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The Healthcare Blog - Fri, 01/20/2017 - 19:54
Community Rating – The Worst Possible Way To Do a Good Thing
I have a grudging respect for health economists, “grudging” because, like many doctors, I want my pieties unchecked. Health economists check our pieties with quantitative truths. They describe the way the healthcare world is – a view from 29, 000 feet, pour cold water on the way we think the world should be, and guide, with abundant disclaimers, the way we can make things better. It’s unwise climbing Everest without a Sherpa, nor is it wise reforming healthcare without listening to health economists from across the political spectrum.
President Trump, along with the Republican House and Senate, will be dismantling the Affordable Care Act (ACA). In a sense, President Trump is not just descending Everest, a treacherous feat in its own right, but scaling a peak arguably more dangerous than Everest. Despite their differences, Mr. Obama and Mr. Trump share one commonality – an implicit distrust of the health insurance industry.
How did the American health insurance industry become so vilified? This is, in part, because necessity is the father of all vilification. Insurers are a necessary evil in a country where there’s still deep mistrust of the government. Partly, this is because we transfer our angst about the uncertainty of our future, the dice which plays with our lives, to insurers who are in the business of rolling the dice. But mostly it’s because the misdeeds of the insurance market have been grossly exaggerated, and the benefits of the market have been attenuated by a few damning anecdotes. This is what Mark V. Pauly (MVP), Professor of Health Economics at the University of Pennsylvania, and one of the most eminent health economists of his generation, believes.
Informed by his research, Pauly is a rare defender of the insurance industry in academia. I recall attending a class by Pauly a few years ago. Two things struck me about the soft-spoken economist. The first was his reluctance to prescribe solutions without explaining the tradeoffs. Pauly is unlikely to appeal to demagogues or policy makers seeking inexpensive balms for complex problems. The second was his penchant for stating the counterintuitive. I met Pauly on a rainy day in Philadelphia in the Library Bar at the Inn at Penn. I remembered from my class how painful ignorance can be when speaking to Pauly. So, I read up as much as I could during the New Year’s weekend. It didn’t help much. I was still beseeched by facts unbeknownst to me.
SJ: The insurance industry is demonized by everyone, particularly doctors. You have a more favorable view of the industry. You believe that it can be a force for good if appropriately managed. I want to get to the heart of the distrust. Is it because we haven’t gotten over Akerloff’s “The Market for Lemons?”
MVP: Let’s back up. The lemons problem, described by George Akerloff, is related to the used car market because of asymmetric information. The sellers know more about the quality of the car than the buyers, and because of that the buyers will underprice the high quality cars, which the sellers will remove because they’re underpriced, and the market will be full of low quality cars. The analogy with healthcare is partial. Buyers of health insurance do know more about their health status than sellers – to be clear, this is relevant in the individual market (IM), not employer sponsored insurance (ESI). Regardless, asymmetric information is not unique to healthcare. For example, drivers know much more about their driving abilities than sellers of car insurance. The insurance for automobile collision hasn’t gone into a death spiral.
However, the information can be symmetric. The sellers of health insurance can roughly risk rate the buyers by asking questions about their health, recent visits to doctors, family history and tobacco and alcohol use. What historically led to adverse selection – the sick disproportionately purchasing health insurance – wasn’t the lemons problem per se but that insurers weren’t allowed to risk rate.
SJ: That’s an early counterintuitive fact. What you’re saying is that community rating – charging everyone the same premium regardless of their risk is what led to adverse selection. If I may restate, community rating made it more likely that sick, rather than healthy people, purchased insurance. Or to put it bluntly, the prescription to prevent adverse selection caused adverse selection. This was a policy own goal. I must admit it doesn’t make sense.
MVP: The reason it doesn’t make sense is because we forget there are tradeoffs. So, when you prevent the insurer from risk rating what do they do?
SJ: They raise the premiums for everyone to compensate.
MVP: What effect does that have?
SJ: It makes insurance more expensive for the healthy.
MVP: Sure, but what effect does that have?
SJ: The healthy are less likely to buy insurance.
MVP: Right. And not just that, people with co-morbidities are more likely to buy insurance. You can see that community rating entices the high-risk and discourages the low-risk. What’s that called?
SJ: Adverse selection.
MVP: And in the IM, it’s more significant than people think. We found that when insurers changed to community rating, while the probability that the high-risk were covered increased, it was overwhelmed by the probability that the low-risk, the healthy, didn’t buy insurance. This is not good for the IM. Another example I have – one of my PhD students has studied the Medigap insurance. She found that adverse selection is greater when there’s community rating than risk rating.
Insurers are good at risk rating. The only thing they miss is when a couple is planning to start a family. As you can imagine, the intent for pregnancy can’t be captured in a questionnaire – you can plausibly deny it. Aside from that, insurers can adequately risk rate – so the lemons problem in healthcare is contrived.
SJ: I can see how one can be poetic with the truth with pregnancy. But this does mean that you endorse risk rating. This means that the sick pay more, a lot more. My residual liberal sentiments can’t abide that. What’s your prescription so that the high-risk aren’t financially fleeced?
MVP: If insurers are permitted to risk rate, the premiums for the healthy will fall and more healthy people will voluntarily buy insurance – let’s agree that’s a healthy outcome. The premiums for the high-risk will surely rise. My proposal– let the insurers risk rate but let us subsidize the premiums for the high-risk.
Money must come from somewhere. What is happening now is that the low-risk are subsidizing the high-risk. Make no mistake – this is a transfer of wealth, but not a very equitable transfer of wealth. In essence, community rating is an excise tax on the low-risk.
SJ: You just used the “T” word which, politically, is more offensive than the “F” word. It seems that you don’t want the high-risk to be thrown under the bus. What you’re suggesting is that the high-risk should be subsidized explicitly by general taxation.
MVP: Taxation is a political problem. Politicians favor hidden taxes over explicit taxes – excise tax on the low-risk, imposed by community rating, is not counted as tax and does not show up on the budget. Even the low-risks are likely to blame the insurers, not the regulators, for the high premiums. The high-risk should be helped by general taxes. The market can’t function without taxation of some form.
SJ: A related question – how significant is the problem of high-risk purchasing insurance in the individual market?
MVP: The numbers quoted about the prevalence of high-risk vary and some say it’s as low as 1 %, but I believe a more correct number is 4 %.
SJ: Many believe that the problem of pre-existing conditions is much higher – around 30 %.
MVP: Most people can’t be “high-risk”, most must be average or below-average risk, unless the country is a perverse Lake Wobegon, where everyone is above-average. This is common sense. In fact, the distribution of risk is skewed to the right, meaning that the average is driven by relatively few high-risks. The probability that someone becomes high-risk precisely when they buy insurance should be even lower than the prevalence of the high-risk – this is simple probability. Yes, we are still talking about many thousands of people and we must help these people, but you do not need drastic changes in the market and heavy regulations to help this small group. Specialized interventions targeted at the small minority of high-risk would be more efficient, more transparent and more feasible.
SJ: Does what you’ve just said not contradict the 80:20 rule – that 80 % of healthcare costs are incurred by 20 % of people? Surely, the high-risk must be at least 20 %.
MVP: Ok, I can see the confusion.
Let’s first define “risk” in insurance parlance. Risk is the expected medical spending. High-risk have a higher expected medical spending and the low-risk have a lower expected medical spending.
The confusion lies in the definition of high-risk. By high-risk, I do not mean low-risk people who have a medical event and then become a higher risk. I mean people who are high-risk when they first purchase insurance – the former is far more common than the latter and is often mistaken for the latter.
Though there are some real cases where insurers misbehave with the low-risk who become high-risk, by dropping coverage, this problem has been exaggerated and can be easily mitigated by guaranteed renewability, which was a common feature in the IM even before it became mandated by regulations.
Thus, the common misunderstanding leads to confusion about the 80-20 rule which is that 80 % of healthcare spending is on 20 % of the population. We confuse this for the magnitude of the problem of the high-risk. Rather, this number refers to the spending distribution of the low-risk who become high-risk in their lifetime. It’s important to maintain this distinction. The major purpose of insurance is financial protection for uncertain events – i.e. the low-risk turning to high-risk. Insurance achieves this by pooling risk, and pooling risk means pooling the people who have similar risks of an uncertain future. Pooling risk pools the unknown. Pooling risk does not work if you pool people with a known future (high-risk) with people with an uncertain future (low-risk).
To emphasize, there are truly more low-risks and fewer high-risks than suggested by the 80-20 rule. This rule merely tells you that even if you start off with a group of people with same (low) risk, the future spending is unevenly distributed.
SJ: This is a very nuanced distinction and I can see how unfettered zeal can conflate the two groups of risk. If I may summarize. What you’re saying is that the market should be allowed to work with risk – the known unknowns (to borrow a Rumsfeldian aphorism) – and the government should help with certainty, the high risk, the known knowns.
I’m going to bring up another point you mentioned in our class, something which stuck with me – see I was paying attention! You said that one of the reasons entities don’t discriminate, and I think you were quoting Milton Friedman, is that the costs of obtaining information to discriminate are so prohibitive that the benefits of discrimination aren’t worth the transaction costs of getting the information to discriminate. Surely, the insurers can’t actuarially price (perfectly risk rate) the high-risk even if they wanted to.
MVP: No they can’t perfectly risk rate, that’s correct. I did a study with David Asch where we asked insurers if they would use genetic information if available. Most said they won’t. Why do you think that is?
SJ: Well, it’s not from the goodness of their hearts. I suspect the added information has diminishing returns.
MVP: That’s certainly one reason. Insurers don’t feel that genetic information adds much more to family history, and it’s easy getting family history. The other reason is that insurers feel that if they mandated genetic testing, people would be even less inclined to buy insurance. Remember, insurers need people buying insurance to survive.
SJ: So, in the individual market there’s a tradeoff between healthy voluntarily buying insurance and community rating?
