like it.
Sanders, an independent senator from Vermont who identifies as a
socialist, told NBC's Meet the Press moderator Chuck Todd to look at how
much the country spends compared to the rest of the world as a reason
for a single-payer system.
"We spend almost twice as much per capita on health care as do the
people of any other country," Sanders said.
It's a striking claim, and one we heard from Sanders six years ago.
We rated the claim False then, and it's still wrong now.
We looked at data from the Organization for Economic Cooperation and
Development (OECD), widely cited by experts as an authoritative source
for this information.
In 2007, the United States led the world in health care spending at
$7,167 per capita, according to the OECD. Norway and Switzerland
followed at $4,579 and $4,568, respectively.
The United States maintained its spending lead in the years that
followed. But Sanders puts the difference too strongly when he says U.S.
spending is "almost twice" per capita of "any other country."
According to the OECD's most recent data, U.S. spending grew to $8,713
per capita in 2013. Switzerland and Norway came in second and third at
$6,325 and $5,862 per capita, respectively.
Had Sanders fine-tuned his talking point by claiming that the United
States spends twice as much per capita as the average developed country,
his statement would been accurate. Average per capita spending is less
than $3,500 across the 32 countries listed in the OECD database. That's
40 percent of what the United States spends per person.
Sanders said that "we spend almost twice as much per capita on health
care as do the people of any other country."
The United States spends more on health care per capita than other
countries, but not always twice as much. Sanders' comment suggests the
United States outpaces all other countries more than it actually does.
European countries with extensive social service networks aren't so far
behind the United States.
We rate his statement False.
OECD Health Statistics 2015
Comment by Don McCanne
Sen. Bernie Sanders told NBC's Chuck Todd, "We spend almost twice as
much per capita on health care as do the people of any other country."
You've probably heard, or thought you heard, similar statements from
others, including some of the PNHP leadership. But this specific
statement is technically incorrect.
Sanders did include the important specification that he was referring to
"per capita" spending, but by specifying that our per capita spending
was almost twice that of any other country, that would place the second
highest spending country at slightly over half of our spending. That is
What he likely intended to say was, "We spend almost twice as much per
capita on health care as the average of developed nations," or, "…
industrialized nations," or, "… wealthy nations," or, more specifically,
"… as the average of all OECD nations." PolitiFact indicates that such a
statement would have been accurate.
Yet this statement still isn't quite accurate. In 2013, the latest year
for which we have full data, the United States spent $8713 per capita,
whereas the OECD average was $3453 per capita. That is not "almost
twice" the OECD average, but rather the United States is spending over
TWO AND A HALF TIMES AS MUCH PER CAPITA as the average per capita
spending of OECD nations (2.52 times as much).
PolitiFact rules, "Sanders' comment suggests the United States outpaces
all other countries (in spending) more than it actually does." In fact,
the United States outpaces the average per capita spending of other
developed nations by even more than what Sanders intended to say.
Remember, THE UNITED STATES SPENDS TWO AND A HALF TIMES AS MUCH PER
CAPITA ON HEALTH CARE AS THE AVERAGE PER CAPITA SPENDING OF ALL OECD
at 4:47 PM
Monday, August 17, 2015
Kaiser Health News
August 17, 2015
California's Plan To Absorb Medically Fragile Children Into Managed Care
By Barbara Feder Ostrov and Anna Gorman
When Kausha King's son Christian was born with cerebral palsy, along
with a seizure disorder and lung disease, doctors told her he would not
live past the age of three. Today, Christian is 18, and although he
cannot walk or speak, he is happy and thriving, King says.
King credits much of her son's progress to a little-known state program
known as California Children's Services (CCS), which pays for
specialized medical care for children with severe illnesses or birth
Beginning next year, state officials essentially want to fold the $2
billion program, which serves an estimated 180,000 children younger than
21, into its vast system of Medi-Cal managed care.
But families like King's, along with children's advocates and pediatric
medical centers, are strenuously opposed. They say Medi-Cal managed care
hasn't worked well for vulnerable populations and is particularly risky
for fragile kids whose lives depend on access to highly specialized care.
