Secure, Affordable, And Adequate Coverage Is Possible In A Level Playing Field

“For health care reform to provide all Americans with secure coverage, changes must be
adopted and enforced to ensure that health insurance is always available, affordable, and adequate,” Karen Pollitz, research professor at Georgetown University’s Health Policy Institute, told the House Energy and Commerce Committee a a June 25 hearing on the Three Committee Draft Proposal for Health Care Reform. Ms. Pollitz addressed the first five titles of the draft legislation. Her testimony is useful because she doesn’t really have a horse in this health care reform race and thus can provide relatively unbiased recommendations.

Essential benefit package. A maximum out-of-pocket limit, whether people receive care in or out of network, is essential. For many proposals, the benchmark standard for coverage adequacy is the Federal Employees Health Benefits Program (FEHBP) Blue Cross Blue Shield Standard Option plan that currently covers most federal employees and many members of Congress. However, the essential benefits package outlined in the House three committee draft proposal appears to provide less coverage than the FEHBP standard. Therefore, Ms. Pollitz recommends that additional resources be added to the bill to raise the minimum benefit standard to the level of the FEHBP. In addition, the standards must be monitored and strengthened regularly to ensure benefits adequacy.

Excepted benefit plans. The draft proposal also provides for the sale of certain so-called "excepted benefits" in traditional health insurance markets, including cancer policies and other dread disease and limited benefit policies. “Consumers are vulnerable to abusive
marketing practices when it comes to these policies and state regulators have long warned
they are a poor value,” Ms. Pollitz warned. “At a minimum, such policies should contain warning labels that they do not constitute qualified health benefit plans and that coverage is duplicative of that provided under qualified health benefit plans.”

Subsidies and Medicaid expansion. Instead of setting the qualification for the subsidy for health insurance at a percent of federal poverty level, the Committee might consider a rule that no individual or family will have to pay more than 10% of income on health insurance premiums (with lower limits, say 5% of household income, set for low-income individuals, as the three Committee draft does.) “Cutting subsidies off entirely at an arbitrary income level can leave families vulnerable…A subsidy system that caps people's liability for premiums at no more than 10% of income would be more protective and subsidies would taper off gradually, avoiding a cliff.”

Private health insurance market reforms. The draft legislation requires private insurers to guarantee issue and renewability and bars these insurers from denying coverage or basing premiums on health status or health history. The legislation also provides for network adequacy standards, timely claims payments, and minimum loss ratios of at least 85%. However, the draft proposal allows full rating for age and Ms. Pollitz recommended that legislators consider tighter limits on age adjustments to premiums, or that they eliminate such age-based premium adjustments altogether. Otherwise seniors (especially Baby Boomers) will be unable to afford coverage.

Oversight and enforcement. Furthermore, for market reforms to be meaningful, Congress must authorize and appropriate resources for oversight and enforcement, both at the federal, where resources are particularly inadequate, and state levels. After HIPAA was enacted, a witness for the Department of Labor testified that the Department had resources to review each employer-sponsored health plan under its jurisdiction once every 300 years. And the Centers for Medicare and Medicaid Services (CMS), the federal agency responsible for oversight of HIPAA private health insurance protections, last summer had only four part-time staff dedicated to HIPAA health insurance issues. “In order for new promised consumer protections to be real, strong oversight and enforcement will be essential,” Ms. Pollitz emphasized.

Establishment of a national health insurance Exchange. To protect against risk selection, requirements must be identical, in terms of design and price, for all qualified health benefit plans, whether they are sold in or outside of the Exchange, Ms. Pollitz urged. And sanctions for violations of market rules and of anti-dumping (into the Exchange) rules must be the same as for those in the Exchange for insurers who sell coverage outside of the Exchange.

A public plan option. Offered in the Exchange along with private plans, a public plan is required to meet the requirements of other qualified health benefit plans offered by private insurers. A public plan option “can address failures of competitive health insurance markets today,” Ms. Pollitz noted.

“First, it offers consumers an alternative to private health plans that, for years, have competed on the basis of discriminating against people when they are sick….If consumers are required to buy health insurance, having a public coverage option that does not have to compete on the basis of profits will give many peace of mind.”

