Friday, October 30, 2015

qotd: The Salt Lake Tribune: Should have been single payer

The Salt Lake Tribune
October 29, 2015
Editorial: End of Arches points to single-payer

The collapse of Utah's cooperative insurance provider, the Arches Health
Plan, was not unforeseen, either by those who favor the Affordable Care
Act or those who have always hated it.

Count Utah's Sen. Orrin Hatch among the latter.

Hatch's preferred alternative, the Patient CARE Act, has the advantage
of not being Obamacare. But it is at least as complex as the ACA, shifts
more costs onto consumers and more work onto states. Worst of all,
passing it would force millions of Americans who have finally found
health care under the current law back to square one.

Which is what just happened to 63,000 Utahns who will have to find new
coverage now that Arches has tanked.

All of this fiddling with rival steampunk assemblages of subsidies,
mandates, taxes, exchanges and co-ops continues to burden Americans
because Republicans have never accepted, and Democrats have never fully
sold, the realization that a country where millions of people do not
have access to affordable health care is the skunk in the garden party
of First World nations. No truly civilized society would tolerate such a

The establishment of non-profit co-ops was one of many unsatisfying
compromises between those who wanted a single-payer, Medicare-for-all
design — or, at the least, a government-run public option — and those
who irrationally trusted the private sector to provide what it simply is
not willing or able to provide, now or ever, affordable health care for all.

The original ACA had funds to back the co-ops if — when — they ran out
of money. But the Republican-controlled Congress, frustrated by many
failed attempts to repeal Obamacare outright, cut back on the
guarantees. So at least 10 such organizations around the country have
now failed.

Meanwhile, premiums continue to rise and the private insurance sector is
consolidating as big firms are bought by bigger ones. There is less and
less of the competition that reformers of all ideological stripes were
hoping, some with more faith than others, would keep costs down.

What Obamacare opponents do not seem to grasp is that, if it doesn't
work, if the co-ops fail and the exchanges don't meet the needs of
working families, going back to a pre-ACA jungle will not be a workable
or ethical option.

It'll be single-payer, or at least a robust public option. As it should
have been from the beginning.


Comment by Don McCanne

What a great opener for this weekend's national meeting of Physicians
for a National Health Program. An editorial in The Salt Lake Tribune
tells us that, as we see the failures of the co-ops, the inadequacies of
the exchanges, and "rival steampunk assemblages," it should have been
single payer from the beginning.

They mention, "or at least a robust public option." But lost in the
prior enthusiasm for the public option was the fact that it would not
have been an adequate solution since it would have been only one more
player in our highly dysfunctional, fragmented health care financing
system. But this does not reduce the impact of their message since the
prevalent belief was that the public option would eventually lead to
single payer (a highly unlikely event since it would not have
fundamentally altered the highly flawed, complex financing
infrastructure). So their intent is certainly well meaning.

Yes, single payer, as it should have been from the beginning.

Thursday, October 29, 2015

qotd: ACA plans do not always have a full complement of in-network specialists

October 27, 2015
Adequacy of Outpatient Specialty Care Access in Marketplace Plans Under
the Affordable Care Act
By Stephen C. Dorner, MSc; Douglas B. Jacobs, ScB; Benjamin D. Sommers,

In this study of federal marketplace plans, nearly 15% completely lacked
in-network physicians for at least 1 specialty. We found this practice
among multiple states and issuers. This likely violates network adequacy
requirements, raising concerns regarding patient access to specialty
care. Such plans precipitate high out-of-pocket costs and may lead to
adverse selection (ie, sicker individuals choosing plans with broader
networks), which is similar to concerns over restrictive drug formularies.

We also found substantial turnover in directory listings. This may
contribute to inaccuracies in listings, which prompted more stringent
federal requirements for 2016. However, physician listings without any
specialists (even if inaccurate) may confuse or impede consumers' access
to physicians.

(R)ural regions are known to have fewer physicians and may have an even
higher prevalence of specialist-deficient plans.


Comment by Don McCanne

This study shows that not all health plans in the ACA insurance
exchanges have a full complement of specialists in their networks. When
patients have to obtain their care out of network, they may face
impaired access and financial penalties. If private insurers cannot
provide the basics, why would we want to include them in our health care
system in the first place?

Single payer.

Wednesday, October 28, 2015

qotd: Evaluation of the ColoradoCare initiative by PNHP's founders and Policy Director

Physicians for a National Health Program
October 27. 2015
Brief Comments on ColoradoCare
By Ida Hellander, M.D., David U. Himmelstein, M.D., and Steffie
Woolhandler, M.D., M.P.H.

Organizers for the ColoradoCare ballot initiative have contacted some
activists in Physicians for a National Health Program seeking their
endorsement and financial support. We summarize, below, our
understanding of the initiative.

Description of the program

ColoradoCare is a ballot initiative for a publicly financed, universal
health plan for the state of Colorado that would be operated by a
private cooperative under a 21-person elected Board. While the ballot
measure spells out the program's governance and Board structure in
considerable detail, key aspects of the program are not specified,
and/or left to the discretion of the Board. In the past the drafters
made clear in public statements that ColoradoCare is NOT a single-payer

The initiative would cover all Colorado residents under a publicly
funded, cooperative insurance plan. While the new program would replace
most private insurance, Medicaid and CHIP coverage, it would serve only
as supplemental coverage for those covered by Medicare, the VA and
TriCare. The initiative would not prohibit the purchase or sale of
private coverage duplicating the public plan. However, proponents expect
that little private insurance would persist, since most businesses and
individuals would not want to pay twice for coverage.

The proposal would cover a broad range of benefits, but would not cover
dental care for adults, or long-term care for most individuals.

ColoradoCare would be funded via a payroll tax of 6.67 percent on
employers and 3.33 on employees, or 10 percent of non-payroll income
(excluding pensions and annuities), along with federal funds that would
have come to the state via subsidies for private coverage under the ACA,
for Medicaid, and for other programs.

The drafting of ColoradoCare was spearheaded by Colorado Sen. Irene
Aguilar and psychologist Ivan Miller. Volunteers and paid staff gathered
the signatures necessary to put it on the ballot. Journalist T.R. Reid
has become a champion and spokesperson for the plan both inside and
outside of Colorado.

Strengths of ColoradoCare

1. The proposal if implemented would cover all, or nearly all of
Colorado's uninsured – apparently (and laudably) including the undocumented.

2. The proposal includes some useful cost-control features, notably the
creation of an annual budget, and the ability to negotiate lower prices
with pharmaceutical companies.

3. The plan allows for a free choice of primary care doctor.

4. The financing plan is more progressive than the current system.

5. ColoradoCare's organizers have mounted an impressive campaign with
considerable mobilization.

Weaknesses of ColoradoCare

1. Multiple payers would persist – probably including private insurers.
As a result, it sacrifices much of the administrative savings that could
be realized through a true single-payer reform because providers would
have to maintain much of their current cost tracking and billing
apparatus in order to apportion costs among the multiple payers.
Published cost estimates for ColoradoCare overstate the savings that
could be achieved through single payer, and do not take into account the
additional costs entailed by ColoradoCare's failure to adopt a full
single-payer structure.

2. The initiative makes no mention of how hospitals or other
institutions would be paid – apart from a rhetorical nod favoring ACOs.
It makes no mention of global budgeting, separating operating and
capital payments, or other constraints on hospital capital spending.
Global budgeting is critical to achieving administrative savings;
separating operating and capital payments is a bedrock of effective
health planning, which is essential for long-term cost containment.

3. The initiative would not ban for-profit hospitals or other providers,
despite clear evidence that they inflate costs and compromise quality.
For-profit ACOs (indistinguishable from HMOs in most respects) might
also flourish.

4. Patients would NOT have a free choice of specialists or hospitals.

5. While the plan would outlaw deductibles, the Board would be empowered
to impose copayments.

6. While the 10 percent tax rate would apply to both the rich and poor
(including those with incomes below the poverty line), income over
$350,000 would not be taxed.

7. The campaign's anti-government rhetoric is problematic.

8. Rather than specifying critical aspects of the plan, the initiative
leaves many of these to be decided later by the Board. Delaying such
decisions has often favored corporate interests, who can intervene after
the popular mobilization required to pass a reform has subsided. In the
case of the ACA, corporate lobbying during the rule-making process
attenuated cuts in Medicare HMO overpayments; reduced promised funding
for public health and community clinics; effectively neutered limits on
insurance overhead; and watered down the mandated benefit package. In
Vermont, the broad-brush program initially passed by the legislature was
whittled down in the detailed design stage, leading to rising cost
estimates and ultimate rejection by the governor.

Dr. Ida Hellander is director of health policy and programs at
Physicians for a National Health Program. Drs. David Himmelstein and
Steffie Woolhandler are internists, professors at the City University of
New York School of Public Health, lecturers in medicine at Harvard
Medical School, and co-founders of PNHP.


Comment by Don McCanne

Until the nation supports a political environment in which a bona fide
single payer national health program can be enacted, it is wise for
activists to advance beneficial health policies that can reduce
suffering and hardship on an interim basis. Until then, PNHP will
continue to carry out its mission of educating the public as we advocate
for a single payer system. As others continue with their efforts to
improve the system, we encourage them to simultaneously actively support
the golden standard of a single payer national health program. All of us
share the common goal of health care justice for all.