"It feels like our children are going to be dumped in to this system
that doesn't even seem to be working for healthier children," said King,
who lives in Concord, Calif. and works as a liaison for families of
children with special needs. "Children like Christian require a
different level of support than your average child."
At issue are two separate programs whose beneficiaries overlap. About 90
percent of children served by CCS also qualify for Medi-Cal, the public
insurance program for low-income Californians. Medi-Cal covers their
general medical care, while CCS covers services related to specific
conditions such as spina bifida, cancer, cystic fibrosis and sickle cell
CCS pays a fee for each service provided, whereas Medi-Cal increasingly
is switching to a managed care approach, in which medical services are
coordinated and covered under a single health plan for a fixed monthly
Many parents and consumer advocates are skeptical. Similar transitions
of elderly, disabled and child populations from traditional
fee-for-service Medi-Cal into managed care programs have proved
These critics point to a scathing report from the California State
Auditor in June, which found that the state could not assure that its
Medi-Cal managed care networks were adequate and that thousands of calls
to an ombudsman's office went unanswered every month. They also refer to
a lawsuit pending in Los Angeles, alleging disabled people were denied
crucial medications, tests and treatment by Medi-Cal managed care plans.
(Ann-Louise Kuhns, president and CEO of the California Children's
Hospital Association) said the state's proposal threatens children's
access to the pediatric specialists who are most familiar with them and
their rare diseases.
"These (managed care) plans typically don't have these specialty
providers in their networks," she said.
Comment by Don McCanne
The origins of California Children's Services (CCS) (formerly Crippled
Children's Services) date back almost a century (1927). It has been a
phenomenal program ensuring care for these children with special needs.
Now the state wants to transfer these children into Medi-Cal managed
care programs (Medicaid). Ouch!
CCS is part of the traditional culture of California health care.
Children's hospitals, academic institutions, specialists and
sub-specialists are readily available to meet the needs of these
unfortunate children, simply because it's always been that way. Well,
really more than that, because that is what they do. But no thought is
ever given to turning these children away.
In contrast, Medi-Cal has been chronically underfunded and has one of
the lowest payment rates in the nation. Many providers refuse to accept
Medi-Cal patients (and they are "providers" when they let money issues
trump their professional obligation to care for the infirm). Now it is
even worse in that the Medi-Cal managed care organizations limit patient
access to their own contracted networks. Experience to date suggests
that these networks are inadequate for basic, primary care services, and
access to more specialized services is much worse.
California Department of Health Care Services director Jennifer Kent
said that this is not about saving money, but rather that children can
benefit by being managed in a system where the whole child is treated by
one plan. But when the decision was made to transfer Medi-Cal patients
to managed care programs it was about saving money, according to state
announcements at that time.
CCS was all about getting the care that these children needed when they
needed it. Medi-Cal managed care is about keeping patients away from
"excessive" specialized care by coordinating their care through
overworked primary care professionals who do not have the time nor
expertise to meet many of the needs of these children with their complex
This should not to be construed as a statement condemning integrated
health care. Just the opposite. Under a single payer system, our entire
health care delivery system can be considered to be a single integrated
system. Primary care provides an entry into a system in which the most
appropriate care can be arranged - the best of integrated health care.
It was a wise move when the precursor of CCS was established early in
the last century. It was a wise moved when they abandoned the label,
"crippled." It was a wise move when they perpetuated the program instead
of folding it into California's overworked and underfunded Medi-Cal
program. But is was a terrible move when, for cost-saving reasons, they
transferred Medi-Cal patients into managed care plans. Moving CCS
patients into the same program is nothing short of tragic.
We need a single payer system so that we can get the bureaucrats and
their private third party payers out of our way as we medically manage
health care based on patient needs, rather than us managing health care
dollars. Yes, we need public administrators to manage distribution of
the funds, but we need to be free to advocate for our patients in a
system designed to ensure access, not to prevent it.
at 1:28 PM
Thursday, August 13, 2015
August 12, 2015
Next Steps for the Affordable Care Act
By Linda J. Blumberg, John Holahan
While the ACA has already had some very important successes, simply put,
there has never been enough funding, given how ambitious the goals of
the law were—for example, substantially reducing the number of
uninsured, ending discrimination against those with health conditions,
and controlling health care costs.
