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eridani
eridani's Journal
eridani's Journal
March 30, 2016
Join the Online Single-Payer Book Club!
Interested in getting together with other single-payer supporters and learning more about organizing, activism, and healthcare policy?
Sign up for our first ever book club!
We’ll start our first book in early May, meeting weekly online for about 5 weeks. Participants will interact with each other in forums, except for the first meeting, which will be held via webinar.
If enough people sign up, there may be opportunities to meet in-person for local chapters of the book club – so invite your friends!
https://www.healthcare-now.org/join-the-single-payer-book-club/
March 29, 2016
Comment by Don McCanne of PNHP: Medicare Part D drug plans are shifting more drugs from a copayment requirement - a fixed dollar amount to be paid for each prescription - to coinsurance - a percentage of the charge for each prescription. This is important because coinsurance payments tend to be higher than coinsurance - sometimes much higher - especially with the recent increases in drug prices.
Obviously this is simply one more method of shifting the costs of health care to the patient. Many are already finding out-of-pocket costs to be unaffordable, yet it keeps getting worse. This is a one way street. The insurers are not looking for ways to reduce out-of-pocket expenses since they would have to pick up the additional costs which would then make their premiums less affordable, and the last thing that they would want to do is risk losing market share through higher premiums.
Coinsurance is a method of reducing health spending by erecting financial barriers to the care that patients should have. Instead, we should be removing financial barriers to care. That is what an improved Medicare for all with first dollar coverage would do.
Majority of Drugs Now Subject to Coinsurance in Medicare Part D Plans
http://avalere.com/expertise/managed-care/insights/majority-of-drugs-now-subject-to-coinsurance-in-medicare-part-d-plans
A new analysis from Avalere finds that a majority of prescription drugs covered by standalone Medicare Part D plans (PDPs) are subject to coinsurance, rather than copayments, in 2016. Coinsurance is when a beneficiary pays a percentage of the cost of the drug, rather than a fixed dollar amount, or copayment. Coinsurance often leads to patients paying more out of pocket compared to fixed dollar amount copayments. The average percentage of covered drugs facing coinsurance has risen sharply from 35 percent in 2014 to 58 percent in 2016 among PDPs. While most PDPs have historically applied coinsurance to high-cost drugs on the specialty tier, plans have extended coinsurance to drugs on lower tiers in recent years, including those covered on preferred and non-preferred brand tiers.
“These very high rates of coinsurance have shifted our understanding of Part D formulary coverage,” said Caroline Pearson, senior vice president at Avalere. “It will be important to monitor what drugs are being placed on various coinsurance tiers and how plans are using these tiers to manage cost and utilization in the program.”
A new analysis from Avalere finds that a majority of prescription drugs covered by standalone Medicare Part D plans (PDPs) are subject to coinsurance, rather than copayments, in 2016. Coinsurance is when a beneficiary pays a percentage of the cost of the drug, rather than a fixed dollar amount, or copayment. Coinsurance often leads to patients paying more out of pocket compared to fixed dollar amount copayments. The average percentage of covered drugs facing coinsurance has risen sharply from 35 percent in 2014 to 58 percent in 2016 among PDPs. While most PDPs have historically applied coinsurance to high-cost drugs on the specialty tier, plans have extended coinsurance to drugs on lower tiers in recent years, including those covered on preferred and non-preferred brand tiers.
“These very high rates of coinsurance have shifted our understanding of Part D formulary coverage,” said Caroline Pearson, senior vice president at Avalere. “It will be important to monitor what drugs are being placed on various coinsurance tiers and how plans are using these tiers to manage cost and utilization in the program.”
Comment by Don McCanne of PNHP: Medicare Part D drug plans are shifting more drugs from a copayment requirement - a fixed dollar amount to be paid for each prescription - to coinsurance - a percentage of the charge for each prescription. This is important because coinsurance payments tend to be higher than coinsurance - sometimes much higher - especially with the recent increases in drug prices.
Obviously this is simply one more method of shifting the costs of health care to the patient. Many are already finding out-of-pocket costs to be unaffordable, yet it keeps getting worse. This is a one way street. The insurers are not looking for ways to reduce out-of-pocket expenses since they would have to pick up the additional costs which would then make their premiums less affordable, and the last thing that they would want to do is risk losing market share through higher premiums.
Coinsurance is a method of reducing health spending by erecting financial barriers to the care that patients should have. Instead, we should be removing financial barriers to care. That is what an improved Medicare for all with first dollar coverage would do.
March 27, 2016
Comment by Don McCanne of PNHP: There are so many issues here, but it really boils down to one, which we’ll get to in a moment.
One of primary the goals of health care reform is to provide integrated health care services. The participants in an ideal health care delivery system work together as a team to ensure that the patient receives the right care, at the right time, at the right place. The care pyramid is built on a solid primary care infrastructure that serves, not as a gatekeeper, but as a facilitator.
Examples range from structurally integrated systems such as Kaiser Permanente, to loosely integrated services provided by the various health care resources in a community - hospitals, outpatient centers, community health centers, and independent primary care and specialty practices. In today’s message, Mayo Clinic represents an integrated system with its mothership in Rochester and its affiliated primary care clinics serving patients in its neighboring state of Iowa.
Thus Mayo provides integrated services that would be paid for by private insurers or employer-sponsored plans, either through fee-for-service or capitated payment schedules. Low income patients would be covered by Iowa’s Medicaid program.
