Wednesday, August 31, 2016

qotd: Government pays for 71 percent of health care in California

UCLA Center for Health Policy Research
Health Policy Brief
August 2016
Public Funds Account for Over 70 Percent of Health Care Spending in California
By Andrea Sorensen, Narissa J. Nonzee, and Gerald F. Kominski


In California, personal health care expenditures are estimated to total more than $367 billion in 2016. Approximately 71 percent of these expenditures will be paid for with public funds (i.e., taxpayer dollars). This estimated contribution of public funds to health care expenditures is much higher than estimates that include only major health insurance programs such as Medicare and Medicaid. Several additional public funding sources also contribute to health care expenditures in the state, including government spending for public employee health benefits, tax subsidies for employer-sponsored insurance and the Affordable Care Act (ACA) insurance exchange, and county health care expenditures. As health care reform continues to take effect, it will be important to monitor the public versus private contributions to state health care expenditures to ensure that funds are being distributed both efficiently and equitably.

Health Care Expenditures in California

In California, health care expenditures in 2016 are estimated to total more than $367 billion; our estimates suggest that 71 percent of these expenditures will be paid for with public funds. Medi-Cal/Healthy Families will comprise the largest proportion of total spending (27 percent), followed by Medicare (20 percent). Tax subsidies for ESI (12 percent); government spending for public employee insurance (4 percent); county health expenditures (3 percent); other government programs—Veterans Affairs (VA) health care, Indian Health Services, and Maternal and Child Health (3 percent altogether); and ACA marketplace exchange subsidies (2 percent) will account for the remainder of total expenditures. Private expenditures for covered benefits will comprise approximately 29 percent of total health care spending in California in 2016. These expenditures include employer share of premiums (16 percent), employee share of premiums (6 percent), out-of-pocket expenditures for covered benefits (4 percent), and premium contributions for individually purchased insurance (3 percent).

Conclusion and Recommendations

Public funds in California contribute to approximately 71 percent of total state health care expenditures. As an increasing number of individuals gain health insurance coverage under the ACA, as health care expenditure growth rates continue to increase, and as policy debates continue to mount around introducing a public insurance option, it is important that public funding for health care expenditures be monitored. Comparable to national-level analyses, these findings run contrary to the assumption that U.S. health care expenditures are funded primarily by private payers. If public funds continue to comprise the majority of total health care expenditures, it will be increasingly important for policymakers to consider whether these public funds are being distributed efficiently and effectively, and whether alternatives such as a state single-payer system would be a more effective use of public and private health spending.


UCLA Center for Health Policy Research
August 31, 2016
Public money accounts for more than two-thirds of health care spending in California
By Gwendolyn Driscoll

Contrary to the notion that the country's health care is primarily a privately funded system, 71 percent of health care expenditures in California are paid for with public funds, according to a new analysis by the UCLA Center for Health Policy Research.

In California, public funds will pay for 71 percent ($260.9 billion) of a projected $367.5 billion spent on health care in 2016, according to the study.

"The public sector is the primary player in health care spending," said Gerald Kominski, director of the UCLA Center for Health Policy Research who led the study. "But monies are disbursed in a fragmented way through numerous different entities, each of which has their own system and way of doing things. The question for policy makers is, 'does this fragmented approach make sense?'"

"For a majority of Californians, a public-run system is already the reality," said Andrea Sorensen, a graduate student at the UCLA Fielding School of Public Health, who co-authored the study. "A single-payer system could unite all these various programs and expand them to the entire population, resulting in a more streamlined and cost-effective approach to health care spending."

David Himmelstein and Steffie Woolhandler on the national taxpayer share of health costs:


Comment by Don McCanne

Over two-thirds of health care in California - 71 percent -  is paid for by the government, using our taxes. That is even greater than the national taxpayer share of health care - 64 percent (increasing to 67 percent in 2024) - as demonstrated by Himmelstein and Woolhandler.

As Himmelstein and Woolhandler have stated previously, U.S. taxpayers are already paying for a national health program, but not getting it. And that is even more true for Californians.

California has previously made efforts to adopt a single payer program, but they have failed - in the election booth, in the state legislature, and on the governor's desk. As we continue to shift more of health care costs to the government, we have brought along our terribly wasteful, fragmented health care financing system. The California taxpayers are getting a bad deal, and a very expensive one at that ($261 billion for 2016 in public spending alone).

Without enabling federal legislation, states are limited in how close they can come to a much more efficient single payer system, but that does not mean that we should not proceed with whatever is possible now.

California, and every other state for that matter, should do two things simultaneously: 1) Advocate vigorously for a national single payer program - an improved Medicare for all, and 2) Move forward on a state level with improving the health care financing system so that eventual transition to a national program will be that much simpler, not to mention providing some limited interim relief.

Tuesday, August 30, 2016

qotd: Indiana’s phony Medicaid health savings accounts

Health Affairs Blog
August 29, 2016
Healthy Indiana 2.0 Is Challenging Medicaid Norms
By Seema Verma and Brian Neale

Last year, the State of Indiana launched the latest version of the Healthy Indiana Plan (HIP), made possible through a series of Medicaid waivers sought by Governor Mike Pence and approved by the Obama Administration.

HIP 2.0's approval ignited a national conversation about the implications of its consumer-driven design for able-bodied adults in Indiana and potentially other reform-minded states. Having served as Governor Pence's main advisors throughout the waiver's development, negotiation, and implementation, we understand the crucial role states play in driving sensible Medicaid reforms.

HIP's consumer-driven design familiarizes its members with the concepts of commercial health insurance and encourages them to be prudent consumers, comparing cost and quality of health care services. In light of the "churn" present in the Medicaid program, HIP's policies are structured to be as consistent as possible with standard provisions found in commercial health plans, including Marketplace plans.

In line with commercial market consumer-driven plans, HIP members receive a $2,500 deductible health plan (HDHP) paired with a $2,500 "POWER" account, similar to a health savings account (HSA). The POWER account is HIP's paramount feature. It acts as both a payment mechanism and a terminal through which HIP's incentive structure flows. Members use the POWER account to pay for health care services until the deductible amount is met, at which point the HDHP becomes solely responsible for paying any further claims. Preventive services are provided outside the deductible and members do not face any barriers to seeking these services.

Contributions To Savings Accounts

HIP members begin coverage in HIP Plus, which offers benefits similar to those found in the commercial market and also includes modest dental and vision coverage. To maintain enrollment in HIP Plus, members are required to make monthly contributions in the amount equal to 2 percent of their income, comparable to the Marketplace's premium formula. Unlike premiums, members own these contributions and are refunded their pro-rata share when they leave the program. The member's pro-rata share is also rolled over from one plan year to the next, thereby reducing the contribution amount required for the upcoming plan year. Rollover amounts are increased for members who complete requisite preventive care services.

HIP respects the dignity of each member by setting a fair expectation of personal investment and engagement in his or her own well-being. Contributions are a way for members to demonstrate personal responsibility, but they also encourage members to stay engaged with their health plan, providers, and overall personal health. Because HIP Plus members' own dollars are at stake, they have "skin in the game" and therefore an incentive to make cost-conscious health care decisions.

HIP Plus members who fail to make contributions within a 60-day grace period are terminated from the plan. Terminated HIP Plus members below the poverty line are transferred to the HIP Basic plan, which offers a more limited benefit package that excludes dental and vision coverage. HIP Basic members also are subject to co-payments for services, which can easily wind up being costlier than the contribution amounts required to maintain HIP Plus enrollment. Because HIP Plus represents the superior value proposition, members have a strong incentive to avoid falling back into HIP Basic. Terminated HIP Plus members above the poverty line must wait six months to re-enroll, with a few limited exceptions.

The delivery system functions more effectively when people seek and receive care in the right setting, as HIP incentivizes its members to do. When members choose the emergency room (ER) for care that could have been more appropriately provided in a primary care setting, they are subject to an $8 co-pay, which rises to $35 dollars for each subsequent inappropriate use of the ER.

HIP 2.0 Is Just The Beginning

HIP has been successful in meeting its policy objectives, but it also continues to demonstrate the potential for consumer-driven health care as an alternative to the traditional Medicaid model. While HIP has never touted itself as some sort of national silver bullet, it continues to serve as an example for states having similar interest in re-aligning Medicaid with the broader objective of individual empowerment.