MVP: Yes, there’s a tradeoff – community rating in the individual market increased premiums making it less likely that healthy purchased insurance, and more likely that the high-risk bought insurance, but the net effect, and this has been empirically shown repeatedly, is that the net uninsured increased.
Once you started community ratings you ran into other problems. Insurers avoided or underserved high-risks. Insurers tried gaming the system with clever insurance design and regulators responded with more regulations. Rules were put in place to risk-adjust revenues insurers collected. Risk adjustments are imperfect. One bad policy led to several regulations.
SJ: This sounds like some game theory going on, like a game of chicken, or something, between insurers and regulators. And we threw bad regulations to chase bad regulations.
You once said that blaming the individual market for high premiums is like blaming Cinderella for poor fashion. Two questions. Why, other than community rating, is the premium so high in the individual market? And does that mean ESI is one of the ugly stepsisters?
MVP: The premiums are high for many reasons. The administrative costs in the individual market are high. I did the calculations once. The administrative costs, as a percentage of claims, are 27 % for group size of 1-20, 12 % for group size of 100-500 and 4-6 % for group size exceeding 10, 000. This is partly because the selling costs for insurance in the individual market are high.
But taking the Cinderella analogy further, the ESI is like a spoilt stepsister because of the tax subsidies. My wife and I receive a tax subsidy of $10, 000, and my administrative assistant, in a much lower income bracket, doesn’t have the same luxury. This is moral inversion. The tax subsidy for ESI is regressive taxation. The individual market can’t compete with that.
Although politically unpopular, the tax subsidies of the ESI should be abolished to level the playing field. I think it’ll make some people choose insurance from the individual market, but overall I don’t think the ESI will be destabilized.
SJ: Continuing with the Cinderella analogy, Cinderella had many redeeming qualities (not related to fashion). Does the individual market have redeeming qualities?
MVP: First, I must emphasize that the markets for insurance for non-poor are easy to mess up.
The individual market can have many redeeming features. For one, there is choice about the level of coverage, what’s covered and the amount of deductible one has to pay. Not everyone has the same preferences for these. Once the insurer set a premium, as long as the premiums were paid regularly, the insurer didn’t increase the premium just because the risk profile changed because of a new disorder. This feature is known as “guaranteed renewability.”
SJ: Can you expand on the second point?
MVP: “Risk reclassification” is when the low-risk have an unexpected medical event changing their risk profile. What then happens is that the insurer drops coverage or raises their premium. The risk of risk reclassification is when there is annual risk-rating of health insurance. Fortunately, most insurers in the individual market before the ACA avoided this problem by “guaranteed renewability” where the insurer didn’t raise the premiums of people who started and remained with the individual market so long, as they kept paying their premiums.
Paradoxically, those at-risk of risk reclassification were people who lost their employer-based coverage and moved to the individual market as high-risks. Even more paradoxically, it was the insurers in the individual market who were blamed for not picking up the slack, rather than the job-based insurers for creating the slack.
The knee jerk policy reaction to risk-reclassification has been community rating which, as I’ve alluded to, is the worst possible way to do a good thing. A better policy prescription, which I believe is in the Ryan plan, is to allow people who leave the employer market to the individual market, to carry their premiums with them.
About the Author
Saurabh Jha is a radiologist and contributing editor to THCB. He knows far less about economics than he thinks he knows, and he thinks he knows far too little. He can be reached on Twitter @RogueRad
Categories: OIG Advisory Opinions
The Healthcare Blog - Fri, 01/20/2017 - 12:18
Obamacare, at least in its original incarnation, is on its way out. The pressing question now is whether “art of the deal” health care will remain.
“The Art of the Deal” is the title of the 1987 best-seller that catapulted real estate developer Donald Trump to national prominence. Although Trump has denounced Obamacare as a “disaster,” and Republicans have voted for its repeal, their attacks have focused mostly on sections of the Affordable Care Act that expanded access to health insurance.
At least as important, however, are the lesser-known parts of the law that have let Medicare use its financial clout to push for better, safer, and less expensive medical care. In Trump’s terminology, it’s been a “terrific deal” for anyone who’s seen a doctor or gone into the hospital, saving a staggering 125,000 lives and $28 billion in just four years, according to the Department of Health and Human Services.
Unfortunately, Trump’s pick as HHS secretary, orthopedic surgeon and Georgia Republican Representative Tom Price, appears at best a lukewarm supporter of this approach. Will Trump protect Americans’ great health care deal? Or might Price be the first cabinet secretary to hear, “You’re fired!”?
The path that Medicare is following, linking provider payments to patient safety and care quality goals, began in the private sector in the late 1980s as the “buy right” strategy developed by health policy activist Walter McClure. It gained a toehold in government under the George W. Bush administration, and flourished when rebranded as “value-based purchasing” under President Obama.
Value-based care initiatives in the ACA include reducing payments for preventable hospitalizations, establishing mandatory reporting of physician quality, and payment arrangements that emphasize care coordination. Those kinds of initiatives have garnered widespread bipartisan support, albeit more vocally outside Washington.
A few years ago, Price and I were keynote speakers at a conference sponsored by a conservative Florida business group. He was applauded for denouncing the ACA; I was applauded for praising it. Price spoke about government-sponsored health insurance, while I laid out the law’s impact on the cost and quality of care.
Business leaders appreciate that HHS, the largest health care purchaser in the world, exerts leverage the private sector alone can only dream about. Or as Trump put it in his book, “Leverage: don’t make deals without it.”
Value-based purchasing saves lives and money. According to the Institute of Medicine, almost one-third of all health care expenditures are unnecessary. In the private sector, which is seeking to move in the same direction as the ACA, that magnitude of savings on health costs can keep employers from moving jobs to cheaper venues overseas.
Most physician organizations now back value-based purchasing, understanding that accountability for quality and safety is the right path to controlling spending — both morally and clinically. (It doesn’t hurt that one alternative to “buy right” is “buy cheap,” meaning cutting physician payments across the board.) Most physician groups supported the 2015 Medicare Access and CHIP Reauthorization Act (MACRA) that made value-based purchasing Medicare’s mainstream payment methodology, and the law passed Congress with overwhelming bipartisan support.
Although some MACRA provisions went into effect on Jan. 1, 2017, implementing them can be slowed and future requirements diluted without strong support from HHS. Price, though he voted for MACRA, also belongs to a far-right physician group that seems to want to shove third-party purchasers, government or private, out of the picture. Without their support, scared and sick patients will be reluctant to challenge their doctors. Making Americans pay more out-of-pocket to become better “consumers,” as Price and other Republicans advocate, doesn’t change that equation.
Trump trumpets his ability to “think big,” but Trumpcare for health insurance doesn’t go far enough. America spent $3.2 trillion on health care in 2015, with $642 billion of that spent by Medicare. Trump needs to tell Price that the far right isn’t right, and then protect the leverage that’s giving every patient, and every doctor trying to do the right thing, a terrific deal.
Michael L. Millenson is president of Health Quality Advisors LLC in Highland Park, Ill., an adjunct associate professor of medicine at Northwestern University’s Feinberg School of Medicine, and author of “Demanding Medical Excellence: Doctors and Accountability in the Information Age.”
Categories: OIG Advisory Opinions
The Healthcare Blog - Thu, 01/19/2017 - 11:24
As DC readies for the Inaugural fest, the four-hour confirmation hearing for President-elect Trump’s nominee for HHS Secretary, Tom Price, an orthopedic surgeon and six term House of Representatives’ member from the Atlanta suburbs, was the focus yesterday. For healthcare industry watchers, the contentious hearing surfaced several themes likely to mark the new administration’s approach to its health policies.
Key takeaways from yesterday:
Party posturing: The orchestration of each party’s messaging was evident and in stark contrast. Democrats on the Senate’s Health, Education, Labor and Pensions (HELP) committee sought to discredit the nominee as a tee-party ideolog whose views are out of touch with mainstream views about the health system. Republicans sought to reinforce “Dr. Price” pedigree as a clinician whose clinical and political experience equipped him well to lead the massive HHS machinery. Going in, the Democratic spin machine sought to paint Price’ as a corrupt politician who’d made $300,000 worth of stock trades in drug and device companies while legislating in their favor. The Republican PR machine sought to mute their attacks, noting the candidate’s trades had been cleared by the Office of Government Ethics.
Repeal and Replace: Democrats probed for specifics of the replacement for the Affordable Care Act, with particular attention to Price’ solution for the 20,000,000 newly insured thru the exchanges and Medicaid expansion. The candidate’s “Empowering Patients First” plan, introduced in 2015, served as the focus for his antagonists: it proposes the use of tax credits of $900-$3000 to permit individuals to buy private coverage, state-administered risk pools for those uninsurable, premium support for Medicare, health savings accounts with a one-time $1000 incentive and easing of restriction on insurers to allow them to sell cheaper policies. On the GOP side, the ACA was called a “disaster” due to insurance premium hikes and growing frustration of physicians. The nominee repeated “access to affordable coverage” and “giving patients more choices of plans and physicians” as his guiding principles while avoiding specifics about how President-elect Trump’s campaign promises to insure everyone and avoid Medicare cuts would be realized.
Insurance market reforms: Price stated that universal access to affordable insurance coverage is the aim and regulatory relief for insurers in the individual and small group insurance markets as keys. Dem’s probed the distinction between access and actual coverage, noting that last week’s Congressional Budget Office’ report estimated a spike in the numbers who will go without coverage in coming years if “replace” doesn’t achieve current levels of coverage. Frequently, Price criticized the ACA for limiting access to physicians by allowing insurers to use narrow networks to premium costs. He noted that one third of physicians refuse Medicaid coverage and one-eighth refuse Medicare coverage due to reimbursement rates and administrative complexities involved in participation, suggesting these were the direct result of the ACA.