Every effort was made to keep the costs of the law under a trillion
dollars over 10 years, which amounted to about 0.7 percent of GDP. This
amount was simply not adequate, given the problems the nation faced in
the health care sector. In order to allow the ACA to meet and exceed its
long-term objectives, additional investments should be made to improve
affordable access to care and bolster administrative capacity.
Under the ACA, significant strides have been made in increasing the
affordability of coverage and reducing the number of uninsured by 15
million people. This was done in an environment with surprisingly
moderate premiums in the private nongroup insurance market and
prohibitions on discrimination against those with health problems.
However, despite these achievements, affordability remains the most
often stated reason for remaining uninsured.
* As it now stands, premium and cost-sharing subsidies are not generous
enough to make coverage affordable for large numbers of low-income
* Low-income families are often unable to obtain subsidized coverage if
one worker in the family receives an offer of affordable single coverage
through an employer.
* Following the Supreme Court decision in 2012, which essentially left
Medicaid expansion up to individual states, 21 states still have not
expanded eligibility for that program. That leaves a significant gap
between those Medicaid eligible prior to the ACA and those eligible for
federal subsidies through the marketplaces.
In addition to these affordability issues, the significant reforms in
the ACA require serious attention to administration. Much of the need
for administrative effort is a consequence of building a system around
competing private insurers. This requires a complex and flexible IT
apparatus, continuing strategies and structures for broad-based
education, outreach and enrollment assistance, and effective approaches
for oversight and enforcement of insurance regulation.
* Experience with IT systems has been decidedly mixed, with some state
marketplaces working effectively, some moving to the federal
HealthCare.gov system, and some moving to well-functioning systems
developed for other states. But the most promising systems, including
HealthCare.gov, require more funding than they have thus far received.
* Education, outreach, and enrollment assistance needs are not
diminishing, although the current funding approach appears to treat it
* Regulatory oversight and enforcement resources have yet to be
All of these issues can only be addressed with additional funding, and
the amount that is needed is trivial as a share of the economy. We
propose the following:
* Make reductions in the premiums and cost-sharing (deductibles,
co-payments, coinsurance) that low-income people pay to purchase
coverage through the nongroup marketplaces.
* Make it possible for families to receive financial assistance for the
purchase of marketplace coverage even if a family member has an
affordable offer of single coverage through an employer.
* Make it an option for states to expand Medicaid to those at or below
only 100 percent of the federal poverty level to induce more states to
* Make permanent a significant federal contribution to administrative
costs. This includes IT systems, but also the human support that is
needed, like call centers and a permanent cadre of personnel to help
individuals get enrolled both during open enrollment and during special
enrollment periods. Plus, make a federal investment in ensuring
appropriate oversight and enforcement of insurance regulations.
How much these solutions cost
We estimate that our proposed reforms could be done for about 0.2-0.24
percent of GDP. There are many ways to pay for this, including applying
rebates used in the Medicaid program to certain Medicare enrollees as
well, increasing cigarette and alcohol taxes, and replacing the
"Cadillac tax" with a cap on the exclusion of employer contributions to
The changes that we propose are not trivial. We recognize that they are
not politically feasible in the near term, but we also believe that what
is politically feasible at this moment will not do the job that is
necessary to make the ACA solve all the problems it is intended to address.
The ACA marks a large step forward for the US health care system, but no
country solves its health care problems with one piece of legislation.
There is more to do, and doing it is achievable with additional
investments that are extremely small relative to our economy and our
total level of health care spending.
Full report (60 pages):
Comment by Don McCanne
This report is ideal for those who say that we should forget single
payer and instead move forward with fixing what we have - the Affordable
Care Act. The authors list some of the more obvious problems and provide
suggested solutions. Although their contribution to the reform dialogue
is commendable, there are two major problems with their approach.
