Friday, July 8, 2022

What’s Wrong With Health Insurance? Deductibles Are Ridiculous, for Starters. July 7, 2022 By Aaron E. Carroll, NYT

Dr. Carroll is the chief health officer of Indiana University and writes often on health policy. More than 100 million Americans have medical debt, according to a recent Kaiser Health News-NPR investigation. And about a quarter of American adults with this debt owe more than $5,000. This isn’t because they’re uninsured. More often, it’s because they’re underinsured. The Affordable Care Act was supposed to improve access to health insurance, and it did. It reduced the number of Americans who were uninsured through the Medicaid expansion and the creation of the health insurance marketplaces. Unfortunately, it has not done enough to protect people from rising out-of-pocket expenses in the form of deductibles, co-pays and co-insurance. Out-of-pocket expenses exist for a reason; people are less likely to spend their own money than an insurance company’s money, and these expenses are supposed to make patients stop and think before they get needless care. But this moral-hazard argument assumes that patients are rational consumers, and it assumes that cost-sharing in the form of deductibles and co-pays makes them better shoppers. Research shows this is not the case. Instead, extra costs result in patients not seeking any care, even if they need it. Cost-sharing isn’t set up in a thoughtful way such that it might steer people away from inefficient care toward efficient care. Deductibles are, frankly, ridiculous. The use of deductibles assumes that all medical spending is the same and that the system should disincentivize all of it, starting over each Jan. 1. There is no valid argument for why that should be. Flu season peaks in the winter. We were in an Omicron surge at the beginning of this year. Making that the time when people are most discouraged from getting care doesn’t make sense. Co-pays and co-insurance aren’t much better. They treat all patients the same, and they assume that all patients should be treated the same way. In a National Bureau of Economic Research working paper published last year, researchers looked at how increases in cost-sharing affected how older adults, who are more likely to need care, pay for and use drugs. Remember, people age 65 and older in the United States are insured with what most consider to be rather comprehensive coverage: Medicare. The researchers claimed, however, that a simple $10 increase in cost-sharing, which many would consider a small amount of money, led to about a 23 percent decrease in drug consumption. Worse, they said it led to an almost 33 percent increase in monthly mortality. In other words, making seniors pay $10 more per prescription led to people dying. These seniors weren’t taking optional, esoteric, exceptionally expensive medications. This finding was for drugs that treat cholesterol and high blood pressure. In fact, they were considered “high value” drugs because they were proven to save lives. Further, those at higher risk of a heart attack or stroke were more likely to cancel their prescriptions than people at lower risk. People are not smart shoppers or rational spenders when it comes to health care. When you make people pay more, they consume less care, even if it’s for lifesaving treatment. Moreover, a $10 increase in drug cost-sharing is small potatoes compared with what most people have to pay out of pocket for care each year. The average deductible on a silver-level plan on the A.C.A. exchanges rose to $4,500 in 2021. If people tried to buy plans with a lower premium, at a bronze level, the average deductible rose to more than $6,000. Granted, some cost-sharing reductions are available for those who make less than 250 percent of the federal poverty line, but even after accounting for those, the average deductible was more than $3,100 for silver plans. Those who receive insurance from their employers aren’t much better off than those who buy on the A.C.A. marketplaces. The average deductible for insurance offered by large companies in the United States was more than $1,200. At small companies, it was more than $2,000. Those are only the deductibles. After they are paid, people must still cover co-pays and co-insurance until they hit the out-of-pocket maximums. The good news is that the A.C.A. limits these in plans sold in the exchanges. The bad news is that they’re astronomical: $8,700 for an individual and $17,400 for a family. A large majority of Americans don’t have that kind of money sitting in accounts, certainly not after paying an average of about $5,000 in premiums each year for a benchmark individual silver plan. Half of U.S. adults don’t have even $500 to cover an unexpected bill. Anyone who requires significant health care will be out the entire deductible, meaning thousands of dollars, and if severely ill, is likely to hit the out-of-pocket maximum. Of course Americans are in medical debt. The Kaiser Family Foundation estimates the country’s collective medical debt is almost $200 billion. It’s worth noting that the cost of health care in the United States is so high that even expensive premiums are not enough to cover the full amount without significant out-of-pocket spending. That doesn’t mean no better options exist for cost-sharing. We could treat those with diagnosed chronic diseases differently, as many countries in Europe do. It makes sense to try to disincentivize healthy people from overtreatment, but lots of people, including me, need care that costs money every day. It makes no sense to try to persuade me to rethink that. U.S. leaders could also consider adapting a reference pricing system, where the health system determines what constitutes the lowest-cost, highest-quality care and makes that available without any out-of-pocket spending. Cost-sharing can then be applied to other options that might cost more or have less evidence behind them. The purpose of insurance is to protect people from financial ruin if they face unexpected medical expenses. Reducing the amount that they need to pay from six figures to five is necessary, but not sufficient. It’s not enough to give people insurance. That insurance must also be comprehensive.

