Category Archives: Health Policy

“Rate shock” explained

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Obamacare is going to raise rates by 88% in Ohio while California officials think health reform has “hit a home run for consumers.”  As these are the only two large states with published rates (not that I don’t love and respect Vermont), we’ll focus on OH and CA.

(For the quick net-net, see the last paragraph)

As Jonathan Cohn points out, this is really an apples to grapefruit comparison.  In order to accurately assess the cost differential, one has to do an actuarially accurate comparison.

Alas, I can’t find any that are credible; Ohio’s doesn’t factor in benefit design differences or the impact of no medical underwriting and fewer age bands; there are several other factors that affect what consumers will actually pay.

First – this only affects people who get coverage thru the exchanges.  That’s about 14 percent in California. Most get insurance thru their employers, Medicaid, or Medicare, so they are unaffected.

Second, a LOT of people will get subsidized coverage, so what they pay will be less – sometimes a lot less – than the advertised price. In California, about half of those getting benefits from the Exchange will get coverage at a lower cost; a 40 year old who makes just under $24,000 a year will get very good insurance at $90 a month (Health Net Silver plan). (I know, taxpayers, hospitals, drug companies, and insurers will pay for those subsidies, but most of the press has been focused on what the insured’s cost will be, so we’ll focus on that)

Third, it’s NOT just the cost of the insurance, it’s the cost of care – premiums and out-of-pocket expenses.  The benefits covered by the Exchange plans are much richer than the lowest-cost plans now offered in many states.  For example, the individual Bronze plan in Ohio has an out-of-pocket cap of $6,350, compared to UnitedHealthcare’s Saver 80′s $13,000 max out of pocket.  But the Saver 80 doesn’t cover maternity, vision, mental health care, drugs or office visits (except for very limited wellcare visits).  So consumers who pay less in premiums for today’s Saver 80 than tomorrow’s Bronze plan will spend much more out of pocket, far outweighing any premium savings.

Fourth, costs for younger people will likely be higher under the Exchange, while costs for older folks may well come down.  That’s a function of the reduced number of “age bands”;  insurance-speak for charging us older folks more because we are worse risks than you young pups.

Fifth, because medical underwriting is banned under Obamacare, many individuals who can’t get coverage at any price today will get coverage tomorrow.  Today, many folks with a history of heart disease or cancer or other serious conditions can’t get any coverage in some states, and only at incredibly high prices in others – due to pre-existing medical conditions.  For those people, any conversation about higher costs is irrelevant, because no one will sell them insurance, or if they do it will be at rates unaffordable to anyone but the top 0.1%.  So, if you have high blood pressure, a family history of heart disease or cancer, a BMI above an acceptable range, lupus or diabetes or high cholesterol or asthma or depression or any of dozens of other “conditions”, you will be able to get coverage next year – at the same price as anyone else your age.

Here’s the net.

For older folks, benefits will likely be richer, out-of-pocket expenses and premiums lower.  Younger people will likely pay more for better coverage than they have today.

Will Obamacare’s costs break your bank?

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There’s much confusion about the “costs” of Obamacare, with some opining that health insurance costs will explode and others citing recent data indicating the opposite.

This is a blog post, and therefore I won’t write, and you don’t have time to read, a comprehensive overview.  So, here are the highlights.

1.  The law requires insurers to sell only standardized benefit plans; one reason for this is to prevent plan-design-based “underwriting”;  today, health plans can use benefit design as a way to encourage sick people to go elsewhere and healthy people to sign up.

2.  In some instances, the plans some people have today are much less generous than even the lowest plan offered thru the Exchanges.  Thus, those people with very high deductible/low benefit plans will see a big increase in cost.  However, their benefits will be much better.

3.  The new law significantly restricts underwriting practices; charging higher prices based on age, pre-existing conditions, sex, and other factors is limited or banned. Thus folks who are very young and healthy today are likely to pay more – in some cases a lot more – while older and sicker people will likely pay less under ACA.  

4.  Employers that have health plans today are not going to see much change as their plans are grandfathered in as long as they don’t significantly reduce benefits.