Indiana Q&A on HIP 2.0:

Lewin Group evaluation of HIP 2.0:

Center on Budget and Policy Priorities critique:


Comment by Don McCanne

Health savings accounts (HSAs) have been touted by conservatives as a way of placing the health care consumers (i.e., patients) in control of their health care spending. As they say, "having skin in the game" (cringe) makes the patients more efficient health care shoppers. But is not the HSAs, rather it is the very high deductibles of the associated insurance plans that cause patients to forgo often beneficial health care services because of the lack of affordability, thus reducing total health care spending.

With high deductibles, patients have to use their own funds before the deductible is met whether those funds come out of their pockets or out of designated HSAs. The HSA is merely a tax advantaged account that favors the healthy and wealthy. Tax expenditures are applied regressively with the wealthy receiving considerable taxpayer support and lower income individuals receiving little or nothing in the way of tax advantages.

Also the healthy who do not spend down their accounts can use the HSA funds as additional retirement benefits - benefits of which those with greater health problems are deprived. Thus HSAs represent the opposite of public policies that we should be pursuing since they disfavor the sick and poor to the benefit of the healthy and wealthy. It is perplexing how officials in Indiana ever conceived the idea that HSAs - know there as POWER accounts - would benefit low-income Medicaid patients with their higher than average medical needs.

So how do the POWER accounts work? First it is important to understand the complexity of the establishment and administration of these accounts because there are so many variables depending on whether the recipients are above or below 100 percent of the federal poverty level (FPL), which plan they participate in (Regular Plus, Regular Basic, State Plus, State Basic, plus HIP Link), whether or not they are classified as medically frail, whether they are Native Americans, whether or not they use preventive care services, and so forth. The description that follows applies differentially depending on these variables but will be presented as if it were a uniform program since these features represent the general drift of HIP 2.0. The actual details can be found in the Lewin Group report (link above).

The POWER accounts are funded mostly by the state with a contribution from the patient amounting to about 2 percent of income, up to a combined maximum of $2500 (mostly from the state). They are used to pay for the first $2500 of care (except for preventive services) and then a managed care plan begins paying. The payment by the patient is so small that it has very little impact on the government's share of the costs. But most of these patients have no discretionary income thus even these small payments can be a financial burden to them, having to displace spending on other essentials.

If the individual uses no medical services, their contributions can accumulate in their POWER accounts and they can take their funds with them when they leave the program. But the maximum in the account can be only $2500, and their contribution is only a fraction of that. It is obvious that the meager amount that would be returned in no way could be used as an additional retirement benefit - defeating one of the purposes of HSAs.

If the patients fail to contribute to the POWER account, and their income is over 100 FPL, they completely lose their coverage and cannot reapply for a minimum of 6 months. If their income is under 100 FPL and they fail to contribute to the POWER account, they are shifted to the Basic plan and then are exposed to copayments, and they lose services such as dental and eye, and are limited in their prescription benefits.

These accounts are supposed to increase consumer awareness, but many of the participants do not know that the accounts exist, and many of those who do don't really understand them. This hardly advances the conservative concept of consumer-directed health care.

Obviously these POWER accounts are not based on any sound health policy science, but they are merely a fabrication of ideologically-driven bureaucrats who want to pretend or maybe have fooled themselves into believing that they have created a poor man's version of health savings accounts. HSAs actually provide benefits, albeit primarily for the healthy and wealthy. Medicaid was designed as a prepaid health care system for those with low incomes. The Medicaid Power accounts do the opposite of HSAs in that they penalize those who do not participate, taking away traditional Medicaid benefits, thereby adversely affecting particularly those with the lowest incomes.

This is a perverse program designed to satisfy the ideology of the Indiana stewards. (Kentucky is next.) One of the Indiana stewards and a strong supporter of POWER accounts - the governor - is currently a candidate for the vice-presidency of the United States. Programs like this expose the souls of those who support them.

Monday, August 29, 2016

qotd: Slow Medicine: Assessing ACA in the Political Fog

MedPage Today
USC Gehr Family Center for Implementation Science
August 26, 2016

Slow Medicine: Assessing the ACA in the Political Fog
First in a new series on healthcare delivery reform

By Steffie Woolhandler, MD, MPH, Adam Gaffney, MD, David U. Himmelstein MD

The Gehr Center/Slow Medicine series "Disruption or Distraction: A Critical Look at Healthcare Delivery Reform" unpacks the data behind healthcare delivery system interventions, highlighting well-intended reforms that have yet to achieve the impact many have assumed. The series is edited by Slow Medicine columnists Pieter Cohen, MD, Michael Hochman, MD, MPH, and Rachael Bedard, MD. This first article in the series is written by three prominent experts in healthcare financing and offers a counterpoint to President Barack Obama's recent article describing the benefits of the Affordable Care Act.

In the current overheated political climate, the Affordable Care Act (ACA) has garnered harsh criticism from some quarters and extravagant praise from others. Both miss the mark.

Critics from the political right seem to ignore the fact that the law has substantially reduced the number of uninsured, and propose alternatives that would sharply increase uninsurance, underinsurance, and healthcare inequality.

On the other hand, President Obama's recent defense of the ACA in the Journal of the American Medical Association papered over its flaws -- notably the fact that 29 million remain uninsured, a figure that the Congressional Budget Office predicts will not change much in the years ahead, even if all states were to accept the ACA's Medicaid expansion.

While persistent uninsurance is the ACA's most glaring deficiency, it has other shortcomings: failure to slow the hollowing out of already inadequate coverage; further stimulation of the already overgrown healthcare bureaucracy; lack of effective cost controls; and Medicare payment reforms that tilt the playing field towards giant corporate organizations and have triggered a surge of mergers and acquisitions.

(Twelve paragraphs discuss the specific deficiencies of the Affordable Care Act - link below)

In sum, the ACA was a useful but inadequate step forward for American healthcare. Tens of millions remain uninsured, and at least as many others have grossly inadequate coverage. Costs are again rising rapidly, and the corporate takeover of care proceeds apace. By any reasonable measure we remain in last place among wealthy nations for coverage, and an outlier for our high costs. The need for more fundamental reform is clear.

Steffie Woolhandler, MD, MPH, is a primary care physician at the CUNY School of Public Health at Hunter College. Adam Gaffney, MD, is a research fellow at Massachusetts General Hospital. David Himmelstein, MD, is a professor at the CUNY School of Public Health at Hunter College. Woolhandler and Himmelstein are co-founders of Physicians for a National Health Program.


Comment by Don McCanne

As the first in a series on healthcare delivery reform, this article sets the stage by describing the profound deficiencies that remain after implementation of the Affordable Care Act. Although ACA did improve coverage and access, the authors note, "The need for more fundamental reform is clear."

This article was merely to assess ACA in the "political fog" and not to suggest solutions. But the problems presented are not amenable to mere teaks and patches. Since the authors are the nation's leading experts on single payer reform, we can assume that the fundamental reform they would call for would be single payer. And they would be right since anything less, such as adopting a public option, would leave in place most of the deficiencies.

Friday, August 26, 2016

qotd: Uwe Reinhardt: “It is hard to see a way out of this dilemma”

JAMA Forum
August 25, 2015
Why Are Private Health Insurers Losing Money on Obamacare?
By Uwe Reinhardt, PhD

The report last week that Aetna, one of the major US health insurance companies, would leave most of the health insurance exchanges established under the Affordable Care Act (ACA) of 2010 follows similar accounts the media that Anthem,  Aetna, and other large private health insurers are contemplating withdrawing from the so-called ACA marketplace. The companies say the reason behind these actions is they are losing hundreds of millions of dollars on the business coming to them from these exchanges. To make up for the losses, some insurers, though by no means all, have quoted premium increases in excess of 25% for 2017.

This development seems puzzling, as it comes in an era of historically low growth in total national health spending. The latest estimates published by the Centers for Medicare & Medicaid Services (CMS), which provides estimates of current and projected national health spending, indicate that spending growth at only 4.8% in 2016 and project health care spending growth to be only 5.8% per year for the decade 2015-2025.

Furthermore, as a report published by the Urban Institute notes, even in 2010, the year the ACA became law, its impact on total national health spending was estimated to be an increase in annual spending of only 2.5% above what would have been spent anyway. In addition, the report also notes that the CMS now projects that total US national health spending during 2014-2019 will be $2.5 trillion lower than projections made in 2010.

Why, then, in the face of these historically low growth rates, have premiums on the ACA health-insurance exchanges for 2017 increased at such high rates?