“Second, a public plan option will promote cost containment,” Ms. Pollitz continued. “Research shows that health insurance markets today do not compete to hold down costs. Rather, insurers and providers negotiate to pass cost increases through to policyholders while maintaining and even growing corporate profits.” A public plan will initially pay medical providers based on the Medicare fee schedule, but at a higher level than Medicare pays, negotiate prescription drug payments with drug makers, offer bonuses to providers that participate both in Medicare and the public plan, and develop innovative payment methods that contain costs and promote quality. “This will help move the market in the direction of competition based on the efficient delivery of health care services.”

Shared responsibility. The draft proposal would continue the employer role in the provision of health insurance, allow individuals to keep their current coverage if they are happy with it, and add a play-or-pay mandate for employers. These provisions “will help keep employer resources in the financing system,” Mr. Pollitz stated.

“No doubt, others will recommend modifications as I have today,” Ms. Pollitz concluded.. “The legislative process was intended to consider all points of view and then act in the best interests of the public you represent {just a little reminder in case legislators have forgotten, as it too often appears] …I thank you for your courage and commitment to health care reform that secures good, affordable health coverage for all Americans.”

There you have it, briefly. Ms. Pollitz shows how we can still offer a little of everything for everybody--private and public health insurance options, operating in a mainly level playing field; employer provided options; coverage for all--while containing costs and improving quality.

A Public Plan Option, From A Personal Perspective

In January 2009, my father, 97 years old at the time and still living in his own home, was taken to an emergency room with a bout of pneumonia. The next 40 days or so included a trip back home; a variety of home visits by nurses, physical therapists, and occupational therapist; a second trip to the hospital; and several weeks in a rehabilitation unit of a nursing home.

Like most elderly citizens, he had a public plan option (Medicare Part A and B); he also had a comprehensive and inexpensive Medicare supplement through his former employer.

My dad died peacefully in mid-February, just two weeks short of his 98th birthday, in a clean and caring nursing home rehab unit reimbursed by Medicare.

Now, at the end of June, some of the medical bills have been paid and processed, and many are still pending. Because I handle my father’s medical affairs, I have some personal experience with how a mature public health care system works from the point of view of the patient and his family. In other words, my experience is not at a theoretical level where it is relatively easy to claim that a government-run plan either saves or destroys the current health care system as we know it.

Practical experience sometimes allows a more complicated and nuanced view of how a public system actually works. Here is what I have learned:

1. Each provider, from the hospital to the doctor, to the company that provides oxygen to a home, to an ambulance company, knows exactly the Medicare reimbursement parameters for their own services, and most of them assume that the patient knows this too. So when a doctor says your father will either have to go home in two days or go to a rehab facility, what the doctor also is telling you is that Medicare will no longer reimburse for an acute hospital stay after two days.

LESSON ONE—Most patients and their families know little about Medicare, and they need to ask lots of questions. When dealing with medical care for Medicare-eligible individuals, start from the assumption that the public plan is calling the initial shots and the course of treatment is being guided by Medicare rules. Don’t, however, assume that this is a bad thing—for example, in my father’s case, Medicare paid for two acute care stays of more than 5 days each and for rehabilitation care after hospitalization, and providers were perfectly willing to explain how the process worked, as long as I knew the questions to ask.

RECOMMENDATION ONE--Every medical care system, whether public or private or some combination under health reform, needs employees whose only job is to help patients navigate through the system. These workers are almost nonexistent today. I had a friend, a retired hospital employee, who set up a volunteer program to help patient in one hospital work their way through outpatient surgery. Her help was invaluable when my daughter had outpatient surgery there, and it was the practical advice we all need when we are in a strange system. For example, I was told that the surgery was scheduled for a certain amount of time and if I did not get notified within an hour, I should talk to the nurse at a specific desk in the waiting area and I was told exactly what to ask. This made the whole experience feel friendly and personal.

2. Because Medicare is available to almost all individuals age 65 and older, its relatively low provider payments do not create a tiered system of care for the elderly. There is, at least within Medicare reimbursement guidelines, a rather level playing field. However, many facilities have designated an allotment of “Medicare beds,” and sometimes it is difficult to arrange for care in one of these facilities. For example, my father was scheduled to go to rehab after his second hospitalization, but there were no beds available in the hospital. There were however, beds available in rehab units of nursing homes. I suspect this was related to my father’s age and the different types of patients hospitals and nursing home typically have. However, again don’t assume this is a bad thing. Good rehab units in nursing homes (my father was in one) are better equipped and better trained to take care of the elderly than are rehab units in hospitals that typically deal with a younger population. A smart public plan result, in my opinion.