Tuesday, October 27, 2015

qotd: Why are the media celebrating a 7.5% ACA premium increase?
October 26, 2015
2016 Marketplace Affordability Snapshot

The 2016 Affordability Snapshot provides a review of the final rate
increases for second lowest cost silver plans, known as benchmark plans,
which will be available for purchase in the 37 states that used the platform in 2015, including those in the
Federally-facilitated Marketplace, State Partnership Marketplaces, and
supported State-based Marketplaces.

Across all 37 states that used the platform, the cost of
the benchmark plan will increase on average 7.5 percent in 2016. These
increases do not take into account advanced payments of premium tax
credits, which lower the monthly costs for the overwhelming majority of
Marketplace consumers.

The second-lowest cost silver plan is notable because it serves as the
benchmark plan to calculate the amount of advanced premium tax credit
consumers may be eligible for to help lower the cost of their
Marketplace coverage.


U.S. Bureau of Labor Statistics
October 15, 2015
Consumer Price Index Summary

Consumer Price Index for All Urban Consumers (CPI-U)

Percent changes, Unadjusted 12 months ended September 2015

0.0% All items

1.9% All items less food and energy

2.4% Medical care services

2.7% Medical care commodities


Comment by Don McCanne

Although there are many variables that produce a wide variation in
premiums for plans offered in the health insurance exchanges
(Marketplaces), the second lowest cost plans in the silver tier serve as
the benchmark for premium tax credits and thus can provide an anchor for
determining health care inflation as reflected by the premiums for the
plans offered by the exchanges.

Many reports in the media today are celebrating the fact that average
increases in the benchmark premiums were held to a single digit. But
these increases in insurance premiums were about 5% greater than the
consumer price index (CPI-U) increases for medical care services and
commodities, and a 7.5% increase over CPI-U for all items.

Our health care financing system that has been heavily dependent on
private insurance plans has been ineffective in slowing health care
inflation to sustainable levels. The Affordable Care Act was supposed to
have made health care more affordable by creating a separate competitive
market of regulated private plans within government-operated insurance
exchanges. With a 7.5% increase above the CPI-U, we can say that this
experiment with private health plans has been failure.

If we want affordable health care for all, we need to eliminate the
private insurers and establish a single payer national health program.
As Fareed Zakaria said last week, "It's absolutely clear that is the
only way you can achieve that goal."

Monday, October 26, 2015

qotd: IRS Form 8962 may cause individuals to lose their ACA premium subsidies

The New York Times
October 25, 2015
Thousands Who Didn't File Tax Returns May Lose Health Care Subsidies
By Robert Pear

Tens of thousands of people with modest incomes are at risk of losing
health insurance subsidies in January because they did not file income
tax returns, federal officials and consumer advocates say.

Under federal rules, anyone who receives an insurance subsidy must file
a tax return to verify that the person was eligible and received the
proper amount of financial assistance based on household income.

When the federal insurance marketplace opens for the third enrollment
season next Sunday, users will see a new question: "Did your household
file a 2014 tax return and reconcile any premium tax credit you used?"

If the answer to that question is no, consumers risk losing the
subsidies they receive to help pay premiums. Without such assistance,
many would find insurance unaffordable.

Many of the people potentially affected have incomes so low that they
would not otherwise have to file tax returns. But if they received
insurance subsidies in 2014, they were required to file this year.

(Christine Speidel, a tax lawyer at Vermont Legal Aid) identified three
groups of people at risk: those who did not file a tax return; those who
filed a return without the correct form to reconcile advance payments of
the premium tax credit; and those who filed and reconciled this fall,
too late for the information to be made available to health insurance
exchanges before the open enrollment period.

In July, the Internal Revenue Service said 710,000 people who had
received subsidies under the Affordable Care Act had not filed tax
returns and had not requested more time to do so.

If those people do not return to the marketplace this fall, they may be
automatically re-enrolled in the same or similar health plans at full
price. And when they receive an invoice from the insurance company next
year, they may be shocked to see that their subsidies have been cut to zero.

The I.R.S. also said 760,000 taxpayers had received subsidies and filed
returns but had not attached the required form comparing the subsidies
paid with the amount they were entitled to receive. Taxpayers describe
that document, I.R.S. Form 8962, as daunting.

"The premium tax credit form, the dreaded 8962, is really hard," said
Eileen P. Duggan, a piano teacher and freelance writer in Maplewood,
Mo., outside St. Louis, who filed the form with her tax return. "It's
enough to make you cry, that form. It was almost impossible to figure out."

IRS Form 8062 - Premium Tax Credit

IRS Instructions for Form 8962 (15 pages)


Comment by Don McCanne

This is just one more small but somewhat shocking example of the
unnecessary administrative complexity created by the Affordable Care Act

Based on income alone, many people are not required to file tax returns
if their income falls below a certain threshold (amount varies based on
taxpayer status). However, many of these low-income individuals purchase
plans through the ACA insurance exchanges and qualify for premium tax
credits. All individuals who receive these credits under ACA must submit
Form 8962 for the premium tax credit. It must be attached to an income
tax return (Form 1040, 1040A, or 1040NR), so these people are required
to submit tax returns no matter how low their incomes.

The penalty for not submitting Form 8962 attached to an income tax
return is the requirement to refund any premium tax credits received and
a disqualification from receiving tax credits in the following year.
That's quite a penalty for people with low incomes when you consider
that ACA was supposed to make health care affordable. After all,
"Affordable" is in its name.

But look at Form 8962 (click on link above). Then glance through the 15
pages of instructions for filling out Form 8962 (link also above).
Sophisticated taxpayers are likely to find this daunting, but think of
what it would be like for many of the low-income individuals who would
have difficulties with just the simplified Form 1040A tax return, not to
mention this monstrosity. It makes you think that ACA means
"Administrative Complexity for All."

Since there are no premiums in a well-designed single payer system,
there would be no need for premium tax credits. The entire health care
system would be funded by simplified taxes based on ability to pay. The
health care system would always be there for you whenever you needed it,
regardless of your tax situation. Even if delinquent, the IRS could not
penalize or take away your health benefits.

Friday, October 23, 2015

qotd: Fareed Zakaria on single payer, using lesson from Kenneth Arrow

Healthcare IT News
October 21, 2015
Fareed Zakaria: Health IT is no magic bullet
By Bernie Monegain

As Fareed Zakaria sees it, the remedy for America's ailing and expensive
health system is clear.

It might be hard for some to swallow, but, in his view, it is sure and

"There's absolutely no question that when we look at the ability to
provide good healthcare at an affordable price, lower levels of massive
inequality in healthcare outcomes or provision, a single government
payer and multiple private providers is the answer. It's absolutely
clear that is the only way you can achieve that goal," Zakaria said.
"The revolution that's needed here is not an information revolution,
it's a political revolution."

Zakaria is a journalist, author and host of Fareed Zakaria GPS, a Sunday
morning staple on CNN that delves into global issues and ways to solve
them. For purposes of his broadcast "GPS" stands for Global Public Square.

Zakaria spoke to a crowd of more than 600 healthcare CIOs at the annual
CHIME Fall Forum, October. 16 in Orlando, Fla.

"The fundamental point, I think, that you have to understand about
healthcare is information technology, globalization are not magical
solutions," Zakaria told the audience.

This is especially so, because the fundamental structure of healthcare
"makes it very difficult to achieve certain economies of scale."

"What I'm always struck by when I look at healthcare," Zakaria said,
"is the fundamental accuracy, impressions of the 1961 or 1962 article
written by Kenneth Arrow, a Nobel Prize winning economist, who said
healthcare is not going to operate like any other market."

Indeed, noted economist, New York Times columnist and author Paul
Krugman also references Arrow's work.

"One of the most influential economic papers of the postwar era was
Kenneth Arrow's Uncertainty and the welfare economics of health care,
which demonstrated – decisively, I and many others believe – that health
care can't be marketed like bread or TVs," Krugman wrote in a 2009 column.

Exactly Zakaria's point.

Healthcare "is all non-tradable work," he explained. Yet, "people look
at healthcare and they ask themselves, 'Why aren't you getting more and
more productivity?'"

That approach works in most industries.

"We have wrung inflation out of literally every industry," Zakaria
noted. "In most cases you've seen enormous price deflation. Think about
computers; think about technology."

Higher education and healthcare have been elusive when it comes to
controlling spiraling costs. In fact inflation rates have been two to
three times higher than the national average, he said.

"In both cases, you have the consumer not paying, very complicated
government regulation that involves lots of third parties that pay and
reimburse on very complicated schedules," Zakaria said. "So all the
normal price mechanisms that are at work that allow supply and demand to
find equilibrium do not exist. "

As Zakaria sees it, the answer does not lie in technology – at least not
in technology alone, but rather in the structure of the health system
itself and leaders should be prepared to unravel the structure.

"I don't mean to be the bearer of bad news. What I mean is you have a
very complicated job ahead of you, which is the structure. In addition
to that you have a Democratic system, which makes it very hard to change
the structure."

Kenneth J. Arrow, "Uncertainty and the Welfare Economics of Medical
Care," The American Economic Review, December 1963:


Comment by Don McCanne

Although Fareed Zakaria has wavered in the past on what we need to do to
improve the health care system in the United States, he has now come to
the firm conclusion that we need single payer.

As he states, "There's absolutely no question that when we look at the
ability to provide good healthcare at an affordable price, lower levels
of massive inequality in healthcare outcomes or provision, a single
government payer and multiple private providers is the answer. It's
absolutely clear that is the only way you can achieve that goal."