The most important concern is that their recommendations are limited to
deficiencies in ACA, but ACA was merely a series of patches to our
highly dysfunctional, inequitable, inadequate, overpriced system
uniquely characterized by profound administrative inefficiencies. The
fundamentally flawed system would remain intact. Though the ACA patches
were beneficial, they did not begin to address the profusion of other
problems in our system.
The authors are merely proposing patches to the patches. We will still
be left with millions without insurance, millions who are underinsured,
profound administrative waste, and little means to control our high
health care costs. In fact, the authors recommend increasing our
spending on health care - additional spending that is appropriate only
if you accept the fact that we reject the comprehensive reform that we
The other problem is political. They acknowledge that their proposals
"are not politically feasible in the near term." But isn't that what
people say about single payer? Is single payer really that much less
feasible than patches to the patches? Look at the current political
campaigns. One of the most outspoken advocates of single payer Medicare
for all is filling stadiums with passionate supporters of his messages.
Yet other candidates who advocate for repeal of Obamacare and reducing
our spending on Medicare and Medicaid are drawing ridicule from those
outside of their narrow camp.
If we are going to work on changing political feasibility, wouldn't it
be far better to join the rising tide in support of replacing bad policy
with good policy through single payer, instead of merely trying to patch
the bad policies of our highly dysfunctional post-ACA non-system?
at 12:16 PM
Tuesday, August 11, 2015
Department of Health and Human Services
Office of the Inspector General
Not All of the Federally Facilitated Marketplace's Internal Controls
Were Effective in Ensuring That Individuals Were Properly Determined
Eligible for Qualified Health Plans and Insurance Affordability Programs
Our objective was to determine whether the Federal marketplace's
internal controls were effective in ensuring that individuals were
determined eligible for enrollment in QHPs (qualified health plans) and
eligible for insurance affordability programs according to Federal
DEFICIENCIES RELATED TO VERIFYING APPLICANTS' ELIGIBILITY
Social Security Numbers Were Not Always Validated Through the Social
Citizenship Was Not Always Verified Properly
Annual Household Income Was Not Always Verified Properly
Family Size Was Not Always Determined Correctly
DEFICIENCIES RELATED TO RESOLVING AND EXPIRING INCONSISTENCIES
Inconsistencies Related to Certain Eligibility Requirements Were Not
Always Resolved Properly
Inconsistencies Related to Certain Eligibility Requirements Were Not
Always Expired Properly
Applicant Data and Documentation Related to Resolving Inconsistencies
Were Not Always Maintained Properly
Comment by Don McCanne
Considering the administrative complexities of the Federally Facilitated
Marketplace (insurance exchanges) established by the Affordable Care
Act, these deficiencies in determining eligibility for the exchange
health plans and for the premium tax credits and cost-sharing reductions
do not really demonstrate bureaucratic incompetence but rather would be
expected based on the complex program design authorized by the legislation.
This was totally unnecessary. By design, in a single payer system
everyone is eligible and automatically enrolled. There is no need for
premium tax credits since there are no premiums. The program is funded
through equitable taxes instead. There also is no need for cost-sharing
reductions since there are no deductibles or coinsurance. It is a
Instead of reading the news reports and merely tisk-tisking the
incompetence of the administration, we need to give more thought as to
why the administrative boondoggles exist and redirect the blame to the
fact that we are implementing a highly flawed model of health care
financing. That should then lead us to advocating for a model that
really does work well - a single payer national health program.
at 12:30 PM
Monday, August 10, 2015
August 10, 2015
In U.S., Uninsured Rates Continue to Drop in Most States
By Dan Witters
The marketplace exchanges opened on Oct. 1, 2013, with new insurance
plans purchased during the last quarter of that year typically starting
on Jan. 1, 2014. Medicaid expansion among initially participating states
also began with the onset of 2014. As such, 2013 serves as a benchmark
year for uninsured rates as they existed prior to the enactment of the
two major mechanisms of the healthcare law.
Nationwide, the uninsured rate fell from 17.3% in full-year 2013 to
11.7% in the first half of 2015.