So, what about costs?

“Rate shock” is the term used by some to describe the big increase in insurance prices due to the mandated benefits under ACA and elimination of pricing differentials based on age etc. There’s been a lot of speculation about pricing, but so far this has been mostly speculation – except for those states which have set up their own exchanges and negotiated pricing with insurers that will offer plans on those exchanges.

BTW, only about 2.5 percent of Americans will get coverage thru the exchanges next year, so all this babble about rate shock and the efficiency of exchanges is somewhat overblown

California published rates that were significantly lower than projected; the blog-o-sphere immediately responded with yelling headlines based on carefully-selected facts that supported their ideological positions.

Here’s the net.  Comparing costs via the exchanges to current published prices is an-almost pointless exercise; the benefits are different and there is underwriting today that will be illegal next year. I say “almost” because the rates for a “bronze level” plan in CA under the exchange are almost identical to those offered today for a similar plan.  However, a quarter of those applying for plans today can’t buy at the published rate because they have health risks that result in higher costs.

That said, I’m a big believer in well-regulated competition.  Insurers will figure out how to deliver lower-cost, higher-quality health plans – or they will go out of business.  Many will offer plans with small provider networks – which is good.  The prices published in California and Vermont are early proof of the power of the market. Some insurers will not adapt and will fail, others will flourish.

Lastly. ponder this.  Where would we be without Obamacare?  What would happen as health care costs continued to escalate and private insurers continued to risk-select? More uninsureds and ever-increasing costs as providers charge insureds more to cover the costs of treating those without insurance – or with insurance that doesn’t cover much.

What does this mean for you?

Obamacare has more than its share of warts.  But the alternative – the continued health insurance death spiral  - is much uglier.  

Affordable Care and Workers’ Comp – a miss

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Kudos to NCCI for devoting an hour at their annual issues symposium to a discussion of medical care and cost drivers provided by the Mayo Clinic’s Douglas Wood MD.

Woods noted - “If the entire country could achieve [quality improvement and cost reduction] results like the top ten states we could reduce spending by a third without reducing – and likely improving – quality.” 

And that’s pretty much what ACA seeks to do, in its convoluted, politically-driven, sausage-making way.

Wood noted that we have to not “ration” but be “rational”.  He reviewed the SGR (something that has been covered in detail in this blog) as a way to show that price controls do not equal cost (or quality) management.

As the “Choosing Wisely” campaign demonstrates, many common procedures don’t add any value. (about 5 of the 800 attendees have heard of this campaign…) This isn’t value defined as improved patient safety/better clinical outcomes/patient satisfaction, but rather functional health (sound familiar, workers’ comp folks?).

Which leads to ACA’s components intended to improve value delivered for dollars spent, focusing on reimbursement based not on per-procedure but episode-based payment – with a warranty for complications.  Wood reviewed the basics of ACA (presentation here).  About 19 states will have their own exchange, 25 will use the federal exchange, and the remainder will have a hybrid, or partnership arrangement.  Some of the larger national insurers don’t want to participate, but may change their minds if lots of employers and individuals buy policies thru the exchanges.

Wood delved into several related topics, many of which are old news to the better-informed medical folks out there, but new news to most in the workers’ comp business.  This included shared decision making, appropriate use criteria, and creating healthy communities.

Now, what’s all that got to do with work comp?  ACA will help “make healthcare more affordable” was Wood’s initial statement, but beyond that he didn’t connect the dots; there are several potential impacts on workers comp (tight access to specialty providers, better health status of claimants, no need for WC payers to pay for non-WC conditions when caring for injured workers, etc.), none of which he noted.

On balance, an excellent presentation on PPACA, but no understanding of workers’ comp or how it will impact WC.

 

NCCI – Gergen’s observations

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A few random observations and perhaps an insight or two.

Keynote speaker David Gergen noted this morning that the recent favorable news about the deficit and its impact on debt may well be counter-productive as it takes the pressure off Congress and the President to deal with the debt while investing in education and infrastructure.  Soundbite – Mexico is investing more than we are in infrastructure.

Mexico.  

