Thursday, January 28, 2016

qotd: Some employers exclude outpatient surgeries from their health plans

Kaiser Health News
January 25, 2016
Check The Fine Print: Some Work-Based Health Plans Exclude Outpatient
By Jay Hancock

Last year regulators blocked companies with millions of lower-wage
workers from claiming that coverage with no inpatient hospital benefits
met Obamacare's strictest standard for large employers.

Now that those so-called "skinny plans" aren't allowed, insurance
administrators and many cost-conscious employers are purporting to meet
the rules with a new version that excludes another major category:
outpatient surgery. The new plans may not survive regulatory scrutiny
any more than the old ones did, some experts believe.

For 2016, such insurance has been marketed primarily to staffing
companies, home health agencies, hoteliers and other lower-wage
employers that had historically never provided major medical coverage.
Those are the same firms that were sponsoring skinny coverage a year
ago, industry consultants say.

"I really wonder whether they can do that," said Timothy Jost, a law
professor at Washington and Lee University in Virginia who is an
authority on the health law. "Refusing to cover any outpatient physician
surgical services is arguably a violation."

Unlike insurance sold to individuals and small businesses through online
marketplaces, large employers are not required to offer a list of
"essential health benefits." Instead, they must offer minimum value —
roughly comparable to that of a high-deductible, "bronze" marketplace
plan — as determined by an online calculator and regulatory guidance, or
face a penalty. There is also a lesser standard for large employers —
"minimum essential coverage" — that triggers different fines for
noncompliance. But nearly all workplace-based plans that offer some
types of preventive care meet this requirement.


Comment by Don McCanne

One of the arguments made for choosing the incremental policies of the
Affordable Care Act (ACA) over a comprehensive single payer model of
reform was that the politicians wanted to avoid disrupting the part of
health care financing that was working well - particularly the
employer-sponsored health plans. So are employees being assured of
adequate health care coverage?

The onslaught of higher deductibles and narrower networks indicates that
maybe these plans are not working so well after all. But you cannot
underestimate the conniving behavior of some of the private sector
employers in shirking their responsibilities for providing adequate
coverage, as supposedly was intended by the architects of ACA.

Since the employers are allowed considerable flexibility in plan design,
some thought that they could exclude inpatient hospital benefits. That,
of course, would be disastrous for anyone requiring hospitalization.
Fortunately that loophole was closed.

Now they claim that they can exclude outpatient surgery. Considering
that now about two-thirds of surgeries are done on an outpatient basis,
that too will lead to financial disaster for far too many patients. It
is likely that our federal stewards will also disallow the exclusion of
outpatient surgery. But then what scheme will they think up next?

Leaving the private sector in control inevitably leads to devious
behavior designed to save money for the employers or insurers at a cost
to the patients. That is the way the private sector and their markets
work. In contrast, responsible public stewards act in the interests of
patients, and part of that means ensuring an adequate health delivery
infrastructure to take care of the patients.

We really do need to dismiss private managers of health care funds and
replace them with our own public administrators. That's precisely what a
single payer national health program would do.

Wednesday, January 27, 2016

qotd: Fidelity is providing us with incremental reform

Bloomberg Business
January 25, 2016
Retirement Giant Fidelity Now Wants Workers' Health Insurance
By Zachary Tracer

Fidelity Investments is already the U.S.’s No. 2 mutual fund company.
Now, it wants to get bigger in the health insurance business.

The financial services firm is introducing a shopping website for health
insurance and other employee benefits called Fidelity Health
Marketplace. Targeted at businesses with as many as 2,500 workers, the
site, known as a private health exchange, complements Fidelity’s
existing benefits products such as retirement accounts.

The private exchanges set up by companies like Fidelity are separate
from the government-run websites created under the 2010 Patient
Protection and Affordable Care Act. But they share some of the same
features and goals, such as letting customers shop for the best deal by
examining the cost and coverage offered by different health plans. They
can also help limit the cost to employers, by giving workers a set
amount to spend.

In a private exchange, when a worker enrolls in a more expensive plan,
the added expense comes out of their paychecks. If a plan costs less,
the employees can use the extra funds to buy life insurance or other
benefits on the same platform.

It’s a change that echoes the shift from pensions to employee-funded
retirement accounts that happened in the U.S. over the past decades, and
helped give rise to investment management giants like Fidelity.

“What they’re trying to do is move to a model where employers are
defining a contribution amount for employees to use on their
benefits,” according to Mike Trilli, senior health-care analyst at
Aite Group, a research and consulting firm.

Fidelity may also be able to use the health offerings to draw customers
to its investing products, according to Amy Gurchensky, an analyst at
consulting firm NelsonHall. When customers pick a high-deductible health
plan â€" for example, one that pairs a $5,000 deductible with a tax-free
savings and investment account â€" Fidelity will be able to offer its
own investing services.


Comment by Don McCanne

Although a majority of Americans favor a national health program, many
in the policy and political communities express a preference for
incrementally building on the existing multi-payer system, as modified
by the Affordable Care Act (ACA). Although 64 percent of our heath
system is already funded through our taxes, our government gives control
of much of our total spending to the private sector, such as the private
insurance companies. Thus the private sector is the source of much of
the incremental changes that are taking place. Now that Fidelity
Investments is entering the scene, what incremental change are they
offering that will benefit patients?

* Â They are introducing Fidelity Health Marketplace - similar to the
government insurance exchanges under ACA except that they are privately
owned and operated. Since they are targeted at small businesses, they
are an additional intermediary that increases administrative complexity
and expenses. That adds to the cost of the insurance, so that does not
benefit the patient.

* Â The plans will be purchased with a defined contribution from the
employer. Because the contribution is fixed, more of the premium costs
are shifted to the employee, especially over time. Either the employee
must contribute more to the premium, or choose a plan with fewer
benefits, which then increases financial exposure in the event of
medical need. That does not benefit the patient.

* Â Fidelity already offers health savings accounts - savings accounts
that are linked with high deductible health plans and can be used to pay
the deductibles and other cost sharing. Since high deductible plans have
lower premiums which are less likely to exceed the defined contribution,
Fidelity will no doubt heavily market the plans which are linked to
their own health savings accounts. Since employers would use the
Fidelity Marketplace to reduce their own health benefit spending, by
offering a defined contribution, it is likely that employees will have
difficulties keeping their health savings accounts funded. Higher
deductibles linked to an empty savings accounts certainly does not
benefit the patient.

* Â If an employee or family member has an expensive chronic disorder
then a more comprehensive plan should be selected to mitigate the higher
costs. But with the smaller defined contribution, the portion of the
premium that the employee must pay is significantly greater, and often
unaffordable. That does not benefit the patient.

Private sector solutions in health care financing, including insurers
and other fiscal intermediaries, are designed primarily to benefit the
industry, usually at a cost to the patient, though often opaque and thus
deceptive. Public sector solutions, such as Medicare and Medicaid, are
designed to benefit the patient. But even there the private sector has
moved in with their private Medicare Advantage plans and their private
Medicaid managed care programs, to the detriment of patients and taxpayers.

How much more of this private incremental invasion of our already
dysfunctional health care financing system can we take? The next time
you hear a politician say that we need to build on the system we have
through incremental steps, do not remain silent. Say something. Yell, if
necessary. Scream, if that’s what it takes. But do not let them con us
out of the national health program that a clear majority of us want.

Tuesday, January 26, 2016

qotd: Pharmacy benefit managers and drug firms battle; patients suffer

January 26, 2016
Fight To Lower Drug Prices Forces Some To Switch Medication
By Alison Kodjak

Steve Miller… The chief medical officer at Express Scripts, the largest
pharmacy benefit manager in the U.S., has been essentially auctioning
off his 80 million customers to the drug companies that will give him
the best deal.

Express Scripts and its rivals including CVS/Caremark and OptumRX manage
prescription drug coverage for insurers and employers. They're trying to
spark price wars among drugmakers by refusing to pay for some brand-name
medications unless they get a big discount.

The result is that average costs for many drugs are falling. At the same
time, consumers are being forced to change medications, sometimes to
brands that don't work as well for them.

This year, more than half of all people with insurance will have some
medications excluded from coverage, says Ronny Gal, a drug industry
analyst at investment firm Alliance Bernstein in New York.

"Drug companies have been pricing their drugs largely along the lines
of, you know, whatever you can get away with and still have the patient
get the drug," he says. "This year exclusion will become a standard
feature of the industry, which is actually quite a shocker for a lot of

Express Scripts pioneered the strategy two years ago, when it announced
it would no longer pay for 48 brand-name drugs.

Express Scripts isn't alone. Caremark, Optum and Prime Therapeutics also
refuse to pay for some name-brand medications. Dr. David Lassen, the
chief medical officer at Prime, which is the pharmacy benefit manager
for several Blue Cross and Blue Shield plans, says the company offers an
exclusion option to its health plan customers.