Drug prices: The costs of drugs, and their well-publicized price hikes, drew barbs from Dems who noted the nominee’s plan was mute on drug prices. They asked specifically for Price to go on-record about allowing Medicare to contract directly with drug manufacturers instead of through private insurers and PBMs. The nominee said he viewed market forces as a solution, suggesting (inaccurately) that generics reflected the market’s constraint on drug prices.
Meaningful use: Only one committee member referenced HIT and meaningful use, Sen. Tim Cassidy (R-LA) a gastroenterologist who assailed the hassle and unnecessary costs associated with electronic health records. The nominee agreed, while conceding that “interoperability is the goal..and it’s good for patients”.
Medicaid: Questioning by Democratic panelists sought to discern the nominee’s views about its expansion and funding. Price offered innovation in the way Indiana’s plan was structured as a promising start whereby states could be granted more flexibility, and the long-term forecast for Medicaid expansion and funding was not addressed.
Value-based payment programs: Value-based programs were referenced three times in passing reference. Sen. Baldwin (D-WI) acknowledged the prevalence of ACOs as an innovation she hoped would continue, and two GOP panelists, both clinicians (Paul and Cassidy), questioned the value of demonstrations sponsored by the Centers for Medicare and Medicaid Innovation (CMMI). Price offered that innovation in the health system is needed and CMMI’s mandates were counterproductive. He noted that bundled payments per se were promising, but dictates from Medicare to physicians about the prostheses they could use discounted their value. (CMS does not dictate the prostheses).
Rural health: GOP committee members Murkowski (AK) and Enzi (WY) inquired about the nominee’s views about protection for rural hospitals, prevalent in their states. The nominee expressed understanding pledging that federal regulatory constraints could be eased to facilitate their survival.
And along the way, the panelists on each side opined on their favorite targets: Dems assailed the drug companies, lack of GOP attention to climate change as a health factor, and inconsistencies between the Trump, Ryan and Price plans. Republicans attacked the credibility of the CBO’s recent forecasts predicting costs would increase post-replace adding to the deficit, the need for medical malpractice as part of the replacement and the need for less regulation.
The confirmation hearing was a media event: it’s unlikely votes on either side changed and virtually certain that Congressman Price will be the next HHS Secretary due to the GOP’s majority on the committee (11-10) and control in the Senate (52-48). Notwithstanding several assertions requiring fact-checking, Dr. Price was poised and remained on message: ‘give patients more choices, let physicians practice without constraint, let markets work, and manage spending aggressively’.
The winners in the Price scheme for ACA replacement are the insurers who’ll see more flexibility in their plan designs, and physicians who’ll have an active supporter in the top job. Those likely to be challenged are hospitals, where commentary was scant in the hearing, states, who’ll shoulder more of the responsibility for the new normal, and individuals newly insured through the ACA who are anxious.
More to come. Stay tuned.
Categories: OIG Advisory Opinions
The Healthcare Blog - Thu, 01/19/2017 - 11:06
The short version of Vox’s Sarah Skiff on “Why Republican disarray on health care doesn’t doom repeal efforts” would read something like: “It always looks this way in the throes of preparing major legislation. Remember how wild and confusing it was when the Democrats were trying to put together healthcare reform in 2009? Joe Lieberman was insisting on a public option, ‘pro-life’ Democrats were insisting that anti-abortion language be written in? Just because it’s chaotic doesn’t mean it won’t get anywhere.”
She’s right, of course — and she’s wrong in a significant way: In 2009 Congress was debating different policy approaches and the tradeoffs involved. There was never a question whether what they were attempting was possible, just whether it was possible to find a political compromise that could garner enough votes to pass. This meant that it was reasonably predictable that they would come up with something they could call “healthcare reform.”
Congressional Republicans are up a different creek right now: What they are attempting is mathematically impossible. The things they and President Trump have promised do not add up. Literally. Their problem is arithmetic. Getting more people covered, with better coverage, with lower deductibles and out-of-pocket costs — all that will cost more money, lots of it. Getting rid of the tax penalties for not having insurance (the “individual mandate” that is the most-hated part of Obamacare) and the taxes built into Obamacare on wealthy people and on segments of the healthcare industry — all these will cost the government revenue, the very revenue it would need to pay for the better coverage of more people. All this while they aim to cut taxes and lower the deficit. And of course they have on every Holy Book within reach that they will repeal Obamacare, so they can’t just leave it in place. This means it is highly unpredictable what they will come up with, or that they will come up with anything at all.
They are indeed in a place of chaos. But it’s not, as Skiff would have it, the usual chaos of constructing complex legislation. This is unusual, special chaos. In a class all it’s own. Really amazing chaos, chaos like you wouldn’t believe.
This is the era of smoke, sand and fog. If there were a more “high variance” time in healthcare in these last 37 years that I’ve been covering it, I don’t know what it would be. I suspect we will continue in a state of confusion and chaos for some time now, maybe several years, with two caveats:
- The bounds of possibility will narrow as we move forward. Right now they seem to include everything from a full single payer system to complete abandonment of the ACA with no replacement at all, considering the wide gap between Trump’s expansive but vague promises; the Congressional Republicans’ conservative principles of smaller government, lower taxes, and lower deficits; and the rather hard, cold problem of arithmetic. As Congress begins to try to actually shape legislation, we will begin to get a better picture. I suspect, though, that between the difficulty of the problem (both politically and economically) and the fact that the new President’s negotiating style relies on lobbing grenades to continually shake things up, taking abrupt turns, and wrong-footing one’s counterparties to get the best deal, I suspect that the process of getting to final legislation will be considerably more protracted and chaotic than anyone hopes for.
- Importantly, the underlying trends of healthcare in demographics, economics, and technology will still hold. The push on the industry to provide more value for less is not rooted only in Medicare and Medicaid and other government-mediated healthcare. In fact, the strongest movers have been the self-funded employers, pension plans, and unions willing to get radical in searching for real value for their employees and their bottom lines.
Republican legislative initiatives and executive actions may bring us more chaos or less, faster or slower, but they are unlikely to stop the massive evolution of healthcare forward as its customers demand more value and the industry grudgingly re-arranges itself to provide it.
Categories: OIG Advisory Opinions
The Healthcare Blog - Wed, 01/18/2017 - 13:52
The Senate has taken its first step to repeal Obamacare. By a final party line vote of 51-48 the Senate approved a budget resolution setting the stage for rolling back much of the Affordable Care Act.
Consternation reigns among Democrats who have closed ranks and promise catastrophe.
Bernie Sanders, the top democrat to lead the resistance said “I think it’s important for this country to know this was not a usual thing, this is a day which lays the groundwork for 30 million people to be thrown off their health insurance… And if that happens, many of these people will die.”
And so it is that a complex problem comes to be painted in black and white. To oppose Obamacare is to be for a medical holocaust. Genghis Khan reincarnated would be unable to wreak a devastation as complete as repeal of Obamacare.
The insidious fact is that this simple phraseology is used as a cudgel by those who well know that the tentacles of a program as complex as Obamacare defies such a simple duality. Understanding the effect of Obamacare is to understand how politicians flapping their wings in Washington DC creates a hurricane in California.
Consider this news item in the Los Angeles times from January 6th.
“The University of California exploits a visa loophole to move tech jobs to India”
The column relates a story of the University of California (UCSF) outsourcing 20% of its IT jobs to India. The thrust of the column is to discuss misuse of the H1B program meant to allow American companies to hire foreign workers with unique talents. As alleged, the H1B program is misused by companies who seek to replace equivalent american talent with cheaper labor from abroad. In this case, UCSF struggling with a shortfall of $42 million dollars on revenue of $3.4 billion looked to the IT department to achieve budget neutrality. We should be happy, I imagine, that software developers were chosen over nurses, physicians, scribes or medical assistants.
Regardless, what should pique everyone’s interest is not the potential misuse of the H1B program, but the reason UCSF finds itself in this predicament. The red ink UCSF finds itself awash in is partially a result of expansion of Medi-Cal, California’s Medicaid program. Expansion of Medicaid lies at the very heart of expanded coverage through Medicaid nationally. Of the 20 million people that have gained coverage after the Affordable Care Act, 14.5 million gained coverage through Medicaid or CHIP (Children’s insurance). There are many that crow about the expanded coverage, but as UCSF found out, Medicaid expansion is no panacea for providers. The problem lies in reimbursement – Medi-Cal reimburses <> $24 for a routine established follow up visit (99213) I am, in general, skeptical of estimates from hospital bosses, but given this level of reimbursement, I can believe their estimate in this case that each Medical patient generates a loss of 40 cents for every dollar spent on treatment.
This is not news to providers that have long understood the financial challenges of delivering care to Medicaid patients. In fact, I grow more certain every day that there are braying donkeys that have more to add to the debate on health care than those who discuss health care coverage without discussing how to pay for said coverage. So while I share the concern of those worried about the vague Republican plan that will replace Obamacare, I am flummoxed by the lack of concern about the Left’s Medicaid-will-solve-everything-solution. If I was forced to sell this as a solution I would be using incredibly fine print. But the Democrats, no doubt emboldened by the massacre predicted on November 8th, used their standard bearer – the most qualified human ever to run for the -office of the President and wear a pant suit – and the hallowed pages of the New England Journal of Medicine to make the case for Medicaid expansion to further expand coverage. The Medi-Cal model is simply financially untenable. UCSF may be able maneuver by replacing John from San Jose with Raj from Mumbai. Your local primary care practitioner has considerably fewer options.
Nuance and granularity purposefully escapes politicians intent on marshaling people to a side. In the health care debate, ideology rules. It is easier to paint those opposed to a broken model of expanded health care coverage as soulless ignorant deplorables willing to let millions die on the streets than answer real questions about how to actually deliver healthcare. For many providers, the real disaster would not be repeal of Obamacare, but a failure to evolve beyond Obamacare.