Thursday, June 9, 2022

Analysis of the 2022 Senate Medicare-for-All legislation

From PNHP: What’s in the Bill? Benefits: Covers all medically-necessary services including primary and preventive care, mental health care, reproductive care including abortion (with a ban on the Hyde Amendment), vision and dental care, prescription drugs, and home- and community-based long-term services and supports. Patient Choice: Provides full choice of any participating doctor or hospital. Providers may not dual-practice within and outside the Medicare system. Patient Costs: Provides first-dollar coverage without premiums, deductibles, or copays for medical services, and prohibits balance billing. Does require small copays for some brand-name prescription drugs. Eligibility: Covers everyone residing in the U.S. regardless of immigration status. Cost Controls: Prohibits duplicative coverage, negotiates drug prices with manufacturers, and funds hospitals through global operating budgets. Timeline: Provides for a four-year incremental transition to Medicare for All. What’s different in this year’s version? The 2022 bill includes some major improvements from the 2019 version, bringing it closer to the PNHP’s gold standard as established by the Physicians Proposal. Global budgeting of hospitals and other institutional providers: Global budgets would fund hospitals with annual lump sum payments which can be used for patient care — not for profits, advertising, or executive bonuses — with separate funding for capital projects. PNHP estimates that global budgets would save $220 billion per year; they would also prevent hospital closures by providing facilities in rural and other underserved communities with stable funding, which can be quickly supplemented during public health emergencies. Global budgets also promote health equity by funding services and capital projects based on community health needs (i.e., mental health, obstetrics, and HIV care), not what’s most profitable for hospitals (i.e., elective surgeries). Standardized fee-for-service payments to providers: Establishes a national fee-for-service schedule for individual and group providers, similar to language in the House bill (H.R. 1976). Expanded benefits: Provides transportation for seniors with functional limitations, and expands mental health care by covering licensed marriage and family therapist and licensed mental health counselor services. Office of Health Equity: Establishes an Office of Health Equity to monitor and eliminate health disparities, and promote primary care. How could the bill be improved? Cover all long-term care (LTC): While community-based LTC supports would be covered by Medicare for All, institutional LTC remains within Medicaid, preserving the state-based variations that contribute to inequities, injustice, and complexity. PNHP recommends moving all LTC services into Medicare for All. Shorten transition period: The four-year transition period gradually expands Medicare’s benefits and lowers the eligibility age, along with a “buy in” scheme that includes commercial Medicare Advantage plans. The transition period is needlessly complex, delays access to care for the most vulnerable patients, and could exacerbate inequalities. PNHP recommends a one-year transition. Eliminate prescription drug costs and strengthen price negotiations: While drug co-pays are lower than the 2019 bill, even modest cost-sharing is a proven barrier to care. PNHP recommends eliminating all patient cost-sharing. While the bill does authorize Medicare to negotiate drug prices, it lacks certain safeguards if negotiations fail, such as direct procurement of drugs. PNHP recommends competitive drug licensing, direct procurement of drugs, and other safeguards if price negotiations fail. Ban (and buyout) investor-owned health facilities: This bill does not explicitly ban for-profit health facilities and agencies, which provide lower-quality care at higher costs than nonprofits. PNHP recommends an orderly conversion of investor-owned, for-profit providers to not-for-profit status.