But wait a minute. The insurers now profess to provide higher quality and lower costs through their own integrated managed care services. Iowa is following the lead of other states and turning its Medicaid program over to private Medicaid managed care companies. Although they avow quality, early experience with other state Medicaid managed care programs indicate that it is all about saving money, as quality and access deteriorate.
So what is happening to Iowa’s Medicaid patients who are currently obtaining their care from Mayo? It seems that Mayo is no longer in charge of integrating the health care of these patients; the private insurers are instead. For most of the patients, that means they lose access to their current care. One of the insurers will still allow patients to use the Mayo affiliated primary care clinics but not the Mayo mothership in Rochester, except by special arrangement on an individual basis. Instead of integrated care, these managed care companies are providing disintegrated care (double entendre intended).
The obvious conclusion is that integration of health care services should be a function of the health care delivery system based on patient service and not a function of an intermediary payer based on business goals.
A publicly administered and financed single payer monopsony would be designed to incentivize appropriate integration of our health care delivery system so that we really could have a higher quality health care system that brings greater value to all of us.
Mayo rebuffs Iowa Medicaid managed-care contracts
http://www.desmoinesregister.com/story/news/health/2016/03/24/mayo-rebuffs-iowa-medicaid-managed-care-contracts/82230958/
Iowans with Medicaid health coverage will not be able to routinely use the Mayo Clinic after the state shifts the $4 billion program to private management next week.
The three managed-care companies that will run Iowa’s Medicaid program told legislators this week they’ve been unable to negotiate contracts with Mayo’s famed hospital system, which is just across the border in Rochester, Minn.
Cheryl Harding, Amerihealth’s top executive in Iowa, told legislators that her managed-care firm has signed contracts with three Mayo-affiliated primary care clinics in Iowa, but not with Mayo’s main medical center in Rochester. The other managed-care companies, UnitedHealth and Amerigroup, also said they have not obtained such contracts.
For the time being, they said, Mayo has agreed to consider single-case contracts for Iowa Medicaid recipients needing specific care that can’t be provided elsewhere.
Iowans with Medicaid health coverage will not be able to routinely use the Mayo Clinic after the state shifts the $4 billion program to private management next week.
The three managed-care companies that will run Iowa’s Medicaid program told legislators this week they’ve been unable to negotiate contracts with Mayo’s famed hospital system, which is just across the border in Rochester, Minn.
Cheryl Harding, Amerihealth’s top executive in Iowa, told legislators that her managed-care firm has signed contracts with three Mayo-affiliated primary care clinics in Iowa, but not with Mayo’s main medical center in Rochester. The other managed-care companies, UnitedHealth and Amerigroup, also said they have not obtained such contracts.
For the time being, they said, Mayo has agreed to consider single-case contracts for Iowa Medicaid recipients needing specific care that can’t be provided elsewhere.
Comment by Don McCanne of PNHP: There are so many issues here, but it really boils down to one, which we’ll get to in a moment.
One of primary the goals of health care reform is to provide integrated health care services. The participants in an ideal health care delivery system work together as a team to ensure that the patient receives the right care, at the right time, at the right place. The care pyramid is built on a solid primary care infrastructure that serves, not as a gatekeeper, but as a facilitator.
Examples range from structurally integrated systems such as Kaiser Permanente, to loosely integrated services provided by the various health care resources in a community - hospitals, outpatient centers, community health centers, and independent primary care and specialty practices. In today’s message, Mayo Clinic represents an integrated system with its mothership in Rochester and its affiliated primary care clinics serving patients in its neighboring state of Iowa.
Thus Mayo provides integrated services that would be paid for by private insurers or employer-sponsored plans, either through fee-for-service or capitated payment schedules. Low income patients would be covered by Iowa’s Medicaid program.
But wait a minute. The insurers now profess to provide higher quality and lower costs through their own integrated managed care services. Iowa is following the lead of other states and turning its Medicaid program over to private Medicaid managed care companies. Although they avow quality, early experience with other state Medicaid managed care programs indicate that it is all about saving money, as quality and access deteriorate.
So what is happening to Iowa’s Medicaid patients who are currently obtaining their care from Mayo? It seems that Mayo is no longer in charge of integrating the health care of these patients; the private insurers are instead. For most of the patients, that means they lose access to their current care. One of the insurers will still allow patients to use the Mayo affiliated primary care clinics but not the Mayo mothership in Rochester, except by special arrangement on an individual basis. Instead of integrated care, these managed care companies are providing disintegrated care (double entendre intended).
The obvious conclusion is that integration of health care services should be a function of the health care delivery system based on patient service and not a function of an intermediary payer based on business goals.
A publicly administered and financed single payer monopsony would be designed to incentivize appropriate integration of our health care delivery system so that we really could have a higher quality health care system that brings greater value to all of us.
March 25, 2016
Comment by Don McCanne of PNHP: One of my father’s favorite phrases was, “There oughta be a law…” Whenever I heard that, I knew a bit of wisdom with a moral message would follow.
Dad’s last three weeks of life was spent in a hospital and could not have been more miserable (this was in the 1970s, before hospice). He had multiple myeloma and had extensive pathological fractures. When the nurses had to turn him, the pain was intolerable. He did not tolerate the narcotics administered as they aggravated his vomiting and obstipation. As a physician, he understood well his status.
At the last relatively rational conversation I had with him, he said, “Don, there oughta be a law. When the tiny bit of good that happens in a day cannot possibly even begin to compensate for the profound, unrelenting pain and suffering, your physician should be able to authorize the placement of a bottle of sleeping pills on the nightstand next to your bed.”