Categories: OIG Advisory Opinions
The Healthcare Blog - Mon, 01/16/2017 - 12:07
From a political perspective, House Speaker Paul Ryan’s trashing of ObamaCare (a.k.a. the Affordable Care Act or ACC) during CNN’s recent town hall meeting probably was quite effective. One would, of course, not expect a staunch political opponent of ObamaCare to render a “fair and balanced” picture of the program, to plagiarize a Fox News mantra. Not surprisingly, the Speaker dwelt solely on some serious shortcomings of ObamaCare that are by now well known among the cognoscenti.
The question now is precisely what would replace ObamaCare, as Republicans fall over one another in their haste to repeal it. Enumerating principles, as has been done in sundry tracts in recent years and is done once again in the House of Representatives’ “A Better Way”, is no longer enough. Yet even at this time of imminent repeal of ObamaCare, the crucial details of any replacement plan remain a mystery. Surely the time has come to let the cat out of the bag.
During the town hall meeting, for example, Speaker Ryan proposed the general outline of a system that would rely on high risk pools for Americans with pre-existing medical conditions, coupled with a market for individually purchased insurance policies whose modus operandi was largely unspecified. What would be the parameters of the high risk pools? Granted, it would have been difficult to be much more specific on this point than the Speaker was in a town hall meeting. But it would certainly have been helpful had there been a website to which he could have directed his audience for the specifics of a replacement plan built on a Republican consensus. To my knowledge, there is no such website.
Risk pools have long been the workhorse of Republican rhetoric on health reform. One can think of such a pool as just another health insurance company selling insurance in the individual market for such policies to relatively sick applicants for insurance. To assess the merits of the coverage it sells, one surely would want to know:
- What would be the benefit package being offered? Would it have exclusions? Would it have tight upper dollar limits on coverage? What deductibles would patients have to pay, what coinsurance, and what would be their maximum annual risk exposure in dollar term? In this regard, the history of high risk pools in this country is hardly reassuring, as can be inferred from a recent analysis by Jean P. Hall. Would it not be utterly ironic if, after trashing ObamaCare for six years over its high deductibles — a point the Speaker drove home once again during the town hall meeting – the coverage sold by the high risk pools he now proposes had similarly high deductibles or even higher ones? Yet one cannot rule that out, and so it certainly is a point worth watching.
- What would be the criteria for eligibility to purchase insurance from the high risk pool? Precisely how would “high risk” be defined operationally?
- What premiums, net of any public subsidy toward that premium, would entrants of into the pool have to pay? Would these premiums related to the disposable income of applicants? If so, how?
One would also want to know, of course, precisely how the individual market for Americans not in the high risk pools would be structured. Would premiums for that segment of the population once again be medically underwritten, as they were pre-ACA? Could insurers structure the benefit package of policies as they saw fit, given the market demand for insurance they face?
And what would happen if an insured had chosen a cheap but shallow health insurance policy and then fall seriously ill? Who would pay for critically needed medical services or products—e.g. an expensive specialty drug — not covered by that cheap policy, if the patient’s own resources were inadequate? Would we go back to the pin-the-tail-on-the-donkey financing by which hospitals sought to recover their cost of uncompensated care from paying patients in pre-ACA days? Or would patients just be denied these services and products altogether, at the risk of avoidable death?
To my knowledge, all of these crucial details have yet to be fleshed out if the ACA is to be repealed and instantly replaced with an alternative. Technically, what Americans have been offered so far in this regard might be called a pig in a poke.
Frankly, I find it remarkable and sad that after six years of trashing ObamaCare Republicans now find themselves without a consensus on a clearly specified replacement to which voters and policy analysts could react. Where have their policy wonks and the politicians they advise been in the meantime? Why had they not long ago agreed on a “replace” and given voters the courtesy of some details, to assess its merits? It is an odd approach to public policy and one not meriting much respect.
Now it turns out that if premiums in the ACA markets continue to rise at double digit rates, and if more and more relatively healthier individuals are thus dissuaded from purchasing insurance on those markets, then the remaining risk pools in those marketplaces will slouch more and more toward high risk pools. Here, however, we would know the benefit package, we would know eligibility criteria and we would know on what financial terms individuals could in these high risk pools, because all of it has been completely specified in the ACA legislation. One certainly could work with this set up and just rename it.
The question then is what then would happen with Americans who eschewed purchasing insurance or bought it outside the ACA market places? Would they remain uninsured and have access to a market structured as it was pre-ACA, with medical underwriting, frequent denial of coverage, and highly variable benefit packages?
For high income people who can afford any health insurance policy, or for those who are securely covered at their place of work, the forthcoming “repeal and replace” drama in Congress will be just that – a basically incomprehensible spectacle played out on cable TV news that luckily does not touch their own lives. The drama will be incomprehensible, because the task of health reform is technical and the television media are just not intellectually equipped to translate such detail into language the viewing public can understand, even though that could be done with some thought.
For the still uninsured or those now covered on the ACA market places, however, the coming year will be a time of high anxiety, with a quite uncertain impact on their own lives. They will learn precisely what is meant by the word “terrific,” the attribute President-elect Trump had ascribed to the insurance coverage by which he had planned to replace ObamaCare. It remains to be seen how pleased these Americans will be by that “terrific” replacement.
Categories: OIG Advisory Opinions
The Healthcare Blog - Thu, 01/12/2017 - 17:37
We all fear that phone call. A medical report turns out the wrong way and life may never be the same. When that call arrives we all have the same needs: A doctor who cares, a place to go for treatment and the finances to afford what’s needed. Starting on January 20th, some of my patients will join the 20 million whose lifeline to those fundamental needs becomes jeopardized.
One of my patients facing this threat lost his job and health insurance during the 2008 recession. Because he’s a diabetic and has a special needs son, no insurance company would sell his family a policy. Why would they? Diabetics and others with serious illnesses pose high risks for future health expenses. Insurance companies make money by avoiding such risk. After exhausting all the options, he sweated out 18 months with no coverage. Finally, the roll-out of the California Exchange, funded by the Affordable Care Act (ACA), allowed him to buy an Anthem Blue Cross policy for his family.
Do we really want millions of our fellow Americans to relive those nightmares? We all benefit from the ACA’s fundamental commitment: That everyone deserves access to healthcare regardless of their ability to pay. The policies guided by this principle moved us toward the achievement of universal coverage without changing the existing care of the majority of working families with employer based plans nor those with self-funded coverage.
Two key features of the ACA make the difference for patients like mine. The first, subsidized insurance exchanges, allows them to get coverage at prices negotiated for all. This provides economies of scale in pricing and spreads the risks over a larger group, reducing the costs for higher risk individuals. The insurance premiums are subsidized by income to keep them affordable.
The second key feature of the ACA, and the most controversial, is the individual mandate. This provision requires individuals to purchase insurance or pay a fine. Opponents consider the mandate an infringement on individuals’ freedom to decline coverage. Despite the superficial appeal of the argument, no one in the United States actually declines coverage. When uninsured individuals arrive in an emergency room with a severe illness or injury they receive treatment and the costs get passed on to the insured and to taxpayers. Such “uninsured” individuals are free riders. They enjoy catastrophic coverage paid for by others.
Additionally, many free riders are young and healthy. Their departure from the system, if allowed by a repeal of the mandate, would leave a sicker, costly population that would likely face unsustainable increases in premium costs. We don’t allow individuals to opt out of auto insurance because it affects the public welfare. Similarly, we should not allow free riders to opt out of health insurance and undermine the financial stability of the health system.
The ACA isn’t perfect but almost everyone gets a fair chance at coverage. Under the ACA the percentage of non-elderly uninsured fell from 18% to 10.5% as 20 million gained coverage. Vice-President Elect Pence recently called for “an orderly transition…to a market based healthcare economy.” The ACA includes market mechanisms, such as the markets for health plans on the exchanges and the markets for providers once insurance is purchased. A purely free market approach, as the Vice-President seems to support, could never reach the level of coverage achieved by the ACA. If markets are completely free, they price out individuals who lack sufficient resources. Healthcare costs are so high that cutting off help from the ACA would deprive millions of needed coverage.
As President-Elect Trump considers healthcare, he may want to consider the words of Martin Luther King, whose holiday precedes the inauguration by just four days. “The arc of the moral universe is long, but it bends toward justice.” Part of that arc includes our social justice system and the safety net that protects patients like mine. Americans never have made a commitment to public welfare and then reneged on it. Despite their party’s opposition to the creation of Social Security and Medicare, incoming Republican administrations never threatened to withdraw existing commitments. Instead, they supported bipartisan efforts to improve the programs. The Trump administration should do no less.
Members of the Trump administration and their congressional allies also should consider that most of them and their family members will someday also receive that call. They should not threaten to deprive fellow Americans of the healthcare security they would want for themselves.
The arc of justice in healthcare has been long indeed. We will soon learn whether the Trump administration will choose to defer the progress of the arc of justice under the ACA. In the long run they cannot stop it.
<em>Daniel Stone, MD is the director of a multi-specialty group in Los Angeles.</em>
Categories: OIG Advisory Opinions
The Healthcare Blog - Thu, 01/12/2017 - 00:38
Meet Edith Stowe.
An 83-year-old resident of the District of Columbia, Ms. Stowe has made a routine out of her two to three monthly trips to MedStar Health, a Maryland-based nonprofit health system.
After all, her life literally depends on it. Ms. Stowe has chronic kidney failure, so her 5-mile trips to the hospital aren’t a luxury. She absolutely needs them.
Stowe doesn’t own a car, and taking the bus to get life-critical care isn’t always reliable–or even desirable for an aged patient with a chronic disease.
That’s how Uber enters the frame.
Beginning earlier this year, MedStar has integrated the ride-hailing giant into its platform, allowing patients to easily schedule rides to and from critical appointments. MedStar’s patient advocates will arrange rides for Medicaid patients who don’t have access to its website or app-capable smartphones.
MedStar’s partnership with Uber made headlines this August when The Atlantic originally told Ms. Stowe’s story.