The core of the answer to this question can be read in the chart (at the link below), showing the highly skewed distribution of per capita health spending across the US population. The phenomenon is known as the "80-20 rule," indicating that 20% of any large insured populations tends to account for 80% of all health care spending on that population.

Individuals in the high spending categories typically have multiple health problems requiring expensive treatments. A question that has troubled US health policy for decades has been what kind of health care these individuals with multiple conditions should receive and who should pay for it, assuming that only few very well-to-do US residents could afford to purchase their health care with their own resources. Here, it is helpful to remember that the US median disposable family income is only about $54 000, not even enough to cover the annual cost of some effective specialty drugs.

The contributions individuals make out of their paychecks toward employer-sponsored health insurance are community rated, which means that they are the same for all employees of the firm, regardless of their health status and even age. So healthy employees are forced to subsidize less healthy colleagues through the premiums they pay. With the ACA, the Obama administration sought to provide the same deal for US individuals purchasing health insurance in the individual market.

For health insurers, however, this approach can be called an unnatural act, because it forces them knowingly to issue policies to very ill people at premiums evidently far below these individuals' likely claims on the insurer's overall risk pool. Actuaries and health policy analysts understand that this approach can work only if all individuals, healthy and ill, are mandated to purchase coverage for a defined, basic package of benefits, at the community-rated premium—thereby forcing young and healthy individuals to subsidize with their premiums the health care of individuals with medical conditions in the insurer's risk pool.

However, for purely political reasons, the ACA mandate for all persons in the United States to be insured was rather weak, leading many younger or healthier individuals simply to forgo purchasing health insurance and paying the relatively low fines for doing so. Over time, this practice naturally will drive up the community-rated premiums, inducing even greater numbers of young and healthy individuals to forgo insurance coverage, leaving private insurers with ever-more expensive risk pools.

The result of this adverse risk selection (the scenario in which sicker-than-average people purchase insurance while young and healthy people do not) has been that some private health insurers underpriced their policies on the ACA exchanges, perhaps to gain market share early on or because they simply did not anticipate quite the adverse risk selection that occurred.

It is hard to see a way out of this dilemma, given the current political climate. The task is doubly difficult in the United States, because the health care system is structured to yield prices for health care products and services that are twice as high or higher than the prices of identical items in other countries, driving US per capita health spending also to be twice as high as in many other developed countries. Thus, it is much more expensive in the United States than in other countries to provide health care to all residents, especially those who are ill and poor.

If health care costs in the United States were lower, most people would probably agree that ill, low-income citizens should receive the needed health care that is available to better-off individuals. The problem is that our health system is in danger of pricing kindness out of our souls.


Comment by Don McCanne

Although many readers are quite familiar with the concept of adverse selection presented here, the take-home message today is contained in the last three paragraphs of Uwe Reinhardt's article. By relying on private insurers to control spending, we have driven per capita health care spending up to twice the average of nations with far better health care financing systems. According to Reinhardt, "The problem is that our health system is in danger of pricing kindness out of our souls."

Thursday, August 25, 2016

qotd: JAMA: Answer to high cost of prescription drugs?

August 23/30, 2016
The High Cost of Prescription Drugs in the United States
Origins and Prospects for Reform
By Aaron S. Kesselheim, MD, JD, MPH; Jerry Avorn, MD; Ameet Sarpatwari, JD, PhD



The increasing cost of prescription drugs in the United States has become a source of concern for patients, prescribers, payers, and policy makers.


To review the origins and effects of high drug prices in the US market and to consider policy options that could contain the cost of prescription drugs.


We reviewed the peer-reviewed medical and health policy literature from January 2005 to July 2016 for articles addressing the sources of drug prices in the United States, the justifications and consequences of high prices, and possible solutions.


Per capita prescription drug spending in the United States exceeds that in all other countries, largely driven by brand-name drug prices that have been increasing in recent years at rates far beyond the consumer price index. In 2013, per capita spending on prescription drugs was $858 compared with an average of $400 for 19 other industrialized nations. In the United States, prescription medications now comprise an estimated 17% of overall personal health care services. The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration approval and by patents. The availability of generic drugs after this exclusivity period is the main means of reducing prices in the United States, but access to them may be delayed by numerous business and legal strategies. The primary counterweight against excessive pricing during market exclusivity is the negotiating power of the payer, which is currently constrained by several factors, including the requirement that most government drug payment plans cover nearly all products. Another key contributor to drug spending is physician prescribing choices when comparable alternatives are available at different costs. Although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear.

Conclusions and Relevance

High drug prices are the result of the approach the United States has taken to granting government-protected monopolies to drug manufacturers, combined with coverage requirements imposed on government-funded drug benefits. The most realistic short-term strategies to address high prices include enforcing more stringent requirements for the award and extension of exclusivity rights; enhancing competition by ensuring timely generic drug availability; providing greater opportunities for meaningful price negotiation by governmental payers; generating more evidence about comparative cost-effectiveness of therapeutic alternatives; and more effectively educating patients, prescribers, payers, and policy makers about these choices.


Possible solutions

  Anticompetitive strategies
  Price negotiation
  Addressing extraordinary shortage or pricing problems
  Generic drug policies
  Follow-on biologic policies
  Drug product selection laws
  Price negotiation
Health Care Organizations
  Price negotiation
  Information dissemination

Improving Competition

(Use the link below to access a more detailed explanation of how they would "improve competition")

Government Efforts to Reduce Drug Prices

In theory, the most effective way for a government to reduce drug prices would be for it to set them for the entire marketplace, as central governments do in countries such as Sweden, or to engage in international reference pricing and set prices at levels similar to those of other countries. Taking such a step in the United States would have major marketplace ramifications and is not at present politically feasible, in part because of the power of the pharmaceutical lobby in Washington, DC.


August 23, 2016
Americans pay more than double what other nations pay for drugs
By Stephen Feller

The cost of prescription drugs in the United States far outpaces prices in similarly industrialized countries, and the continuously rising costs are causing concern in every part of the healthcare industry, from patients and doctors to insurance companies and government officials.

Researchers at Harvard Medical School suggest in a new study, published in the Journal of the American Medical Association, that the nature of the American drug marketplace, as designed and regulated by the government, bears a large part of the blame.

A doctor's group called for the United States to move to a single-payer health insurance system, potentially similar to those in Canada and England, to make care more available to everyone while bringing down costs.

They argue that between the number of people seeking care and the single-payer system creating the ability to aggressively negotiate the cost of drugs, overall healthcare costs in the United States would go down, while people get healthier.

"I do think there are a lot of improvements that can be made to the U.S. system without tossing it out the window and starting over with the type of system you'd find in a European country," Kesselheim said.


Comment by Don McCanne

This JAMA article provides a comprehensive explanation as to why pharmaceutical prices are so high in the United States, and they even provide a few suggestions as to what might be done about it. The major error they make is that they assume that the problem should be addressed by US-style quasi-market solutions but not through a government solution that they say "would have major marketplace ramifications and is not at present politically feasible, in part because of the power of the pharmaceutical lobby in Washington, DC."

We are already deeply involved in supposed marketplace solutions, and yet drug prices continue to skyrocket. We really do need a  government health care financing infrastructure that is designed to serve patients rather than private sector shareholders. The obvious model which would be most suitable for the United States would be a single payer national health program.

The lead author, Aaron Kesselheim, says, "I do think there are a lot of improvements that can be made to the U.S. system without tossing it out the window and starting over with the type of system you'd find in a European country."

But we would not be starting over with the delivery system which is really what counts in health care. We would improve it and make it non-profit, but its basic structure in delivering health care would remain the same. It is only the financing system which would change dramatically, making it far more equitable, efficient and effective, while finally slowing health cost increases to sustainable levels.

JAMA is allowing free access to this article (link above). It is well worth reading if you want to understand why we are in this mess with pharmaceutical pricing. But as you read their suggestions, think about how a single payer system would be so much better.

Above all, reject the same old, tired and worn out argument they present that a better system is not "politically feasible," and the industry lobbyists would not let us make the changes anyway. The logical conclusion we should arrive at is that we need to replace our legislators who are listening to the lobbyists with legislators who will, instead, listen to us, the people.

Wednesday, August 24, 2016

qotd: Mylan CEO Heather Bresch: EpiPen is my “baby”

August 24, 2016
The EpiPen was her 'baby.' Now this pharma CEO is in the hot seat over price hikes
By Damian Garde

Drug company CEO Heather Bresch affectionately describes the humble EpiPen as her "baby," a once-middling product that she turned into a blockbuster.