No such bottle appeared. The agony persisted for several more days, without even any fleeting moments of contentment, before he slipped into his final coma. In spite of my reverence for life, I knew this wasn’t right.
Today’s message on Valeant's price gouging for Seconal - price gouging timed to capitalize on California’s new aid-in-dying law - would normally lead to my usual diatribe on the evils of dysfunctional health market dynamics in the U.S. But this time, it led to tears - mine.
How can we leave our health care system under the control of the rentiers in the medical industrial complex? Dad would have said, “There oughta be a law.” And we know what that law would be - an improved Medicare for all that spends money exclusively for the benefit of patients.
Why am I not out there helping to organize the marches on Washington and our state capitols on behalf of health care justice for all? For that matter, why aren’t you?
Pharmaceutical Companies Hiked Price on Aid in Dying Drug
http://ww2.kqed.org/stateofhealth/2016/03/22/pharmaceutical-companies-hiked-price-on-aid-in-dying-drug/
When California’s aid-in-dying law takes effect this June, terminally ill patients who decide to end their lives could be faced with a hefty bill for the lethal medication. It retails for more than $3,000.
Valeant Pharmaceuticals, the company that makes the drug most commonly used in physician-assisted suicide, doubled the drug’s price last year, one month after California lawmakers proposed legalizing the practice.
Most drug companies justify such hikes by pointing to high research costs. But Grube says that’s not the case with Seconal. It’s been around for 80 years.
“It’s not a complicated thing to make, there’s no research being done on it, there’s no development,” he says. “That to me is unconscionable.”
When California’s aid-in-dying law takes effect this June, terminally ill patients who decide to end their lives could be faced with a hefty bill for the lethal medication. It retails for more than $3,000.
Valeant Pharmaceuticals, the company that makes the drug most commonly used in physician-assisted suicide, doubled the drug’s price last year, one month after California lawmakers proposed legalizing the practice.
Most drug companies justify such hikes by pointing to high research costs. But Grube says that’s not the case with Seconal. It’s been around for 80 years.
“It’s not a complicated thing to make, there’s no research being done on it, there’s no development,” he says. “That to me is unconscionable.”
Comment by Don McCanne of PNHP: One of my father’s favorite phrases was, “There oughta be a law…” Whenever I heard that, I knew a bit of wisdom with a moral message would follow.
Dad’s last three weeks of life was spent in a hospital and could not have been more miserable (this was in the 1970s, before hospice). He had multiple myeloma and had extensive pathological fractures. When the nurses had to turn him, the pain was intolerable. He did not tolerate the narcotics administered as they aggravated his vomiting and obstipation. As a physician, he understood well his status.
At the last relatively rational conversation I had with him, he said, “Don, there oughta be a law. When the tiny bit of good that happens in a day cannot possibly even begin to compensate for the profound, unrelenting pain and suffering, your physician should be able to authorize the placement of a bottle of sleeping pills on the nightstand next to your bed.”
No such bottle appeared. The agony persisted for several more days, without even any fleeting moments of contentment, before he slipped into his final coma. In spite of my reverence for life, I knew this wasn’t right.
Today’s message on Valeant's price gouging for Seconal - price gouging timed to capitalize on California’s new aid-in-dying law - would normally lead to my usual diatribe on the evils of dysfunctional health market dynamics in the U.S. But this time, it led to tears - mine.
How can we leave our health care system under the control of the rentiers in the medical industrial complex? Dad would have said, “There oughta be a law.” And we know what that law would be - an improved Medicare for all that spends money exclusively for the benefit of patients.
Why am I not out there helping to organize the marches on Washington and our state capitols on behalf of health care justice for all? For that matter, why aren’t you?
March 24, 2016
http://www.nytimes.com/2016/03/24/upshot/how-to-stop-the-bouncing-between-insurance-plans-under-obamacare.html
Consider a young construction worker, a patient of mine, whose hours are cut during the winter. His income drops slightly, and now his family no longer qualifies for financial assistance through marketplace subsidies and must sign up for Medicaid. He had finally managed to control his diabetes with his primary care doctor, but when scheduling his next appointment, he is told his doctor doesn’t accept Medicaid.
When the summer rolls around, he picks up more hours, and starts making too much for Medicaid. He has to go back on a marketplace plan, a different one from before. Meanwhile, providers and insurance plans rack up administrative costs as they accommodate these changes.
Because of fluctuations in income, millions of Americans move back and forth between Medicaid and the Affordable Care Act’s insurance marketplace, leading to significant health and financial costs for individuals, states and insurance companies.
Published Comment:by Don McCanne of PNHP: Tweaking the alignment of Medicaid and the private ACA exchange plans still leaves in place a fragmented system of incongruous provider networks, and unstable cost sharing depending on plan actuarial values and sliding-scale subsidy qualifications. These efforts result in wasteful administrative excesses, inefficiencies and inequities in care.
A well designed single payer system - an improved Medicare for all - would provide stable health care coverage for life - totally eliminating churning. The savings from the administrative efficiencies would be enough to eliminate current financial barriers faced by the uninsured and the underinsured, while reducing inequities and ensuring access for all.
Tweaking a highly dysfunctional system just won't get us there.
Further Comment by Don McCanne of PNHP: Dhruv Khullar has provided us with an important policy lesson. He seems to be amongst those who believe that we should accept Obamacare (ACA) as a given and build on it through incremental reform. Amongst the multitude of problems with ACA, he has selected as an example the issue of churning in and out of Medicaid and the private ACA exchange plans. What does he propose?