That article’s takeaway was simple: The ride-hailing revolution pioneered by Uber and Lyft poses to give mobility—and hence access to care—to millions of home-bound Americans suffering from chronic disease.
That’s not an exaggeration.
After all, mobility and healthcare are intimately intertwined. Patients relying on public transit are more likely to be late for, or miss appointments entirely, than those with reliable access to a car, according to public studies. And those missed appointments add up. The Harvard Business Review points to one survey estimating that in 2006 Americans missed 900 million medical appointments at a cost of more than $150 billion. In the last decade, it’s doubtful those costs have gone anywhere but up, making the problem even more acute.
Importantly, many other health-focused startups and technology-minded hospitals have seized on the trend, promising to eat into a clear source of waste in the already-wasteful American health system.
Startups like Circulation have built their new business models around partnering with Uber to make it easier for patients just like Ms. Stowe to get to their doctors.
But I’d argue the healthcare trend posed by Uber and Lyft goes beyond merely logistics. Instead, the real transformation hitting medicine isn’t merely a transportation revolution but a broader revolution in consumer demand.
The on-demand economy, which Uber and Lyft have come to typify during this mobile-driven tech boom, has created a new breed of healthcare consumers who demand care with increasing disregard for place or time.
Put simply, they want their care where and when they want it. They also increasingly expect transparent prices, little to no wait times and mobile digital tools to make appointments, track their health and access care, according to a 2016 Deloitte survey of health care consumers.
Some healthcare players get it. Some still don’t.
Oscar, which markets itself as “a new kind of health insurance company,” aims to transform people’s smartphones into hubs of their personal health. Currently operating in California, Texas and New York, Oscar uses an intuitive, accessible mobile app that allows a patient to enter a health problem—say your kid has a bad cough, or you need a physical—and get a callback from a doctor within 10 minutes, according to the company. One anonymous patient on the company’s website claims he or she received a prescription within 30 minutes of entering their malady using the app.
Another insurance startup, Clover Health, is hoping its data-driven approach it can rebuild healthcare for seniors from the ground up. Clover is trying to use data analysis and preventive care to improve healthcare for seniors and to give customers who use private versions of Medicare a cheaper option.
The company’s software is supposed to recognize when patients need medical treatment and then preventively intervene in their care. In fact, it can often even play “quarterback” for all the medical records and interventions a senior citizen has and help doctors make decisions. For example, it even notices when a patient doesn’t refill a prescription and makes the doctor aware that the patient may not be taking a medicine.
Then there’sOne Medical Group , a concierge medical practice that promises high-quality care at an affordable rate and reimagines the customer experience so that it’s so much more user-friendly.
The companyoversees a network of 250-plus primary care specialists in 40 US cities, enabling patients to book last-minute appointments on their phones, get certain prescriptions via the One Medical app, and access health records online. Itadded 80,000 new patients in 2015 and brought in a number of enterprise clients.
Companies like mine, HealthEdge—a Burlington, Massachusetts-based healthcare payor-focused software company–saw this trend coming a decade ago, and we’ve been prepping our health insurer clients accordingly.
To be sure, healthcare is different animal from a lot of industries. The regulatory barriers to entry slow change, for better and worse, often insulating some healthcare players from the types of competitive pressures most companies face.
But private health players are not insulated from the market’s changing demands in the long-run.
Like every other sector of the economy already transformed by the on-demand revolution—from take-out and groceries to rental cars, used car buying, beauty, shaving, laundry and just retail in general—the market will reward the innovators who respond nimbly to consumer caprice.
The rest it’ll eventually send to join Blockbuster and Borders.
Categories: OIG Advisory Opinions
The Healthcare Blog - Wed, 01/11/2017 - 13:42
Every so often, voters conspire to hand unambiguous control over the federal government to a single political party. It is rarely the unmixed blessing that party strategists dream it to be. President Clinton got a Democratic Congress, and promptly lost it two years later in the wake of the famously unproductive HillaryCare debate. President George W Bush invaded Iraq. Lyndon Johnson waged War on Poverty and sent a half-million baby boomers to Vietnam.
More recently, President Obama had a (brief) filibuster proof Senate majority and an eighty vote House majority entering 2009. Despite this huge advantage, the passage of ObamaCare turned into a costly, fifteen-month political cliffhanger. A lot of Obama’s problem wasn’t merely an increasingly angry Republican minority but a substantial (and imperiled) moderate wing of his own party.
What can the resurgent Republicans learn from these cautionary tales as they enter Donald Trump’s Presidency? What they will come to realize is that often, “friendly fire” is as perilous a risk as anything the other party throws at you. The Republicans are actually in a much less strong position than they appear as they enter 2017.
Today’s Republican Party is actually riven into at least four distinct factions, each of which has its own health policy agenda and hot buttons. Arrayed from Far Right to Center Right, these factions are:
- The Hamburger Hill Republicans. (See Wikipedia definition.) Exemplars include the House Freedom Caucus, who won office in the Tea Party rebellion, and would be perfectly comfortable repealing ObamaCare without replacing it, and letting states, particularly of the blue variety, sort out the carnage. A lot of them are “safe seat” Red State Republicans who can afford to take some electoral risks in the name of party principle.
- The Take Your Castor Oil Republicans. Exemplars include most prominently Speaker Paul Ryan, and also HHS Sec. Designate Dr. Tom Price, who believe that entitlement reform is actually a bigger deal, fiscally and politically, than repealing ObamaCare, and who favor cutting entitlement spending, “pro-competitive solutions” (whatever that means in a highly concentrated health industry), and also compelling “wealthy” Americans to pay a bigger share of their healthcare bill.
- The Pragmatic Republicans. Exemplars include: Lamar Alexander, Orrin Hatch and Kevin Brady, all burdened with the realism borne of Chairmanships of major Committees, all of whom would prefer to strap on a parachute before exiting the airplane on Repealing and Replacing ObamaCare and who are also cognizant of the cost of ownership of the healthcare issue.
- Ten Republican Governors Who Expanded Medicaid. Exemplars include: Governors Snyder, Kasich, Brewer, Sandoval, Martinez, Baker, etc. whose states could be on the hook for billions in additional state costs if ObamaCare’s ten million person Medicaid expansion is scaled back. Each of these Governors has Two Senators to advocate on their states’ behalf. Vice President to be Pence also expanded Medicaid while Governor of Indiana.
Interestingly, the new Republican standard bearer, Donald Trump (who was until 2012 registered for thirteen years in New York’s independent but left-leaning Reform party), ran to the left of his Congressional base on healthcare issues. While he advocated “repeal and replacement ” of ObamaCare with “something terrific” (aka “TerrifiCare”), he also advocated “covering everybody” and “not cutting Social Security or Medicare”.
If Trump had sided with either of the two dominant Congressional factions (Hamburger Hill or Castor Oil), he probably would not have gotten enough hard pressed working class votes to put him in office. While at least three of the Republican factions outlined above are nominally committed to getting rid of ObamaCare, they are variously sensitive to the political cost of dislocating 20 million presently covered Americans, as many as 6 million of whom may have voted for Trump.
In the past two weeks, the momentum to “repeal” has been blunted by divisions over the timing and content of the “replace” part of the Republican agenda. The stickiest wicket by far: rapidly repealing the roughly trillion in taxes and fees in ObamaCare would require a LOT of replacement revenues from somewhere (provider payments, import duties on Chinese manufactured goods, capping the tax deductibility of corporate health benefits, you name it), or those 20 million newly insured folks really do get thrown to the wolves.
It is easy to understand why postponing a big new revenue raise for a few years might be attractive politically; but what pays for all those premium subsidies and Medicaid matching payments to states in the interim? There is a very good reason why we haven’t yet seen a credible replacement plan. Big revenue raises are best done “secretly” at 2:30 in the morning in a last-minute Reconciliation bill mark-up, not in the klieg light glare of a gigantic press conference.
Since you can only lose two Senate Republican votes before use of reconciliation to repeal ObamaCare is not viable, the political path leading to repeal is narrower and rockier than most people think. One Republican Senator, Rand Paul, has already declared that he will not vote for repealing ObamaCare without a viable replacement, and several others (Cotton, Corker, Portman. et.al.) have echoed his concern. A rapid Senate vote for repeal and then replacement in two or three years looks like an increasingly questionable strategy.
The larger question, of course, is what the electoral payoff from killing ObamaCare is likely to be. Certainly, taking health insurance away from twenty million newly insured folks because of a diffuse ideological concern about “government-run healthcare” doesn’t seem to be an obvious political winner. The redistribution of those trillion dollars in taxes on high income individuals and fees from health insurers, device manufacturers, etc. to pay for those health benefits may be the real rub for the Hamburger Hill caucus.
Indeed, the vehemence of the Republican opposition to ObamaCare may have been driven by its seeming irreversibility; once granted, an entitlement is almost impossible to take away.
The classic interest group political logic of granting a government entitlement has historically been was that delivering tangible benefits to a specific group of voters would bind them to the party who gave it to them. Roosevelt gave the elderly Social Security and Lyndon Johnson gave them Medicare; therefore, elderly voters would always think fondly of Democrats, etc.
Obama’s reward for passing ObamaCare, on the other hand, was to lose first one, then the other house of Congress in the next two non-Presidential election cycles, and to help birth the Tea Party, a still powerful insurgent faction of the Republican party. What changed? Well, after the post-World War II creation of the Veterans Administration, then Medicare for the elderly and disabled and Medicaid for the categorically needy, and the bipartisan S-CHIP for kids, the most “attractive” subgroups of vulnerable Americans already had their health care entitlement.
Those who remained uninsured were a mélange of marginalized folks- young people transitioning from school to work or stuck in their parents’ basements, part-time workers and the “new” working class in low wage jobs without benefits, single unemployed people, immigrants, documented or otherwise, victims of age discrimination in employment but years shy of Medicare eligibility, people rendered uninsurable by chronic illnesses. There was no common denominator other than their marginality.