Comment by Don McCanne

Drug prices are a problem, so much so that many people will not fill
their prescriptions unless they have a drug plan that will cover most of
the costs. The United States relies largely on market solutions through
pharmacy benefit managers (PBMs), rather than through government
administered pricing. Markets and the government function quite differently.

Drug companies have been pricing their products at the maximum that the
market will bear, which results frequently in truly unreasonable prices.
As the market intermediaries, PBMs are now boycotting products that they
believe are overpriced. The obvious problem is that patients are then
denied coverage for some medications that may be much more preferable
than other options, including doing without.

In contrast, government programs such as Medicaid and the VA have been
able to negotiate even better prices while making the drugs more
accessible to patients on those programs.

It is time for us to quit pretending that there is some magic in the
market when it is our public programs that function far better. If we
had a national single payer program that included a drug benefit, the
intrusive obstruction of the pharmacy benefit managers would go away.

Monday, January 25, 2016

qotd: Insurance industry gearing up again for more Medicare Advantage overpayments

America's Health Insurance Plans (AHIP)
January 22, 2016
New Report: CMS' Changes to Medicare Advantage Undermine Care for
Beneficiaries Managing Chronic Conditions

With 17 million seniors and individuals with disabilities depending on
the Medicare Advantage program, a report from Avalere Health raises new
concerns about CMS' policies that undermine health plans' efforts to
care for beneficiaries managing multiple chronic conditions. After
assessing the accuracy of CMS' current risk adjustment model and the
cost of care for chronic health conditions, the Avalere analysis found
that the model under-predicts costs for individuals with multiple
chronic conditions by $2.6 billion on an annual basis. These findings
come just weeks before CMS releases its annual proposed payment notice
and call letter for Medicare Advantage and Part D plans, which may
include further changes to the program and seniors' benefits.

In the spring of 2015, CMS finalized changes to the risk adjustment
system, which directly targeted chronic disease prevention programs.
This latest Avalere analysis demonstrates that these changes
significantly limit health plans' early intervention efforts and
seniors' benefits.

"Further cuts to Medicare Advantage and seniors' benefits are
fundamentally at odds with the goal of delivering better care and better
value for beneficiaries," AHIP President and CEO Marilyn Tavenner said.
"Rather than relying on an antiquated fee-for-service approach as the
model for care delivery, CMS should focus on strengthening Medicare
Advantage and the innovative programs that improve seniors' health."

Last year, more than 340 members of Congress, lead by Sen. Chuck Schumer
(D-NY), Sen. Mike Crapo (R-ID), Rep. Patrick Murphy (FL-18), and Rep.
Brett Guthrie (KY-02), urged CMS to protect seniors' coverage and
provide stability to the program. Ahead of the upcoming February rate
notice, more than 2 million seniors from AHIP's Coalition for Medicare
Choices have mobilized, urging Washington to defend the Medicare
Advantage program from further payment cuts.


Avalere Health
January 2016
Analysis of the Accuracy of the CMS-Hierarchical Condition Category Model

From the Executive Summary

Since 2000, the Centers for Medicare & Medicaid Services (CMS) has
adjusted Medicare Advantage (MA) capitated payments for demographic
characteristics and health status (also known as "risk adjustment"). In
2004 CMS adopted the Hierarchical Condition Category (HCC) risk
adjustment model, which includes a series of patient diagnoses that
impact healthcare spending. In 2014, CMS introduced a new version of the
model that removed certain conditions, added others, and made additional
modifications (hereafter referred to as the "2014 model").

In this project, Avalere assessed the accuracy of the 2014 model for
beneficiaries in the traditional Medicare program with certain common
chronic conditions by using Medicare fee-for-service (FFS) claims data
to compare predicted healthcare costs with actual healthcare costs.

In summary, we estimate that the 2014 model under-predicts costs for
individuals with multiple chronic conditions by $2.6 billion on an
annual basis (see Table 1). As a result, because the model is "zero
sum"—that is, the values for each condition are relative to the average
cost across all individuals—under-prediction for individuals with
multiple chronic conditions is balanced by over-prediction of costs for
individuals with no chronic conditions.

On October 28, 2015, CMS announced proposed changes to the MA risk
adjustment model that the agency believes will improve its predictive
power for low-income beneficiaries. Specifically, CMS intends to further
refine the model by accounting for both dual eligible/low-income subsidy
(LIS) eligible and disabled status.

(W)e intentionally used a different disease classification system from
the HCC model groupings in order to independently assess how well the
model predicts costs for specific chronic diseases.

Table 1. Predictive Accuracy for Beneficiaries with Multiple Chronic

Total Estimated MA Over/Under- Prediction of Expenditures ($ millions)

Multiple Chronic Conditions (All) $ (2,613.7)
Multiple Chronic Conditions (Dual/LIS-eligibles) $ (401.8)

The purpose of risk adjustment is to anticipate systematic differences
in costs for groups of individuals so that plans are reasonably
compensated for the financial risks they bear. If plans are not
accurately compensated for taking on the risk associated with a
particular group, it creates a misalignment between payments and costs
for higher cost beneficiaries, and under-compensates plans that enroll
many chronically ill members. For any particular individual, the model
may over- or under-predict actual costs, in some cases by a wide margin;
every dollar of under-predicted cost is balanced by a dollar of
over-predicted cost.

From the Detailed Findings

Analysis for Multiple Chronic Conditions

We reviewed how well the model predicts expenditures for individuals
with multiple chronic conditions in order to determine how well payments
to MA plans would be risk adjusted for the clinical severity of their
patient populations under the 2014 model. As shown in Table 3, we find
that the model under-predicts costs by approximately $2.6 billion for
individuals with three or more chronic conditions. We also find that the
model over-predicts disease burden for individuals without chronic

Table 3. Predictive Accuracy for Members with Chronic Conditions; All
Members and Dual/LIS-Eligibles

Total Estimated MA Over/Under- Predictions ($ millions)

All Members

Multiple (3+) Chronic Conditions $ (2,613.7)

Few (1-2) Chronic Conditions $ 936.2

No Chronic Conditions $ 1,677.50


Multiple (3+) Chronic Conditions $ (401.8)

Few (1-2) Chronic Conditions $ 599.8

No Chronic Conditions $ 582.9

From the Conclusion

We reviewed the accuracy of the new CMS-HCC model at predicting costs
for individuals with multiple chronic conditions, and paid particular
attention to how well the model predicts costs for high cost
individuals. We find that the CMS-HCC model substantially under-predicts
costs for individuals with multiple chronic conditions, under-predicts
costs for several specific chronic conditions, and does not accurately
predict costs for high cost individuals within each chronic condition.

These findings suggest the model may need improvements and modifications
in order to appropriately pay for high cost members and individuals with
multiple and certain single chronic conditions. In other words, the
model may not be adequately compensating health plans for treating these


Comment by Don McCanne

For the past four years, the private insurance industry, led by their
lobby organization - AHIP, has been successful in offsetting the
reductions in overpayments that have been made to the private Medicare
Advantage plans - reductions that are required by the Affordable Care
Act. AHIP has now commissioned Avalere to produce a study that
purportedly shows that they will need higher capitation payments than
the CMS's risk adjustment program would allow. The release of this study
is the first step in their campaign to, once again, offset the decreases
required by ACA.

A program to authorize private Medicare Advantage plans (originally
Medicare + Choice plans) was authorized by Congress as a move to
eventually completely privatize Medicare once the private plans were
able to show that they could deliver higher quality at lower costs.
Early on the concept was proven a fraud when the plans successfully
marketed their plans selectively to healthy Medicare beneficiaries,
while being compensated at levels equivalent to the costs of those in
the traditional fee-for-service (FFS) Medicare program who had greater
health problems.

In response, CMS developed a risk adjustment program that would pay more
when the Medicare Advantage plans enrolled beneficiaries with greater
health care needs, based on their diagnoses. The private plans then
responded by upcoding the diagnoses of their enrollees, making them
appear much sicker than they were. They even went to the point of
sending out teams to make detective house calls so that they could add
more diagnoses that were not being itemized by the providers.

In 2004, CMS adopted the Hierarchical Condition Category (CMS-HCC) risk
adjustment model, which does adjust payments upward for those with
greater needs, but it still fails to prevent about four-fifths of the
excessive payments.

With pressure from AHIP, and with the support of Congress, CMS used
various innovative methods to boost the payment rates for these private
plans. This year, they seem to be headed towards a claim that they are
being paid much less for high cost patients than the actual costs entailed.