He suggests reducing churning by offering twelve-month eligibility for Medicaid, and he suggests aligning benefits and provider networks between Medicaid managed care and private ACA exchange plans - a proposal with obvious profound administrative complexity. Further, when these anti-churning measures are implemented, he concedes that “the patchwork of health care in the United States may make some amount of churning unavoidable.”
This is the policy lesson. Our fragmented, dysfunctional financing infrastructure is so highly flawed that patches to it will have very little impact in moving us closer to the ideal of a quality health care system that serves all of us well. In contrast, the patches themselves lead to further administrative waste with associated higher costs.
The obvious answer to churning is to have a single, well-designed Medicare for all program in which individuals are enrolled for life. That would also take care of most of the multitude of other health care financing problems that Dhruv Khullar nor I could address here.
How to Stop the Bouncing Between Insurance Plans Under Obamacare
http://www.nytimes.com/2016/03/24/upshot/how-to-stop-the-bouncing-between-insurance-plans-under-obamacare.html
Consider a young construction worker, a patient of mine, whose hours are cut during the winter. His income drops slightly, and now his family no longer qualifies for financial assistance through marketplace subsidies and must sign up for Medicaid. He had finally managed to control his diabetes with his primary care doctor, but when scheduling his next appointment, he is told his doctor doesn’t accept Medicaid.
When the summer rolls around, he picks up more hours, and starts making too much for Medicaid. He has to go back on a marketplace plan, a different one from before. Meanwhile, providers and insurance plans rack up administrative costs as they accommodate these changes.
Because of fluctuations in income, millions of Americans move back and forth between Medicaid and the Affordable Care Act’s insurance marketplace, leading to significant health and financial costs for individuals, states and insurance companies.
Published Comment:by Don McCanne of PNHP: Tweaking the alignment of Medicaid and the private ACA exchange plans still leaves in place a fragmented system of incongruous provider networks, and unstable cost sharing depending on plan actuarial values and sliding-scale subsidy qualifications. These efforts result in wasteful administrative excesses, inefficiencies and inequities in care.
A well designed single payer system - an improved Medicare for all - would provide stable health care coverage for life - totally eliminating churning. The savings from the administrative efficiencies would be enough to eliminate current financial barriers faced by the uninsured and the underinsured, while reducing inequities and ensuring access for all.
Tweaking a highly dysfunctional system just won't get us there.
Further Comment by Don McCanne of PNHP: Dhruv Khullar has provided us with an important policy lesson. He seems to be amongst those who believe that we should accept Obamacare (ACA) as a given and build on it through incremental reform. Amongst the multitude of problems with ACA, he has selected as an example the issue of churning in and out of Medicaid and the private ACA exchange plans. What does he propose?
He suggests reducing churning by offering twelve-month eligibility for Medicaid, and he suggests aligning benefits and provider networks between Medicaid managed care and private ACA exchange plans - a proposal with obvious profound administrative complexity. Further, when these anti-churning measures are implemented, he concedes that “the patchwork of health care in the United States may make some amount of churning unavoidable.”
This is the policy lesson. Our fragmented, dysfunctional financing infrastructure is so highly flawed that patches to it will have very little impact in moving us closer to the ideal of a quality health care system that serves all of us well. In contrast, the patches themselves lead to further administrative waste with associated higher costs.
The obvious answer to churning is to have a single, well-designed Medicare for all program in which individuals are enrolled for life. That would also take care of most of the multitude of other health care financing problems that Dhruv Khullar nor I could address here.
March 23, 2016
Secret deals often prompt drug benefit companies to cover brand-name prescriptions when equally effective generic or even over-the-counter medications are available, several drug pricing experts say.
These companies, known as pharmacy benefit managers (PBMs), negotiate deals with drug makers that include rebates and other compensation to encourage certain drugs and come up with lists of drugs that their insurance plans will cover. Employers and insurance companies then determine which drugs to encourage on these formularies.
The process is so convoluted that even the United States' largest insurer, Anthem, discovered what it said were $3 billion in overcharges by Express Scripts and filed suit Monday against the PBM for damages.
Comment by Don McCanne of PNHP: Pharmacy benefit managers (PBMs) are yet one more example of how effective our policymakers have been in taking care of the medical industrial complex while perpetuating the highest level of health care spending of all nations. PBMs are superfluous pharmaceutical middlemen who further compound our uniquely-American, highly wasteful administrative excesses as a necessity to gain reward for their own rent-seeking behavior.
Rent-seeking is the use of a company, organization or individual's resources to obtain economic gain from others without reciprocating any benefits to society through wealth creation. (Investopedia)
Rent-seeking is a creature of the medical-industrial complex. It should have no place in our health care system. If we established a single, universal, publicly-funded and publicly-administered health care financing infrastructure, it would function as a monopsony, representing the people, that would work for us to dramatically reduce administrative waste while preventing clandestine rent-seeking gains.
In the words of Nobel laureate Kenneth Arrow - the leading authority in markets and health care - single payer is “better than any other system.”
Secret deals may mean consumers pay more for drugs
http://www.usatoday.com/story/news/nation/2016/03/21/pharmacy-benefit-firms-can-raise-drug-costs-despite-cheaper-choices/81767978/Secret deals often prompt drug benefit companies to cover brand-name prescriptions when equally effective generic or even over-the-counter medications are available, several drug pricing experts say.
These companies, known as pharmacy benefit managers (PBMs), negotiate deals with drug makers that include rebates and other compensation to encourage certain drugs and come up with lists of drugs that their insurance plans will cover. Employers and insurance companies then determine which drugs to encourage on these formularies.