Other than the hospitals, who are obligated by federal law (EMTALA, 1986) to treat them, there was almost no focused interest group advocacy on behalf of the uninsured; rather, it was almost Great Society “muscle memory”- an inchoate desire to get the rest of the way to universal coverage- rather than some massive political reward that drove Obama to greenlight health reform as his highest domestic policy priority.
In retrospect, investing his limited stack of political chips not just in avoiding a Depression, but in more vigorous economic growth, as his political team (notably Rahm Emanuel and David Axelrod) advocated, might have been a better bet than doubling down on healthcare. Hindsight is, of course, always crystal clear and 20/20.
Nevertheless, the hand the Republicans seem to have dealt themselves on ObamaCare seems even less promising: how do you unmake the law without stranding 20 million people and somehow provide them something “better” than ObamaCare’s mixture of Medicaid and heavily subsidized high deductible private coverage without either raising taxes further, adding to the deficit or cutting caregiver payments to pay for it. As the new Republican majority will learn in the next year, healthcare is an issue that you can win and still lose. President Trump’s skill as a dealmaker will likely meet an early and stern test.
Jeff Goldsmith is President, Health Futures and Assoc Professor, Public Health Sciences, University of Virginia.
Categories: OIG Advisory Opinions
The Healthcare Blog - Tue, 01/10/2017 - 17:57
The Centers for Medicare & Medicaid Services (CMS) EHR Incentive Program—also known as Meaningful Use (MU)—initially provided incentives to accelerate the adoption of electronic health records (EHRs) to meet certified program requirements. Many physicians were mandated to change over to electronic records at the cost of tens of thousands of dollars. Electronic records have never been shown to improve patient care or outcomes with statistical significance, the criteria physicians routinely use when making care decisions.
Physicians who failed to participate in MU would receive penalties in the form of reduced Medicare reimbursements automatically. To avoid a penalty, physicians had to implement certified electronic health records (CEHRT) and demonstrate MU of that technology through an attestation process at the end of each reporting period. There were 10 data specifications. Approximately 209,000 physicians were facing penalties at the start of 2016, almost one-fourth of the U.S. physician workforce.
By the end of 2015, CMS had stated it would broadly accept applications for hardship exemptions because of the delayed publication of the program regulations. Applications for physicians were due by July 1, 2016.
A friend of mine opened a private practice in October 2015 and thought she was on the right path toward submitting data and meeting MU requirements. One of the most challenging things about running a business is hiring excellent ancillary staff for support. Employees should be smart, capable, and well, able to reliably submit data. It is worthwhile to note physicians receive no business training in medical school, so the learning curve is steep for all physicians including my friend, who is a family practice doctor.
There are mistakes and triumph along the way and my friends’ misstep was hiring an office manager who ultimately was not a good fit – unbeknownst to the physician, she did not submit ANY data. The notification arrived in the mail that this practice did not meet all 10 MU program requirements. “We had recently acquired a new EHR (cost 6K) and were uncertain how to verify data had been submitted. We were working on it.” She contacted CMS and they denied any opportunity for appeal.
Welcome to the penalty box, with no term limit. Every single visit, procedure, counseling session, or medical intervention will have 2% shaved off the top. The average family physician receives about $100,000 a year in Medicare reimbursements, so a 2% penalty for 2017 will become 3% in 2018, and increase to 4% in 2019—a combined three-year total of $9,000.
This total overlooks the increased costs and overhead of running a business. Staff members get raises; medical supplies cost more, and even medical license fees continue increasing — all while the physicians’ income is decreasing with no end in sight.
This young physician is working in her hometown somewhere in Middle America, a small community, with a population of 13,000. She is there because her family and friends are nearby. She loves her patients; 50% of them are insured by Medicare and Medicaid. She provides high quality care; for which she will be paid less and less each year.
This physician is neither lazy nor stupid. She is just not a businesswoman, yet. She opened her practice straight out of residency and was under the impression she did not need to submit data immediately while getting things settled. Once she began “submitting” data, she trusted the office manager to do it, because she was otherwise engrossed in seeing patients, (a part of our profession likely to disappear in the near future.) The art of practicing medicine will become an outdated and ridiculous notion at the rate we are going.
My advice for every primary care physician in this country is to opt-out of Medicare and Medicaid so our businesses can survive. This particular physician cannot do that as the hospital has guaranteed her salary for one year while she gets her practice started. What a great deal for the hospital! The primary care physician is left to their own devices, to build a practice, and serve as a source of revenue feeding the specialists, who are employed by the hospital in this particular scenario. The hospital did offer to employ her; however the wage was far below the industry standard.
This family physician might reluctantly have to close her Medicaid and Medicare panels anyway. If her business begins failing due to the penalties being leveraged, she will opt out of both Medicare and Medicaid. So will us all if this punitive payment structure continues unabated.
This scenario is repeating itself over and over across the country every day. Private practice physicians are stuck between a rock and hard place. Indentured servitude is on one side and the freedom to independently practice medicine is on the other.
Financial analyst John Graham at Forbes wrote in April of 2015 that MACRA was a “fiscally irresponsible approach to increasing the amount the federal government spends on Medicare’s physicians’ services.” What should we do when working with a fiscally irresponsible person? Do we jump on board and begin a business partnership? No. Then why are physicians acquiescing to this abuse? MACRA penalties will begin in 2019 at 4% and increase to 9% by 2022. Who can afford to stay in practice at the rate of decline in reimbursement?
In general, physicians tend to be compassionate and empathetic, they are rule followers, and do the ‘right’ thing; traveling on the straight and narrow should not bring us to the point where we cannot make more than we would working in a fast food restaurant. The answer is we must opt-out until changes are made. Private practice physicians need to realize we are on our own. The AMA, ACP, and CMS are working in direct opposition to independent physicians fighting hard to break the chains that bind us. It is simply time to let go and walk away.
Suneel Dhand recently wrote, “it’s not just the ace of spades that the doctor and patient are holding — but the entire deck.” He is right. It is time for us to become dealers. And I want to play dealers’ choice.
Categories: OIG Advisory Opinions
The Healthcare Blog - Tue, 01/10/2017 - 09:27
Years ago, when I was less inflexible, I took up Pilates. My instructor, Jim, a charming chap with an infectious laughter, was a 911 truther. I’d egg him on to hear about his conspiracy theories. Jim believed that 911 was concocted by Bush and Haliburton so that the U.S. could invade Iraq to capture their oil. He thought that United Flight 93 never took off. Whatever happened after 911 became the motivation for 911. He was the sort of person who would have concluded that Mahatma Gandhi plotted the Second World War to free India from British rule.
I began to suspect that Jim was, to put it charitably, nice but dim. But he wasn’t that dim. He corrected me when I once, innocently, underpaid him. He was also smart at advertising and when he met my wife, he told her that she should join me for Pilates because it would strengthen our marital bond. My wife politely declined the bond strengthening. He was also very cued up with the nutritional sciences and warned me, without leaving a trace of irony, “don’t believe everything you read about diets.”
911 truthers remind me of antivaxxers. They share a deep paranoia which is impervious to logic and science and which becomes stronger when confronted with logic and science. What doesn’t change their minds, and little does, makes their beliefs stronger.
Recently, Dr. Daniel Neides from Cleveland Clinic, opined about the risks of immunization. Writing in the local newspaper, which I wouldn’t have known about if it weren’t for Twitter’s excitable crowd, he cautioned his readers about the industry and toxins. He said “we live in a toxic soup.” He alluded that vaccinations cause autism. For good scientific measure, he threw in the microbiome – an entity which will lead to much confusion before clarification.
The history of the anti-vaccination movement is the history of paranoia in the developed world. People in developing worlds don’t fear vaccinations – they have genuine fears to contend with. Vaccine phobia, though a marker of scientific illiteracy, can be traced to heavy paranoia of industry, and a belief in environmental utopianism. Only once in history has there been purer environmentalists – the Digambar sect of Jainism who believed that wearing clothes harmed the environment (don’t go looking for them – they no longer exist).
With a bit of historical reflection, you can see how “vaccines cause autism” got out of hand. I highly recommend Paul Offit’s “Autism’s False Prophets.” Andrew Wakefield’s now discredited research linking MMR with autism made social justice warriors positively tumescent. It’s easy to see why – greedy industrialists and greedy doctors polluting little, unsuspecting babies, that’s candy for righteous rage. It’s no surprise that Wakefield’s research was funded by trial lawyers – a profession which makes a lot of money exploiting paranoia about greedy capitalists. Wakefield’s discredited findings moved the FDA and the Congress. Both right and left wing publications warned people of the dangers of immunization. It is possible that Cherie Blair, Tony Blair’s chakra-believing wife, and a gifted lawyer, also fell for the paranoia.
The tide has turned. It is vaccine skepticism which evokes considerable rage. Fighting antivaxxers is now the lowest common denominator of intellectual probity. No doubt, the fight is important, and, it seems, to be seen fighting is also important. To me, the antivaxxers, one of the most demonized constituencies, evoke pity rather than anger. I feel that if I shouted “boo” they’d collapse into a pile of liquid. But shaming them, by calling them selfish for free-riding herd immunity and putting immunosuppressed people at-risk, or stupid, or scientific illiterates, will unlikely persuade them to get vaccinated. Nor will they be persuaded by reams of data or a powerpoint showing that the confidence intervals for the likelihood that vaccinations cause autism, like the point estimate, is zero.
But doctors should know better. Should the anti-vax physician have his medical license revoked? Should his employer fire him? The near-unanimous view of physicians on Twitter was affirmative for the latter, and a desirability for the former. But once you think beyond stage 1, you’ll realize the matter isn’t so simple.