Collectively, the uninsured rate in states that have chosen to expand
Medicaid and set up their own state exchanges or partnerships in the
health insurance marketplace has declined significantly more since 2013
than the rate in states that did not take these steps. The uninsured
rate declined 7.1 points in the 22 states that implemented both of these
measures by Dec. 31, 2014, compared with a 5.3-point drop across the 28
states that had implemented only one or neither of these actions.
Although the 22 states that implemented both mechanisms before Jan. 1,
2015, had a lower uninsured rate to begin with, the 7.1-point drop is
larger than what is reported among the other 28 states, and represents a
44% decline since 2013 in the uninsured rate among adults residing
there. The 5.3-point drop in the 28 states that have implemented one or
neither of the mechanisms represents a 28% decline in uninsured rates.
Still, the difference in the rate of decline in uninsured rates between
the two groups of states has now leveled off, and is unchanged relative
to the same 1.8-point gap in the rate of decline measured in midyear 2014.
Comment by Don McCanne
Although supporters of the Affordable Care Act (ACA) celebrate the
reductions in the numbers of uninsured into the second year of plan
enrollment, those of us who believe that everyone should be covered
certainly do not have cause to celebrate.
Nationally, the rate of uninsured fell from 17.3% before ACA expansions
were implemented to 11.7% after the second annual enrollment period.
That is a decline in the uninsured of only 32%. Two-thirds of the
numbers previously uninsured still remain uninsured.
Even in those states that cooperated with ACA by both expanding Medicaid
and by establishing exchanges themselves or partnering with the federal
government to establish exchanges still saw reductions in the uninsured
of only 44% - less than half (a decline from 16.0% to 8.9%). Thus even
the optimal results are disappointing. States that failed to cooperate
saw even less of a decline in the uninsured - 28% (from 18.7% to 13.4%).
With two seasons of ACA implementation, the low fruit has been picked.
With increasing penalties for remaining uninsured, a few more enrollees
should trickle into the exchanges. Also some states missing in action
will likely reluctantly expand their Medicaid programs. But even with
optimistic estimates of the increases in participation, it is quite
clear that far too many will remain uninsured.
The defect is in the design of the Affordable Care Act - an
administratively complex, fragmented system that could never result in
truly universal coverage, not to mention all of the inequities that it
perpetuates. In contrast, a single payer system automatically enrolls
everyone, while reducing inequities. That's the design that we need.
at 3:45 PM
Friday, August 7, 2015
August 4, 2015
Tax Filing Problems Could Jeopardize Health Law Aid for 1.8M
By Ricardo Alonso-Zaldivar
About 1.8 million households that got financial help for health
insurance under President Barack Obama's law now have issues with their
tax returns that could jeopardize their subsidies next year.
Consumers who got health care tax credits are required to file tax
returns that properly account for them, even if they are unaccustomed to
filing because their incomes are low. Unless they follow through, "they
will not be able to receive tax credits to help lower the cost of their
health insurance for 2016," Lodes explained (Lori Lodes, communications
director for the Centers for Medicare and Medicaid Services).
Treasury officials said 1.8 million households are at risk of losing
subsidies for next year, and that number breaks down as follows:
-About 710,000 households that have not filed a 2014 tax return,
although they were legally required to account for health insurance tax
credits that they received.
-Some 360,000 households that got tax credits and requested an extension
to file their returns. They have until Oct. 15.
-About 760,000 households that got tax credits and filed their tax
returns omitted a new form that is the key to accounting for the
subsidies. Called Form 8962, it was new for this year's tax filing season.
The 1.8 million households with tax issues represent 40 percent of 4.5
million households that had tax credits provided on their behalf and
must account for them.
"What the IRS is doing here is sending these people a not-so-gentle
reminder that they need to file or they will put their subsidy at risk,"
said Mark Ciaramitaro, vice president for tax and health care at H&R
Block, the tax preparation company. He cautioned that many consumers
will find the process cumbersome, so they should waste no time getting
Comment by Don McCanne
Forty percent of the 4.5 million households that received tax credits in
2014 for the health plans offered in the ACA exchanges have failed to
complete the tax filing requirements for these credits and thus will be
ineligible for tax credits for 2016, unless they follow through with
their delayed filings.