Look at Table 1 in the Executive Summary (the only part that legislators
read). Based on current CMS risk adjustment methods, they predict that
the calculated costs for beneficiaries with multiple chronic conditions
will fall short of actual costs by $2,614 million. They are now
campaigning to have those costs added to their reimbursement rates for

But look at Table 3 which is found in "Detailed Findings" (which most
will not read). It is the same as Table 1, but expanded to include the
predicted calculations for those who have few or no chronic conditions.
It shows that the CMS calculations predict $2,614 million in excess
estimates of costs.

For the dual eligible/low-income subsidy group (Dual/LIS), Table 1 shows
that the costs for those with multiple chronic conditions would be
underestimated by $402 million. But for the Dual/LIS with few or no
conditions, Table 3 shows that the predicted costs would be calculated
to be $1,183 million over the actual costs. The report indicates that
Dual/LIS patients have greater costs, so they plead to be compensated
for this $402 million underestimate. They remain silent on the $1,183
overestimate for the healthier sector.

Also the estimates are based on patients in the traditional FFS Medicare
program, a less healthy population than those in the Medicare Advantage
plans. Since the Medicare Advantage plans continue to be successful in
recruiting healthier patients, the overestimates by which they would be
reimbursed would be even greater.

The politics are ugly. Marilyn Tavenner, as head of CMS, participated in
the conspiracy to use devious innovations to overpay the Medicare
Advantage plans. She is now president and CEO of AHIP and will use her
cozy relationship with members of Congress to be sure that they put more
pressure on CMS to once again jack up the rates for Medicare Advantage
plans, in conflict with the intent of the ACA legislation.

This is a nefarious effort that is part of the conspiracy to completely
privatize Medicare. As Marilyn Tavenner said in the AHIP news release,
"Rather than relying on an antiquated fee-for-service approach as the
model for care delivery, CMS should focus on strengthening Medicare
Advantage and the innovative programs that improve seniors' health."
This statement is not ambiguous. It is a blatant call for total
privatization of Medicare.

The last thing we want is a privatized Medicare Advantage for all who
can afford it.

Friday, January 22, 2016

qotd: PNHP response to national debate on ‘Medicare for All’

Physicians for a National Health Program

January 22, 2016

Doctors group welcomes national debate on 'Medicare for All'

Nonpartisan physicians group calls single-payer reform 'the only
effective remedy' for nation's continuing health care woes and urges
focus on facts, not rhetoric

Physicians for a National Health Program, a nonprofit, nonpartisan
organization of 20,000 doctors who support single-payer national health
insurance, released the following statement today by its president, Dr.
Robert Zarr, a Washington, D.C., pediatrician.

The national debate on single-payer health reform, or "Medicare for
All," that has emerged in the course of the presidential primaries is a
welcome development. But unfortunately a number of misrepresentations
about single-payer national health insurance – and the prospects for its
attainment – have crept into the dialogue and are potentially misleading
the public.

Most of these misrepresentations, or myths, have been decisively refuted
by peer-reviewed research. They include the following:

Myth: A single-payer system would impose an unacceptable financial
burden on U.S. households. Reality: Single payer is the only health
reform that pays for itself. By replacing hundreds of insurers and
thousands of different private health plans, each with their own
marketing, enrollment, billing, utilization review, actuary and other
departments, with a single, streamlined, tax-financed nonprofit program,
more than $400 billion
in health spending would be freed up to guarantee coverage to all of the
30 million people who are currently uninsured
and to upgrade the coverage of everyone else, including the the tens of
millions who are underinsured
Co-pays and deductibles, which have been rapidly rising under the
Affordable Care Act, would be eliminated. Further, the single-payer
system's bargaining clout would rein in rising costs for drugs and
medical supplies. Lump-sum budgets for hospitals and capital planning
would control costs even more.

A recent study
shows 95 percent of U.S. households would come out financially ahead
under an improved version of Medicare for all. The graduated,
progressively structured tax burden would be based on ability to pay,
and the heavy cost
to average U.S. households of private insurance premiums, co-pays,
deductibles, and many currently uncovered services would be eliminated.
Patients could go to the doctor or hospital of their choice, and would
no longer be restricted to proprietary networks. Multiple studies over a
period of several decades
including by the General Accountability Office and the Congressional
Budget Office, show that a single-payer system would provide universal
coverage at a much lower cost, per capita, than we are spending now.
International experience confirms it. Even our traditional Medicare
program, which falls short of a true single-payer system, has much lower
than private insurance, and shows that publicly financed programs can
deliver affordable, reliable care.

A single-payer system would also greatly diminish the administrative
burden on our nation's physicians
and hospitals
freeing up physicians, in particular, to concentrate on doing what they
know best: caring for patients.

Covering everyone for all medically necessary care is affordable;
keeping the current private-insurance-based system intact is not.

Myth: The U.S. has a privately financed health care system. Reality:
About 64 percent of U.S. health spending is currently financed by
(Estimates that are lower than this exclude two large sources of
taxpayer-funded care: health insurance for government employees and tax
subsidies to employers and individuals for purchasing private health
plans.) On a per capita basis, the amount of government-funded health
care in the U.S. exceeds the health spending of nations with universal
health systems, e.g. Canada. We are paying for a national health
program, but not getting it.

Myth: A single-payer system would overturn the gains won under the
Affordable Care Act and provide inferior coverage to what people have
today. Reality: A single-payer system would go far beyond the modest
improvements that the ACA made around the edges of our current
private-insurance-based system and ensure truly universal care,
affordability and health security. For example, H.R. 676, the Expanded
and Improved Medicare for All Act
would guarantee coverage for all necessary medical care, including
prescription drugs, hospital, surgical, outpatient services, primary and
preventive care, emergency services, dental, mental health, home health,
physical therapy, rehabilitation (including for substance abuse), vision
care and correction, hearing services including hearing aids,
chiropractic, durable medical equipment, palliative care, podiatric
care, and long-term care. It would eliminate financial barriers to care
like co-pays and deductibles and eliminate restrictive networks. It
would end the steady erosion of job-based coverage under our current
arrangements and disconnect insurance coverage from employment. H.R. 676
currently has 61 sponsors.

Myth: The American people don't support single payer. Reality: Surveys
have repeatedly shown that an improved Medicare for All is the remedy
preferred by about two-thirds
of the population. A recent Kaiser Family Foundation survey yielded
similar results, showing 58 percent of Americans supporting Medicare for
A solid majority of the medical profession favors such an approach, as
well, as do more than 600 labor organizations
and many civic and faith-based groups

Myth: The goal of establishing a single-payer system in the U.S. is
unrealistic, or "politically infeasible." Reality: It's true that
single-payer health reform faces formidable opposition, especially from
the private insurance industry, Big Pharma, and other for-profit
interests in health care, along with their allies in government. This
prompts some people to conclude that single payer is out of reach and
therefore not worth fighting for. While such moneyed opposition should
not be underestimated, there is no reason why a well-informed and
organized public, including the medical profession, cannot prevail over
these vested interests. We should not sell the American people short. At
earlier points in U.S. history, the abolition of slavery and the
attainment of women's suffrage were considered unrealistic, and yet the
movements to achieve these goals were ultimately victorious and we now
wonder how those injustices were allowed to stand for so long.

What is truly "unrealistic" is believing that we can provide universal
and affordable health care, and control costs, in a system dominated by
private insurers and Big Pharma.

We call upon our nation's lawmakers and the political leaders of all
political parties to heed public opinion and to do the right thing by
acting swiftly to bring about the only equitable, financially
responsible and humane cure for our health care ills: single-payer
national health insurance, an expanded and improved Medicare for all.

/Physicians for a National Health Program (//
has been advocating for single-payer national health insurance for three
decades. It neither supports nor opposes any candidates for public office./'medicare-for-all'


Comment by Don McCanne

The concept of a single payer national health program - Medicare for all
- has become part of the political debate leading up to the presidential
primaries. To no surprise, the rhetoric has been driven by politics
which characteristically reduces important concepts to sometimes
meaningless or deceptive sound bites. The media, including liberal
pundits who should know better, have made the debate a battle of words
rather than ideas. We at PNHP believe that facts should guide the
national debate, and thus this release.

Thursday, January 21, 2016

qotd: U.S. health system is already predominantly taxpayer funded

American Journal of Public Health
Published online ahead of print January 21, 2016
The Current and Projected Taxpayer Shares of US Health Costs
By David U. Himmelstein, MD, and Steffie Woolhandler, MD, MPH

Objectives: We estimated taxpayers' current and projected share of US
health expenditures, including government payments for public employees'
health benefits as well as tax subsidies to private health spending.

Methods: We tabulated official Centers for Medicare and Medicaid
Services figures on direct government spending for health programs and
public employees' health benefits for 2013, and projected figures
through 2024. We calculated the value of tax subsidies for private
spending from official federal budget documents and figures for state
and local tax collections.