Let’s explore the case for revoking his medical license. The logic is taut. His piece advising against immunization is jeopardizing patients’ lives. But is that true? I mean is it true that there were people undecided about vaccinations, or felt that they should be vaccinated who, after reading his piece, and persuaded by his credibility as a doctor in the prestigious Cleveland Clinic, have decided against being vaccinated? Plausibly yes, but arguably no. Antivaxxers reject vaccination despite the evidence, and despite persuasion from mighty Ivy league doctors to get vaccinated. Their sensitivity to doctor’s advice to get vaccinated, whether positive or negative, is likely zero. They’d stay unvaccinated despite his piece, not because of it.
Thus, it’s likely that he was preaching to the choir and unlikely that the net mass of unvaccinated people changed by his forgettable piece. And, if you’re going to make an empirical case that he led to net harm, you’d also have to blame the social media which, in a Streisand effect, helped his piece reach people who wouldn’t have read it.
How about this rationale: physicians skeptical in the public domain about mass immunization, an indisputable standard of care (SOC), are unfit to practice? The rationale appeals because doctors with such scientific illiteracy so as to peddle fears about vaccination may be clinically incompetent. But let’s parse the issue because there are two problems. The first is that the anti-vax sentiment of doctors might not affect their clinical work. If they were radiologists, for example, adept at detecting acute pathology, it would scant matter what they thought about immunizations. You might find them annoying, but if they quietly cranked through the list, never missing important findings, would it matter to a medical tribunal if they believed in Santa Claus, or that the moon landing was a hoax, or that immunizations cause autism?
The second problem is that anti-vax doctors might not practice what they blog – that is they may still offer their patients vaccinations. Furthermore, they may resort to that capacious formulation called shared decision making, to show that the patient’s decision not to be vaccinated was the patient’s decision, not theirs. How will you prove that this was not so, particularly if the patient was an antivaxxer?
I’m unable to find any legal precedence of a physician found guilty of malpractice, or who has lost his or her medical license, for merely questioning an indisputable SOC in the public domain – if you know of such a case please let me know. It will be a tough case to try because it would, in effect, censor skepticism, and in a country with a strong tradition of free speech, evidenced by the protracted Scopes Monkey Trial, censoring skepticism, even if the skepticism is idiotic, would likely reach the supreme court. Antivaxxers would be emboldened and the anti-vax doctor would become a martyr. Vaccinations would become even more politicized than they are today.
There is clearly legitimate and illegitimate skepticism – skepticism of statins for primary prevention, now endorsed by the USPSTF and, therefore, standard of care, is legitimate, and skepticism of vaccinations is illegitimate. This begs the question: how do we define legitimate skepticism? To that, I can offer no better answer than Potter Stewart’s. When asked to define pornography, he said: “I know it when I see it.” You could argue that vaccinations are different from statins because not being vaccinated has negative externalities as it endangers others, and that vaccinations have the same effect across the whole group, neither of which is true for statins. However, these are post hoc rationalizations why skepticism of vaccinations should be censored. There’s no formalized framework for what’s legitimate skepticism of standard of care, in general, which impugns skepticism of vaccinations but doesn’t impugn skepticism of statins.
Censoring skepticism of vaccinations is a slippery slope which could be applied to any standard of care. Don’t think of the present, think what might happen fifty years from now. Science progresses when someone questions the status quo. Do we really wish to endanger this avenue for the sake of one physician?
Silencing skeptics in the U.S. is never a good idea as climate scientist, Michael Mann has found. He sued writer, Mark Steyn, for calling his research fraudulent. Whatever the outcome of the trial, Steyn has far from been silenced – he has upped the ante in his derision of Mann, and has even written a book solely devoted to ridiculing Mann. The suit has become an avoidable own goal for Mann. Climate science is already excessively politicized, to the detriment of the science, and Mann’s lawsuit doesn’t help – even if Mann wins, climate science loses.
The Cleveland Clinic, a private entity, where the First Amendment doesn’t apply, can dismiss the physician. But they may not wish to. Dr. Neides heads their Wellness Unit. Cleveland Clinic is the premier center, it seems, not only for mitral valve repair but Reiki and other para-medical phenomena. It’s likely that his views, specifically his morbid fear of industry and toxins, comports nicely with the mumbo-jumbo ethos of Wellness programs, an initiative which is the mother of quackery and which, it must be reminded, is enshrined in Obamacare, and whose provenance is, amongst other things, a study by preeminent economists. To put it bluntly, he’s quite possibly a cash cow for the clinic. The brouhaha over his anti-vax piece is likely to draw even bigger crowds enamored by chakras and complementary and alternative medicine, meaning it won’t have harmed the Clinic’s bottom line. Physicians on Twitter just gave the Clinic’s Wellness Institute free publicity – congratulations.
Were I the Healthcare Czar I’d throw wellness programs into the Potomac, but I’m not the Czar, and there are no Czars in the U.S. who can tell a hospital not to offer aromatherapy. Will the Clinic lose credibility for employing a physician with anti-vax views? I doubt it. The rich oil sheikhs from the Gulf countries couldn’t care less about a doctor in charge of aromatherapy with crank theories about immunizations. Just because something bothers the medical commenteriat, doesn’t mean it bothers patients.
To save science, you need skepticism. To save skepticism, you must tolerate stupidity. But there are other lessons. Vaccination phobia is the perfect storm of paranoia. We’re conquering hype. We’re not doing too well with paranoia. Evidence and science won’t reduce paranoia. It is the culture which begets paranoia which should be addressed. Perhaps we should think twice before we demonize, whether it be doctors, industry, regulators, lawyers, insurers, government, or markets, as we can so easily excessively and irreparably demonize.
The lesson I’ve drawn from conspiracy and non-conspiracy theorists is that crank can coexist with competence and competence can coexist with stupidity. May be if we treated the antivaxxers with a smidge of respect they might, just might, get over their vaccination phobia.
About the Author
Saurabh Jha is a radiologist and a contributing editor to THCB who can be reached on Twitter @RogueRad. He is up to date with all his immunizations, including Japanese B Encephalitis.
Categories: OIG Advisory Opinions
The Healthcare Blog - Mon, 01/09/2017 - 23:16
Theranos raised $900 million from investors and achieved a market capitalization of nearly $9 billion. Today, its investors may have lost most of their money and the company is pursuing a new strategy. It’s a familiar story to lenders and investors and likely to be hallway chatter today as the 35th Annual J. P. Morgan Healthcare Conference convenes in San Francisco.
Theranos targeted the lucrative blood testing market offering a new technology that allowed labs to do 30 blood tests almost instantly with a single drop of blood. The company began its operations in 2003 with a $5.8 million investment from Draper, Fisher, Jurvetson and other venture funds. By 2010, it had raised $83.4 million more in three follow-on rounds and then scored a reported $633 million investment in 2014 increasing its market value to $9 billion. In those 11 years, the company operated in relative secrecy: its 60-plus patent filings gave clues about its activities while its CEO, Stanford drop-out Elizabeth Holmes, shunned the spotlight.
The company used its capital to hire 800 and open labs in Arizona and California. By 2015, it had developed collaborative deals with Capital Blue Cross (PA), Walgreens, Cleveland Clinic and others, built a blue-chip board including former Senators Bill Frist and Sam Nunn and incoming Secretary of Defense James “Mad Dog” Mattis and received approvals from the FDA for its HSV-1 test and CLIA for labs to use its devices. Forbes named Holmes among its richest in 2014, with an estimated net worth of $4.5 billion and media attention followed. In a Stanford Business School profile (February 2, 2015), she told the interviewer that she had no Plan B for her company, characterizing contingency planning as an “act of failure.” But things changed.
By the spring of 2016, the company faced questions about its Edison technology, cease and desist orders and an array of lawsuits. Media coverage followed. A critical piece in the Wall Street Journal (October 16, 2015) by John Carreyrou observed “Hot Startup Theranos Has Struggled with Its Blood-Test Technology.” Then followed a stream of articles by a trio of WSJ business journalists (Carreyrou, Christopher Weaver, and Michael Siconolfi) exposing the company to more scrutiny: “Agony, Alarm and Anger for People Hurt by Theranos Botched Blood Tests” (WSJ October 20, 2016), “Theranos Whistleblower Shook the Company and His Family” (WSJ November 18, 2016), “Big Names take Hit on Theranos” (WSJ November 28, 2016), “Theranos Ties Pose Possible Obstacles for Mattis Confirmation” (WSJ December 2, 2016),“Theranos Foresaw Huge Growth in Revenues and Profits” (WSJ December 5, 2016) and “Theranos Slashes Staff, Voids more Test Results” (WSJ January 6, 2017). And coverage in the New York Times, Forbes, and other business media followed suit. Theranos is now pursuing Plan B, a new mini-lab concept, having laid off all but 200 of its workforce.
Stories like Theranos are familiar to every investor and lender gathered in San Francisco this week. All of them have had disappointing results because an organization where they’ve parked capital as debt or equity has failed to meet expectations due to poor execution, or changing market conditions derailed their plan. And some have faced the enormity of challenges like those facing Theranos today in the companies/organizations they’ve funded.
As JPM attendees listen to CEOs and CFOs tell their stories this week, they’ll filter their business propositions through imperatives for investing or lending, regardless of the sexiness of their pitches:
1. GROWTH IS ESSENTIAL.
2. FOCUSED EXECUTION IS KEY.
3. AN EFFECTIVE CEO IS VITAL.
4. BOARDS MUST BE INDEPENDENT AND OBJECTIVE.
5. THE ORGANIZATION’S VALUE PROPOSITION MUST BE CLEAR.
They understand the importance of an organization’s reputation and solicit insight from former colleagues about the organization’s culture and the capability of its management.
Looming prominently at JPM this week is speculation about the Trump administration’s replacement for the Affordable Care Act. No one knows for sure what’s ahead but two core beliefs seem fundamental to its forthcoming policies and directives: 1-private sector solutions are better than “big government” and 2-getting consumers to have more skin in the game will force more accountability into the system. That bodes well for healthcare lending and investing, driving more deals and increased demand for their capital.