With aggressive advertising — and even more aggressive price hikes — Bresch has fostered the EpiPen into a bestseller that brings in more than $1 billion a year in revenue for Mylan Pharmaceuticals.

Even (Martin) Shkreli, widely perceived as a paragon of greed after hiking a drug price by 5,000 percent, decried Mylan as a group of "vultures."

The EpiPen, an auto-injector used to reverse life-threatening allergic reactions, is inextricably tied to Bresch, whose ascension at the company tracks with the product's rapid growth.

She has also become one of the drug industry's highest-paid CEOs, pocketing more than $18 million in cash and stock last year.

Among the Senate's membership is her father, Joe Manchin, a populist West Virginia Democrat whose influence is woven throughout her rise in the drug industry.

Bresch first adopted EpiPen in 2007, when Mylan purchased the generic drugs division of Germany's Merck KGaA for $6.7 billion.

Bresch was promoted to chief operating officer at Mylan shortly after the deal with Merck KGaA. The official corporate announcement touted her MBA from West Virginia University. Months later, an exhaustive investigation by the Pittsburgh Post-Gazette revealed that she hadn't finished the MBA program — and a later independent report found that university officials had falsified her transcripts to conceal that fact, adding in grades "pulled from thin air."

WVU's provost and business school dean later resigned, and the university revoked Bresch's degree.

In 2015, Mylan announced that it would move some of its operations overseas in search of a more favorable tax rate. The tactic, known as an inversion, exploits what President Obama has called "one of the most insidious tax loopholes out there." For Mylan, inversion meant shifting its business address to the Netherlands through a complicated transaction with Abbott Laboratories.

Senator Bernie Sanders had tweeted that "there's no reason an EpiPen, which costs Mylan just a few dollars to make, should cost families more than $600."

If Mylan loses too much value, it could struggle to defend itself from a future hostile takeover. But Bresch herself is well-insured: According to a recent analysis from Bloomberg, if she's deposed in a merger, she's in line for a $61.5 million golden parachute.

Aaron Carroll also discusses EpiPen as a case study in health care system dysfunction:


Comment by Don McCanne

Much is being written about Mylan's price gouging of its life-saving injectable epinephrine - EpiPen - charging over $600 for a product that costs less than a dollar to make, so rather than discussing the background, comments will be limited to the ethical underpinnings of this decision to gouge us.

Actually, nothing further need be said about the ethics of Mylan and its CEO Heather Bresch since they scream out at you in a cursory reading of the STAT article excerpts above. In an oft-repeated scenario, they created nothing but paid billions for a company that made their targeted product - billions of dollars that must be recovered through sales - then generated skyrocketing returns through escalating price gouging, and even avoided taxes through inversion. As CEO Bresch says, that's her "baby."

We sure get a lot of talk from Congress and the administration about outrageous drug prices, yet all we get from them is more talk. It almost makes you want to start a revolution (Bernie style) and nationalize the pharmaceutical industry (and some of the other industries while we're at it). Well, maybe not a complete government takeover, but mandate that they be converted to non-profit public service corporations. We can start negotiations over nationalization and then come to the compromise of converting to non-profit private sector corporations, wherein the gains serve the public interest rather than being drained off to the one-percenters.

Tuesday, August 23, 2016

qotd: Des Moines Register says government should not rely on private insurers

The Des Moines Register
August 22, 2016
Government should not rely on private insurers

Aetna announced last week that it was reducing participation in health insurance exchanges created by the Affordable Care Act. It will sell plans in only four states next year, including Iowa, down from 15 this year. This follows similar market exits from UnitedHealth Group and Humana.

This is yet another reminder of why government should not rely on private companies to deliver health insurance to Americans. History has repeatedly shown this is a costly, dangerous and unsustainable idea. Yet politicians refuse to listen to history.

When Medicare was created in 1965, the goal was to insure seniors through a program administered by the government. In traditional Medicare, Uncle Sam directly pays providers for health services. The program is reliable, predictable and has low administrative costs. But politicians saw an opportunity to funnel public money to for-profit insurers to take over the job of administering benefits.

In the 1990s, private "Medicare+Choice" plans saved taxpayers no money while insurers demanded more and more money from the government. The companies failed to turn a healthy profit and disappeared. Fortunately, seniors could return to traditional, government-run Medicare.

Instead of learning from that experience, Congress embraced private insurers again in 2003. Medicare Advantage plans resulted in taxpayers paying 14 percent more per senior than the cost of care in traditional Medicare. Yet these plans are popular with seniors, who pay lower monthly premiums — and vote. Earlier this year, the GAO reported the feds improperly paid Medicare Advantage companies $14.1 billion in 2013. That's billion with a "b."

Lucky private insurers. Unlucky taxpayers. Reckless politicians.

Then there are governors, including Terry Branstad, who insist on handing over Medicaid administration to for-profit companies. Let's take a look at how this has worked in Florida, where former Gov. Jeb Bush pushed the idea, arguing the cost of Medicaid operated by the state was "unsustainable."

Privatization was rolled out statewide in 2014. Almost immediately, insurers complained they were losing money. They asked the state for a $400 million raise and a 12 percent increase in rates. This, of course, jeopardized any savings taxpayers may have realized. Two months ago Florida received a surprise Medicaid bill: It owed $433 million in unpaid reimbursements to insurers.

Then there is the Affordable Care Act.

One of the law's fundamental flaws is its reliance on private insurers to provide coverage to millions of Americans through exchanges. With no "public option" safety net to offer government coverage if companies jump ship, the insurers have incredible political and financial power. They can, in fact, try to hold the government hostage. Pay higher reimbursements, don't dispute our business decisions, do what we say or we are dropping out of exchanges.

Enter Aetna.

In a July 5 letter, Chief Executive Mark Bertolini informed the Justice Department that if it sued to block Aetna's dealt to acquire Humana Inc., the insurer would reduce its presence in exchanges. The Obama administration says such a merger would increase consumer costs.

"If the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses," he wrote.

Is that a warning? A threat? And how is the Obama administration supposed to respond?

The Justice Department sued to block the merger. Then Aetna announced it was scaling back its offerings in exchanges.

Americans' access to health insurance should not depend on the profit margins, business dealings, or mergers of for-profit companies. Not in Medicare. Not in Medicaid. And not in exchanges created by health reform law. Instead of funneling tax dollars to private companies, government is better equipped to administer insurance. It is not beholden to stockholders. It does not seek to turn a profit. And it will not abandon the responsibility of providing health coverage to Americans.


Comment by Don McCanne

There is much discussion today about moving forward with reform by introducing a public option - a competing government insurance plan - into the ACA insurance exchanges. Yet that would leave in place the current health care financing system, including the multitude of private insurers. As this editorial explains, the government "should not rely on private companies to deliver health insurance to Americans" as "this is a costly, dangerous and unsustainable idea."

Under our current system, the design of a public option would be very similar to existing private plans. That would perpetuate the flaws of the individual insurance model when what we need is a universal, prepaid health care system. Also, a public option designed as an individual plan to complete with private plans would fail to capture almost all of the efficiencies of a single payer national health program, leaving in place our dysfunctional, fragmented system of a multitude of public and private plans.

The editorial provides a very powerful message on why private insurers should be excluded from our health care financing. Once the public clearly understands that then we can explain to them why we should not accept even a fragmented system of public programs, even if dominated by a "public option" individual insurance plan. We need one single, efficient government financing program like Medicare, except even better.

Monday, August 22, 2016

qotd: When income is too high for a subsidy for ACA plans

Associated Press
August 20, 2016
Without a subsidy, couple faces higher insurance premiums
By Carla K. Johnson

With a household income too high for a federal subsidy, Bruce Mainzer and Beth Shadur are bracing for higher health insurance premiums in 2017.

As in other states, many insurers in Illinois have requested double-digit rate increases. Americans ineligible for the government subsidies that help cover their premiums will be hit hardest.

Health insurance already takes a hefty bite out of the couple's budget. They pay $1,200 a month for a bronze plan with high deductibles, which means they pay $13,000 annually out of pocket before their coverage even kicks in.

"It has been a challenge, and it causes us to dip into our retirement savings and increase our debts," Mainzer said.