Results: Tax-funded health expenditures totaled $1.877 trillion in 2013
and are projected to increase to $3.642 trillion in 2024. Government's
share of overall health spending was 64.3% of national health
expenditures in 2013 and will rise to 67.1% in 2024. Government health
expenditures in the United States account for a larger share of gross
domestic product (11.2% in 2013) than do total health expenditures in
any other nation.

Conclusions: Contrary to public perceptions and official Centers for
Medicare and Medicaid Services estimates, government funds most health
care in the United States. Appreciation of government's predominant role
in health funding might encourage more appropriate and equitable
targeting of health expenditures.

From the Discussion

Americans pay the world's highest health-related taxes. Yet many
perceive that US health care financing system is predominantly private,
in contrast to the universal tax-funded health care systems in nations
such as Canada, France, or the United Kingdom. By 2024, government
expenditures in the United States are expected to account for more than
two thirds of national health spending. This is nearly the same
proportion as in Canada, where official figures put government's share
at 70.7% (although this figure excludes modest tax subsidies for
supplemental private coverage).

Public funds help the vast majority of Americans pay for care, but these
funds flow through many different spigots. The funding streams for the
poor, the elderly, veterans, family planning, and public sector workers
are visible and hotly debated. Meanwhile, the hundreds of billions in
tax subsidies that disproportionately benefit wealthier Americans have
drawn far less public attention.

Although taxpayers fund the vast majority of health spending, overall
priorities for this funding are rarely discussed. Appreciation of the
magnitude of government funding might encourage more explicit,
appropriate, and equitable targeting of these expenditures as components
of a total health budget.


Comment by Don McCanne

We often hear that we cannot afford the taxes to pay for a single payer
national health program - an improved Medicare for all. Yet we are
already paying most of the taxes that would be required; it's just that
they are relatively obscure and thus not recognized by most taxpayers.

By 2024, government expenditures will pay for more than two-thirds of
national health spending (up from 64.3% in 2013). "Government health
expenditures in the United States account for a larger share of gross
domestic product (11.2% in 2013) than do total health expenditures in
any other nation," according to this study. Our government health
expenditures alone are more than both government and private health
expenditures in any other nation. We are paying for a national health
program, but we are not getting it.

Most people are aware of the insurance premiums and out of pocket
expenses that they and their employers pay for health care, so they tend
to think that most health care spending is private. They are aware of
the payroll deduction for Medicare, but they do not tend to consciously
connect other taxes, especially income taxes, with expenditures for Part
B and Part D Medicare, Medicaid, CHIP, the VA system and other
government health programs. Also, totally out of mind is the portion of
personal and corporate income taxes that help pay for government health
programs - taxes that are built into the pricing of consumer goods and
services (not to mention that the cost of employee health benefit
programs is also built into consumer prices). (This may be double
counting for the tax tally, but higher health spending in the U.S. does
pass on opaque employer plan health costs to the consumer.) And one of
the largest silent taxes is the tax expenditure (tax subsidies) on the
federal, state and local level that help pay for private,
employer-sponsored health plans. Also, we are paying, through taxes, for
most of the health benefits offered to federal, state and local
government employees.

The roughly $300 billion we pay for tax expenditures for
employer-sponsored health plans (will be over $500 billion by 2024) is a
prime example of how dysfunctional our health care financing is. The
subsidies are credited in direct proportion to income - the higher a
person's income, the greater the subsidy. That is really unfair to
lower-income individuals and families who may be paying the same
insurance premium, directly or indirectly through forgone wage
increases, as the higher-income employees do, but at a greater dollar
amount than those with higher incomes after the subsidy is applied, and
at a much greater percentage of income. This is a highly regressive tax

The point is, we are already spending our taxes on the health care
system, and we can do it much more equitably through a well-designed
single payer program. Not only would we increase transparency, we would
also reduce inefficient spending by eliminating the private insurance
industry, saving more in premiums than would be the increase in taxes.
The next time someone says that we cannot afford the taxes for a single
payer system - clue him or her in. Let everyone know that it is time to
demand much greater value for the enormous amount of taxes that we are
already paying for health care.

Wednesday, January 20, 2016

qotd: More Hispanic children covered, but do we need a public option?

Georgetown University Health Policy Institute
& National Council of La Raza
January 2016
Historic Gains in Health Coverage for Hispanic Children in the
Affordable Care Act's First Year
By Sonya Schwartz, Alisa Chester, Steven Lopez, and Samantha Vargas Poppe

Key Findings

1. Uninsurance rates for Hispanic children reached a historic low in the
first year that the Affordable Care Act's (ACA) coverage provisions took
effect. The number of uninsured Hispanic children dropped by
approximately 300,000 children, from about 2 million uninsured Hispanic
children in 2013 to 1.7 million in 2014. The uninsurance rate for
Hispanic children declined by nearly 2 percentage points from 11.5 to
9.7 percent in the same one-year time period.

2. Hispanic children were much more likely to have health coverage in
states that have taken multiple steps to expand coverage for children
and parents. In 2014, 20 states had uninsurance rates for Hispanic
children that were significantly below the national average. Of these,
16 states covered children in Medicaid and the Children's Health
Insurance Program (CHIP) above 255 percent of the Federal Poverty Level
(FPL, the median eligibility level for children), 18 states provided
Medicaid and/or CHIP coverage to lawfully residing children in the
five-year waiting period, and 17 states extended Medicaid to low-income
parents and other adults.

3. Despite these gains, health coverage inequities for Hispanic children
remained. Hispanic children accounted for a much greater share of the
uninsured child population (39.5 percent) than the child population at
large (24.4 percent) in 2014. These inequities existed even though the
vast majority of uninsured Hispanic children were eligible for Medicaid
and CHIP, but unenrolled.


Comment by Don McCanne

They say that the historic gains in health coverage for Hispanic
children is one of the many accomplishments of the Affordable Care Act
(ACA) that we can celebrate. From 2013 to 2014 the number uninsured
Hispanic children declined from about 2 million to 1.7 million.

Of course, under a well-designed single payer system, that number would
have dropped to zero, not only for Hispanic children, but for everyone.
Yet, now that single payer has been thrust back into the political
debate, the sides are lining up between those who say that we should try
to build on ACA and those who say that we should move to single payer,
improved Medicare for all.

Now be real. With ACA, we have reduced the number of uninsured Hispanic
children by about 300,000. What kind of adjustments would we have to
make in ACA to insure the other 1,700,000? With greater outreach to the
eligible children, we might be able knock that number down a little bit
more, but there is no mechanism under ACA, even if tweaked, that we
could use to come anywhere near eliminating uninsurance.

The ongoing, highly publicized debate between two potential presidential
candidates has produced a surge in interest in single payer, according
to several polls. There is now a spate of opinion articles being written
by progressives who have previously acknowledged the straightforward
benefits of single payer. Ironically, many of these articles represent a
retreat, taking the position that we have gained much with ACA and we
should continue to build on it, that single payer is not politically
feasible. Yet none of them have even hinted at the policies they would
propose that would be truly effective in achieving the same goals as
single payer, except maybe for the fantasy fix of the public option.

The public option would be only one more player in our dysfunctional,
administratively complex, multi-payer system, and an expensive one at
that. If it were a Medicare buy-in, would new enrollees be placed in the
same risk pool as the elderly and people with long-term disabilities?
That would require very high premiums because of the greater needs of
these patients. Also Medicare covers only about one-half of health care
costs and works only because almost everyone has some additional
coverage such as Medigap, employer-based retiree coverage, Medicare
Advantage, or Medicaid. So would people have to buy two plans - the
Medicare buy-in plus some sort of Medigap plan? Too expensive and
administratively wasteful. If the buy-in were a Medicare Advantage plan
insurers would be reluctant to enter that market since it is subject to
adverse selection and a death spiral because of the high premiums they
would have to charge. Besides, Medicare Advantage plans are private
plans and could hardly be categorized as a "public" option. Instead of
using Medicare, could we start with a new government-run insurance plan?
We would want to have reasonably comprehensive benefits, with a higher
actuarial value to avoid excessive out-of-pocket costs, and we would
want free choice of our health care professionals and institutions, all
with no underwriting (subjecting it to adverse selection). Since the
government would require that it be budget-neutral, the premiums of such
a plan would be much higher than any plan currently on the market.
Forget that. Okay, so let's offer an affordable public option that has
spartan benefits, low actuarial value (high deductibles, etc.), and
limited choice of narrow networks. Wait a minute. Isn't that where ACA
is taking us? Do we really want the public option to be just another
player on the ACA exchanges? How could that ever be considered an
incremental step that would bring us closer to single payer?