Tuesday, June 7, 2022

HJM: Repeat -- Medicare Advantage & Other Private Investment Hurt Medicare Summary: A September 2021 Health Affairs blog revealed how Medicare Advantage insurers use aggressive and fraudulent diagnostic coding practices to artificially boost revenues, with similar risks looming from Direct Contracting Entities. That blog was criticized as inaccurate by two corporate leaders in healthcare. The original blog authors responded this week, buttressing their case against Medicare Advantage and DCEs (now known as ACO Reach). The Emperor Still Has No Clothes: A Response To Halvorson And Crane Health Affairs Forefront June 6, 2022 By Richard Gilfillan and Donald M. Berwick Following our September 2021 Health Affairs Forefront articles on the “Medicare Advantage Money Machine,” the most common reaction of which we are aware has been that this was an “Emperor Has No Clothes” moment. Many knew the Medicare Advantage (MA) game, but few had called it what it was. Two responses to our articles … have been published in Forefront that find fault with our analyses. … For the most part, their arguments fail. We count more than a dozen assertions in these critiques, some matters of opinion and others matter of fact. These can be grouped into … six categories … [see HJM Comment] [Many] have documented that MA costs more than fee-for-service [largely due to the gaming of risk scores]. Every extra dollar paid to MA plans is, indeed, a transfer of taxpayers’ money to MA plans, which then benefit in terms of growth and higher profits. Those profits represent direct transfers of wealth from taxpayers to plans. The impact of MA on the delivery of care goes well beyond the Risk Score Game. Traditional Medicare presents a relatively straightforward, highly standardized approach to coverage and the financing of health care. MA creates a highly fragmented coverage and financing system that brings complexity and additional cost for all segments of the industry, particularly the providers. The result is an expensive MA administrative superstructure that we have layered on top of, and that now permeates and distorts, the actual delivery of care. Estimates of administrative costs and profits for all health system parties vary significantly but the broadest definitions are in the range of 25 percent. MA is a major driver of those costs. We must ask what we are getting for that if, after 35 years of privatized Medicare costing more than fee-for-service, we cannot demonstrate real clinical outcomes improvement. The answer is, “We are not getting much.” The opacity that comes from the privatization of public payment confounds objective, scientific analysis. Comment by: Jim Kahn Gilfillan and Berwick logically and effectively counter the two published criticisms of their September 2021 “Medicare Advantage Money Machine” blog (discussed in HJM). In so doing, they solidify an appropriately harsh assessment of Medicare Advantage and ACO Reach (rebranded DCEs). Below is a structured summary, incorporating quotations from the blog. Bottom line: Massive insurer profits achieved via widespread diagnostic upcoding deplete Medicare funds without evidence of added value for beneficiaries. 1) The Medicare Advantage Business Model Snapshot: Model = diagnostic upcoding to raise capitation rates. Coding efforts are not just to inform clinical practice, as the critic argues; they are to drive up payment rates. “MA risk scores have for decades risen continually … now almost 2 percent per year faster than those in traditional Medicare. That is not a mark of … increasing relative severity of actual illness in MA compared with the fee-for-service population; it is the Risk Coding Game …” The industry is so focused on this, it refers to a “risk score headwind” when COVID prevented home visits used to add more diagnoses. Overall, an estimated 14 percent risk score excess will result in overpayments to Medicare Advantage of $600 billion from 2023-2031. 2) The Profitability of MA Firms Snapshot: Huge profits and valuations. The critic proposes “Most businesses in most industries would see their stock prices dropping with only 4.5 percent profits [as seen with insurers].” Yet “[T]he increases in plans’ stock prices and valuations [are extraordinary].” Why? I argue in HJM that the nominal 4.5% for insurers obscures a real return rate of 30%, and thus explains why the investment is so attractive. “Profits are the product of profit margin multiplied by revenue. Risk Score Gaming positions plans to increase profits from both.“ And here’s the maximum profit strategy: if insurers buy up providers, as they are doing, the “Medical Loss Ratio” restriction on profits is easily evaded, dropping the real MLR from 85% to 70% and thus more than doubling actual profit margins. 3) The Effects of MA On Care and Underinsurance for Low-Income MA Beneficiaries Snapshot: Lower upfront costs, but poor financial protection when sick. “Plans use some of the subsidies [overpayments] from CMS to offer products with improved benefits and lower premiums for members. … Zero-premium products, with less-rich benefits and more out-of-pocket costs, are targeted at cost conscious buyers, particularly those with limited disposable income. Lower-income individuals have little choice but to trade a known zero premium cost for an unknown likelihood of greater out-of-pocket costs. But that tradeoff leaves many low-income beneficiaries underinsured and possibly experiencing significant negative impacts on their health.” The Kaiser Family Foundation found that “enrollees in Medicare Advantage do not generally receive greater protection against cost-related problems than beneficiaries in traditional Medicare with supplemental coverage, particularly for some enrollees, such as Black beneficiaries in relatively poor health...” 4) Financial Savings for MA Beneficiaries Snapshot: Impossible to tell, with distorted comparisons. The critics claim that “MA members actually spend much less money each year on care.” Gilfillan and Berwick explain why: a) MA plans are subsidized due to over-payment by Medicare, and they share the subsidies with members, and b) the plans use risk selection to enroll a healthier population than traditional Medicare. In other words, apparent savings are artifact, meaningless. 5) The Quality of Care In MA Snapshot: Mixed and ambiguous picture, with flawed data. The critics claim higher quality of care in MA. We just can’t know, say Gilfillan and Berwick. For example, “[R]ecent studies document that MA plans are actively ignoring system-improvement efforts as they use lower-quality skilled nursing facilities and home health providers more, and high-quality hospitals less, than traditional Medicare.” Claims that integrated care systems like Kaiser improve care (itself dubious, IMO) don’t carry over to the non-integrated Medicare Advantage norm. MA plans actually artificially boost quality scores – “manipulating contracts to ‘move about 550,000 enrollees from non-bonus contracts to bonus-level contracts, resulting in unwarranted bonus payments in the range of $200 million in 2019.’” “Understanding the effects of MA on quality is extremely difficult in part because MA operates in an information environment in which it is all but impossible to demonstrate better clinical outcomes for patients.” Data are missing, biased, or manipulated. [Stunning eg’s in the blog.] Gilfillan and Berwick’s positive view of ACOs diverges from my deep skepticism. But I agree with them, the greatest danger lies in the growth of investor-controlled entities. 6) The Direct Contracting Model/ACO Reach Model Snapshot: Investor control portends problems such as in Medicare Advantage. [W]e remain concerned that [ACO Reach] brings MA investor and insurer-controlled firms directly into the fee-for-service alternative payment model (APM) world. The 52 of 100 Reach ACOs that are investor-controlled operate in 49 states (including the District of Columbia and Puerto Rico) containing 99 percent of the 35 million fee-for-service beneficiaries. 7) Resolution via Single Payer Snapshot: They didn’t say this. They should have.