He cites the 1963 landmark article by Nobel laureate Kenneth Arrow,
"Uncertainty and the Welfare Economics of Medical Care," (link above)
explaining why health care cannot achieve a competitive equilibrium in
the marketplace. In today's terms, Arrow's work explains why it is
foolish to continue to rely on a marketplace of private health plans
plus various public programs to try to manage spending in our $3
trillion health care industry.

As Nobel laureate Paul Krugman states, "health care can't be marketed
like bread or TVs."

Imagine marketing fire or police or disaster relief services like bread
or TVs. Those services should be there, ready for any of us whenever we
need them. The same is true for health care. That would work just fine
if we made our government the single payer.

Thursday, October 22, 2015

qotd: Sarah Kliff shops for health care

October 19, 2015
I thought people should shop more for health care. Then I actually tried it.
By Sarah Kliff

I spend most of my time writing about the health care system. But every
now and again, I actually use the system, too. This past week, those two
activities collided on a very specific subject: shopping for better
medical prices, and why patients don't do it.

I recently decided to select a medical service strictly on price. This
is something many economists think ought to happen more, to lower health
spending. I was ready to do my part. Most patients, though, don't do
this, even when they have to spend way more out of pocket to get the
more expensive care.

In retrospect, I wish I hadn't either. The lower-cost procedure — in
this case, an MRI — did indeed save my insurance plan money. But it
created a worse medical experience for me, and was helpful in
highlighting the trade-offs that patients must make in the shopping

This past June, I stress-fractured my left foot. Though I spent six
weeks in a very stylish walking cast over the summer, the injury has
stubbornly refused to heal. Earlier this fall I saw an orthopedic
specialist, who recommended an MRI to get a better sense of what exactly
was wrong. He referred me to a large academic medical center for the
scan, and I made an appointment.

My insurance quickly intervened — and, as a health care wonk, I was very

I got a phone call one evening from a woman who asked if I'd consider
switching to a private imaging center nearby that charged about $400 for
an MRI — about half as much as the academic center cost. She offered to
help me make the appointment, right then and there.

For me, the cost would be exactly the same; I'd have a $50 copay for the
procedure regardless of where I got my foot scanned. But I'd long
understood MRIs as a commodity health care service, essentially an
advanced photograph that would come out the same regardless of who
snapped it. So, in the sake of doing my part to lower national health
spending, I switched to the cheaper center.

To preface: I understand my list of complaints is relative minor and at
the end of the day probably won't affect the ultimate outcome of my
care. At the same time, I didn't think I was making any trade-off when I
chose a cheaper MRI. Now I know that isn't true.

The first issue arose when I went back to the orthopedic specialist.

He wasn't familiar with the place my insurer sent me, and the imaging
center had forgotten to fax him a copy of my test. This meant a
half-hour wait for me in his office, and more work for the office
administrators to track down the images and radiological report.

Getting an MRI at the expensive medical center would have meant a
smoother experience. The administrators there would know the exact drill
of how and when to ship off my scan. Instead, I inadvertently created a
new inefficiency in my own attempt to reduce wasteful spending.

Then there was the image itself. It did show a stress fracture that
hadn't healed, but it was blurry and a little harder for the doctor to
make out what exactly was going on. The academic center he refers
patients to, he told me, typically sends back much clearer images.

Knowing what I know now, I'm way more torn on whether I would choose the
lower-cost MRI facility.

On the one hand, I did save my insurance plan about $400. If everyone at
Vox shopped like I did, then that might do a lot of work to reduce our
premiums. That would probably make us all pretty happy! My slightly
blurry scan was still enough for my doctor to diagnose the fracture,
although I still don't know if he'd have seen something else on a
clearer image.

At the same time, my own experience convinces me I've downplayed the
trade-offs inherent in shopping for even basic health services. If I
went back and did it again, I probably would have gone to the academic
medical center for the scan.

Recently, I wrote about a new study looking at 75,000 patients who
switched from a no-deductible plan to one requiring $3,750 in spending
before the benefits kicked in. It showed that even with that really high
deductible, patients didn't shop on price. Instead, they saved money by
just going to the doctor less.

One economist who contributed to the study described the finding as
"surprising," and I agreed: When patients have to cover the full cost of
their health care, why wouldn't they look for a better deal? I even
called out MRIs specifically as an area where you'd expect to see price
shopping but didn't.

My own health care experience is far from unique. But it was a helpful,
first-person demonstration of how shopping for health care might not be
a zero-sum game, and that even with basic services, there can be clear
winners and losers.


Comment by Don McCanne

One anecdote does not a study make. But Sarah Kliff is a very astute
observer of our health care system, and she has an important lesson for
us that further challenges the rationale of consumer-directed health
care (CDHC).

The concept behind CDHC is that the consumers (i.e., patients) are
placed in charge of a portion of the spending on health care, through
deductibles and other cost sharing, by using their own money. They then,
theoretically, are motivated to shop for better prices. Although Sarah
Kliff had met her deductible and thus would not benefit by price
shopping, as a well informed journalist covering health care financing,
she wanted to see how this concept might work anyway.

As she explains, she accepted the advice given in a cold call from a
representative of her insurer - a representative who supposedly assists
with obtaining higher quality care at lower prices. Indeed, the price
was lower - for the insurer - but the quality was worse, and the patient
experience was inferior. (It is ironic that HHS allows the insurers to
log these interventions as "quality improvement" that applies to the
medical loss ratio, allowing the insurers to retain even more revenue as

She mentions a recent article of hers (covered in a Quote of the Day
last week) about an important study that showed that patients with high
deductibles do not shop health care prices. Rather the study showed that
patients reduce their use of health care services - much of it that
would be beneficial - and the sick do so at a greater rate. Thus CDHC
does not achieve its goal of reducing prices but rather has the perverse
result of reducing beneficial health care services instead.

We want a system that improves quality and the patient experiences while
using patient-friendly methods of containing spending. We will not get
that from the private insurers, but we would achieve that goal if we
established our own public, single-payer national health program.

Monday, October 19, 2015

qotd: Do exit studies show that private Medicare Advantage plans are more efficient?

The National Bureau of Economic Research
October 2015
NBER Working Paper No. 21650
The Efficiency Consequences of Health Care Privatization: Evidence from
Medicare Advantage Exits
By Mark Duggan, Jonathan Gruber, Boris Vabson


There is considerable controversy over the use of private insurers to
deliver public health insurance benefits. We investigate the efficiency
consequences of patients enrolling in Medicare Advantage (MA), private
managed care organizations that compete with the traditional
fee-for-service Medicare program. We use exogenous shocks to MA
enrollment arising from plan exits from New York counties in the early
2000s, and utilize unique data that links hospital inpatient utilization
to Medicare enrollment records. We find that individuals who were forced
out of MA plans due to plan exit saw very large increases in hospital
utilization. These increases appear to arise through plans both limiting
access to nearby hospitals and reducing elective admissions, yet they
are not associated with any measurable reduction in hospital quality or
patient mortality.

From the introduction

The growing privatization of Medicare has been motivated by potential
efficiencies from the Medicare management provided by private insurance
companies. This is a particularly interesting topic in the context of
Medicare Advantage, where private insurers provide coverage side-by-side
with the government system.

… we find that there is a substantial rise in inpatient hospital
utilization after MA plan exit. We estimate that previous MA enrollees
see their utilization of the hospital rise by about 60%, when moving
back to the traditional FFS plan. This estimate is comparable to the
corresponding estimate of 65% from the RAND Health Insurance Experiment
of the 1970s, which randomly assigned patients to managed care plans.
The finding is robust to specification checks and appears to be
long-lasting, so that it does not simply reflect pent-up demand that
caused a temporary increase in utilization. The increases appear across
all types of hospitalizations, but are particularly pronounced for
elective visits. We also find substantial reductions in the average
distance traveled to the hospital when patients exogenously switch from
MA to FFS following plan exit. This suggests that the mechanisms for
lowering costs under MA plans are both reduced hospital availability and
greater restrictions on elective care.

From 3.3 Quality Impacts

To measure the quality of care at the hospital level, we turn to two
sets of standardized measures from the CMS Hospital Quality Initiative
database. The first set of metrics consists of process measures…

Using these measures, we do not see any consistent evidence of moving to
higher quality hospitals, as seven of the nine measures are
insignificant; further, one of the significant coefficients suggest
higher quality (improved process for pneumonia) while the other suggests
lower quality (worse outcomes for heart failure). Moreover, all of the
coefficients are very small relative to mean values and precisely
estimated, ruling out meaningful impacts.

We next turn to more direct process measures of outcomes created from
our discharge data. One such measure, the 60-day hospital readmission
rate… Another measure, preventable hospitalizations…

When MA plans exit, we find that both measures rise - that is, plan exit
does not appear to be translating to more efficient care on net that is
lowering readmissions or preventable admissions. The odds of
readmission, conditional on an initial hospitalization, rises by about
15% among those initially in MA plans after plans exit. Meanwhile, the
odds of a given hospitalization being preventable rises by 10%. By these
measures, therefore, quality is falling for those initially enrolled in
MA following the exit of MA plans.

Finally, we examine the impact on mortality… Both estimates are in fact
positive, suggesting that plan exit leads to higher mortality, although
neither estimate is significant.

The results from this section appear to indicate that there is a
sizeable inefficiency in transitioning elders out of Medicare Advantage
into the FFS program. Utilization of, and spending in, the hospital
rises substantially, with no consistent indication of quality
improvement (although travel to the hospital is greatly reduced). If
anything, we find a reduction in quality, with readmissions, preventable
hospitalizations and mortality (the last insignificantly) increasing
after the shift out of managed care plans.