Gergen also does not believe there’s going to be much progress in Washington over the next few years; Obama’s over-reaching post-election has come up against the newly-energized GOP’s belief they can wait him out and win the mid-terms.  That reality, combined with the current crop of controversies, makes for a DC not focused on strategic issues such as long term deficit reduction, infrastructure, education – and therefore little of the important work will get done.

Long term, Gergen is much more optimistic, primarily due to American energy independence – lower energy costs and energy security will bring manufacturing back to our shores – and already is (Gergen didn’t have anything to say about the potential implications for climate change, a notable miss).

He is also a big fan of the millennial generation, citing their enthusiasm for helping others (a quarter of Spellman College graduates and a fifth of Harvard’s applied to Teach for America) and willingness to serve both in the military and other volunteer/low-paid-but-critically-important jobs).

Austerity’s impact on public health

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A new book reports on the impact of financial austerity measures on public health, suicide rates, hospital admissions, and other measures of morbidity and mortality.  The news is striking – countries that adopted severe austerity measures have seen rapid deterioration of citizens’ health status, while those that dealt with financial trauma in a more measured way avoided those consequences.  In a piece in today’s NYTimes, they  contrast two recent financial disasters – Greece and Iceland – and the impact of their austerity programs on public health.

Lest you think this has nothing to do with we Americans, think “sequester”.  More on that in a minute.

Severe austerity measures in Greece have produced similar consequences for public health -

“Greece['s] national health budget has been cut by 40 percent since 2008, partly to meet deficit-reduction targets set by the so-called troika —  the International Monetary Fund, the European Commission and the European Central Bank — as part of a 2010 austerity package. Some 35,000 doctors, nurses and other health workers have lost their jobs. Hospital admissions have soared after Greeks avoided getting routine and preventive treatment because of long wait times and rising drug costs. Infant mortality rose by 40 percent. New H.I.V. infections more than doubled, a result of rising intravenous drug use — as the budget for needle-exchange programs was cut. After mosquito-spraying programs were slashed in southern Greece, malaria cases were reported in significant numbers for the first time since the early 1970s.”

While Iceland’s more measured approach has had little impact on their citizens’ health status -

“Iceland avoided a public health disaster even though it experienced, in 2008, the largest banking crisis in history, relative to the size of its economy. After three main commercial banks failed, total debt soared, unemployment increased ninefold, and the value of its currency, the krona, collapsed. Iceland became the first European country to seek an I.M.F. bailout since 1976. But instead of bailing out the banks and slashing budgets, as the I.M.F. demanded, Iceland’s politicians took a radical step: they put austerity to a vote. In two referendums, in 2010 and 2011, Icelanders voted overwhelmingly to pay off foreign creditors gradually, rather than all at once through austerity. Iceland’s economy has largely recovered, while Greece’s teeters on collapse. No one lost health care coverage or access to medication, even as the price of imported drugs rose. There was no significant increase in suicide. Last year, the first U.N. World Happiness Report ranked Iceland as one of the world’s happiest nations.”

Which brings us home to the US.

Sequestration’s impact on public health has been well-documented.  What I find really troubling is how fast Congress and the President reacted to air traffic delays – it took them less than a week – compared to their total inactivity on Head Start, addiction treatment, inoculations, and staffing cuts.

Good to know we abide by the Golden Rule:

He who was the Gold, rules.

HWR on health care cost trends, reform implementation, and motivations

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This biweekly edition of health Wonk Review covers the recent news that health care cost inflation has moderated, digs into various aspects of ACA implementation, and provides insights on a couple other timely topics.  Read on!

Health care cost trends are slowing…

First up, Health Affairs’ just-released research indicates the decline in inflation could result in a reduction of $770 billion (yup, that’s “billion” with a B) in public program health care costs over ten years.  

I can hear the cheering…

For those looking for a thoughtful and comprehensive consideration of the sustainability of this trend, consider this post from John Holahan and Stacy McMorrow of the Urban Institute; “All of these factors taken together suggest that a return to a high historic growth rates in health care spending may not materialize….we…are cautiously optimistic.”