Monday, June 6, 2022

What is single payer?

What is Single Payer? Summary: Today we take a step back to review a fundamental issue – the definition of single payer. Also its typical features and options. Why? Because sometimes we get lost in technical details, and forget the big picture. And too often experts get confused, and thus confuse others. Comment by: Jim Kahn It drives me to distraction when health policy researchers, journalists, medical journals, and critics misrepresent single payer. This has come up several times in recent months. I guess it’s understandable, with all the misinformation that’s floating around. But I’m eager to settle on a single, correct definition. Here’s my attempt… DEFINITION: One entity (a public agency) pays for health care. This agency receives all funding and disburses all payments for standard comprehensive coverage. Private insurers are prohibited from this role. All patients and providers deal with just one payer for the standard coverage. This is especially important for providers, offering the simplicity of a single payment source. TYPICAL FEATURES: These elements are typical in single payer, if not in the definition, in order to achieve overall goals of universal, equitable, efficient, and affordable access to care. Everyone is covered. Universal, lifelong – meeting a fundamental human need, and part of single payer’s efficiency. Everyone has identical comprehensive coverage / benefits. This is hugely different from our current system, with myriad and varied restrictions on benefits according to health plan. Payment rates are the same for everyone. Again, this is vastly different from today, with up to 10-fold differences in payment levels for the same services, creating strong economic forces for unequal access. Cost-sharing is minimal. No deductibles, and co-pays either not used or small with low-income exemptions. This avoids financial barriers to care. Capital spending (investment) decisions are made by the payer, not by providers. This assures that capacity is increased where most needed. Negotiated drug & medical equipment prices. A single payer negotiates a single set of prices, directly with manufacturers. Currently prices vary widely across insurers and plans, and intermediary PBMs distort the market and extract profits. Long-term care. In most single payer plans, long-term care (both institutional and community-based) is included as an essential care need. A single electronic health record, focused on clinical care rather than billing. With much simpler billing, a universal EHR would reduce the burden on providers and facilitate exchange of medical information and enable effective public health tracking and intervention. DO WE HAVE SINGLE PAYER NOW? NOT MUCH Veterans Affairs (the VA) has a single payer (the federal government). With full-time staff, the VA resembles a national health service. Access to and quality of care is better than average. Some patients have private insurance as well, and recently more VA funds have been used for community providers, but still, a single payer. Medicare is not a single payer, even though it’s the predominant payer for seniors. This is a common misunderstanding. Medicare is not a single payer because from the perspective of providers, it’s just one of many payers, losing the efficiencies and equity enhancements of single payer. The large role of private insurers in Medicare Advantage further distances Medicare from single payer. CHOICES UNDER SINGLE PAYER: Provider payment mechanisms. Fee-for-service is the most common proposed approach for individual providers, but they can also be paid with salaries. Hospitals and other institutions may be paid via global budgets. Indeed, capitated provider groups (without intermediaries, and not-for-profit) may be possible, though controversial and require very strong rules to prevent undertreatment and gaming. Supplemental or complementary insurance. Many nations permit focused (small scope) additional insurance, e.g. to speed access to specialty care. These are fraught, potentially undermining standard coverage, but satisfying demand for service enhancements. In other countries, they take many forms and work acceptably (not materially reducing access for the broad population) … but can they in the US? Parallel single payer systems. A single payer approach may permit having a second system in tandem, such as the VA. Two independent systems, each meeting the definition of single payer from the perspective of participating providers and patients. Opting out. Providers can practice outside of the single payer system, accepting direct payments for services. But they are not permitted to both participate in single payer and accept payment for the same services. That is: either fully in or fully out. So, now that we’ve clarified, let’s get back to winning the long-running battle for an efficient and equitable system to pay for health care – single payer (you know what I mean!). From Health Justice Monitor