From the Conclusions

The role of private players in public insurance is the subject of a
central debate in U.S. public policy. This debate is perhaps most heated
around the role of Medicare Advantage plans. Advocates claim that the
higher efficiency of such private options should push the government
towards expanding the role of managed care plans. Opponents point to the
sizeable positive selection faced by these plans (and their high
baseline reimbursement, even independent of selection) to claim that
they are over-reimbursed and are costing, rather than saving, government

Central to this debate is the question of whether MA plans actually
deliver care more efficiently. Our paper contributes to the literature
on this point in two important ways. First, we make use of data that
tracks the treatment of both traditional Medicare (FFS) recipients and
MA enrollees. Second, we make use of exogenous variation in MA
availability, arising from county-level exit of MA plans. Using these
empirical advantages, we document sizeable increases in hospital
inpatient utilization along many dimensions when MA plans exit a county.
Hospital inpatient utilization rises by 60%, and total charges by more
than 50%. We find that MA insurers may achieve this by reducing the use
of the hospital for elective and emergency cases, and also by increasing
the distance that a patient needs to travel to the nearest hospital.
Moreover, we find no evidence that this is accompanied by reduced
quality of care for Medicare patients when enrolled in MA; quality
indicators, if anything, deteriorate when MA plans exit.

… our results suggest that there are large efficiencies from ensuring
that at least some managed care option is available to enrollees. This
could occur through a premium support system of the type discussed in
CBO (2013), which would set up competitive exchanges through which
private plans could compete with the government option. Alternatively,
the government could establish a monopoly MA provider for each area, and
auction off the number of MA slots for the area, in that way minimizing
the reimbursement of MA plans while ensuring MA plan availability.


Comment by Don McCanne

We will likely hear more about this study. The reports will certainly
say that private Medicare Advantage (MA) plans provide greater
efficiency and lower costs by reducing unnecessary hospitalizations and
elective care. We may even hear that they do this while increasing
quality and reducing mortality. With a more careful analysis of this
article and with additional thought input, these conclusions do not seem
to be warranted.

This study was of hospital utilization in regions where the sole MA plan
picked up stakes and left the region. Why would a plan pull out of a
region? Simply because the business prospects did not seem favorable
(code language for not enough profits).

These plans were successful in reducing access to hospitals, partly by
using hospitals that were a greater distance away, requiring greater
travel for patients. They were also able to use managed care techniques
(prior authorization, etc.) in a manner that reduced elective and
emergency admissions. Even though the MA plans were paid more than what
was being spent on traditional fee-for-service (FFS) Medicare patients,
it still wasn't enough, and they bailed out.

After the plans left, the patients were hospitalized at a greater rate,
and costs went up. The authors of this study suggest that these
hospitalizations occurred because the FFS Medicare program is not as
efficient in preventing them as were the private MA plans. But couldn't
this be explained by the business success of MA plans in preventing
patients from having care that was appropriate? Isn't it more likely
that chronic conditions - ubiquitous in this group - became worse and
thus more expensive through the neglect imposed by the MA plans?

The authors try to dismiss this possibility by looking at measurements
of quality and mortality. They report that "quality indicators, if
anything, deteriorate when MA plans exit." Yet from the CMS Hospital
Quality Initiative database, they report, "we do not see any consistent
evidence of moving to higher quality hospitals, as seven of the nine
measures are insignificant; further, one of the significant coefficients
suggest higher quality (improved process for pneumonia) while the other
suggests lower quality (worse outcomes for heart failure)." By these
measures, there was no quality difference.

On the other hand, they report that hospital readmissions and
preventable hospitalizations both rose after the MA plans exited. They
interpret this as evidence of lower quality in the traditional FFS
Medicare program. But every clinician knows that readmissions and
preventable hospitalizations represent a sicker patient population.
Rather than being evidence of poorer quality it is much more likely that
this is further confirmation of the well established adage that Medicare
Advantage patients go into the plan healthy and come out sick.

They use mortality estimates that are not statistically significant to
suggest that plan exit leads to higher mortality. Even if the data were
powered to show an increase in mortality, is it not true that sicker
populations have a higher mortality rate?

This study has the same flaws as many other studies being produced today
that are supportive of the private insurance industry. They look at only
a minuscule portion of potential outcomes of health care. They show that
the differences of what they did measure are almost or sometimes even
completely negligible. Then when drawing conclusions between the choices
of whether additional care is inefficient or is beneficial, they choose
the conclusion that supports the private insurance industry, even if it
is a non sequitur.

In their conclusion, they suggest that the "large efficiencies" from the
managed care option warrant consideration of the premium support
proposal that would privatize Medicare (convert it into a market of
private plans). A better interpretation of their data, based on what is
best for the patient, rather shows us that we should end the experiment
with private Medicare Advantage plans since they prevent patients from
receiving care that they should have.

Friday, October 16, 2015

qotd: Financial barriers are slowing rate of enrollment in ACA plans

Department of Health and Human Services
October 15, 2015
How Many Individuals might Have Marketplace Coverage at the End of 2016?

Last year, the Secretary of Health and Human Services projected that 9.1
million consumers would be enrolled through the Marketplaces for
individual coverage at the end of 2015. We expect that figure to be the
starting point for the third open enrollment period.

We project that in 2016 the year-end effectuated enrollment will be 9.4
to 11.4 million. ASPE's analysis implies that most of the new
Marketplace enrollment for 2016 is likely to come from the ranks of the
uninsured, with more than three previously uninsured new enrollees for
each one new enrollee who previously had off-Marketplace individual


Department of Health and Human Services
October 15, 2015
Health Insurance Marketplace: Uninsured Populations Eligible to Enroll
for 2016
By Kenneth Finegold, Kelsey Avery, Bula Ghose, and Caryn Marks

People who are uninsured often experience financial barriers to coverage
and may place other priorities over obtaining health insurance.

* Only 26 percent of those who are uninsured say that they are doing
well financially. Nearly 80 percent have less than $1,000 in savings and
about half have less than $100 in savings.

* More than half of people who are uninsured feel financially insecure
and half had difficulty affording basic necessities such as food or
housing in the past year.

* When asked what they would do if they were to become better off
financially, many uninsured people say they would pay down their debt,
put money into savings, or make home or car repairs before buying health


Associated Press
October 15, 2015
Is Obama's Health Overhaul Losing Steam?
By Ricardo Alonso-Zaldivar

The health care law's historic gains in coverage may be leveling off:
The Obama administration announced Thursday it expects only a slight
overall increase in enrollment next year.

(Health and Human Services Secretary Sylvia M. Burwell) said it's
getting harder to sign up the remaining uninsured. They tend to be
young, managing very tight household budgets, and often unaware they can
qualify for taxpayer-financed assistance with their premiums.

Some people who sign up for a plan don't follow through and pay their
first month's premiums. Others drop out because they can't afford even
their subsidized premiums.

A new research paper from the administration finds that nearly 60
percent of the uninsured were not aware or did not understand that
subsidies are available to help with their premiums. Half had difficulty
affording basic necessities. And many have other financial priorities -
such as paying down debt or making car repairs - before buying health

Getting and keeping coverage under Obama's law can be frustrating,
especially when it comes to documenting eligibility for benefits.
Insurance counselors say they are seeing many people whose subsidies
were completely eliminated because of income reporting problems.


Comment by Don McCanne

Out of a population of about 322 million, 32 million US residents remain
uninsured. Because of the complex eligibility requirements for various
insurance programs under the Affordable Care Act, there are many reasons
that so many remain uninsured. Regardless, this latest data from HHS
shows that the success in reducing the numbers who are uninsured is
leveling off, and one of the most important reasons is that the
Affordable Care Act did not make health insurance affordable for far too
many of us.

Four-fifths of the uninsured have less than $1,000 in savings. Half have
difficulty affording food or housing. Even if they had more money, many
would feel obligated to use it to pay down debt, or to repair their
homes, or to repair their automobiles that provide them transportation
for employment. They still wouldn't have enough left to purchase health

Yet when these people turn 65, they can afford Medicare. The program is
automatically funded, primarily through the tax system.

If we improved Medicare, funded it completely through progressive taxes,
and then provided it to everyone, not only would it be affordable for
all of us, none of us would ever have to make a decision on whether our
health care dollars needed to be used for food, housing or any other
essentials. Medicare would automatically always be there for all of us.

Thursday, October 15, 2015

qotd: Is it just red-state policies that cause so many to remain uninsured?

The Wall Street Journal
October 14, 2015
Covering the Remaining Uninsured: Not Just a Red-State Issue
By Drew Altman

About 32 million people in the U.S. remained uninsured as of early 2015,
a Kaiser Family Foundation analysis of federal survey data has found,
with about half of them eligible for Medicaid or subsidies under the
Affordable Care Act. With the high-profile resistance in some states to
Medicaid expansion and the ACA generally, you may think those places are
the main obstacle to covering more of the uninsured. But the uninsured
remain a problem in both red and blue states.

About half of the remaining uninsured, 16 million people, are in mostly
blue states that have expanded Medicaid. The other 16 million are in
states that have not expanded Medicaid and where there is strong
anti-ACA sentiment. Consider the examples of California and Texas, the
states with the largest populations of remaining uninsured, to
understand the different challenges.