John Roehrig is less optimistic, using research into economic cycles and related factors to come to a conclusion that “I don’t think either of these studies suggests that spending growth is likely to remain at the 4 percent levels seen over the past four years. [emphasis added] Some portion of the slowdown is permanent but some will be given back during a recovery.

I’ve reviewed these and several other reports, and my takeaway is guarded optimism.  Sure, the economy reduced demand, but there’s no question there are fundamental changes occurring that are affecting care delivery, pricing, and reimbursement.  

While drug costs are not top-of-mind these days, a group of oncologists is plenty cranky about the cost of specialty meds intended for cancer patients.  David Williams gives us his take, quoting one section of the doctors’ opinion piece: ““In the US, prices represent the extreme end of high prices, a reflection of a “free market economy”.

One cannot talk drugs without talking marketing to docs; Gary Schwitzer has highlighted an innovative marketing approach involving Hooters… If you don’t follow Gary, you should.

One area that researchers are paying close attention to is facility costs; Brad Flansbaum’s entry; Brad discusses the problems inherent in reducing costs in the hospital environment – “Most providers employed by hospitals know the drill: increase throughput, implement regulatory changes, monitor hospital measurement and report cards, and of course, reduce costs.  However, despite the growth of “hospital as laboratory” and rise of the inpatient practitioner, we must face facts.  We receive our salary from the beast we wish to slay.” [emphasis added]

Sticking with hospitals, a recent WSJ opinion piece assaulted Medicare’s new hospital re-admissions reimbursement policy; the John Hartford Foundations’ Chris Langston presents a clear-eyed, point-by-point rebuttal that shows why the program is a necessary and important step to improving health care for older adults. The net? The reduction in reimbursement for re-admitted patients appears to be good policy and will likely drive improvements in patient care and quality. 

Implementing reform

A big part of reform’s implementation involves exchanges; Louise Norris ofColorado health Insurance provides a brief overview of the progress his state has made: “Less than a year after the ACA was signed into law, Colorado began the – often contentious – process of creating the state’s exchange.  They’ve been working on it pretty much constantly ever since.  And the result is Colorado’s health insurance exchange is on track to open on time and provide all of the promised services:  small business and individual sales platforms, with an option for employees to select from multiple plan options in the small business exchange.  Jay hasn’t seen data from DC and the other 16 states that opted to run their own exchanges, but guesses they’re also faring relatively well,

Interestingly, the move to electronic health records (EHR) may well lead to higher costs, as providers get better at coding, payers end up paying for more stuff.  That’s one  takeaway from Jonena Relth’s submission on EHR and a recent teleconference on same.

The changes in delivery models may well lead to long-term cost reductions, however patient involvement will be key.  Jason Shafrin’s contribution contemplates the issues inherent in informing Medicare patients they’ve been assigned to an ACO; many may not know…

Neil Versel has also contributed a piece on consumer awareness – or more accurately the lack thereof.  His piece refers specifically to ignorance about telemedicine, and what the industry must do to reduce that ignorance

For those seeking more info on Medicare and the often-mind-numbingly-confusing array of programs, acronyms, and payment schemes, Joanne Conroy MD’s post offers a simple overview of the program.

Writing at healthinsurance.org, Wendell Potter doesn’t see the possible decision of some large insurers to avoid the exchanges as much of an issue; “The number of insurers that participate in the exchanges will vary from state to state, but there should be no shortage of affordable options available, especially when the subsidies – which will be available only for coverage purchased through the exchanges – are factored in.”  Wendell cites Vermont as an example; there are only two likely participants but both have submitted rates that are quite competitive with current products.

Motivations and motivators

Then there’s the motivation of big health plans and their leaders – can you spell M-O-N-E-Y?  I thought you could…The always-engaged Roy Poses MD has two posts; one discussing UnitedHealth’s CEO, his compensation, and UHG’s rather checkered recent past and issues of quality, physician oversight, and patient safety.  Ouch.  Similar concerns exist regarding Amgen’s executive compensation and their recent legal troubles.  