The process is so convoluted that even the United States' largest insurer, Anthem, discovered what it said were $3 billion in overcharges by Express Scripts and filed suit Monday against the PBM for damages.
Comment by Don McCanne of PNHP: Pharmacy benefit managers (PBMs) are yet one more example of how effective our policymakers have been in taking care of the medical industrial complex while perpetuating the highest level of health care spending of all nations. PBMs are superfluous pharmaceutical middlemen who further compound our uniquely-American, highly wasteful administrative excesses as a necessity to gain reward for their own rent-seeking behavior.
Rent-seeking is the use of a company, organization or individual's resources to obtain economic gain from others without reciprocating any benefits to society through wealth creation. (Investopedia)
Rent-seeking is a creature of the medical-industrial complex. It should have no place in our health care system. If we established a single, universal, publicly-funded and publicly-administered health care financing infrastructure, it would function as a monopsony, representing the people, that would work for us to dramatically reduce administrative waste while preventing clandestine rent-seeking gains.
In the words of Nobel laureate Kenneth Arrow - the leading authority in markets and health care - single payer is “better than any other system.”
March 22, 2016
Comment by Don McCanne of PNHP: Risk pooling is the most fundamental concept in health care financing. Funds are paid into a common pool to cover the health care needs of those insured by the pool. Although that is a simple, basic concept, this article explains the complexities of risk pooling, with special attention to policies that promote greater risk pooling and policies that decrease pooling, separating the risks. The consequences are immense.
The politicians are discussing various concepts of health care reform ranging from incremental changes to the Affordable Care Act (ACA), to various concepts of replacing ACA, to establishing a single payer national health program. The most important differences between these models are in how they pool risk. The least effective are the ACA replacement proposals, and the most effective is a universal single payer system (an improved Medicare for all).
Even though it is easy to explain risk pooling, it is important to be able to respond to each proposal for reform with a precise explanation of how that proposal impacts risk pooling. The reason is that it’s all about the risk pool. A well designed universal risk pool ensures that health care will be affordable for each of us whenever we need it.
The full article by Linda Blumberg and John Holahan should be downloaded, studied, and saved as a reference to be used in health policy advocacy. We won’t get risk pooling right until we have everybody in, nobody out! (Thanks, Quentin.)
Insurance companies try to avoid pooling health care risk
http://healthaffairs.org/blog/2016/03/15/dont-let-the-talking-points-fool-you-its-all-about-the-risk-pool/
Most people are healthy most of the time, and as a consequence, health care expenditures are heavily concentrated in a small share of the population: about 50 percent of the health care spending in a given year by those below age 65 is attributable to just 5 percent of the nonelderly population. The lowest spending half of the population accounts for only about 3.5 percent of health care spending in a year.
Deciding how much of total health care expenditures should be shared across the population and how to share it is the fundamental conundrum of health care policy. There is more risk pooling the larger the share of health expenditures included in the insurance as covered expenses (i.e., the fewer benefits excluded and the lower the out-of-pocket cost requirements), the larger the number of both the healthy and the sick insured, and the lower the variation in premiums across different enrollees. Sharing the costs of the sick across the broader population (a.k.a., risk pooling) increases costs for the healthy to the benefit of those with health problems; this creates more financial losers than winners at a point in time, since there are many more healthy people than sick in a given year. Segmenting risk pools has the opposite effect, savings for the currently healthy while increasing costs for those with health problems.
The degree of risk sharing under current law varies by the insurance market. Public insurance (e.g., Medicare, Medicaid) represents the most pooling of risk. All beneficiaries are eligible for the same health insurance benefits, and the cost of providing those benefits is largely financed by broad-based revenue sources (e.g., income or payroll taxes), completely separating enrollee health status from financing of the programs’ benefits. Public programs that include deductibles, co-insurance, or co-payments or limit covered benefits reduce the sharing of risk to some extent, as these provisions increase financial burdens directly with medical care use.
Risk pooling approaches promote broad access to affordable medical care regardless of income or health status, while the risk segmenting approaches do not and would in fact reduce access relative to current law. Advocates of the latter generally employ terms such as individual responsibility, skin in the game, consumer choice, and market competition, but make no mistake about it: it is all about the risk pool.
Most people are healthy most of the time, and as a consequence, health care expenditures are heavily concentrated in a small share of the population: about 50 percent of the health care spending in a given year by those below age 65 is attributable to just 5 percent of the nonelderly population. The lowest spending half of the population accounts for only about 3.5 percent of health care spending in a year.
Deciding how much of total health care expenditures should be shared across the population and how to share it is the fundamental conundrum of health care policy. There is more risk pooling the larger the share of health expenditures included in the insurance as covered expenses (i.e., the fewer benefits excluded and the lower the out-of-pocket cost requirements), the larger the number of both the healthy and the sick insured, and the lower the variation in premiums across different enrollees. Sharing the costs of the sick across the broader population (a.k.a., risk pooling) increases costs for the healthy to the benefit of those with health problems; this creates more financial losers than winners at a point in time, since there are many more healthy people than sick in a given year. Segmenting risk pools has the opposite effect, savings for the currently healthy while increasing costs for those with health problems.
The degree of risk sharing under current law varies by the insurance market. Public insurance (e.g., Medicare, Medicaid) represents the most pooling of risk. All beneficiaries are eligible for the same health insurance benefits, and the cost of providing those benefits is largely financed by broad-based revenue sources (e.g., income or payroll taxes), completely separating enrollee health status from financing of the programs’ benefits. Public programs that include deductibles, co-insurance, or co-payments or limit covered benefits reduce the sharing of risk to some extent, as these provisions increase financial burdens directly with medical care use.