On top of the cost, they've experienced the hassles of major disruptions in the Illinois insurance market. For one, their insurance company recently folded. It was one of the struggling co-ops set up under the federal health care law.

They are switching to Aetna in October but will start shopping again for another insurer a month later because Aetna recently said it is bailing out of the Illinois exchange-based marketplace.

They are in good health, but Mainzer has a blood disorder, a pre-existing condition that led insurers to reject him before the Affordable Care Act took effect. He was able to get coverage only through Illinois' high-risk pool, at about the same price he pays today.

Mainzer rejects the "repeal and replace" Republican solution, in part because getting rid of the law would mean that insurance companies could go back to denying coverage for people with pre-existing conditions.

"Ultimately, it's clear that health care is not something that can be efficiently provided by the private sector," he said. "The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity."


August 19, 2016
Experts Predict Sharp Decline in Competition across the ACA Exchanges
By Dan Mendelson

A new analysis from Avalere finds that nearly 36 percent of exchange market rating regions may have only one participating insurance carrier offering plans for the 2017 plan year and there may be some sub-region counties where no plans are available. Nearly 55 percent of exchange market rating regions may have two or fewer carriers.

"Lower-than-expected enrollment, a high cost population, and troubled risk mitigation programs have led to decreased plan participation for 2017," said Dan Mendelson, president of Avalere.


Comment by Don McCanne

An important measure of the success of the Affordable Care Act is how well it is working for middle and upper middle income working families who are not eligible for employer-sponsored health plans. The experience of the two-income couple described in this AP article demonstrates that it is not working so well for some.

Bruce Mainzer and Beth Shadur received their coverage through the ACA exchange in Illinois, but it was with one of the co-ops that failed (giving us a hint of what might happen to a "public option" once the private insurers provide their input into the design of such an option).

They had then applied for coverage with Aetna, but now it is pulling out of the Illinois exchange. Fewer plans will be available. In fact, according to the Avalere report, over one-third of exchange market rating regions throughout the United States will have only one plan available, eliminating competition as a means of holding down premiums (not that it was particularly effective anyway).

Because insurers in the exchanges have been experiencing losses, typical premium increases are expected to be in the double digits for 2017. For their bottom-tier bronze plan which has high deductibles, this couple has been paying $1,200 per month for coverage. Next year it will certainly be higher. Also the instability of plan coverage destabilizes access to health care because of the incongruity of the narrow provider networks.

In rejecting single payer, progressive politicians say that we should build on the success of ACA. What changes would you make in the system so that it would work well for Bruce and Beth? When you think about it, it is obvious that mere tweaks will not work. The changes that they need would require comprehensive reconstruction of the health care financing infrastructure.

Well, Bruce Mainzer has figured it out. As he says, "Ultimately, it's clear that health care is not something that can be efficiently provided by the private sector. The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity."

Thursday, August 18, 2016

qotd: Medicare Advantage plans pay hospitals less than does traditional Medicare

Health Affairs
August 2016
Medicare Advantage Plans Pay Hospitals Less Than Traditional Medicare Pays
By Laurence C. Baker, M. Kate Bundorf, Aileen M. Devlin and Daniel P. Kessler


There is ongoing debate about how prices paid to providers by Medicare Advantage plans compare to prices paid by fee-for-service Medicare. We used data from Medicare and the Health Care Cost Institute to identify the prices paid for hospital services by fee-for-service (FFS) Medicare, Medicare Advantage plans, and commercial insurers in 2009 and 2012. We calculated the average price per admission, and its trend over time, in each of the three types of insurance for fixed baskets of hospital admissions across metropolitan areas. After accounting for differences in hospital networks, geographic areas, and case-mix between Medicare Advantage and FFS Medicare, we found that Medicare Advantage plans paid 5.6 percent less for hospital services than FFS Medicare did. Without taking into account the narrower networks of Medicare Advantage, the program paid 8.0 percent less than FFS Medicare. We also found that the rates paid by commercial plans were much higher than those of either Medicare Advantage or FFS Medicare, and growing. At least some of this difference comes from the much higher prices that commercial plans pay for profitable service lines.

From the Discussion

Knowing how Medicare Advantage prices compare to those of FFS Medicare is important for public policy. Health spending is the product of price and quantity. If Medicare Advantage prices are lower than those of FFS Medicare, then Medicare can obtain the same quantity of services for less money through Medicare Advantage than through FFS Medicare.

Contrary to conventional wisdom, we found that Medicare Advantage plans paid lower prices for hospital services than FFS Medicare — around 8 percent lower in both 2009 and 2012 — once the DRG and geographic-area mix of FFS Medicare was made comparable to those of Medicare Advantage.

If differences in hospital mix are also accounted for, Medicare Advantage's hospital prices are about 5.6 percent less than those of FFS Medicare. Thus, about a third of the 8 percent difference is attributable to the narrower hospital networks in Medicare Advantage, compared to FFS Medicare.

Our results also show how Medicare Advantage can be used to get a better deal (at least from hospitals) for the Medicare program as a whole, by adjusting administered prices across geographic areas and DRGs to better reflect the market.

Finally, consistent with previous research, we found that the rates commercial plans pay to hospitals are significantly higher than those of either Medicare Advantage or FFS Medicare and that they are rising.


Comment by Don McCanne

The pro-market authors of this study have shown that the private Medicare Advantage plans pay hospitals less than traditional Medicare pays, concluding that the private plans "get a better deal for the Medicare program." But that conclusion is not true if you look at the whole picture.

Because the private Medicare Advantage plans were being paid more than what was being paid for comparable care in the traditional Medicare program, Congress included in the Affordable Care Act adjustments to reduce the overpayments. However, the private plans have continued with their mastery of gaming the system to increase their payment rates, such as selective marketing to healthier populations and upcoding to receive greater payments through risk adjustment. This has been with the complicity of the people in HHS who have used innovative administrative tools and creative accounting to more than offset the required reductions. The private plans are still receiving greater payments than are being made for comparable patients in the traditional Medicare program.

Since the private plans are receiving larger payments, and, according to this study, are paying less for health care, the Medicare program is getting a worse deal, and it is the private insurers themselves who are getting a great deal, at a cost to taxpayers. This extra money that the insurers are siphoning out of the system is going to overpriced administrative services and, yes, to extra profits.

Although the private insurers are pulling out of the ACA exchanges because they cannot make their business model work there, they boast to their investors that their commercial accounts are highly profitable (employer-sponsored plans) and that their government accounts - especially the Medicare Advantage plans - are producing extraordinary returns for the investors (and humongous compensation packages for the corporate executives). We are paying for this through higher premiums for private plans and greater taxes for privately-managed government programs. A well designed single payer system should fix that.

Wednesday, August 17, 2016

qotd: Bernie Sanders is not giving up on Medicare for all

Senator Bernie Sanders
August 16, 2016
Sanders Statement on Aetna's Decision to Withdraw from Health Insurance Exchanges

U.S. Sen. Bernie Sanders (I-Vt.) issued the following statement Tuesday after Aetna announced plans to withdraw from Affordable Care Act health exchanges in 11 of 15 states where it currently operates:

"It is disappointing that Aetna has joined other large for-profit health insurance companies in pulling out of the insurance marketplace. Despite the Affordable Care Act bringing them millions more paying customers than ever before, these companies are more concerned with making huge profits than ensuring access to health care for all Americans.  

"In my view, the provision of health care cannot continue to be dependent upon the whims and market projections of large private insurance companies whose only goal is to make as much profit as possible. That is why we need to join every other major country on earth and guarantee health care to all as a right, not a privilege. That is also why we need to pass a Medicare-for-all single-payer system. I will reintroduce legislation to do that in the next session of Congress, hopefully as part of the Democratic Senate majority."


Comment by Don McCanne

Since the Clinton Camp was successful in keeping single payer out of the Democratic Party platform, much of the media seems to believe that it has completely gone away as an issue. The good news is that Bernie Sanders assures us that it hasn't. We need to do our part to be sure that the nation knows that.

Tuesday, August 16, 2016

qotd: Aetna, UnitedHealth and Humana provide important lesson on feasibility

NB:  Superficially this looks like the other 4000 plus Quote of the Day messages that have been distributed, but this one does seem to drive home the most fundamental flaw with our current health care financing system. See if you agree.