Remaining uninsured as of 2015:
California 3,845,000
Texas 4,425,000

Eligible for Medicaid:
California 1,428,000
Texas 493,000

Eligible for tax credit:
California 623,000
Texas 1,035,000

Ineligible for financial assistance due to income, employer offer, or
citizenship status:
California 1,795,000
Texas 2,132,000

In Medicaid "coverage gap":
California (no gap)
Texas 766,000

Some elements of the remaining uninsured problem are uniquely a red
state issue. The most prominent of these are 3.1 million people—or one
in 10 of the uninsured—who fall in the "coverage gap" in 20 red states
that have chosen not to expand Medicaid coverage. But as the examples of
Texas and California demonstrate, progress on covering the remaining 32
million uninsured will depend on action in both red and blue states.


Comment by Don McCanne

Texas should be ashamed. They have the largest number of uninsured
individuals in the nation, and yet they have failed to take advantage of
the provisions in the Affordable Care Act (ACA) that would grant the
state 90 percent of the costs of Medicaid expansion, plus they have
failed to provide adequate outreach efforts to enroll individuals in
exchange plans where they would be eligible for federal premium tax
credits and cost-sharing subsidies. In contrast, California has been
aggressive in trying to get as many individuals as possible covered by
health insurance of one type or another. How do the results in
California (a blue state) compare to those in Texas (a red state)?

In California, 10 percent remain uninsured, whereas in Texas, 16 percent
lack insurance. California's efforts have paid off… for some. But why
should California, with its strong support of ACA, still have 3,845,000
people without any insurance? It's very simple. ACA is a highly flawed
model of reform.

Models which build on existing, fragmented, multi-payer systems are the
most expensive models of reform, yet they fall short of many of the
goals, including universality. Yet the least expensive comprehensive
models of reform achieve the goals of universality, efficiency,
affordability, equity, improved access, and better health care outcomes.
These are the single payer national health insurance and national health
service models.

Many suggest that we should celebrate our gains and move forward with
incremental patches to the system. There are two problems with this
approach. Incremental patches will add significant additional costs to
the system, and patches cannot possibly repair the fundamental
structural flaws in the financing system. Thus, under ACA, we will
always fall short of the goals.

There is a better way. Fix Medicare and provide it to everyone.
California would then achieve its goal of reducing its uninsured to
zero. Texas would too, even if its politicians were opposed. One thing
for sure, once everyone in Texas did have Medicare, the people would be
overwhelmingly supportive.

Wednesday, October 14, 2015

qotd: Deductibles cause sick patients to reduce beneficial care

The National Bureau of Economic Research
October 2015
NBER Working Paper No. 21632
What Does a Deductible Do? The Impact of Cost-Sharing on Health Care
Prices, Quantities, and Spending Dynamics
By Zarek C. Brot-Goldberg, Amitabh Chandra, Benjamin R. Handel, Jonathan
T. Kolstad


Measuring consumer responsiveness to medical care prices is a central
issue in health economics and a key ingredient in the optimal design and
regulation of health insurance markets. We study consumer responsiveness
to medical care prices, leveraging a natural experiment that occurred at
a large self-insured firm which forced all of its employees to switch
from an insurance plan that provided free health care to a non-linear,
high deductible plan. The switch caused a spending reduction between
11.79%-13.80% of total firm-wide health spending ($100 million lower
spending per year). We decompose this spending reduction into the
components of (i) consumer price shopping (ii) quantity reductions (iii)
quantity substitutions, finding that spending reductions are entirely
due to outright reductions in quantity. We find no evidence of consumers
learning to price shop after two years in high-deductible coverage.
Consumers reduce quantities across the spectrum of health care services,
including potentially valuable care (e.g. preventive services) and
potentially wasteful care (e.g. imaging services). We then leverage the
unique data environment to study how consumers respond to the complex
structure of the high-deductible contract. We find that consumers
respond heavily to spot prices at the time of care, and reduce their
spending by 42% when under the deductible, conditional on their true
expected end-of-year shadow price and their prior year end-of-year
marginal price. In the first-year post plan change, 90% of all spending
reductions occur in months that consumers began under the deductible,
with 49% of all reductions coming for the ex ante sickest half of
consumers under the deductible, despite the fact that these consumers
have quite low shadow prices. There is no evidence of learning to
respond to the true shadow price in the second year post-switch.

From the Conclusion

In this paper we studied the health care decisions and spending behavior
for a large population of employees (and their dependents) who were
forced into high-deductible insurance after years of having access to
completely free health care.

A meaningful portion of all spending reductions came from well-off
consumers who were predictably sick, implying that the true marginal
prices they faced under high-deductible care were actually quite low.

We found that almost all spending reductions during the year occurred
while consumers were still under the deductible, despite the fact that
the majority of incremental spending occurs for consumers that have
already passed the deductible. Moreover, about 30% of all spending
reductions come from consumers in months when they (i) began that month
under the deductible but (ii) were predictably sick, in the sense that
they had very low shadow prices for health care.


October 14, 2015
This study is forcing economists to rethink high-deductible health insurance
By Sarah Kliff

Economists Zarek Brot-Goldberg, Amitabh Chandra, Benjamin Handel, and
Jonathan Kolstad studied a firm that, in 2013, shifted tens of thousands
of workers into high-deductible insurance plans. This was a perfect
moment to look at how their patterns of care changed — whether they did,
in fact, use the new shopping tools their employer gave them to compare

Turns out they didn't. The new paper shows that when faced with a higher
deductible, patients did not price shop for a better deal. Instead, both
healthy and sick patients simply used way less health care.

This raises a scary possibility: Perhaps higher deductibles don't lead
to smarter shoppers but rather, in the long run, sicker patients.

Kolstad and his co-authors looked at the case of a large, unnamed
company that shifted more than 75,000 workers and their dependents from
a plan with no deductible to one with a $3,750 deductible.

Workers' health spending dropped, and did so quickly.

In one sense, then, the high-deductible plan did accomplish a key goal:
lower health spending. But when the researchers looked at why spending
dropped, they found it had nothing to do with smarter shopping. The
average price of a doctor visit wasn't dropping.

Instead, under the high-deductible plan, workers just went to the doctor
way less. The paper finds that "spending reductions are entirely due to
outright reductions in quantity." Workers did use less "potentially
wasteful care," like imaging services, but they also cut back on
"potentially valuable care," like preventive visits.

Even more striking: The sickest workers were those who were most likely
to reduce their use of care while still under the deductible — even
though this is the group that needs lots of care and is most likely to
blow through the deductible by the end of the year. Once these sick
workers actually exceeded their deductible, though, use of medical
services rebounded.

"This is a difficult task for consumers to take on, and we now have very
detailed data to show that's the case," (Kolstad) says. "When we've
thought about the economics, we've generally thought this type of price
change wouldn't be problematic, that sicker people would just spend
their deductible and get the care they need. This research suggests
that's not the case."

For Kolstad, this makes him skeptical of "demand-side" interventions in
health care — those that rely on consumer demands for lower health
prices to ultimately lead to less medical spending.


Comment by Don McCanne

This is an important study. It shows that sick patients will not shop
prices but rather they will forgo beneficial health care services while
they are still under the deductible for their plan.

This confirms that deductibles are an inappropriate tool for reducing
health care spending, since health policies should be designed to
improve care rather than impair it. This puts the entire concept of
consumer-directed health care under question as a means of slowing
health care spending. In contrast, single payer policies control
spending while benefiting patients.

This study may seem familiar to regular readers. That is because it was
covered in our June 15, 2015 Quote of the Day. It was based on an
article in "The Conversation" by Ben Handel, one of the co-authors of
this study.

What is new is that NBER has now released the full study, and reports of
it are appearing in the media. It is a concept well worth repeating.
Excerpts of the Vox article by Sarah Kliff are included above in that
her description is quite clear, avoiding the technical language of
economists and policy wonks.

Quote of the Day, June 15, 2015:

Monday, October 12, 2015

qotd: US government is abandoning health insurance co-ops

The Washington Post
October 10, 2015
Financial health shaky at many Obamacare insurance co-ops
By Amy Goldstein

A new breed of health insurers created under the Affordable Care Act —
representing one of the government's most innovative attempts in decades
to foster better coverage — is on shaky financial ground in many of the
23 states where the plans began.

The nonprofit health plans were envisioned as a consumer-friendly
counterweight to for-profit insurers, a way to provide more competition,
greater consumer choice and better coverage in markets typically
dominated by big commercial carriers. The government allocated billions
of dollars in loans for them.

But in recent months, nearly half of the un­or­tho­dox start-ups have
been told by federal regulators that their finances, enrollment or
business model need to shape up.

The Centers for Medicare and Medicaid Services (CMS), which oversees the
health-care law, recently sent warning letters to 11 of the "co-ops," as
they're known. The agency placed them on "enhanced oversight" or
required them to produce a plan of "corrective action," or both,
according to federal figures not previously made public. Several have
been notified in the past two weeks.

Amid this increased monitoring, one co-op has folded, stranding its
members, and four others are preparing to close in late December. They
include the Nevada Health Co-Op, which was initially among a top tier
that federal officials had regarded as best poised to succeed.

The birth and quick death of these co-ops illustrate the program's
fragility. When the ACA was enacted in 2010, the Consumer Operated and
Oriented Plans were a compromise to appease congressional liberals who
had wanted a new public insurance program for Americans unable to get
health benefits at work.