So as attendees flood the lobby of the St. Francis Hotel this week, it’s certain they’ll compare notes about what’s next in healthcare and make bets on the next winners and losers. They’ll ruminate about the plights of companies like Theranos, the big consolidation plays on the landscape and game-changing innovations in how care is delivered and financed.
The JP Morgan conference is Woodstock for lenders and investors who want to make money with their money. At the end of the day, healthcare is a big business. Organizations, whether not for profit or investor owned, need funds to innovate and grow. That’s the reality of our industry and why everyone can learn from Theranos.
Categories: OIG Advisory Opinions
The Healthcare Blog - Sun, 01/08/2017 - 12:59
There is no conservative replacement health reform plan for Obamacare — because Obamacare is a conservative health reform plan.
After six years of promising to repeal ‘n’ replace the President’s signature domestic achievement, Republican lawmakers have no coherent alternative to the Affordable Care Act for one good reason: because the Affordable Care Act was once the market-based alternative to a real, not imagined, “government takeover” of health care.
What has always made the ACA a political pariah to Republicans, typified by the bizarre claim by House Speaker Paul Ryan (R-WI) on Wednesday that “Obamacare” has “ruined” and “dismantled” our health care system, is the plan’s namesake — far more than its necessarily complex architecture or any of its actual details, unless you count the details they made up.
And so, if only for kicks, how about some actual historic facts and context about a health reform plan that was actually decades in the making, only three years into full implementation, and on the eve of blind destruction by demagogues who have no idea what they’re taking about.
The chart below illustrates where the ACA sits, ideologically, relative to all other health reform plan models.
This chart places the ACA along a continuum of all serious reform options developed, debated, and discarded or ignored since the 1980s. They are all here: from the single-payer, centrally controlled models popular with those who detest corporations and the corrupting influence of money in medicine — two actual, not imagined “government takeovers of health care” — to a fully free-market, laissez faire model favored by those who detest regulation and the heavy hand of government in medicine.
On the far left, the federal (or provincial) government is the main insurer, owns most hospitals, and employs most doctors. This pure form of single-payer seems to be supported or reviled in equal measure, especially by the nation’s physicians. As a model for nationwide reform, it is as much a religion as a public policy framework — people believe it will be either health care’s Messiah or its anti-Christ — and no one will convince them otherwise. This model is the foundation for many of the systems in Europe, and the systems in Canada, Australia, New Zealand, and Singapore. Unbeknownst to many under their actual care today, there are two working systems based on this model in the US today: Kaiser, and the Veterans Health Administration.
The second model, Medicare-for-All, differs from the pure form of single-payer by retaining the current independence of most hospitals and doctors. This model jettisons private insurance companies and covers all Americans directly, while an all-encompassing Medicare program pays for covered care delivered by today’s crazy quilt of providers: large and small physician groups, for-profit, religious-affiliated, independent and academic hospitals, the works. This is what Medicare beneficiaries have today — except for the 31 percent who opt for privatized “Medicare Advantage” plans offered by commercial insurers. Medicare-for-all is supported by those who believe it would bring the relative efficiencies, fairness, and low administrative costs of Medicare to all of us — and reviled by those who think Medicare works like hell. Because there are oceans of data to support both views, this too is ultimately a matter of secular faith: government, good; government, evil.
To the right of Medicare-for-all is “managed competition,” the basis for the reform plan proposed in 1993 by President Bill and First Lady Hillary Clinton and derided as “Hillarycare.” This model is built on the traditional system of multiple private insurers and providers, but highly organizes and regulates both. It achieves universal access by mandating employers and individuals to participate and by requiring everyone — with or without current coverage — to give up what they have and commit to one of several competing vertical insurer/provider entities. The managed competition model is based on managed care theories developed in the 1970s; when proposed by the Clintons in 1990s, it was popular with much of the Washington technocracy — and vilified by conservatives. Modified versions of this model exist in Germany and Israel, and in a handful of US markets (e.g., Hawaii, San Francisco and Portland, Oregon, sort of) with vertically integrated providers that compete with Kaiser.
Back in the mid-1990s, most Republicans and many health industry experts attacked “HillaryCare” as cumbersome, over-engineered, and hyper-bureaucratic; it was destroyed in the court of public opinion by an insurer-funded TV ad campaign that people remember better than any details of the plan itself. Conservatives hated the plan so much, in fact, that the folks over at the Heritage Foundation came up with their own market-based alternative. The plan achieved universal access by requiring people to purchase their own insurance, but enabled them to do so through a competitive marketplace, with subsidies for the poor. Hmm. Sounds familiar, no?
The Heritage plan sounds familiar because it was the conservative alternative to government-driven plans like single-payer and Hillarycare, and because it became the basis for Mitt Romney’s health reform plan implemented in Massachusetts — which is turn was the basis for – for what? It was the basis for the plan one click from the far right of our spectrum of health reform models: President Obama’s plan, known as the “Patient Protection and Affordable Care Act,” or the ACA, until it was branded — derisively by Republicans — as “Obamacare.” (I tried to point all this out in the New York Times in 2012, while working at a conservative think tank, for which I was ridiculed by my own colleagues, excoriated on Capitol Hill, and received death threats, a few years before getting death threats for publishing actual facts was in vogue.)
Notwithstanding all the political noise that long ago drowned out all discussion of actual facts about the actual law: Obamacare is a radical endorsement and extension of the status quo. This is why everything that was ever wrong with the health insurance system — ever increasing premiums, deductibles, and co-payments, the perennial narrowing networks of providers, and all of its byzantine administrative processes — has now been laid at the feet of the plan. This is why the House Speaker has no qualms about uttering utter nonsense about Obamacare “ruining” and “dismantling” the health care system.
To minimize actual (not perceived or politicized) disruption to most people’s coverage – a major and valid criticism of the Clinton plan — the architects of the ACA retained most of the features of the traditional employer, insurance and provider systems. The ACA merely expanded the system toward universal access by mandating that most of the uninsured participate in it, unless their incomes were low enough to qualify them for an expanded version of Medicaid.
Because Obamacare requires insurers to cover all comers — and does away with caps on those with catastrophically expensive medical situations — it is funded by mandated participation by all of us too young for Medicare and too well off for traditional Medicaid, either directly or through employers. Expanding the exact same plan to include Health Savings Accounts and allowing consumers to buy coverage across the stateliness — two line-item policy ideas Republicans tout as the major levers in their magical mystery replacement plan — could be appended onto the ACA with a dozen pages of legislation.
By contrast, the only “replacement” model of any substance that breaks to the right of Obamacare – the one free market economists have been championing for decades — would be truly disruptive and a complete political non-starter.
This model, on the far right of the chart above, would be a truly free market health care system. It would allow people with commercial insurance or no insurance to purchase their own coverage in an open market; and it would not require anyone to purchase insurance, nor any insurer to cover anyone they did not want to. Under this model, kicked around in the back pages of the health policy literature since the 1990s, all purchasing decisions about coverage and plan design are left to individuals and insurers.
Economists believe this Lord of the Flies model would radically reshape health insurance and downstream medical markets, by driving efficiency in pricing and reducing excess medical resource spending. They believe that market distortions created by the tax deductibility of health insurance purchasing are enormous — and that the extra political mile it would take to eliminate this tax deduction would be well worth the effort in terms of health care marketplace correction and system self-reform.
As a corollary to this belief, this “direct retail” model extracts employers from the system altogether, converting the health insurance market into something more akin to auto and homeowners insurance markets and maximizing the power of consumer market forces to control health care spending in general. Under this model, everyone is free to purchase whatever mix of insurance and services they want and can find, from whatever organization will sell to them, at whatever price the market yields. Modified versions of this model exist in China and India on top of threadbare single-payer systems incapable of serving the needs of their large and growing populations and emerging middle classes.
Proponents of the only model to the right of Obamacare believe that its inherent pricing efficiency would drive the marketplace to very high-deductible insurance plans, while converting a great deal of medical care to a cash-and-carry system. They believe this model would drive healthy Americans toward Health Savings Accounts and greatly benefit from consumers purchasing whatever plan they wanted across state lines.
In terms of moving us toward universal access, they would augment this model by allowing lower-income people, the uninsured and others priced out of these liberated insurance markets with either a “premium support” or “voucher” program — two ideas that sound similar but play out differently as health care costs increase. The subsidy mechanism — and its associated semantic and political branding wars over “premium support” vs. “voucher” — is also the economic fulcrum in Congressman Paul Ryan’s proposal in 2013 for reforming Medicare.
That Obamacare is a right-of-center plan, especially when viewed relative to all viable alternatives, explains why it has always had so little political support from anyone. Liberals hate Obamacare because it is not single-payer, and feeds tens of millions of newly insured people to what they revile as a money-gobbling, profit-obsessed health insurance dragon. Conservatives hate Obamacare because it is the heavy hand of government choking whatever air is left out of the current, dysfunctional health insurance market — and because they cannot see beyond their political rage at President Obama to recognize their own ideas at the core of his health reform plan. Obamacare has always been a shabby political step-child.
So where is that Republican replacement plan? Don’t hold your breath. Health Savings Accounts and buying insurance across state lines may sound nifty to people who have no idea what that means or might look like, but they are at best minor endorsements and extensions of the status quo, chocolate and rainbow sprinkles on the same old sour ice cream.
The only meaningful right-wing replacement plan is the only one to the right of Obamacare in our chart: a health insurance market free-for-all. No tax deductibility, no employer involvement, no fuss, no muss. And what would be the actual effect of implementing that? Everyone who has insurance through their employer today – which is to say almost everybody not in Medicare or Medicaid — suddenly pays a whole lot more in taxes. Not exactly what any of the Republicans clamoring to repeal ‘n’ replace want to sell back home.
This is the real reason why, when asked for the details for their replacement plan, the Republicans in Congress have always had, and still have, exactly and only one real answer: “Our replacement plan is Obamacare sucks.”
Stay tuned for more of nothing.
Categories: OIG Advisory Opinions