August 15, 2016
Aetna to Quit Most Obamacare Markets, Joining Major Insurers
By Zachary Tracer

Health insurer Aetna Inc. will stop selling individual Obamacare plans next year in 11 of the 15 states where it had been participating in the program, joining other major insurers that have pulled out of the government-run markets in the face of mounting losses.

While the Affordable Care Act, known as Obamacare, has brought coverage to millions, the new markets have proven volatile for some of the largest for-profit insurers. Aetna said earlier this year that it expected to lose $300 million on the plans. UnitedHealth Group Inc. and Humana Inc., which Aetna has agreed to buy for $37 billion, are also pulling out after posting hundreds of millions of dollars of losses.

"The vast majority of payers have experienced continued financial stress within their individual public exchange business," Aetna Chief Executive Officer Mark Bertolini said in the statement. "Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool."


The New York Times
August 16, 2016
Aetna to Pull Back From Public Health Care Exchanges By Robert Pear

Kevin J. Counihan, the chief executive of the federal insurance exchange, said the marketplace would remain strong and vibrant despite Aetna's decision.

"It's no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality, rather than by denying coverage to people with pre-existing conditions," Mr. Counihan said Monday.


Comment by Don McCanne

Three of the nation's largest insurers - Aetna, UnitedHealth and Humana - are pulling out of the ACA insurance exchanges because they have been unable to use their business model to make a profit. Although over fourth-fifths of enrollees are receiving government subsidies for these plans, that is not enough for the insurers. They also want the government to pay for those who need significant amounts of care (reinsurance). They want to abandon covering risk while they sell us wasteful administrative services.

The failure stems from the fact that our public administrators and legislators bent over backwards to try to make reform work for the private insurers, but health care is now so expensive that the insurers' model requires unaffordable premiums and unaffordable deductibles and other cost sharing. They pushed the limit on premiums and deductibles and that has resulted in tens of millions remaining uninsured or unable to pay their out-of-pocket costs.

And the government's response? The marketplace remains "strong and vibrant" because insurers compete on "cost and quality" rather than "denying coverage to those with pre-existing conditions." Yet the nation's largest insurers cannot compete on those terms.

It is difficult to believe that members of the administration and Congress are so dense that they cannot see that it is this model of health care financing that is creating so many of our problems. Mention a model that actually does work - single payer - and they plead that it is not feasible, that it is not capable of being done. But they have already proven that the fragmented system under ACA is not capable of covering everyone with affordable health care. It is not a feasible method of ensuring affordable health care for all. Single payer is.

Monday, August 15, 2016

qotd: TPP and pharmaceutical regulation in Canada and Australia

International Journal of Health Services
August 11, 2016
The Trans Pacific Partnership Agreement and Pharmaceutical Regulation in Canada and Australia
By Joel Lexchin and Deborah Gleeson


The Trans Pacific Partnership Agreement (TPP) is a large regional trade agreement involving 12 countries. It was signed in principle in February 2016 but has not yet been ratified in any of the participating countries. The TPP provisions place a range of constraints on how governments regulate the pharmaceutical sector and set prices for medicines. This article presents a prospective policy analysis of the possible effects of the TPP on these two points in Canada and Australia. Five chapters of relevance to pharmaceutical policy are analyzed: chapters on Technical Barriers to Trade (Chapter 8), Intellectual Property (Chapter 18), Investment (Chapter 9), Dispute Resolution (Chapter 28), and an annex of the chapter on Transparency and Anti-Corruption (Chapter 26, Annex 26-A). The article concludes that the TPP could have profound effects on the criteria these countries use to decide on drug safety and effectiveness, how new drugs are approved (or not) for marketing, post-market surveillance and inspection, the listing of drugs on public formularies, and how individual drugs are priced in the future. Furthermore, the TPP, if ratified and enforced, will reduce future policy flexibility to address the increasing challenge of rising drug prices.

From the Conclusion

The final text of the TPP Agreement holds significant possible risks for pharmaceutical regulation and access to affordable medicines in both Australia and Canada. For Australia, the final provisions related to biologic products in the intellectual property chapter are worryingly ambiguous and unclear. This ambiguity was intended to be constructive, but it may have unintended effects if the United States insists on a certain interpretation, in the event of a dispute, or if the provisions have a chilling effect on future regulatory reform to bring biosimilars to the market more speedily.

Aside from the biologics provisions, there are a number of other provisions in the intellectual property chapter that will lock in existing policy settings and could potentially frustrate future reform efforts to reduce pharmaceutical expenditure in both Australia and Canada. Adopting detailed, prescriptive policy settings negotiated in a fraught political context—largely out of the view of stakeholders and involving bargaining and trade-offs between the objectives of different sectors—does not amount to sensible health or intellectual property policy making, which is attuned to current and future domestic needs.

The TPP's investment chapter, and in particular its investor-state dispute settlement mechanism, also bring new threats to the affordability of medicines. It is likely that multinational pharmaceutical companies will quickly take advantage of this new avenue, along with the provisions in Chapter 8 on the Technical Barriers to Trade, to contest and frustrate Australia's and Canada's pharmaceutical policy making.

It is also worth repeating that the U.S. pharmaceutical industry was not satisfied with the outcome of the TPP negotiations, especially with respect to the provisions on intellectual property rights. As a result, it is likely the industry will be very aggressive in pushing for the strictest interpretation of the various provisions of the TPP that relate to medications.


Comment by Don McCanne

The Trans Pacific Partnership trade agreement (TPP) has raised concerns about giving private sector industries too much control over the public affairs of participating nations. In health care we are particularly concerned about the benefits that the agreement would provide to the pharmaceutical sector at a cost to the citizens of participating nations.

Some have suggested that adopting a single payer system would protect the United States since the government could negotiate as a monopsony to ensure availability and fair pricing of their products. But this article discusses the problems that Canada and Australia could face with ratification of TPP - problems that would not be prevented by their single payer systems.

In a previous post I had mentioned, as a typical concern, that the industry was successful in including in TPP the principle that they would be rewarded with the value that use of their products would provide to patients. Thus the drugs for hepatitis C that reduce morbidity and prolong life should command the high prices that they do simply because the pharmaceutical firms  believe that they should have ownership of the benefit of their products transferred to them regardless of the fact that research, production and distribution costs may be a very small fraction of the prices they wish to command. It takes a lot of gall to support the concept that "I saved your life therefore I own the value of your life."

Although both leading presidential candidates have stated their opposition to TPP, there is considerable pressure to ratify TPP during the lame duck session - an approach which is supported by President Obama. Also Hillary Clinton, overwhelmingly favored to win the election, has previously supported TPP and likely will not give more than token verbal opposition to ratification, allowing leeway for President Obama to orchestrate the process.

If TPP is ratified, it is likely that the U.S. pharmaceutical industry would "be very aggressive in pushing for the strictest interpretation of the various provisions of the TPP that relate to medications." As this article indicates, that would be harmful to Canada and Australia plus other participating nations, but it would also be harmful to the people of the United States as well, sacrificing our health for the wealth of the drug industry investors.

More generally, just because the presidential candidates of the two major parties have expressed token opposition, we should not relax our efforts to inform the public that the TPP is designed to make the rich much richer at the cost of working families in participating nations.

Friday, August 12, 2016

qotd: Shameful racial disparities in health and health care

International Journal of Health Services
August 12, 2016
Racial and Ethnic Disparities in Mental Health Care for Children and Young Adults:  A National Study
By Lyndonna Marrast, David U. Himmelstein, Steffie Woolhandler


Psychiatric and behavior problems are common among children and young adults, and many go without care or only receive treatment in carceral settings. We examined racial and ethnic disparities in children's and young adults' receipt of mental health and substance abuse care using nationally representative data from the 2006–2012 Medical Expenditure Panel Surveys. Blacks' and Hispanics' visit rates (and per capita expenditures) were about half those of non-Hispanic whites for all types and definitions of outpatient mental health services. Disparities were generally larger for young adults than for children. Black and white children had similar psychiatric inpatient and emergency department utilization rates, while Hispanic children had lower hospitalization rates. Multivariate control for mental health impairment, demographics, and insurance status did not attenuate racial/ethnic disparities in outpatient care. We conclude that psychiatric and behavioral problems among minority youth often result in school punishment or incarceration, but rarely mental health care.