Yet the co-ops' struggle of late also reflects regulators' shifting
posture. In moves that could affect coverage for hundreds of thousands
of people, CMS has gone from nurturing to getting tough.

The first plan to collapse served people in Iowa and Nebraska; it folded
in February after being taken over by state insurance regulators. In
July, Louisiana's co-op revealed it was shutting down. Then late last
month in New York state, the nation's largest co-op toppled, startling
insurance industry and health policy analysts who thought it was too big
for the government to let fail.

The latest announcement came Friday, when the Kentucky Health
Cooperative, serving about 51,000 customers, said that it, too, will
close Dec. 31 because of poor finances.

The co-op disappearances are disrupting coverage for nearly 400,000
customers across five states, according to the most recent publicly
available enrollment figures.

The program has been under siege from the start, including from the
insurance industry. Before the law's passage, government grants to help
them get going were switched to loans. None of that money could go for
advertising — a wounding rule for new insurers that needed to attract
customers. Moreover, the amount available was cut from $10 billion to $6
billion and then later, as part of the administration's budget deals
with congressional Republicans, to $2.4 billion. Federal health
officials abandoned plans for a co-op in every state.

At the time, some health policy experts warned that the constraints
would make it difficult for some co-ops to thrive.

In August, federal officials delayed another type of assistance intended
to help cushion the risk of covering the previously uninsured. This
temporary "risk corridor" money was cut last week to a small fraction of
what many co-ops had been banking on. The Kentucky co-op blamed its
demise on its cut — from an expected $77 million to less than $10 million.


Comment by Don McCanne

During the crafting of the Affordable Care Act (ACA), there was strong
support for including the option of selecting a government-run insurance
program in the insurance exchanges. This "public option" was first
emasculated so that it would not be an effective competitor to the
private insurance firms, and then it was totally eliminated from ACA by
political chicanery. That led to support for including "Consumer
Operated and Oriented Plans" (co-ops) - nonprofit insurers controlled by
directors elected by the enrollees - as a substitute for the public option.

The private insurers were not through. Obviously they did not want
competition from a nonprofit consumer-operated system that should have
significantly lower expenses than do the private insurers. Insurers
require capital - both for start-up expenses and for establishing
reserves from which to pay claims. Although the original intent was to
provide government grants to the co-ops, these were changed to
government loans which the co-ops would have to pay back (not to mention
that borrowing to fund reserves is a shell game - the net reserves are
zero). Adding the burden of debt service onto the backs of these co-ops
basically destroyed their competitive advantage, especially at a time
that they were facing high start-up costs. Further, as an extra measure,
the insurers had included in ACA a rule that prohibited the co-ops from
advertising. Thus the insurers saw to it that the co-ops were placed at
a competitive disadvantage.

And what help did the co-ops receive from the government? First the
government cut way back on the funds that were made available as loans
to satisfy capital requirements. When co-ops were successful in their
enrollment efforts, the government did not make further loans available
to satisfy increased reserve requirements (larger member rolls require
greater reserves). Then the feds reneged on their requirement to pay the
co-ops losses above the risk corridor (a form of reinsurance for
excessive losses by the co-ops). Finally, the feds have become
hard-nosed and have begun shutting down the co-ops because of failure to
maintain adequate reserves. Surprise! How were they supposed to build
reserves in a year with high start-up costs, high debt service, and
increased reserve requirements because of greater than expected enrollment?

It is clear that HHS, from the beginning, has been in bed with the
private insurers. This experience with the co-ops is not the only
example of their effort to relieve the insurers of competition from
government programs. They have been supporting the private Medicare
Advantage (MA) plans through administrative manipulations that offset
the required reductions in overpayments to these plans. Also, they are
now greatly increasing Part B premiums for about one-third of Medicare
beneficiaries, especially for those with high incomes - a measure bound
to diminish support for the traditional Medicare program, chasing irked
beneficiaries into the private MA plans.

This unfortunate outcome for the co-ops was not exactly unanticipated.
It was inevitable based on the design features dictated by the private
insurers (see our Quote of the Day of July 18, 2011). What is
particularly sad is that our own government has not been a reliable
partner with our citizens and their organizations. They have gotten into
bed with the private insurers instead.

Single payer would fix this, but we would need new public administrators.

Friday, October 9, 2015

qotd: Physician concentration drives up prices

Health Affairs
October 2015
Less Physician Practice Competition Is Associated With Higher Prices
Paid For Common Procedures
By Daniel R. Austin and Laurence C. Baker


Concentration among physician groups has been steadily increasing, which
may affect prices for physician services. We assessed the relationship
in 2010 between physician competition and prices paid by private
preferred provider organizations for fifteen common, high-cost
procedures to understand whether higher concentration of physician
practices and accompanying increased market power were associated with
higher prices for services. Using county-level measures of the
concentration of physician practices and county average prices, and
statistically controlling for a range of other regional characteristics,
we found that physician practice concentration and prices were
significantly associated for twelve of the fifteen procedures we
studied. For these procedures, counties with the highest average
physician concentrations had prices 8–26 percent higher than prices in
the lowest counties. We concluded that physician competition is
frequently associated with prices. Policies that would influence
physician practice organization should take this into consideration.


The existence of an association between concentration and prices should
underscore the importance of continued attention to the challenges posed
by provider consolidation, especially given that consolidation among
physician groups is likely to continue. Increased health care
expenditures attributable to higher prices without improved outcomes for
patients would generate inefficiency in the US health care system at a
time when the opposite is badly needed. Policies that balance any
benefits of larger organizations with the potential for problematic
price increases, possibly including appropriate antitrust oversight, are
needed as the country seeks to ensure efficient, high-quality patient care.


Comment by Don McCanne

Consolidation of physician practices has been promoted as a means of
improving efficiency and quality of care by means of integrating health
care services. But this has raised the concern that concentration is
anticompetitive and thus may result in higher health care prices. This
study looks at that possibility.

Although outrage is often expressed at some of the very high prices that
physicians charge for procedures, those prices are rarely paid since
Medicare and Medicaid dictate the actual amount they pay, and private
insurers contract for allowable charges for their network providers.
Only patients who are uninsured or who are using out-of-network
providers face the full charges, but, even then, lower prices are often
negotiated on an individual basis, or sometimes the patient simply
defaults on the bill. So in considering health care costs in general, it
is the authorized payments that count and not the list prices.

This study, in fact, confirmed that where physician practices are more
concentrated, prices insurers paid for health care are higher. So
physician concentration is anticompetitive and results in higher
payments. But are physicians the bad guys who are making us pay more for
health care than we should be?

Looking closer at this study, the prices analyzed were those paid to
in-network physicians in preferred provider organizations (PPOs)
representing larger employers. This is where insurers should be able to
deliver on their promises of lower prices. By representing larger
employers, the insurers contracting with the physicians who would be
included in the networks should be able to extract from them their most
competitive prices.

But that didn't happen. The insurers were not able to drive a better
bargain in markets with physician concentration. Physicians in less
concentrated markets were able to provide their services for lower
prices, so that means that insurers actually were paying excessive
prices in the concentrated markets.

Some say that the costs of large integrated systems are higher, so the
prices had to be higher. But this belies the claim that integration of
services increases efficiency, thereby reducing prices. What this
actually shows is that the PPOs were not as effective negotiators when
faced with provider concentration.

Compare that with the publicly-administered pricing that takes place in
a single payer national health program. The amount paid is based on
actual costs with fair margins, not on whatever the market will bear.
What we don't need are wimpish insurers who charge us outrageous
administrative fees for a job they don't even do well. Let's get rid of

Thursday, October 8, 2015

qotd: More on high health spending and poor population health in U.S.

The Commonwealth Fund
October 8, 2015
U.S. Health Care from a Global Perspective: Spending, Use of Services,
Prices, and Health in 13 Countries
By David Squires, Chloe Anderson

This analysis draws upon data from the Organization for Economic
Cooperation and Development and other cross-national analyses to compare
health care spending, supply, utilization, prices, and health outcomes
across 13 high-income countries: Australia, Canada, Denmark, France,
Germany, Japan, Netherlands, New Zealand, Norway, Sweden, Switzerland,
the United Kingdom, and the United States.

Key Findings:

* The United States is the highest spender on health care.

Data from the OECD show that the U.S. spent 17.1 percent of its gross
domestic product (GDP) on health care in 2013. This was almost 50
percent more than the next-highest spender (France, 11.6% of GDP) and
almost double what was spent in the U.K. (8.8%). U.S. spending per
person was equivalent to $9,086 (not adjusted for inflation).

* Private spending on health care is highest in the U.S.

In 2013, the average U.S. resident spent $1,074 out-of-pocket on
health care, for things like copayments for doctor's office visits and
prescription drugs and health insurance deductibles. Only the Swiss
spent more at $1,630, while France and the Netherlands spent less than
one-fourth as much ($277 and $270, respectively). As for other private
health spending, including on private insurance premiums, U.S. spending
towered over that of the other countries at $3,442 per capita—more than
five times what was spent in Canada ($654), the second-highest spending

* U.S. public spending on health care is high, despite covering fewer

Public spending on health care amounted to $4,197 per capita in the U.S.
in 2013, more than in any other country except Norway ($4,981) and the
Netherlands ($4,495), despite the fact that the U.S. was the only
country studied that did not have a universal health care system. In the
U.S., about 34 percent of residents were covered by public programs in
2013, including Medicare and Medicaid.7 By comparison, every resident in
the United Kingdom is covered by the public system and spending was
$2,802 per capita. Public spending on health care would be even greater
in the U.S. if the tax exclusion for employer-sponsored health insurance
(amounting to about $250 billion each year) was counted as a public

* Despite spending more on health care, Americans have fewer hospital
and physician visits.