Back to those 1,700,000 uninsured Hispanic children. Do we want all of
them insured, along with everyone else? It will never happen under ACA
since thousands of tweaks would not be enough to make it an effective
financing system that would take care of everyone. The fundamental ACA
infrastructure is irreparably flawed. We have to let these sheep in
progressive clothes - the aforementioned opinion writers - know that
they are flat-out wrong. Instead of whining about feasibility, we need
to change the politics so that single payer becomes the only feasible

Or shall we simply continue on the ACA path and adopt some more tweaks
so that in the next decade or so we can get maybe another 300,000
Hispanic children insured? And the other 1,400,000 Hispanic children?
Under single payer, we wouldn't have to ask that.

(Note: While we are battling for single payer, we do need to continue
tweaking ACA. California's Health for All Kids law will allow about
170,000 of the state's 497,000 uninsured children to quality for
Medi-Cal, plus many others are already qualified but do not enroll. But
we cannot allow ACA tweaking to in any way diminish our drive toward
national single payer.)

Tuesday, January 19, 2016

qotd: High deductibles do not increase patient price shopping

JAMA Internal Medicine
January 19, 2016

Cost-Sharing Obligations, High-Deductible Health Plan Growth, and
Shopping for Health Care
By Anna D. Sinaiko, PhD; Ateev Mehrotra, MD; Neeraj Sood, PhD

The rapid growth of high-deductible health plans (HDHP) has been driven
in part owing to a belief that cost-sharing obligations (ie, having skin
in the game) will encourage health insurance enrollees to shop for
health care. The wide variation in costs across physicians and hospitals
implies considerable opportunity for enrollees to save money by
switching to lower-cost providers. High-deductible health plan
enrollment is associated with lower health care spending. However, prior
studies using health insurance claims data indicate these savings are
primarily owing to decreased use of care and not because HDHP enrollees
are switching to lower-cost providers. Limited prior work has assessed
attitudes toward price shopping among HDHP enrollees and whether they
were more likely to consider costs when seeking care.

From Methods

We surveyed a nationally representative sample of insured US adults
between 18 and 64 years of age who used medical care in the last year
and compared HDHP enrollees with people in traditional plans on rates of
shopping for care. The definition of an HDHP was established as a health
plan having an individual deductible greater than $1250 or a family
deductible greater than $25006 or a health plan that included a health
savings account.

From Results

During their last use of medical care, HDHP enrollees were no more
likely than enrollees in traditional plans to consider going to another
health care professional for their care (n = 120 [10.9%] vs n = 85
[10.0%]; P = .67), or to compare out-of-pocket cost differences across
health care professionals (n = 42 [3.8%] vs n = 23 [2.7%]; P = .37).

From Discussion

Simply increasing a deductible, which gives enrollees skin in the game,
appears insufficient to facilitate price shopping. Members of HDHP and
traditional plans are equally likely to price shop for medical care, and
they hold similar attitudes about health care prices and quality.

Editor's Note
High-Deductible Health Plans and Higher-Value Decisions
By Joseph S. Ross, MD, MHS

High-deductible health plans — insurance plans that have lower premiums
but higher deductibles than traditional health plans — have been
increasingly promoted as a means to incentivize higher-value health care
decision making. However, we have little information on how individuals
take accessibility, cost, and quality information into account when
making health care decisions. Moreover, there remains uncertainty about
whether individuals will obtain recommended health care services while
at risk for greater out-of-pocket costs.

In this issue of JAMA Internal Medicine, Sinaiko and colleagues conduct
an internet-based survey of enrollees in high-deductible health plans
and traditional health plans to better understand how they think about
health care decisions. Individuals enrolled in plans with different
financial incentives actually share many of the same beliefs about
health care pricing and how to obtain high-quality care. Both rarely
consider obtaining care from a different health care professional and
even less often compare costs among health care professionals. Despite
the limitations of an internet-based sample and few questions to
disentangle the nuance of decision making, an interpretation of this
study could be that high-deductible health plans are rationally designed
for individuals who do not yet have access to sufficient information to
make higher-value decisions in today's market, suggesting that these
plans have not yet succeeded at making cost and quality information more
available and more actionable for their enrollees. However, a more
likely interpretation is that getting enrollees to make higher-value
decisions remains a mirage. High-deductible health plans take advantage
of an irrationally designed health care system. In fact, information
about our health care system is asymmetric in that it is better
understood by physicians and less so by patients, which means patients
obtaining care are not truly informed decision makers.

It is true that high-deductible health plan enrollees have "skin in the
game." However, these enrollees are exposed to substantial out-of-pocket
cost risk with little evidence that this risk exposure will incentivize
higher-value health care decisions, meaning they are essentially playing
the game blindfolded with one hand tied behind their back.


Comment by Don McCanne

This study shows that individuals with high-deductible health plans
(HDHP) are no more likely to select their care based on their
out-of-pocket costs than do individuals enrolled in traditional health
plans without high deductibles. As the editorial states, it is likely
that "getting enrollees to make higher-value decisions remains a mirage."

So high deductibles do not cause patients to be smart shoppers, but they
do cause patients to decline beneficial health care services. They also
create financial hardships for some patients. Thus high deductibles have
a net negative impact. We should get rid of them. A single payer system
is a much more efficient and patient-friendly method of controlling
health care spending.

Monday, January 18, 2016

qotd: What would Martin Luther King, Jr. say?

The New York Times
January 17, 2016
Transcript of the Democratic Presidential Debate

(The debate is sponsored by the Congressional Black Caucus Institute)

Brief excerpts

Hillary Clinton: We finally have a path to universal health care. We
have accomplished so much already. I do not to want see the Republicans
repeal it, and I don't to want see us start over again with a
contentious debate. I want us to defend and build on the Affordable Care
Act and improve it.

Bernie Sanders: No one is tearing this up, we're going to go forward.
But with the secretary neglected to mention, not just the 29 million
still have no health insurance, that even more are underinsured with
huge copayments and deductibles. Tell me why we are spending almost
three times more than the British, who guarantee health care to all of
their people? Fifty percent more than the French, more than the
Canadians. The vision from FDR and Harry Truman was health care for all
people as a right in a cost-effective way.

Bernie Sanders: What this is really about is not the rational way to go
forward — it's Medicare for all — it is whether we have the guts to
stand up to the private insurance companies and all of their money, and
the pharmaceutical industry. That's what this debate should be about.

Hillary Clinton: So, what I'm saying is really simple. This has been
the fight of the Democratic Party for decades. We have the Affordable
Care Act. Let's make it work.


The New York Times
January 18, 2016
Health Reform Realities
By Paul Krugman

Obamacare is… what engineers would call a kludge: a somewhat awkward,
clumsy device with lots of moving parts. This makes it more expensive
than it should be, and will probably always cause a significant number
of people to fall through the cracks.

The question for progressives — a question that is now central to the
Democratic primary — is whether these failings mean that they should
re-litigate their own biggest political success in almost half a
century, and try for something better.

My answer, as you might guess, is that they shouldn't, that they should
seek incremental change on health care (Bring back the public option!)
and focus their main efforts on other issues — that is, that Bernie
Sanders is wrong about this and Hillary Clinton is right.

… as the health policy expert Harold Pollack points out, is that a
simple, straightforward single-payer system just isn't going to happen.


January 16, 2016
Here's why creating single-payer health care in America is so hard
By Harold Pollack

The experience of peer industrial democracies suggests that a
well-designed single-payer system would be more humane and markedly less
expensive than what we have right now.

Passing a single-payer plan requires precisely the same interest-group
bargaining and logrolling required to pass the ACA. The resulting
policies will thus replicate some of the very same scars, defects, and
kludge that bedevil the ACA.

Progressives should still push for basic reforms that improve our
current system. I supported the public option in 2009. I still do. I
hope it resurfaces in some form, particularly for older participants in
the state marketplaces . It may open a pathway to a true single-payer.
If it doesn't — which I suspect it will not — it might still provide a
valuable alternative and source of pricing discipline within our
pathological health care market.


January 17, 2016
Bernie Sanders's single-payer plan isn't a plan at all
By Ezra Klein

Sanders calls his plan Medicare-for-All. But it actually has nothing to
do with Medicare. He's not simply expanding Medicare coverage to the
broader population — he makes that clear when he says his plan means "no
more copays, no more deductibles"; Medicare includes copays and
deductibles. The list of what Sanders's plan would cover far exceeds
what Medicare offers, suggesting, more or less, that pretty much
everything will be covered, under all circumstances.

Behind Sanders's calculations, both for how much his plan will cost and
how much Americans will benefit, lurk extremely optimistic promises
about how much money single-payer will save. And those promises can only
come true if the government starts saying no quite a lot — in ways that
will make people very, very angry.

This is what Republicans fear liberals truly believe: that they can
deliver expansive, unlimited benefits to the vast majority of Americans
by stacking increasingly implausible, and economically harmful, taxes on
the rich. Sanders is proving them right.