From the Discussion

The under-provision of mental health care for minority children contrasts starkly with the high frequency of punitive sanctions that their behaviors elicit. Black children suffer excessive rates of school discipline, such as suspensions and expulsions, starting at preschool ages. Minority teens also have disproportionate contact with the juvenile justice system, with higher arrest rates for nonviolent, low-level offenses such as drug possession and for non-criminal misbehaviors such as truancy and curfew violations. Most relevant to our study, youthful transgressions that might result in referral for treatment among non-minority children more often incur criminal sanctions for minorities. Overall, blacks and Hispanics account for 63% of the children detained in juvenile facilities.


Health Affairs
August 2016
Active Life Expectancy In The Older US Population, 1982–2011: Differences Between Blacks And Whites Persisted
By Vicki A. Freedman and Brenda C. Spillman


Understanding long-range trends in longevity and disability is useful for projecting the likely impact of the baby-boom generation on long-term care utilization and spending. We examine changes in active life expectancy in the United States from 1982 to 2011 for white and black adults ages sixty-five and older. For whites, longevity increased, disability was postponed to older ages, the locus of care shifted from nursing facilities to community settings, and the proportion of life at older ages spent without disability increased. In contrast, for blacks, longevity increases were accompanied by smaller postponements in disability, and the percentage of remaining life spent active remained stable and well below that of whites. Older black women were especially disadvantaged in 2011 in terms of the proportion of years expected to be lived without disability. Public health measures directed at older black adults — particularly women — are needed to offset impending pressures on the long-term care delivery system as the result of population aging.

The residential concentration of blacks in the United States is high, and related inequities in neighborhood resources — including access to medical and long-term care — reinforce black-white disparities.

From the Discussion

Older blacks and older whites in the United States have experienced different disability patterns since the early 1980s, as longevity has increased. For older whites, disability has been postponed to older ages, and the proportion of life expected to be lived without disability has increased. However, for older blacks, longevity increases have been accompanied by smaller postponements in disability, and the proportion of remaining life to be spent active has remained stable — about two-thirds at age sixty-five and one-third at age eighty-five. Consequently, the proportion of life expected to be active for older blacks continues to remain well below the proportion for older whites.

Our analysis also suggests that the black-white gaps persisted during the study period in large part because of the lack of progress for older black women in gaining years of active life. This finding is consistent with previous research demonstrating that black women experience a unique disability trajectory in later life that reflects accelerated impairment at older ages. We add to this literature by pointing out that in the aggregate, older black women have not experienced the gains seen for other groups since the early 1980s in either the number of years of active life or the percentage of life expected to be active.


Comment by Don McCanne

These two new studies demonstrate that we still have far to go in reducing racial and ethnic disparities as they relate to health and health care.

Particularly shocking is the study that shows that "youthful transgressions that might result in referral for treatment among non-minority children more often incur criminal sanctions for minorities," especially for young, black males. Behavioral problems in white kids get treated whereas black and Hispanic kids are thrown in jail.

Also, black adults, especially women, are more likely to spend their later years with significant disabilities than are whites. Although the reasons for the differences are not fully elucidated, it is known that "inequities in neighborhood resources — including access to medical and long-term care — reinforce black-white disparities."

In a message earlier this week we were reminded that one of the most dramatic reductions in disparities occurred very rapidly as a result of government action. That was the compulsory end to segregation in hospitals with the implementation of Medicare. Our government can do so much more than the private sector has been willing to do.

We do not have to wait around for another series of historical events funneling down into a grand political action. We can create that history and that action ourselves. But it does require, yes, action on our part. Citizen inaction crushes social movements.

Thursday, August 11, 2016

qotd: Reinhardt and Cheng: The ethical structure of sustainable health spending

Altarum Center for Sustainable Health Spending
July 12, 2016

Transforming the Ethical Structure of U.S. Health Care

A presentation by Uwe E. Reinhardt and Tsung-Mei Cheng


The theme of these Altarum symposia has been what can be done to make our health system – especially spending thereon – "sustainable."


"Sustainability" is a much-mouthed word, although few people using the word actually define it. We can think of at least two distinct meanings in the context of health care:

A. Economic sustainability – the ability of the macro-economy to absorb further growth in health spending;

B. Political sustainability – the willingness of families in the upper-income strata to subsidize through taxes or health insurance premiums the health care of families in the lower income strata.

Total health spending is the product of health-care utilization and prices.

Under our system of governance, in which the sympathy of politicians literally can be purchased retail, it has been very difficult to control prices overall, other than in government programs.

Indeed, because prices for identical services or products vary enormously across the U.S., within regions and even within cities, it is hard even to measure what prices actually are in this country. What price is representative?

So the focus of health-care cost containment in the U.S. naturally has been and will continue to be mainly on health-care utilization.

The question then becomes whose ox is likely to be gored in our quest to reduce utilization – that is, who will be asked to do most of the belt tightening in health-care.

That question will be the focus of our presentation.

We shall abandon erstwhile dreams of an egalitarian health-care system and instead develop platforms that will allow policy makers to ration health care by income class, without ever openly saying so or debating that policy. By 2030 at the latest these new platforms are likely to be cemented in place.





Although anyone can clearly discern these sharply different views on the distributive social ethic of U.S. health care, Americans are invariably reluctant ever to debate them openly, because that could be divisive.

So we talk about the distributive ethic of our health system in code words where, for example, "freedom of choice" may be just code for "you should make do with whatever financial resources you may have, but you are free to deploy them any way you want."

To progressives, the very idea of rationing health care by income class is anathema – hence their penchant for a single-payer system that at least tries to be egalitarian.

To conservatives, rationing by income of the timeliness, amenities and quality of health care does not seem anathema, because we routinely apply it to other basic necessities such as food, clothing, housing, education and even the administration of justice. Why should health care be different?

Between these more extreme views on the ethics of health care is the confused, large group of citizens without firm views, at least as long as they are healthy.

Correlated with the views on the distributive ethics of health care are views concerning the degree to which the supply side of the health care market should be allowed to extract the maximum revenue from the rest of society through their pricing policies.

Health policy in the past 40 years basically has been a civil war between the two more extreme views on health care, although, as noted, we have debated it mainly in code words, given our reluctance to confront ethics forthrightly.

On the ground, this civil war has taken the form of a myriad of small legislative skirmishes at the federal and state levels, giving victory sometimes to one side and at other times to the other side.

Overall, however, victory has gone to the conservative side.


So what do we need in the structure of a health system designed to ration health care by income – at least a good bit of it? We need two distinct platforms:

A. we need a platform for varying the quality of the health insurance policy by income class, and

B. we need high cost sharing by patients at point of service, to ration health care utilization when illness strikes.

If you think of it, we have been busily building these two platforms during the past 20 or so years, brick by brick.


Health insurance exchanges – public or private – are the ideal platforms for tiering the quality of health insurance by income class. ObamaCare explicitly acknowledges it with its metal tiers.

The instruments for tiering here are
- narrowness of the network of providers 
- narrowness of the drug-formularies
- limits on services covered
- other features of the benefit package

The often proposed conversion of the egalitarian Medicare program from its defined benefit structure to a defined contribution structure (the premium support model) is one of the bricks for the desired platform.

Likewise, the idea to move Medicaid beneficiaries out of that defined benefit program onto the insurance exchanges can be interpreted in the same way.

Finally, the conversion of employment-based health insurance from defined benefit to defined-contribution plans, coupled with private health insurance exchanges, is another brick in the strategy.

It will finally permit the quality of health-insurance coverage within a company to vary by income level.


High-deductible health insurance policies are ipso facto an instrument for rationing health care by income class, unless the deductible were closely linked to income.

One does not need a Ph.D. in economics to realize that a low income family confronted with a high deductible will tighten its belt in health care much more than would a high income family confronting the same deductible.

Similarly, under our progressive income-tax structure, the idea of tax-preferred Health Savings Accounts (HSAs) ipso facto makes health care for high income people cheaper than for low income people – an amazing ethical proposition.


At this time, the gradual transformation of our health-care system into one that allows us to ration health care by income is not yet complete.

Part of the problem is that it is not yet politically correct for politicians or the policy wonks who advise them openly to state that rationing by income class is their goal.

The desired structure therefore has to be developed quietly, and so that the general voting public does not know what is happening to their health system.

Indeed, sometimes the steps toward this goal are marketed to the voting public in classic Orwellian lingo – e.g., "Consumer Directed Health Care" (CDHC) that will "enable consumers [formerly patients] to sit in the driver's seat in health care to shop around for cost-effective care."

Absent solid, consumer-friendly information on binding prices and the quality of health care produced by different providers of health care – still typically the norm in the U.S. – CDHC actually has turned out to be a cruel hoax.