The U.S. had fewer practicing physicians in 2013 than in the median OECD
country (2.6 versus 3.2 physicians per 1,000 population). With only four
per year, Americans also had fewer physician visits than the OECD median
(6.5 visits). In the U.S., there were also fewer hospital beds and fewer
discharges per capita than in the median OECD country.

* Americans appear to be greater consumers of medical technology,
including diagnostic imaging and pharmaceuticals.

The U.S. stood out as a top consumer of sophisticated diagnostic imaging
technology. Americans had the highest per capita rates of MRI, computed
tomography (CT), and positron emission tomography (PET) exams among the
countries where data were available. In addition, Americans were top
consumers of prescription drugs.

* Health care prices are higher in the U.S. compared with other countries.

Data published by the International Federation of Health Plans suggest
that hospital and physician prices for procedures were highest in the
U.S. in 2013. Other studies have observed high U.S. prices for

* The U.S. invests the smallest share of its economy on social services.

A 2013 study by Bradley and Taylor found that the U.S. spent the least
on social services—such as retirement and disability benefits,
employment programs, and supportive housing—among the countries studied
in this report, at just 9 percent of GDP.12 Canada, Australia and New
Zealand had similarly low rates of spending, while France, Sweden,
Switzerland, and Germany devoted roughly twice as large a share of their
economy to social services as did the U.S.

The U.S. was also the only country studied where health care spending
accounted for a greater share of GDP than social services spending. In
aggregate, U.S. health and social services spending rank near the middle
of the pack.

* Despite its high spending on health care, the U.S. has poor
population health.

On several measures of population health, Americans had worse outcomes
than their international peers. The U.S. had the lowest life expectancy
at birth of the countries studied, at 78.8 years in 2013, compared with
the OECD median of 81.2 years. Additionally, the U.S. had the highest
infant mortality rate among the countries studied, at 6.1 deaths per
1,000 live births in 2011; the rate in the OECD median country was 3.5
deaths. The prevalence of chronic diseases also appeared to be higher in
the U.S.

A 2013 report from the Institute of Medicine reviewed the literature
about the health disadvantages of Americans relative to residents of
other high-income countries. It found the U.S. performed poorly on
several important determinants of health. The Institute of Medicine
found that poorer health in the U.S. was not simply the result of
economic, social, or racial and ethnic disadvantages—even well-off,
nonsmoking, nonobese Americans appear in worse health than their
counterparts abroad.

* The U.S. performs well on cancer care but has high rates of mortality
from heart disease and amputations as a result of diabetes

One area where the U.S. appeared to have comparatively good health
outcomes was cancer care. The opposite trend appears for ischemic heart
disease, where the U.S. had among the highest mortality rates in
2013—128 per 100,000 population compared with 95 in the median OECD
country. The U.S. also had high rates of adverse outcomes from diabetes,
with 17.1 lower extremity amputations per 100,000 population in 2011.
Rates in Sweden, Australia and the U.K. were less than one-third as high.

From the Discussion

Health care spending in the U.S. far exceeds that in other countries,
despite a global slowdown in spending growth in recent years. At 17.1
percent of GDP, the U.S. devotes at least 50 percent more of its economy
to health care than do other countries. Even public spending on health
care, on a per capita basis, is higher in the U.S. than in most other
countries with universal public coverage.

How can we explain the higher U.S. spending? In line with previous
studies, the results of this analysis suggest that the excess is likely
driven by greater utilization of medical technology and higher prices,
rather than use of routine services, such as more frequent visits to
physicians and hospitals.

High health care spending has far-reaching consequences in the U.S.
economy, contributing to wage stagnation, personal bankruptcy, and
budget deficits, and creating a competitive disadvantage relative to
other nations. One potential consequence of high health spending is that
it may crowd out other forms of social spending that support health. In
the U.S., health care spending substantially outweighs spending on
social services. This imbalance may contribute to the country's poor
health outcomes. A growing body of evidence suggests that social
services play an important role in shaping health trajectories and
mitigating health disparities.

Exhibit 8. Health and social care spending as a percentage of GDP

(The first number is the percent of GDP spent on health care, the second
is the percent spent on social care, and the third is the percent spent
on both combined)

12 21 33 France
12 21 33 Sweden
11 20 31 Switzerland
11 18 29 Germany
12 15 27 Netherlands
16 09 25 United States
09 16 25 Norway
08 15 23 United Kingdom
09 11 20 New Zealand
10 10 20 Canada
09 11 20 Australia


Comment by Don McCanne

This update, comparing us with 13 high-income countries, confirms that
we still spend far more than any other nation on health care, partly
because of our very high prices, even though we are not using more
health care. Worse, in spite of our high levels of spending, our
population health remains relatively poor.

One exhibit in this report shows that our combined spending on health
care and on social care (retirement and disability benefits, employment
programs, and supportive housing) is about average (see Exhibit 8,
above). Considering that our health care spending is so high, it may be
that the comparatively low spending on social services is a significant
contributor to our poor population health.

We do need to improve the way we spend our health care dollars so that
everyone has affordable access to high quality care, and a single payer
system would do that. However, since we are a very wealthy nation, we
should be able to increase spending on social services as well. The
progressive taxes required to do that would also help to address our
crisis in income inequality.

Wednesday, October 7, 2015

qotd: What lessons can we learn from Europe’s health insurance exchanges?

Health Affairs
October 2015
Risk Selection Threatens Quality Of Care For Certain Patients: Lessons
From Europe's Health Insurance Exchanges
By Wynand P. M. M. van de Ven, Richard C. van Kleef and Rene C. J. A.
van Vliet


Experience in European health insurance exchanges indicates that even
with the best risk-adjustment formulas, insurers have substantial
incentives to engage in risk selection. The potentially most worrisome
form of risk selection is skimping on the quality of care for
underpriced high-cost patients—that is, patients for whom insurers are
compensated at a rate lower than the predicted health care expenses of
these patients. In this article we draw lessons for the United States
from twenty years of experience with health insurance exchanges in
Europe, where risk selection is a serious problem. Mistakes by European
legislators and inadequate evaluation criteria for risk selection
incentives are discussed, as well as strategies to reduce risk selection
and the complex trade-off among selection (through quality skimping),
efficiency, and affordability. Recommended improvements to the
risk-adjustment process in the United States include considering the
adoption of risk adjusters used in Europe, investing in the collection
of data, using a permanent form of risk sharing, and replacing the
current premium "band" restrictions with more flexible restrictions.
Policy makers need to understand the complexities of regulating
competitive health insurance markets and to prevent risk selection that
threatens the provision of good-quality care for underpriced high-cost

Lessons from Europe:

Risk Selection Is A Serious Problem

Examples of selection activities include offering health plans attuned
to the preferences of the under- and overpriced insured, opening clinics
in regions with healthy populations, closing offices in areas with
underpriced high-cost populations, selective marketing to preferred
groups, the use of group contracts, and selection of favorable
applicants by insurance agents.

The situation is more critical in the United States than in Europe in
the short run, because in the United States there are many competing
managed care organizations that deliver care themselves and therefore,
compared to European insurers, have much more effective and subtle tools
to use to distort the level of quality of care. In addition, for-profit
insurers in the United States have extensive experience with risk selection.

Risk Adjustment Should Be Improved

Because risk adjusters ideally should fulfill criteria such as
appropriateness of incentives, fairness, and feasibility, adding new
risk adjusters may involve trade-offs. For example, using a patient's
health care expenses in the previous year as a risk adjuster effectively
reduces selection by insurers, but it also reduces the insurers'
incentives for efficiency.

The United States might consider adopting the following risk adjusters
that are currently used in Europe: disability, pharmacy-based cost
groups, previous use of durable medical equipment, and high costs from
multiple prior years.

Invest In Collecting Data

Another lesson for US policy makers is that it is worthwhile to invest
in collecting appropriate data. Several of the risk adjusters currently
used in Europe required many years of investment in building up
appropriate data systems.

Risk Sharing Is An Effective Strategy

Given imperfect risk adjustment, which seems inevitable to a certain
extent, an effective strategy for reducing selection incentives is risk
sharing. There are several forms of risk sharing. One form is mandatory
risk sharing among insurers, which is sometimes referred to as mandatory
reinsurance with a community-rated reinsurance premium. Another form is
risk sharing between the regulator and the insurers — for example, when
a regulator provides cost-based compensations to the insurers for
high-cost patients. Because risk sharing also reduces an insurer's
incentive for efficiency, it confronts the regulator with a trade-off
between selection and efficiency.

Adopt A Generic Premium Rate Band

Another effective strategy for US policy makers to use in reducing risk
selection is to allow insurers to charge their enrollees, within a band
or range of acceptable charges, risk-adjusted health insurance premium
rates. As a result, the information surplus about enrollees that
insurers have over the regulator might be focused on premium rate
variation rather than on risk selection.

Understand The Complexities

An important lesson from European experience with health exchanges is
that there are no easy solutions and that regulating competitive health
insurance markets involves complex trade-offs among selection (through
quality skimping), efficiency, and affordability. Another lesson from
Europe is that legislators and policy makers can easily make serious
mistakes and be misled by incorrect arguments.