Risk pooling approaches promote broad access to affordable medical care regardless of income or health status, while the risk segmenting approaches do not and would in fact reduce access relative to current law. Advocates of the latter generally employ terms such as individual responsibility, skin in the game, consumer choice, and market competition, but make no mistake about it: it is all about the risk pool.
Comment by Don McCanne of PNHP: Risk pooling is the most fundamental concept in health care financing. Funds are paid into a common pool to cover the health care needs of those insured by the pool. Although that is a simple, basic concept, this article explains the complexities of risk pooling, with special attention to policies that promote greater risk pooling and policies that decrease pooling, separating the risks. The consequences are immense.
The politicians are discussing various concepts of health care reform ranging from incremental changes to the Affordable Care Act (ACA), to various concepts of replacing ACA, to establishing a single payer national health program. The most important differences between these models are in how they pool risk. The least effective are the ACA replacement proposals, and the most effective is a universal single payer system (an improved Medicare for all).
Even though it is easy to explain risk pooling, it is important to be able to respond to each proposal for reform with a precise explanation of how that proposal impacts risk pooling. The reason is that it’s all about the risk pool. A well designed universal risk pool ensures that health care will be affordable for each of us whenever we need it.
The full article by Linda Blumberg and John Holahan should be downloaded, studied, and saved as a reference to be used in health policy advocacy. We won’t get risk pooling right until we have everybody in, nobody out! (Thanks, Quentin.)
March 17, 2016
Comment by Don McCanne of PNHP: Nobody understands markets and health care better than Nobel laureate Kenneth Arrow who wrote the classic treatise on the topic over half a century ago. Based on his work, it is clear that the government must be involved if we are to improve efficiency in the system as we attempt to expand it to include everyone. So what does Kenneth Arrow think about single payer as a model for health care?
Although he understands that there are some deficiencies in the single payer model, he states, “it’s better than any other system.” He does say that he believes that private practice should be permitted as an option, like they have in the United Kingdom. But when asked if the United States should adopt the UK system, he says, “I would say the Canadian model, rather than the UK model.” That’s interesting in that Canada does not permit health care to be paid for privately if it is covered by their single payer Medicare program (although that continues to be challenged by the Canadian privatizers).
Kenneth Arrow is not an ideologue. He is a gifted, two-handed economist (i.e., looks at the options). He has stated that single payer is better than any other system, and we should listen to him.
Noted health care economist comes out for single payer
https://promarket.org/there-is-regulatory-capture-but-it-is-by-no-means-complete/
Arrow, Kenneth J., “Uncertainty and the Welfare Economics of Medical Care, The American Economic Review, December 1963: https://www.aeaweb.org/aer/top20/53.5.941-973.pdf
Q: It does sound like you are strongly in favor a single-payer system, though. Last year you signed, along with 266 other economists, a declaration that called on policymakers around the world to work toward universal health coverage.
I wouldn’t say I’m strongly in favor of a single payer system. I can find objections to it. But I still think it’s better than any other system. However, the idea of permitting private practice must not be ruled out. Similar to the UK, there can be a single payer system which everybody can go to, and private medical practices for those who want. In the UK, private medicine is about 20 percent of the total, so there is this escape valve for those who want it, but also a single payer system that anybody can join.
Q: Perhaps the way to fix the American health care system is simply to adopt the UK model?
I would say the Canadian model, rather than the UK model. But it’s so politically out of the question I don’t even think about it.
Q: So you’re saying that one answer to the influence of special interest groups in the health care system is to have the government intervene in a major way, whether it is through a single payer system or something more akin to the UK model?
That’s right. Of course, George Stigler would say that there could be regulatory capture, but so far it doesn’t seem to have happened really.
Arrow, Kenneth J., “Uncertainty and the Welfare Economics of Medical Care, The American Economic Review, December 1963: https://www.aeaweb.org/aer/top20/53.5.941-973.pdf
Q: It does sound like you are strongly in favor a single-payer system, though. Last year you signed, along with 266 other economists, a declaration that called on policymakers around the world to work toward universal health coverage.
I wouldn’t say I’m strongly in favor of a single payer system. I can find objections to it. But I still think it’s better than any other system. However, the idea of permitting private practice must not be ruled out. Similar to the UK, there can be a single payer system which everybody can go to, and private medical practices for those who want. In the UK, private medicine is about 20 percent of the total, so there is this escape valve for those who want it, but also a single payer system that anybody can join.
Q: Perhaps the way to fix the American health care system is simply to adopt the UK model?
I would say the Canadian model, rather than the UK model. But it’s so politically out of the question I don’t even think about it.
Q: So you’re saying that one answer to the influence of special interest groups in the health care system is to have the government intervene in a major way, whether it is through a single payer system or something more akin to the UK model?
That’s right. Of course, George Stigler would say that there could be regulatory capture, but so far it doesn’t seem to have happened really.
Comment by Don McCanne of PNHP: Nobody understands markets and health care better than Nobel laureate Kenneth Arrow who wrote the classic treatise on the topic over half a century ago. Based on his work, it is clear that the government must be involved if we are to improve efficiency in the system as we attempt to expand it to include everyone. So what does Kenneth Arrow think about single payer as a model for health care?