Why We Can't Wait
By Martin Luther King, Jr.

"For years now, I have heard the word 'Wait!' It rings in the ear of
every Negro with piercing familiarity. This 'Wait' has almost always
meant 'Never.' We must come to see, with one of our distinguished
jurists, that 'justice too long delayed is justice denied.'"


Comment by Don McCanne

Martin Luther King, Jr. already said it, and that was half a century ago.

Saturday, January 16, 2016

qotd: Berenson on the fallacy of “If you can’t measure it, you can’t manage it”

JAMA Forum
January 13, 2016
If You Can't Measure Performance, Can You Improve It?
By Robert A. Berenson, MD

"If you can't measure it, you can't manage it" is an often-quoted
admonition commonly attributed to the late W. Edwards Deming, a leader
in the field of quality improvement. Some well-respected health policy
experts have adopted as a truism a popular variation of the Deming quote
— "if something cannot be measured, it cannot be improved" — and point
to the recent enactment of the Medicare Access and CHIP Reauthorization
Act of 2015 (MACRA) as a confirmation of "the broadening societal
embrace" of this concept.

The problem is that Deming actually wrote, "It is wrong to suppose that
if you can't measure it, you can't manage it — a costly myth" — the
exact opposite. Deming consistently cautioned against requiring
measurement to guide management decisions, observing that the most
important data needed to manage often are unknown and unknowable.

Many Routes to Improvement

The requirement for measurement as essential to management and
improvement is a fallacy, not a self-evident truth and not supported by
Deming, other management experts, or common sense. There are many routes
to improvement, such as doing things better based on experience,
example, as well as evidence from research studies.

Comparative public performance using meaningful and accurate measures
has led to quality improvements, as clinicians and hospitals reflect on
their own comparative performance and seek to improve their public
standing. Examples include improved hospital care for patients
experiencing heart attacks and improved renal dialysis. In most clinical
areas, however, we lack readily available measures to use as valid
benchmarks to assess performance.

Not deterred, however, last year a rarely bipartisan Congress passed the
MACRA legislation. Its core element was repealing the unsustainable
sustainable growth rate mechanism threatening huge payment cuts to
physicians caring for Medicare patients. The law called for development
of "value based" payment approaches that would pay for quality and cost
outcomes, rather than just for the myriad services physicians provide or
order, whether or not the services are needed or well performed. "Paying
for value, not volume" has become the slogan du jour, itself assuming a
mostly unchallenged position in health policy circles.

Now comes the hard part: actually achieving greater value, rather than
fashioning an increasingly complex, intrusive, and likely doomed attempt
to measure value.

After the MACRA's Merit-Based Incentive Payment System (MIPS) is fully
phased in early in the next decade, a physician caring for Medicare
patients under MIPS stands to lose up to 9% of their Medicare payments
or conceivably gain 27%, based on their performance on measures of
quality, their use of health care resources, the extent to which they
have implemented electronic health records, and their participation in
quality improvement activities.

But performance on a few, random and often unreliable measures of
performance can provide a highly misleading snapshot of any physician's

A Bad Idea?

Practical challenges aside, pay for performance for health professionals
may simply be a bad idea. Behavioral economists find that tangible
rewards can undermine motivation for tasks that are intrinsically
interesting or rewarding. Furthermore, such rewards have their strongest
negative impact when they are perceived as being large, controlling,
contingent on very specific task performance, or associated with
surveillance, deadlines, or threats, as with MIPS.

Another major problem with the current preoccupation with measurement as
the central route to improvement is the assumption that if a quality
problem isn't being measured, it basically doesn't exist. A prime
example is diagnosis errors. Recently, an Institute of Medicine (IOM)
committee, on which I was a member, issued Improving Diagnosis in Health
Care, documenting serious errors of diagnosis in 5% to 15% of
interactions with the health care system.

As the report emphasizes, we cannot now measure the accuracy of
diagnoses, which means MIPS scores will not include performance on this
core physician competency. Still, the IOM committee proposed numerous
improvement strategies. These include development of immediate feedback
programs to erring clinicians from patients and other health
professionals when a serious misdiagnosis occurs (making errors
memorable if not measureable), greater attention in medical education to
the cognitive bias that commonly clouds clinicians' judgment, improved
systems to ensure that abnormal test results are promptly communicated
to patients and diagnostic team members, and giving patients direct
access to their medical records so they can introduce relevant, missing
information and correct the misinformation that is common in clinical

These and other IOM recommendations represent better practices that
might dramatically improve diagnostic accuracy, relying not on
performance measures but on adopting better work processes and focused
education. Measures would help, but substantial progress can be made

The overarching concern is that under MIPS and similar programs,
physicians will focus on the money while their intrinsic motivation to
make accurate, timely diagnoses as a core responsibility will be crowded
out. If so, the worthwhile recommendations in the IOM report will likely
sit on the shelf, gathering dust, thanks to the misguided supposition
that "if you can't measure it, you can't manage it."


AMA Wire
January 13, 2016
CMS chief vows to replace meaningful use with better policy

Centers for Medicare & Medicaid Services (CMS) Acting Administrator Andy
Slavitt on Monday said that the agency is changing its culture to focus
more on listening to physician needs and giving them the freedom they
need to keep patients at the center of the practice of medicine.

Referring to execution of the electronic health record (EHR) meaningful
use program, Slavitt noted that the agency's previous regulatory
approach created difficulties. "When in doubt, I think, do less and
figure it out."

"The meaningful use program as it has existed will now be effectively
over and replaced with something better," Slavitt said.

In its place will be the new Merit-Based Incentive Payment System
(MIPS), called for in the Medicare Access and CHIP Reauthorization Act
of 2015, which is intended to sunset the three existing reporting
programs and streamline them into a single program.

"The stakes are high for this program," Slavitt said. "As any physician
will tell you, physician burden and frustration levels are real.
Programs designed to improve often distract. Done poorly, measures are
divorced from how physicians practice and add to the cynicism that the
people who build these programs just don't get it."


Comment by Don McCanne

As several prior Quote of the Day messages warned, MACRA's Merit-Based
Incentive Payment System (MIPS) is a horrendous trade-off for getting
rid of the flawed SGR payment system. At least for the next decade, we
are going to have to live with a system which supposedly will reward or
penalize physicians based on measured performance when "the most
important data needed to manage often are unknown and unknowable."

Robert Berenson writes, "a few, random and often unreliable measures of
performance can provide a highly misleading snapshot of any physician's
value." Further, under MIPS, "physicians will focus on the money while
their intrinsic motivation to make accurate, timely diagnoses as a core
responsibility will be crowded out."

CMS is responding to the great dissatisfaction with the administrative
burden of the "meaningful use" program for electronic health records,
which would have been the source of many of these performance
measurements. But what is their response? Acting CMS Administrator Andy
Slavitt says, "The meaningful use program as it has existed will now be
effectively over and replaced with something better" - MIPS! He says,
"Done poorly, measures are divorced from how physicians practice and add
to the cynicism that the people who build these programs just don't get it."

Well, yes. They just don't get it.

qotd: Disentangling moral hazard and adverse selection

National Bureau of Economic Research
January 2016
NBER Working Paper 21858
Disentangling Moral Hazard and Adverse Selection in Private Health Insurance
By David Powell and Dana Goldman


Moral hazard and adverse selection create inefficiencies in private
health insurance markets and understanding the relative importance of
each factor is critical for policy. We use claims data from a large firm
to isolate moral hazard from plan selection. Previous studies have
attempted to estimate moral hazard in private health insurance by
assuming that individuals respond only to the spot price, end-of-year
price, expected price, or a related metric. The nonlinear budget
constraints generated by health insurance plans make these assumptions
especially poor and we statistically reject their appropriateness. We
study the differential impact of the health insurance plans offered by
the firm on the entire distribution of medical expenditures without
assuming that individuals only respond to a parameterized price. Our
empirical strategy exploits the introduction of new plans during the
sample period as a shock to plan generosity, and we account for sample
attrition over time. We use an instrumental variable quantile estimation
technique that provides quantile treatment effects for each plan, while
conditioning on a set of covariates for identification purposes. This
technique allows us to map the resulting estimated medical expenditure
distributions to the nonlinear budget sets generated by each plan. We
estimate that 53% of the additional medical spending observed in the
most generous plan in our data relative to the least generous is due to
moral hazard. The remainder can be attributed to adverse selection. A
policy which resulted in each person enrolling in the least generous
plan would cause the annual premium of that plan to rise by $1,000.