In a health care system already heavily burdened with administrative
excesses, it is unfortunate that the Affordable Care Act significantly
increases the administrative burden. In this instance, the additional
hassle of the tax filing requirements for those receiving subsidies
under ACA may be confusing enough that many may fail to file correctly,
and thus they may become disqualified for tax credits to which they are
entitled and which many need just to be able to afford the premiums for
the exchange plans.
Many of ACA's provisions and regulations apply specifically to
individuals and families, creating sometimes complex administrative
requirements in each individual case. In contrast, a single payer system
requires simple registration only once in a lifetime, and the financing
requires nothing more than compliance with the existing tax system, with
rates set based on ability to pay.
For the individual, a single payer system is hassle-free, whereas for
the entire nation, single payer frees up enough administrative waste to
pay for the care that people are not currently receiving but should be.
When we have a financing system requiring IRS rules that can threaten
individuals with loss of their health care, we know that the system
needs to be changed. Time for an improved Medicare for all.
at 1:27 PM
Tuesday, August 4, 2015
AMA Journal of Ethics
The All-Payer Rate Setting Model for Pricing Medical Services and Drugs
By Gerard Anderson, PhD, and Bradley Herring, PhD
In theory, the price set by a competitive market-oriented health care
system should result in efficient (and presumably ethical) rates for
hospitals, physicians, drugs, and other health care services. In
practice, however, price efficiency does not generally occur for many
health services. Because of health insurance, most patients are less
sensitive to prices than they would be if they paid the full price. In
addition, in some geographic areas, health systems with significant
market power can negotiate very high prices, while in other areas, one
or two dominant private health insurers have great power to set
relatively low prices. As a result, prices paid by individuals for the
same service can vary by a factor of 10 at some hospitals. Moreover, a
side effect of all these negotiations is that the private insurers and
health systems spend millions of dollars negotiating and carrying out
unique deals with each other—dollars that could be better spent
At the same time, the public Medicare and Medicaid programs in the US
have set payment rates using a totally different approach from that of
the private insurers. The Medicare program has used a diagnosis-based
prospective payment system for hospitals since 1984 and the
Resource-Based Relative Value Scale (RBRVS) payment system for
physicians since 1992. Both attempt to estimate the underlying costs of
providing a given service, resulting in a distinct amount for each of
about 750 different hospital services and 16,000 different physician
services. There is, however, wide variation in payment rates among state
Medicaid programs; the average Medicaid payment rates are comparable to
Medicare for hospitals but about one-third lower than Medicare for
Consequences of Price Inefficiency in Health Care
The result of the wide variations in payment rates and methods among
private and public insurers can lead to access problems. When the
payment rate of one insurer is much lower than that of other insurers,
patients have access to a restricted number of participating hospitals
and clinicians. And when the premium rates of some insurers are much
higher than those of other insurers, people have difficulty paying for
health insurance. Moreover, as noted above, the complexity of numerous
insurer payment methods means that health systems have to negotiate
payment rates with various insurers and hire many people to keep track
of these different payment methods, leading to higher administrative
costs embedded in these prices. The end result is that prices in the US
are typically much higher than they are for similar services in other
industrialized countries, or, as one of us wrote years ago, "It's the
prices, stupid." In addition, when the payment methods differ from one
insurer to another, hospitals and clinicians are given mixed messages
about exactly what services to provide and whether to emphasize quality,
price, or satisfaction.
Are there alternatives?
Alternate Model: The Common Payment Method
One option is for all insurers—public and private—to use the same method
for paying hospitals, but not necessarily the same rates. This would
reduce the administrative costs associated with each insurer's
developing and maintaining its own payment methodology and each health
system's learning each new methodology. A common payment system (but not
necessarily the same payment rates) could be adopted voluntarily or
imposed through legislation.
The US has developed a variant of this approach already: the RBRVS
payment system for physicians used by Medicare since 1992. Subsequently,
nearly all private insurers have chosen to adopt Medicare's relative
value units as the starting point for negotiating payment rates to
physicians. Although most private insurers pay higher rates than
Medicare does and some pay less, nearly all insurers use relative value
units as the basis for starting the negotiation.