An interesting perspective on the same issue comes from Jaan Sidorov MD MHSA; Jaan wonders if the policy of “no pay for readmissions” could translate into shoddy care for patients who, despite the best of care, still have to be readmitted; If you had to be readmitted through no fault of anyone, wouldn’t YOU want your doctors to be compensated for taking care of you?

Thanks to Maggie Mahar for her post on breast cancer awareness – an effort that I (and others) think has had some significant negative consequences.  Maggie says: “Could it be that breast cancer arareness has become over-awareness? This isn’t happening in other countries. Then again, we are better at marketing fear than any other country in the world. And the pink ribbon campaign is all about marketing.”[emphasis added]

Side-bar note – I’ve long been a critic of the male version of breast cancer awareness; the prostate cancer scare, those who profit from it, and their well-intentioned but harm-causing supporters.

Research says…

John Goodman thinks a recent analysis of Oregon’s Medicaid program is a damning indictment of Obamacare; “a new study finds that (as far as physical health is concerned) there is no difference between being in Medicaid and being uninsured.”

Ezra Klein has a different take on that study; while there’s no question many health status measures did not differ between the Medicaid insureds and uninsured’s, depression was 30% lower among the insured group.  More significantly Ezra notes a wealth of other research has found Medicaid coverage does tend to improve health status.

Thanks to Vince Kuraitis and Leslie Kelly Hall for their editorial on the “duty to share” patient information with the patient.  In the US and the UK, providers have excessive incentives to “hoard” patient data and insufficient incentives to “share” it.  Consistent with a recently released report in the UK, they authors recommend development of an explicit duty to share patient information and discuss barriers and implications.

from the Work Comp World

WorkCompInsider’s Jon Coppelman thinks Massachusetts’ Governor Deval Patrick’s idea to tax workers’ comp indemnity (wage replacement) benefits.  This in a state where those benefits are already inadequate – at best. 

Bad idea, Your Honor.

Mike Allen alerts workers’ compensation payers to the need to prepare for reform; while PPACA doesn’t specifically address workers’ comp, there are a host of implications – especially for tech platforms.

Today’s tech topic

David Harlow’s piece focuses on Massively Open Online Medicine, showing just how diverse – and informed – HWR contributors are. If health sensors and wearable devices do become prevalent, it will likely take a lot of time – and a lot of change by a lot of people and institutions.

Health inflation is down – and may stay down

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There appear to be several reasons for the decline in the health care cost inflation rate with a poor economy and resulting job loss and changes in benefit design often cited – rightly – as chief contributors.  There’s some fear that an improving economy and higher employment will return us to the ugly days of 7+ percent health inflation rates.

Possibly. However there are indicators that changes to provider-payer contracts, a reduction in unused facility capacity, growth in medical homes and ACOs, changes in reimbursement methodologies, and less reliance on new technology are having an impact. These factors, and others unknown, look to be responsible for more than half of the decrease in inflation.

Here’s how the authors of a recent article in Health Affairs put it:

“we believe that current trends support cautious optimism that the spending slowdown may persist—a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country, among other factors.”

The implications are vast.  At the highest level, lower medical trend allows employers and their employees to use cash for other purposes, alleviates some of the pressure for Medicare reform and reduces deficit and debt projections.

This last may be the most significant implication – an analysis indicates public-sector health spending over the next ten years may be $770 billion lower than projections.  

What does this mean for you?

Those of us with grey hair and fading eyesight have seen too many of our hopes for cost control crushed to get overly excited.  Nevertheless, this is far better than the proverbial stick in the eye…

 

Health care spending is stabilizing – why?

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There have been a plethora of reports of late indicating health care spending trend has decreased significantly - to an average of 3.9 percent since 2009; the trend appears to be continuing today.  This after annual increases ranged from 6.2 to 9.7 percent between 2000 and 2007.  While there’s no denying an increasing portion of costs have been borne by insureds dealing with higher out-of-pocket costs, there’s something else going on here.

The question is – what?

The quick answer is – several things.

First, the continued sluggish economy; recent research published by the Kaiser Family Foundation attributes about three-quarters of the decline to the recession; others think it is only about a third.