From the Introduction

Moral hazard and adverse selection create inefficiencies in health
insurance markets and result in a positive correlation between health
insurance generosity and medical care consumption. The policy
implications are very different, however, depending on the relative
magnitudes of each source of distortion, though isolating the
independent roles of both moral hazard and adverse selection is rare in
the health insurance literature. This paper separates moral hazard and
adverse selection for the health insurance plans offered by a large firm.

The average observed expenditures in the most generous plan are $3,969
more than the per person costs in the least generous plan. We estimate
that if selection were random, that the most generous plan would lead to
$2,117 in more spending than the least generous plan, implying that 53%
of the differential can be attributed to moral hazard. We also estimate
adverse selection without restrictive structural assumptions. We find
that if everyone in the sample were enrolled in the least generous plan
that the premium for that plan would increase by over $1,000.

2.1 Moral Hazard and Adverse Selection

Optimal policy depends on the relative important of adverse selection
compared to moral hazard in explaining the correlation between plan
generosity and medical care costs. The policy implications for moral
hazard are different than those required to confront adverse selection.
Adverse selection typically requires risk-pooling, while distortions
driven by moral hazard would motivate additional cost-sharing.

3.4 Attrition

If we define attrition as individuals enrolled in 2005 but enrolled for
less than 365 days in 2007, the attrition rate in the MarketScan data
(selecting on firms in the data in both 2005 and 2007) is 58.3%. Our
sample has a 58.7% attrition rate.


Understanding moral hazard and adverse selection in private health
insurance is widely- recognized as critical to policy. While the
literature has frequently estimated the effect of price on medical care
consumption, it has typically resorted to parameterizing the mechanism
through which individuals respond to cost-sharing. We show that these
assumptions typically contradict economic reasoning, and we provide
empirical evidence that these specifications perform poorly. In this
paper, we estimate the impact of different health insurance plans on the
entire distribution of medical care consumption using a new instrumental
variable quantile estimation method. These estimated distributions are
the distributions caused by the plans in the absence of systematic
selection into plans. We map these causal distributions to the
parameters of the plans themselves. We can statistically reject that
individuals only respond to the end-of-year price.

We also estimate the magnitude of adverse selection. We find favorable
selection in the least generous plan and adverse selection in the most
generous. We estimate that adverse selection is responsible for $773 of
additional per-person costs in the most generous plan, implying that an
individual considering this plan would pay over $60 per month in
additional premium payments simply to cover the expected costs of the
population selecting into the plan. Similarly, a policy which resulted
in our entire sample enrolling in the least generous plan would cause
annual premiums for that plan to rise by over $1,000.

We estimate that moral hazard is responsible for 53% of the differences
in expenditures between the most and least generous plans. Adverse
selection also plays an important role, accounting for the other 47%. In
the absence of moral hazard, the difference in average medical
expenditures across these plans would be $2,117 instead of $3,969.
Finally, we find that using the previous year's medical expenditures as
a metric of selection greatly overstates the magnitude of selection.

PDF of full paper (53 pages):


Comment by Don McCanne

In health insurance, moral hazard occurs when individuals obtain more
health care than they would have if it were not paid for by the insurer.
Adverse selection occurs when individuals with greater health care needs
select plans that provide greater coverage. Both have an impact on
health care spending. This paper estimates the relative impact of each
of these in spending under private health insurance.

Each is responsible for roughly half of the differences of expenditures
between the most and least generous health plans. So enrollees in the
more generous plans pay higher premiums because of both moral hazard and
adverse selection.

Today's standard in insurance coverage is shifting towards lower
actuarial value plans - plans that pay a lower percentage of the total
health care costs. What does this study tell us about premiums for these
less generous health plans? As more people enroll in them, which they
are, the premiums increase to cover the additional expenditures for
those who otherwise would have enrolled in the more comprehensive plans.
The lower actuarial value plans are subject to favorable selection (the
healthy buying less expensive plans in anticipation of not needing
care), but that diminishes as higher cost patients move from the more
comprehensive plans into these cheaper plans.

The insurance actuaries set premiums based partly on anticipated moral
hazard and adverse selection. Though less comprehensive plans
theoretically have less moral hazard and no adverse selection, the lower
premiums are attractive even to those with higher health care needs. As
Powell and Goldman have shown, increased enrollment in the least
generous plans cause premiums for those plans to increase. This likely
goes a long way toward explaining why premium increases this year were
much higher than the overall rate of inflation, even though the rate of
increase in total national health expenditures has slowed.

Under a single payer national health program, adverse selection doesn't
even exist since everyone is in the same plan. Efficiency is an
important goal of health care reform, and wouldn't it be much more
efficient putting these health economists to work designing a simple
single payer financing system, instead of laboring over the complexities
of making a dysfunctional and inequitable market of private health plans
somehow work for us, though not very well?

Tuesday, January 12, 2016

qotd: Single payer and the pending boomer caregiving crisis

January 11, 2016
Long-term care must become a more prominent part of the single-payer campaign
By Henry Moss, PhD

We are facing a perfect storm. AARP's Public Policy Institute points out
that as boomers age into their 80s, there will be a sharp drop in
available family caregivers due to the "birth dearth" following the
postwar baby boom. At the same time, longevity is increasing due to
effective treatments of heart disease, lung disease, diabetes, cancer,
and other conditions. A longer life, however, will likely mean more
years with severe disability for boomers due to the secondary effects of
increased obesity, including high blood pressure, high cholesterol, and
inflammation due to metabolic disorders.

These secondary effects include damage to brain blood vessels and a
likely increase in the incidence of dementia, including Alzheimer's
disease. We already know that the prevalence of dementia will grow due
to the sheer size of the boomer cohort. In addition, however, it now
appears that a recent steady decline in the incidence of cognitive
impairment and dementia have ended and are starting to reverse. Dementia
is by far the most care-intensive of conditions. More years with
dementia (and other disabling conditions fed by the effects of obesity,
including mobility disorders) will mean more need for 24/7 care in the
face of declining numbers of family caregivers.

Hence the perfect storm. Hence the "2030 crisis". 2030 is when boomers
start becoming the "oldest old" in large numbers.
The boomer generation is defined by a dramatic rise in home ownership.
This trend, coupled with real and perceived problems in nursing homes,
means that home care has become, by far, the preferred approach to
long-term care. With declining numbers of family caregivers, an army of
personal care aides, well-trained and better-paid, will be needed to
address the coming crisis. Medicare or another universal plan will need
to cover the cost.

PNHP and the single-payer bills circulating in Congress fail to place
enough emphasis on long-term care and severely underestimate the costs
associated with an aging population and declining numbers of
caregivers. There is no way to separate long-term care and health
care. Living at home alone with dementia, frailty syndrome, or a
mobility disorder are an invitation to falls and other safety-related
events, a major source of healthcare costs for older adults. Shortages
of physicians, nurses, psychiatrists, and social workers with
specialties in geriatrics and mental health will create serious concerns
for elderly patients both in and out of nursing homes. Medication
management will be severely compromised. The health of stressed family
caregivers will also suffer.

Over the course of its history, Medicare has added mental health
services, prescription drug benefits, and hospice care. Long-term care
is the next frontier and boomers and their future caregivers represent a
massive potential constituency. It must become a prominent part of the
single-payer campaign.

(Henry Moss is a retired baby boomer doing independent academic and
public policy research and writing. He has a PhD in philosophy and has
written on cognitive science and the history and philosophy of
technological progress. His public policy interests include health
care, housing and urban development, technological progress, and
theories of social democracy.)

The 2030 Caregiving Crisis; A Heavy Burden for Boomer Children, by Henry
Moss (250 pages)
For paperback, eBook or free PDF download:


Comment by Don McCanne

Most single payer advocates certainly support inclusion of coverage for
long-term care in a national health program. Inevitably there is concern
about the magnitude of the problem, including defining the conditions
requiring long-term care, and the costs that care will entail.

In his book, "The 2030 Caregiving Crisis," Henry Moss discusses the
pending crisis when a disproportionately large number of baby boomers
will require long-term care at a time when there will be a
disproportionate decline in available family caregivers. Addressing this
problem now will provide a policy platform which will ease the problems
of long-term care once the surge in baby boomers diminishes through

His book is well researched and well referenced, plus he provides his
own constructive thoughts as to addressing this problem. Hopefully it
will be a helpful resource as PNHP members clarify and organize our
concepts on the financing of long-term care, as a part of our mission to
achieve health care justice for all.

Monday, January 11, 2016

qotd: Special enrollments cause adverse selection

The New York Times
January 9, 2016
Insurers Say Costs Are Climbing as More Enroll Past Health Act Deadline
By Robert Pear

Eager to maximize coverage under the Affordable Care Act, the Obama
administration has allowed large numbers of people to sign up for
insurance after the deadlines in the last two years, destabilizing
insurance markets and driving up premiums, health insurance companies say.