For the most part, CDHC has been merely an instrument to ration health care by income.

We came across the following paper that goes along with our thesis on rationing: "Wealthy spending more on health care than poor and middle class, reversing trend"


It is not our place to render a value judgment on the merits of this development. That is a matter of ideology and of ideas of what is a "just society."

But register our amazement — almost our admiration — at the ease with which one faction of the nation's elite has been able to further this transition – a development of which the voting public hardly seems aware (except when illness strikes).

It can be doubted that the general populace of other countries – France, Germany, the U.K., Canada – would accept this transition with such astounding equanimity.

It is only of recent that the American public seems to have lost faith in the wisdom and beneficence of the nation's policy-making elite.

We shall see how far that elite can push rationing health care by income before the American public becomes fully alert to that policy.

In an honest referendum, with full knowledge of what is underfoot, the general voting public probably would not support a move to rationing more and more health care by income.

More likely the voting public would opt for a more egalitarian system, which can explain why it is not yet politically correct for politicians openly to advocate rationing health care by income.

"Americans Overwhelmingly Prefer This Presidential Candidate's Healthcare Plan, Study Shows"

According to Gallup… the overwhelming favorite was the single-payer plan offered by Bernie Sanders. Overall, 58% of respondents favored the idea, with just 37% opposing it and another 5% having no opinion.

In a separate question, Gallup asked respondents to choose between putting a single-payer system in place versus keeping Obamacare in place,and single-payer won by an even broader margin — 64% to 32%.


Comment by Don McCanne

Everyone should master understanding the concept presented here. Should the distributive ethic in health care represent a social good for all or an individual responsibility for each of us?

We are transitioning further into the individual responsibility ethic through the platforms of tiering insurance by income (narrow networks and limited benefits) and tiering health care by income at the point of service (high deductibles, health savings accounts, and consumer-directed health care). Thus we are rationing health care by ability to pay, and that will only increase further as we expand our current health care policies. Too many people will not be receiving the care that they should have.

This slide set was expanded to include some of the narrative so that we can understand better how our current approach to sustainability is political rather than economic - supporting an ethic that preserves the wealth of the wealthy by suppressing redistribution, while making the health care system sustainable by making health care less affordable for the majority.

This presentation by the insightful team of Uwe Reinhardt and Tsung-Mei Cheng should be downloaded and shared with as many other concerned individuals as possible. We need to deliver the egalitarian message that the people of other nations take for granted: we can have health care for everyone in a system that is truly sustainable.

Wednesday, August 10, 2016

qotd: The role of Medicare in integrating the nation’s hospitals

Kaiser Health News
August 9, 2016
1965: The Year That Brought Civil Rights To The Nation's Hospitals
By Michelle Andrews

In his new book, David Barton Smith takes us back to the mid-1960s, when a small band of civil rights activists-cum-government bureaucrats toiled to get the nascent Medicare program up and running. In the process, they profoundly changed the way health care is delivered in this country.

It stands in marked contrast to the political turmoil over health care of recent years.

"In four months they transformed the nation's hospitals from our most racially and economically segregated institutions to our most integrated," Smith writes in "The Power to Heal: Civil Rights, Medicare, and the Struggle to Transform America's Health Care System."

"In four years they changed patterns of use of health services that had persisted for half a century. The fundamental moral imperative — that those needing medical care should receive it — began for the first time to reflect actual use of services. A profound transformation, now taken for granted, happened almost overnight."

Michelle Andrews:  Over the course of several months, a small group of government workers implemented the Medicare program. From the start, they said that hospitals that discriminated couldn't participate. How did they manage it?

David Barton Smith:  Wilbur Cohen and the people in the Social Security Administration were absolutely masterful in pulling this together in such a short period of time. They knew exactly how to get things done and they paid attention to the details. It's remarkable that without the computers that we have today or the Internet, they were able to do this all in 11 months. They were just good professionals.

Michelle Andrews:  There has been talk at various times about creating "Medicare for All." Given what you know, what are the odds of that ever happening here?

David Barton Smith:  The odds are better now than a few years ago. Because of the ACA, but also because people are beginning to understand some of the limitations of a privately insured system. It's more complicated, it's more costly, it's harder to get good competitive pricing from hospitals or from drug companies. And this idea is something that's been resisted by the insurance industry. But I get the sense that people are getting a little bit more impatient. Although a lot of Republicans bash Obamacare, I don't hear a lot of them bashing Medicare. The resistance would be strong, certainly. This is a very interesting year.


Comment by Don McCanne

The story of using Medicare to rapidly integrate our nation's hospitals is inspiring. It should give us hope that an Improved Medicare for All could be used to leverage corrections of other health care injustices.

David Barton Smith reminds us that people are beginning to understand some of the limitations of a privately insured system and that they are becoming more impatient. Let's leverage that.

Tuesday, August 9, 2016

qotd: What changes in ACA might the election bring?

Modern Healthcare
August 6, 2016
Could Trump loss spur ACA deal with Clinton?
By Harris Meyer

With Donald Trump's presidential campaign faltering, Republican health policy experts are gaming out Plan B for working with a Hillary Clinton administration to achieve conservative healthcare goals.

Their focus is on a possible "grand bargain" that would give conservative states greater flexibility to design market-based approaches to make coverage more affordable and reduce spending in exchange for covering low-income workers in non-Medicaid expansion states. A key element, conservative experts say, would be for a Clinton administration to make it easier for states to obtain Section 1332 waivers under the Affordable Care Act. Those waivers allow states to replace the law's insurance exchange structure with their own innovative models.

To win GOP backing for measures to stabilize the exchanges, Republicans will seek changes to make ACA coverage more attractive and affordable for younger people, said James Capretta, a conservative health policy expert at the American Enterprise Institute. That includes allowing lower premiums for young people, a wider range of benefit designs and premium subsidies for plans bought outside the exchanges and easing minimum benefit requirements.

Clinton's best opportunity might be to persuade GOP governors and lawmakers in non-expansion states to accept Medicaid expansion by giving them more leeway on program design.


Comment by Don McCanne

Although elections can be unpredictable, this time we can make a couple of predictions that are a near certainty.

Donald Trump will not be able to change his image as a dangerous incompetent before the election, and Hillary Clinton will be elected by default, even though she will remain unpopular.

Gerrymandering as a result of the 2010 Census will remain unchanged in this election, so the Republicans will maintain control of the House of Representatives with Paul Ryan as the Speaker. Although the Tea Party faction will have been diminished in numbers, enough will be reelected such that Ryan will have to include them in legislative negotiations.

Although it is uncertain which party will hold the majority in the Senate, it is clear that each of the two major parties will still have the ability to block most legislation through the filibuster. For the Democrats, that means that they can forget about a Medicare buy-in starting at age 55, and they can forget about a government-administered public option to compete with the private plans. For the Republicans, that means that they can forget about a repeal of the Affordable Care Act, and they can forget about completing privatization of Medicare through premium support.

So for the time being, the Affordable Care Act is here to stay. Both sides will want changes in it, but only modest incremental changes will be possible, and they must satisfy both sides or they will not clear Congress.

Democrats will want expanded enrollment in the ACA exchanges and in Medicaid. Republicans will want less regulation in these programs. For the exchange plans both will want lower premiums to make insurance more affordable, and they may do that by easing the minimum benefit requirements, by allowing more flexible innovations in insurance design, by reducing premiums for young adults, and perhaps even by allowing premium subsidies for plans outside of the exchanges. For Medicaid, through waivers or through new legislation they may allow greater flexibility and further privatization to encourage non-participating states to join in the program to expand Medicaid.

These compromises will further reduce the numbers of uninsured and make health insurance more affordable, but affordable access to actual health care is already a major problem and these measures will make it much worse. Increasing the numbers of individuals who are nominally insured should not be considered a success when the tradeoff is the erection of financial and logistical barriers to essential health care services. Leaving patients sick and broke is not the direction in which we want to be headed.

What are the political prospects for single payer post-election? This January Hillary Clinton said, "I want you to understand why I am fighting so hard for the Affordable Care Act. I don't want it repealed, I don't want us to be thrown back into a terrible, terrible national debate. I don't want us to end up in gridlock… People who have health emergencies can't wait for us to have a theoretical debate about some better idea that will never, ever come to pass."

Never, ever. The political barricade is up. It is up to us to break it down.