Although he understands that there are some deficiencies in the single payer model, he states, “it’s better than any other system.” He does say that he believes that private practice should be permitted as an option, like they have in the United Kingdom. But when asked if the United States should adopt the UK system, he says, “I would say the Canadian model, rather than the UK model.” That’s interesting in that Canada does not permit health care to be paid for privately if it is covered by their single payer Medicare program (although that continues to be challenged by the Canadian privatizers).
Kenneth Arrow is not an ideologue. He is a gifted, two-handed economist (i.e., looks at the options). He has stated that single payer is better than any other system, and we should listen to him.
March 16, 2016
Comment by Don McCanne of PNHP: The concept of return on investment (ROI) in health care may represent what is wrong with our system that causes it to be so expensive yet often mediocre by international standards.
Most health care professionals and institutions are largely fixated on their efforts to provide the best patient care they can with the given resources. But much of the medical-industrial complex is fixated on ROI, as is obvious by the examples of the private, for-profit insurers and the pharmaceutical firms with their egregiously high profits.
The authors of this article discuss trying to take care of cancer patients in which ROI standards are not considered since “monetized” gains for cancer patients would be “deeply negative.” They contrast that with readmissions of patients with chronic illnesses in which the ROI is important based on the penalties assessed for failing to prevent the readmissions.
On the one hand, the professionals and institutions are simply paid for providing appropriate care.
On the other, attempting to provide appropriate care is complicated by a necessity to consider the potential of a negative ROI because of financial considerations - penalties - which have nothing to do with the actual medical care being provided.
Instead of ROI driving motivation, the authors suggest that we reframe health care financing as “positive payments for noble work rather than punitive revenue reductions.”
They conclude, “As U.S. health care financing begins again to shift risks to hospitals and physicians through bundled payments or readmission penalties, the financing of the care for our most challenging patients might be better shifted in the other direction.”
Health care: Asymmetric Thinking about Return on Investment
http://www.nejm.org/doi/full/10.1056/NEJMp1512297
We’ve attended many conferences about providing health care to patients with high medical and social needs — people with chronic illnesses who are frequently readmitted to the hospital. It seems as if every presentation refers to “return on investment” (ROI), which is invariably presented as a constraint — as in “Our program kept people out of the hospital, but we just couldn’t get the ROI to work.” Heads nod understandingly, and then participants move on to other topics.
At conferences about providing care for patients with cancer or other acute illnesses, by contrast, we almost never hear the term ROI. Instead, people talk about clinical gains, using understandable and patient-centered terms like “survival.” Though high drug prices are sometimes mentioned, no one ever says the ROI is prohibitive. No one mentions ROI at all.
There is no obvious reason why ROI is more relevant to some clinical situations than to others. So why do we focus so heavily on ROI when the topic is chronic illness but rarely mention it when the topic is cancer? A huge amount of the cancer care we deliver provides such small personal and social gains that, were those gains monetized, the endeavor’s ROI would be deeply negative. And yet we ask,
“What’s the ROI of that program that keeps chronically ill patients out of the hospital?” but not “What’s the ROI of treating advanced lung cancer?”
We’ve attended many conferences about providing health care to patients with high medical and social needs — people with chronic illnesses who are frequently readmitted to the hospital. It seems as if every presentation refers to “return on investment” (ROI), which is invariably presented as a constraint — as in “Our program kept people out of the hospital, but we just couldn’t get the ROI to work.” Heads nod understandingly, and then participants move on to other topics.
At conferences about providing care for patients with cancer or other acute illnesses, by contrast, we almost never hear the term ROI. Instead, people talk about clinical gains, using understandable and patient-centered terms like “survival.” Though high drug prices are sometimes mentioned, no one ever says the ROI is prohibitive. No one mentions ROI at all.
There is no obvious reason why ROI is more relevant to some clinical situations than to others. So why do we focus so heavily on ROI when the topic is chronic illness but rarely mention it when the topic is cancer? A huge amount of the cancer care we deliver provides such small personal and social gains that, were those gains monetized, the endeavor’s ROI would be deeply negative. And yet we ask,
“What’s the ROI of that program that keeps chronically ill patients out of the hospital?” but not “What’s the ROI of treating advanced lung cancer?”
Comment by Don McCanne of PNHP: The concept of return on investment (ROI) in health care may represent what is wrong with our system that causes it to be so expensive yet often mediocre by international standards.
Most health care professionals and institutions are largely fixated on their efforts to provide the best patient care they can with the given resources. But much of the medical-industrial complex is fixated on ROI, as is obvious by the examples of the private, for-profit insurers and the pharmaceutical firms with their egregiously high profits.
The authors of this article discuss trying to take care of cancer patients in which ROI standards are not considered since “monetized” gains for cancer patients would be “deeply negative.” They contrast that with readmissions of patients with chronic illnesses in which the ROI is important based on the penalties assessed for failing to prevent the readmissions.
On the one hand, the professionals and institutions are simply paid for providing appropriate care.
On the other, attempting to provide appropriate care is complicated by a necessity to consider the potential of a negative ROI because of financial considerations - penalties - which have nothing to do with the actual medical care being provided.
Instead of ROI driving motivation, the authors suggest that we reframe health care financing as “positive payments for noble work rather than punitive revenue reductions.”
They conclude, “As U.S. health care financing begins again to shift risks to hospitals and physicians through bundled payments or readmission penalties, the financing of the care for our most challenging patients might be better shifted in the other direction.”
March 16, 2016
Comment by Don McCanne of PNHP: Hillary Clinton says that one of her proposals is to bring health care costs down. This town hall exchange is significant because it reveals the depth, or lack thereof, as to how she might accomplish this.