The Commonwealth Fund
October 6, 2015
Risk Selection Threatens Quality of Care for Certain Patients: Lessons
from Europe's Health Insurance Exchanges

The Issue

Beginning in the early 1990s, several European countries, along with
Israel, established health insurance exchanges similar to those launched
in the U.S. as part of the ACA. For a Commonwealth Fund–supported study
in Health Affairs, researchers gleaned lessons from those countries on
how to reduce incentives to engage in risk selection. Insurers can
engage in risk selection by steering away high-risk patients in a
variety of ways, including purposefully contracting with doctors or
hospitals that offer mediocre or substandard care or excluding providers
with the best reputations for treating certain diseases.

The Big Picture

Risk selection may be a more critical issue in the U.S. over the short
run. "[I]n the United States there are many competing managed care
organizations that deliver care themselves and therefore, compared to
European insurers, have much more effective and subtle tools to use to
distort the level of quality of care," the authors write. U.S. insurers
also are experienced at identifying medical risk and may use the
information at their disposal to design products that are unattractive
to high-risk patients—including those with cancer and substance abuse
disorders. The high number of consumers choosing health plans in the
insurance exchanges may exacerbate the problem. Solving these vexing
issues, the authors say, must be made a priority to prevent sick
patients from receiving poorer-quality services or reduced access to care.


Comment by Don McCanne

This report, supported by the Commonwealth Fund and published in Health
Affairs, looks at European nations that use variations of market
exchanges of private insurance plans (Belgium, Germany, Ireland,
Switzerland and, especially, the Netherlands) to see what lessons on
risk selection they may have for the United States. But are these the
right lessons for us?

Private insurers in the United States have long been masters at figuring
out ways of insuring the healthy, with their relatively low health care
costs, while avoiding insuring individuals with greater health care
needs. Although the Affordable Care Act prohibits insurers from refusing
to cover individuals anticipated to have higher health care costs, we
are seeing insurance innovations in gaming risk selection that
substitute for medical underwriting, which sometimes still prevents
patients from receiving the care that they should have.

The multi-payer system in the United States is infamous for the very
high costs of the wasteful administrative excesses in our health care
financing. In fact, some of these excesses are for the very purpose of
ensuring the business success of the private insurers. So what
efficiencies do the European systems that use marketplace exchanges of
private plans have that might help the United States avoid the
perversities of favorable risk selection on the part of the insurers?

The authors suggest the introduction of additional risk adjusters (more
administration), systems to collect yet more data (more administration),
introduction of risk-sharing strategies such as mandatory
community-rated reinsurance or risk sharing between the regulator and
the insurers (more administration), allowing insurers to charge their
enrollees, within a band or range of acceptable charges, risk-adjusted
health insurance premium rates (more administration), and balancing
trade-offs of quality-skimping selection, efficiency, and affordability
(more administration).

Not only would these "lessons" expand the administrative excesses of our
system, but because of the trade-offs involved, further compromises in
quality and equity would result. No matter what strategies are used, the
private insurers will always find a way around them. That is inherent in
their business-model DNA.

Instead of us looking for lessons in the European private insurance
markets, it seems that these European nations should be looking for
lessons from our neighbor to the North: Canada and its single payer
model of health care financing. We would do well to do the same.

Tuesday, October 6, 2015

qotd: High-cost patients exit private Medicare Advantage plans

Health Affairs
October 2015
High-Cost Patients Had Substantial Rates Of Leaving Medicare Advantage
And Joining Traditional Medicare
By Momotazur Rahman, Laura Keohane, Amal N. Trivedi and Vincent Mor


Medicare Advantage payment regulations include risk-adjusted capitated
reimbursement, which was implemented to discourage favorable risk
selection and encourage the retention of members who incur high costs.
However, the extent to which risk-adjusted capitation has succeeded is
not clear, especially for members using high-cost services not
previously considered in assessments of risk selection. We examined the
rates at which participants who used three high-cost services switched
between Medicare Advantage and traditional Medicare. We found that the
switching rate from 2010 to 2011 away from Medicare Advantage and to
traditional Medicare exceeded the switching rate in the opposite
direction for participants who used long-term nursing home care (17
percent versus 3 percent), short-term nursing home care (9 percent
versus 4 percent), and home health care (8 percent versus 3 percent).
These results were magnified among people who were enrolled in both
Medicare and Medicaid. Our findings raise questions about the role of
Medicare Advantage plans in serving high-cost patients with complex care
needs, who account for a disproportionately high amount of total health
care spending.

From the Introduction

Each year Medicare beneficiaries can choose between two options for
health coverage: traditional Medicare and Medicare Advantage. Although
each option covers the same core set of benefits, the two may differ in
terms of beneficiaries' out-of-pocket expenses, choice of providers, and
access to additional services. Approximately 30 percent of Medicare
beneficiaries in 2014 were enrolled in Medicare Advantage plans.

Because Medicare Advantage plans receive prospective, capitated payments
to finance and deliver services for their enrollees, they operate under
strong incentives to manage their members' health care costs. Policy
makers have been concerned that capitated payments give Medicare
Advantage plans an incentive to enroll healthier beneficiaries and to
avoid enrolling those with chronic conditions. Indeed, a large body of
literature based on data from the 1990s and early 2000s found that
Medicare Advantage plans disproportionately enrolled healthier
beneficiaries. This phenomenon, known as favorable risk selection, has
historically yielded substantial overpayments to Medicare Advantage plans.

From the Discussion

We examined the relationship between use of hospital, nursing home, and
home health care in 2010 and beneficiaries' switching between Medicare
Advantage and traditional Medicare by January 2011. Among traditional
Medicare beneficiaries, we observed lower rates of switching into
Medicare Advantage among people who used nursing home, home health, or
acute inpatient care, compared with beneficiaries who did not use these
services. In contrast, among Medicare Advantage beneficiaries, we found
increased rates of switching into traditional Medicare among people who
used nursing home and home health care, compared with beneficiaries who
did not use these services.

Our results are consistent with other studies reporting that
beneficiaries who report poorer health, use more health services, and
have higher health care spending are more likely than their counterpart
Medicare Advantage beneficiaries to leave Medicare Advantage plans,
despite the recent reforms to the Medicare Advantage payment formula.

Our results raise questions about whether current Medicare Advantage
regulations and payment formulas are designed to meet the needs of
Medicare Advantage members who use postacute and long-term care. First,
the enhanced payments to Medicare Advantage plans for dual eligibles or
people who receive extended nursing home care do not appear to be
effective in retaining these beneficiaries in Medicare Advantage plans.
The unidirectional flow of these high-risk and often high-spending
patients from Medicare Advantage to traditional Medicare appears to
transfer responsibility to traditional Medicare just as patients enter a
period of intensive health care needs.

There could be several reasons for the switching of high-risk Medicare
Advantage enrollees. One possibility is that Medicare Advantage plans
may not have sufficient incentives to spend their enhanced payments on
better services for their beneficiaries.

Second, our findings suggest that Medicare Advantage members who use
home health or nursing home services might be dissatisfied with the
Medicare Advantage program. Medicare Advantage beneficiaries may find
that their plans' network restrictions make it harder to access these
services that would be the case in traditional Medicare, creating an
incentive to switch.

Additionally, some Medicare Advantage plans have been criticized for
imposing high cost sharing for services such as the skilled nursing
facility care that can be necessary for seriously ill beneficiaries.


We observed substantial switching from Medicare Advantage to traditional
Medicare by beneficiaries who used nursing home and home health care,
particularly those who were also eligible for Medicaid, and virtually no
entry into Medicare Advantage plans by traditional Medicare
beneficiaries who used these services or acquired dual eligibility. We
found that a high proportion of beneficiaries with nursing home or home
health care use choose to exit the Medicare Advantage program by the
start of the next plan year. Thus, our study raises questions about the
role of Medicare Advantage plans in serving high-cost patients with
complex health care needs that span acute, postacute, and long-term care


The New England Journal of Medicine
July 17, 1997
The Medicare-HMO Revolving Door — The Healthy Go in and the Sick Go Out
By Robert O. Morgan, Ph.D., Beth A. Virnig, Ph.D., M.P.H., Carolee A.
DeVito, Ph.D., M.P.H., and Nancy A. Persily, M.P.H.

Enrollment in Medicare health maintenance organizations (HMOs) is
encouraged because of the expectation that HMOs can help slow the growth
of Medicare costs.


The rate of use of inpatient services in the HMO-enrollment group during
the year before enrollment was 66 percent of the rate in the
fee-for-service group, whereas the rate in the HMO-disenrollment group
after disenrollment was 180 percent of that in the fee-for-service group.


Comment by Don McCanne

In 1997, The New England Journal of Medicine published a landmark
article that showed that Medicare patients who enrolled in private
Medicare HMOs exited them when they developed a need for a greater
amount of health care: "The Medicare-HMO Revolving Door — The Healthy Go
in and the Sick Go Out"

After nearly two decades of refinement of payment methods for the
private Medicare Advantage plans, this new study from Health Affairs
shows that "a high proportion of beneficiaries with nursing home or home
health care use choose to exit the Medicare Advantage program."
Specifically, "Our results are consistent with other studies reporting
that beneficiaries who report poorer health, use more health services,
and have higher health care spending are more likely than their
counterpart Medicare Advantage beneficiaries to leave Medicare Advantage
plans, despite the recent reforms to the Medicare Advantage payment

The healthy go in and the sick go out. With Medicare Advantage plans,
the patients and the taxpayers end up as losers.