Alternate Model: All-Payer Rate Setting
A significant step beyond the common payment method approach is
"all-payer rate setting." In this approach, there is both a uniform
payment method and a single rate that all private and public insurers
pay for a service. In some variants, all hospitals and physicians are
paid the same rate, while in other variants each hospital and clinician
has a unique rate. An international example of all-payer rate setting is
the German system. In Germany, all insurers sit on one side of the
proverbial table and representatives for the hospitals and physicians
sit on the other side. Their objective is to negotiate a single payment
rate for each service that all health insurers and all health systems
will accept. The rates are binding on all insurers and all hospitals and
clinicians. There are no special deals for a dominant organization in a
The US attempted a number of state-specific all-payer rate setting
programs beginning in the 1970s. One program that has remained
operational is Maryland's, which was fully implemented in 1977. Until
2014, the state used prospective diagnosis-based payments for each
admission, a method similar to the Medicare hospital payment system. The
Maryland program was able to reduce significantly the rate of increase
in spending per hospital admission below the national rate of increase
in the US. However, because the admission rate increased, the program
was less successful in controlling overall hospital spending. This
necessitated a revision to the payment system. Since 2014, Maryland has
used a prospective annual global budget that requires each hospital to
monitor both the number of admissions and the cost per admission.
The Maryland program has a number of features that differentiate it from
other all-payer rate setting programs. Whereas the payment rates in
Germany result from a negotiation between payers and hospitals and
physicians, the payment rates in Maryland are established singlehandedly
by a quasigovernmental agency called the Health Services Cost Review
Commission (HSCRC). Moreover, all payers in Maryland—large private
insurers, small private insurers, the Medicare program, and the Medicaid
program—essentially pay a given hospital the same rate for the same
service. Unlike the Germany system, however, each hospital negotiates
its own rates.
The Maryland program has a Medicare waiver that allows it to set
Medicare payment rates. Much of the attention paid to the HSCRC's
all-payer hospital rate revolves around this waiver and what Maryland
must do to maintain it.
These models have numerous advantages and have worked relatively well in
Maryland and in other countries. However, all-payer rate setting could
be difficult to sell elsewhere in the US, inasmuch as many insurers,
hospitals, and clinicians believe they live in Lake Wobegon and receive
above-average rates that give them a competitive advantage. This makes
them less willing to accept a regulated system that would eliminate this
competitive advantage, which means that the US will continue to pay
higher prices than other countries and will restrict access to health
care for some Americans.
Comment by Don McCanne
Because of the political resistance to single payer, some have suggested
that we adopt an all-payer system instead, especially since we already
have an example of such a system in Maryland, and it has even introduced
a form of global budgeting for hospitals - a policy feature of the
single payer model. Would this be an incremental step towards single payer?
All-payer leaves in place the multitude of payers, both public and
private. It would perpetuate administrative complexity and would have
very little impact on the inequities of our system. Although the prices
public and private insurers pay would be more highly regulated, the
complex system of collecting premiums for private plans, and taxes for
public programs would remain in place.
The major advantage is that all-payer depends more heavily on government
or quasi-government control, with experience confirming the principle
that the government can do health care financing better. The major
disadvantage is that all-payer likely would be considered an endpoint
rather than an incremental step, with little appetite for moving forward
with the disruptive changes that implementation of single payer would
require. That would be unfortunate since those systems in other nations
that more closely resemble all-payer tend to be more expensive than the
OECD averages for per capita health spending.
In this article, Anderson and Herring make the point that all-payer
could be a hard sell since many insurers, hospitals and clinicians
believe they are receiving above average "Lake Wobegone" rates compared
to what they would receive in an all-payer system. As the authors state,
"This makes them less willing to accept a regulated system that would
eliminate this competitive advantage, which means that the US will
continue to pay higher prices than other countries and will restrict
access to health care for some Americans."
So we're back to the political feasibility issue. As we've stated many
times before, instead of modifying policy to match the politics, we
should advocate for optimal policy and work on changing the politics.
Instead of accepting all-payer as a compromise, let's go for single payer.
at 1:55 PM