Second, increased deductibles and co-pays account for about a fifth, according to some researchers.

More encouraging is the sense (and it is ONLY a sense) that the new contracts between insurers and providers are partially responsible.  

Health plans and providers (mostly health care systems) are increasingly basing reimbursement less on fee-for-service and more on accountable-care type methodologies, wherein providers benefit from delivering less, not more care.  The evidence for this is best described as “anecdotal data”; several health plans are reporting lower inpatient admissions, reduced length of stay, fewer expensive procedures, more generic meds, better care for chronically ill patients along with fewer acute episodes.

This is a big deal – a very big deal.  We will be digging into this for the rest of the week.

Sequestration’s impact on health care

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For most, the federal budget sequestration (that’s the event, sequester is the verb, as in “to sequester, thanks Gary) has yet to make itself felt.

For some, it’s all too real; one person’s waste is another person’s livelihood.

Here’s a few ways the sequestration stalemate in Washington is affecting health care.

So, what does this mean for you?

Well, reduced reimbursement for hospitals, doctors, and drug companies may mean more cost shifting to privately insured patients.

That’s the macro issue.  On a personal level, cuts will affect individuals relying on free vaccinations, wages from medical research funded by NIH, Medicare reimbursement for their salaries, jobs for newly graduated nurses, and residency programs for newly-minted MDs.

There will also be a long-term, downstream impact that we won’t feel for some years – the FBI will not have any new agent classes for at least two years.  That’s not good for health care fraud investigations.  

“Disability” is increasing…why?

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Are we suffering traumatic injuries from falling trees, collapsing scaffolds, dangerous industrial machines?

Is it because so many of us work at jobs requiring intense physical labor, and we are working long hours long past middle age?  Conversely, is it the very sedentary nature of many jobs that saps energy and wastes muscle?

Could it be we are just living longer than we ever have, and our bodies, programmed by evolution to live long enough to procreate, just aren’t built to stay strong, flexible, and resilient for decades?

Or are we way too fat, get far too little exercise, eat lousy food, and blame everyone but ourselves for the consequences?

Is it the continuing high unemployment rate and dearth of good-paying jobs?

And/Or – and here’s the scary thought – is it the definition of “disabled” that’s changed – both the public one and the way some view themselves?

This is becoming an increasingly critical question – as the number of Americans on Social Security for “disability” has increased rather dramatically – doubling from 1985 to 2005. In 1984 2.2% of the working-age population was receiving Social Security Disability Insurance (SSDI); 4.1% was in 2005.  This increase was, according to a paper published by the National Bureau of Economic Research, driven by a change in the definition of disability:

The most important factor is the liberalization of the DI screening process that occurred due to a 1984 law. This law directed the Social Security Administration to place more weight on ap-plicants’ reported pain and discomfort, relax its screening of mental illness, consider applicants with multiple non-severe ailments, and give more credence to medical evidence provided by the applicant’s doctor.

These changes had the effect of both increasing the number of new DI awards and shifting their composition towards claimants with low-mortality disorders. For example, the share of awards for a primary impairment of mental illness rose from 16 percent in 1983 to 25 percent in 2003, while the share for a primary impairment of musculoskeletal disorders (primarily back pain) rose from 13 per-cent in 1983 to 26 percent in 2003.

The number of working-age folks receiving SSDI reached 8.8 million at the end of last year.  That’s about 4.4 percent of the working age (18-64) population, an increase of 0.3 percent over the last seven years.

There’s been an increasing amount of attention paid to this issue; that’s both warranted and appropriate.

Yet I’m reminded of something Jennifer Christian MD told me years ago; “there’s no condition so disabling that there isn’t someone in the US with that condition working full time today.”

So, what is it?

My sense is it is all of the above. Some are really hurting or unable to work at jobs they can perform, others lazy, some dispirited, some enabled by physicians, many just getting older and wearing down, many unable to find good-paying jobs.

What does this mean for you?

Big, knotty problems aren’t fixed by simple answers or assignment of blame.  They are fixed by understanding drivers and the various moving parts needed to assemble solutions.