She says that she would lower co-pays and deductibles. But the question was about high premiums, and the market is using higher deductibles and other cost sharing to lower premiums. Lowering deductibles will cause higher premiums, not lower.
She says that we need more non-profit insurers like Blue Cross and Blue Shield used to be. But if you compare premiums in California for for-profit Anthem Blue Cross and non-profit Blue Shield, they are the same. The non-profit insurers share the same inefficiencies and administrative excesses as the for-profits.
She says that she wants more competition in the exchanges so that less expensive plans will be available for diligent shoppers, but, again, lower premiums are possible only by reducing coverage - higher deductibles, less accessible narrower networks, etc.
Private plans competing in the marketplace is what we already had before the Affordable Care Act was passed. We merely continued the same system. Adding exchanges did very little except to enable the administration of subsidies and credits for lower-income individuals. For those not eligible for government subsidies and credits, nothing was done to control the very high costs of health care and the insurance products that pay for that care.
Unfortunately, Hillary’s proposal is more of the same. Perpetuate the fiction of lower prices through competition while manipulating the insurance products to have either lower premiums or poorer coverage. In fact, included in ACA is the excise tax (Cadillac tax) which is designed to prevent the marketing of full benefit plans. Making health care less affordable through greater out-of-pocket cost exposure is the exact opposite of where Clinton says she wants to take us. The problem is that the current financing infrastructure will not allow us to go there.
If we want affordable care for everyone, we need a single payer improved Medicare-for-all which will control costs and make the financing more equitable.
PNHP reviews Clinton on health care
ttp://cnnpressroom.blogs.cnn.com/2016/03/13/full-rush-transcript-hillary-clinton-partcnn-tv-one-democratic-presidential-town-hall/
So you have the federal exchange. And to go on and keep looking to see what the prices are, because we have to get more competition back into the insurance market. One thing that I want to work on with my friends from Congress who are here is we've got to get more non-profits that are capable of selling insurance back into the insurance market.
You know, Blue Cross and Blue Shield used to be non-profits. And then they transferred themselves into for-profit companies. And there was some effort made under the Affordable Care Act to get some competition from non-profit institutions, some of them worked and a lot of them didn't.
I want to know what we can do, because if you could get a range of insurers, some of who were not-for-profit companies, that would lower costs.
So there is a number of things I am looking at. And what I want to assure you and your family of is I will do everything I can as president, working with members of Congress where necessary, to try to get the costs down.
But I do want you to keep shopping, because what you are telling me is much higher than what I hear from other families, and so I want to be sure that if there is a better option out there for you, you're going to be able to take advantage of it.
And then I'll work as hard as I can to get the costs down for everybody, and that includes prescription drug costs, which are skyrocketing and increasing costs for everything else.
So you have the federal exchange. And to go on and keep looking to see what the prices are, because we have to get more competition back into the insurance market. One thing that I want to work on with my friends from Congress who are here is we've got to get more non-profits that are capable of selling insurance back into the insurance market.
You know, Blue Cross and Blue Shield used to be non-profits. And then they transferred themselves into for-profit companies. And there was some effort made under the Affordable Care Act to get some competition from non-profit institutions, some of them worked and a lot of them didn't.
I want to know what we can do, because if you could get a range of insurers, some of who were not-for-profit companies, that would lower costs.
So there is a number of things I am looking at. And what I want to assure you and your family of is I will do everything I can as president, working with members of Congress where necessary, to try to get the costs down.
But I do want you to keep shopping, because what you are telling me is much higher than what I hear from other families, and so I want to be sure that if there is a better option out there for you, you're going to be able to take advantage of it.
And then I'll work as hard as I can to get the costs down for everybody, and that includes prescription drug costs, which are skyrocketing and increasing costs for everything else.
Comment by Don McCanne of PNHP: Hillary Clinton says that one of her proposals is to bring health care costs down. This town hall exchange is significant because it reveals the depth, or lack thereof, as to how she might accomplish this.
She says that she would lower co-pays and deductibles. But the question was about high premiums, and the market is using higher deductibles and other cost sharing to lower premiums. Lowering deductibles will cause higher premiums, not lower.
She says that we need more non-profit insurers like Blue Cross and Blue Shield used to be. But if you compare premiums in California for for-profit Anthem Blue Cross and non-profit Blue Shield, they are the same. The non-profit insurers share the same inefficiencies and administrative excesses as the for-profits.
She says that she wants more competition in the exchanges so that less expensive plans will be available for diligent shoppers, but, again, lower premiums are possible only by reducing coverage - higher deductibles, less accessible narrower networks, etc.
Private plans competing in the marketplace is what we already had before the Affordable Care Act was passed. We merely continued the same system. Adding exchanges did very little except to enable the administration of subsidies and credits for lower-income individuals. For those not eligible for government subsidies and credits, nothing was done to control the very high costs of health care and the insurance products that pay for that care.
Unfortunately, Hillary’s proposal is more of the same. Perpetuate the fiction of lower prices through competition while manipulating the insurance products to have either lower premiums or poorer coverage. In fact, included in ACA is the excise tax (Cadillac tax) which is designed to prevent the marketing of full benefit plans. Making health care less affordable through greater out-of-pocket cost exposure is the exact opposite of where Clinton says she wants to take us. The problem is that the current financing infrastructure will not allow us to go there.
If we want affordable care for everyone, we need a single payer improved Medicare-for-all which will control costs and make the financing more equitable.
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