The administration has created more than 30 "special enrollment"
categories and sent emails to millions of Americans last year urging
them to see if they might be able to sign up after the annual open
enrollment deadline. But, insurers and state officials said, the federal
government did little to verify whether late arrivals were eligible.

That has allowed people to wait until they become ill or need medical
services to sign up, driving up costs broadly, insurers have told
federal health officials.

"Individuals enrolled through special enrollment periods are utilizing
up to 55 percent more services than their open enrollment counterparts"
who sign up in the regular period, the Blue Cross and Blue Shield
Association, whose local member companies operate in every state, told
the administration.

"Many individuals have no incentive to enroll in coverage during open
enrollment, but can wait until they are sick or need services before
enrolling and drop coverage immediately after receiving services, making
the annual open enrollment period meaningless," Steven B. Kelmar, an
executive vice president of Aetna, said in a letter to Sylvia Mathews
Burwell, the secretary of health and human services.

A quarter of the applications that Aetna received in the health law's
public insurance marketplace last year came through special enrollment
periods, he said.

Kevin J. Counihan, the chief executive of the federal insurance
marketplace, said nearly 950,000 people used special enrollment periods
to get coverage through from late February to the end of
June 2015.

"On average," Aetna said, "special enrollment period enrollees stay with
us for less than four months, while enrollees who come to us during the
annual open enrollment period maintain their coverage on average for
eight to nine months."

Daniel J. Schumacher, the chief financial officer of UnitedHealthcare,
the insurance unit of UnitedHealth Group, said more than 20 percent of
its marketplace customers signed up after open enrollment ended last
year. And they used 20 percent more health care than people who signed
up before the deadline, he said.

Such concerns could portend higher insurance rates broadly. In setting
current premiums, insurers say, they did not realize how many people
would sign up after the deadline and how much care they would use. That
information may affect future rates and benefits.

The federal government allows people to sign up or switch health plans
outside open enrollment for various reasons. Lawyers said it was not
easy to find a complete list of the eligibility criteria, which have
been set forth in regulations, bulletins, official policy statements,
manuals and informal "guidance documents." Some of the reasons are
straightforward, like getting married or having a baby.

Others are more complicated and less clear-cut. Consumers may, for
example, be eligible for a special enrollment period in "exceptional
circumstances" and in "other situations determined appropriate" by the
Centers for Medicare and Medicaid Services. The circumstances may
include "a serious medical condition" that kept a person from enrolling.

"Most consumers are confused by the rules on special enrollment periods
and do not understand the system well enough to try to game it," said
Christine Speidel, a lawyer at Vermont Legal Aid. On the other hand, she
said, "many people feel that insurance is not affordable, even with
subsidies, and they will call the marketplace to see if they qualify for
insurance when they get sick."


Comment by Don McCanne

Open enrollment periods for the ACA exchange health plans are limited in
duration to prevent people from buying insurance only when a need
arises, and then canceling the insurance after the need is met. This
"adverse selection" would reduce premium revenues for the insurers while
increasing expenditures for medical benefits. This drives up the cost of
premiums for everyone else which can cause the healthy to bail out,
driving premiums up even more and resulting in the "death spiral," which
is very disruptive to insurance markets.

Circumstances for individuals do change when enrollment is closed, thus
the law allows special enrollment so that individuals don't have to wait
up to a year to gain coverage. The problem with special enrollment
during closed enrollment periods is that it is the individuals with
changing circumstances who also have pressing medical needs that will be
compelled to enroll. Thus the payouts by the insurers will increase
during these closed enrollment periods. Also, many healthy individuals
who feel that they cannot afford their premiums will drop their
coverage, decreasing revenue for the insurers. Increased expenditures
and reduced revenues is not exactly the business model that insurers seek.

This creates a dilemma for the actuaries. To ensure solvency, premiums
will have to be set higher than would be warranted based strictly on the
better health of those enrolling during the open enrollment period.
Higher premiums then threaten the insurers' ability to gain market
share. This is a problem for even the nation's largest insurers, as we
now see UnitedHealth is withdrawing from the exchanges for this very reason.

The Affordable Care Act perpetuates a market of private plans
theoretically designed to use competition to improve quality while
reducing costs. But because insurers are not allowed to exercise pure
market forces since they must sell their products to people who will
actually need to use them, the regulated market of private plans fails
under these countervailing forces. Waste escalates because of the
greater administrative burden of this defective market, and because of
the need of the insurers to distort the functioning of their plans
(e.g., higher deductibles and narrower networks) in an attempt to
protect their bottom lines.

We can't keep pretending that we will figure out a way to make private
insurance markets work for everyone. We already have over half a century
of failure. That's enough. It's time to enact a publicly-administered
and publicly-financed single payer national health program - an improved
Medicare for all.

Friday, January 8, 2016

qotd: NCQA at 25 years: Lessons for us

Kaiser Health News
January 8, 2016
Health Plan Watchdog Still Seeks Progress After 25 Years
By Phil Galewitz

The nation's oldest private arbiter of what defines high-quality health
plans turned 25 last year. The National Committee for Quality Assurance
(NCQA) started soon after HMOs became popular in the 1980s, measuring
the effectiveness of the first managed care plans as millions of
consumers flocked to join them.

Today, NCQA accredits health plans in every state, covering 109 million
Americans or about 70 percent of all Americans enrolled in private coverage.

Founding and current president Margaret "Peggy" O'Kane discussed her
organization's past and future recently with KHN's Phil Galewitz.

Phil Galewitz: What do you see as NCQA's biggest achievement after 25

Margaret O'Kane: Just getting the measurements out there in a
systematic way. We are now finally at a stage where the delivery system
is getting it and trying to reorganize itself with primary care medical
homes and accountable care organizations.

Galewitz: Is the United States doing a better job for consumers in
measuring health plans' quality of care?

O'Kane: Maybe the glass is half full on measurement, or less than that.
I think our strategy was to always walk behind the evidence. We have
good measures where there is good evidence on preventive services and
chronic diseases like hypertension and diabetes. What we are missing is
often in areas where the science is unclear. These also tend to be
high-stakes areas of care, like cancer or other complex illnesses.

Galewitz: Are health plans receptive to being evaluated by NCQA?

O'Kane: It's less than voluntary, I would say. It's in the health law
for exchange plans (to be accredited by NCQA or another accrediting
group) and has been driven by employers traditionally. Some plans really
question whether it matters what (their) quality is. You see narrow
networks emerging and if they are chosen just based on price, that isn't
going to go well among consumers.

Galewitz: How much has NCQA's work improved the quality of health care
that Americans receive?

O'Kane: In the areas we have measured, you can point to real
improvements. My main gripe now is what I see as contradictory
strategies of high deductibles versus a delivery system reform promoting
primary care. If you have to spend out of your own pocket $2,000 or
$5,000 before you get to see your primary care physician (for free),
many Americans don't have that money. We are reforming the delivery
system and then people can't afford to see their primary care doctor.
That makes no sense.


Comment by Don McCanne

As our health care system is being refined to supposedly replace
quantity with quality in the delivery of health care services, we should
learn from the experience of the National Committee for Quality
Assurance (NCQA) - one of the more credible and experienced
organizations attempting to improve quality in health care. Their
founder and president, Margaret "Peggy" O'Kane, has a few lessons for us.

How are we doing on quality measurements? The glass is "half full… or
less." We are not doing well on "high-stakes areas of care, like cancer
or other complex illnesses." How can you ignore the quantity of care
that is required for these complex cases and pretend that you are going
to make payments based instead on quality that you can't measure?

And the reception by the exchange health plans of the ACA requirement
that they be accredited for quality? O'Kane says that the involvement of
the plans is "less than voluntary." She says, "Some plans really
question whether it matters what (their) quality is." Wow! Plans are
setting up narrow networks that are based on price (while ignoring
quality - DMc).

Her most important message: "My main gripe now is what I see as
contradictory strategies of high deductibles versus a delivery system
reform promoting primary care. If you have to spend out of your own
pocket $2,000 or $5,000 before you get to see your primary care
physician (for free), many Americans don't have that money. We are
reforming the delivery system and then people can't afford to see their
primary care doctor. That makes no sense."

As the policy and political communities divert their efforts to
structural reforms that have not been demonstrated to have more than a
negligible impact on quality, the private insurance industry has moved
forward with changes that are making health care unaffordable and
inaccessible for far too many Americans. When what we need is a strong
primary care infrastructure, our health care leaders are allowing the
insurers to erect intolerable financial barriers to care. As O'Kane
says, "That makes no sense."

It's great that we have dedicated organizations such as NCQA and AHRQ to
help ferret out and correct quality problems. But we cannot let that
distract us from what we really need to do: enact a well designed single
payer national health program that will bring us the structural reforms
that we desperately need, so all of us can have affordable, accessible,
high quality health care.