LESSON TWO. Basically the same as Lesson One—Medicare calls the initial shots, providers assume patients know this, and everything works better if you know the questions to ask.

RECOMMENDATION TWO—Same as recommendation 1, but let me elaborate. Mandate a formal ombudsman program that will personally guide patients and their families through all public health options, whether Medicare, Medicaid, or a public option in health reform. Lots more published information about public health systems also should be valuable, but every patient needs a person they can talk with who knows how to navigate the system. I’ll reiterate that this does not exist right now—there are social workers and there are hospitalists who fill part of the role needed, but that is not enough.

3. Medical care is not provided by insurers, third-parties, a National or State Exchange, or a government-run plan, but the care is heavily influenced because of the nature of the reimbursement system. And public systems run into the same problems private systems run into in terms of quality of care—better care does not necessarily cost more money.

LESSON THREE.—Basically just a subset of Lessons One and Two. If you don’t know the questions to ask, you’ll get lost and frustrated. For example, because much of the rehab for the elderly is done in nursing homes, it is important to know the quality of the nursing home. Right now that is not always easy, but there is an easy test that anyone who is taking someone to a nursing home should consider. It’s the smell test. If a nursing home does not smell of urine, it is one of the top nursing homes in the area, and the staff knows and cares about good care.

RECOMMENDATION THREE. This is different than Recommendations One and Two. Starting with all public plans, known and effective standards of care should be widely disseminated and implemented. If something as simple as an odor check in nursing homes was done on a regular basis, care would improve significantly. I don’t want cookie cutter medicine—I want good, standard levels of care used by all providers

One last example: until recently, it was rare (if not unknown) for surgical staff to perform checklists before surgery (do we have the right patient, which leg are we operating on, have all allergies been verified, etc., etc.). A collection of hospitals in eight cities around the globe has successfully demonstrated that the use of a simple surgical checklist during major operations can lower the incidence of deaths and complications by more than one third. The year-long study was led by researchers from the Harvard School of Public Health (HSPH) in collaboration with the World Health Organization. The results are published in the New England Journal of Medicine.

If a public plan option required this simple checklist, it would become standard operating procedure, in the same way many good medical standards have been adopted for Medicare.

And for all those organizations and experts who oppose a priori public plan options and government mandates? Well, possibly they would prefer advocating for hospitals that do not want to use checklists or recommend nursing home rehab units that stink.

Look To Retirement, Disability Plan Taxation For Clarity In Taxing Health Benefits

(Today’s post comes from Ross D. Spencer, general manager and senior writer for Wolters Kluwer Law And Business.)

A June 23, 2009, New York Times column by David Brooks advocates “ending the tax exemption on employer-provided health benefits….” Unfortunately, the term “tax exemption” is not easily understood, and many of its possible definitions are taken for granted and not fully recognized by the general public.

First, there is the tax deduction that employers take for their cost of providing health care coverage. This is considered to be part of “the cost of doing business.” This could be capped. Or, it could be eliminated altogether, which would cause many employers to cease providing employer-paid health care coverage to their general population. Executives will continue to receive their special health care perks, though, because companies will be willing to pay for that coverage even if it is not deductible.

Second, there is the tax exclusion that employees receive for making premium payments through a Sec. 125 premium-only plan.

Third, there is the tax exemption that employees enjoy for benefits actually paid from a health care plan. Think of the cost to the employee if a $50,000 hospital bill paid by the “employer-provided” health care plan were taxable to the employee. Eliminating that exemption would be political suicide.

Looking to existing tax policies as they relate to retirement plans and to disability plans might offer some insight to the consequences of “ending the tax exemption on employer-provided health benefits.” The tax provisions under retirement plans simply postpone the payment of taxes. Monies that are contributed on a “tax-deferred” basis, such as to a Sec. 401(k) plan or a defined benefit plan, are taxable when paid out as benefits. The only issue with retirement plans is when the tax is paid, when the money goes into the plan or when the money comes out of the plan. In health care plans, no tax is payable either going into the plan or coming out of the plan. So, “ending the tax exemption” also would level the playing field between retirement plans and health care plans.

Following the retirement plan model, though, creates the nightmare of paying huge tax bills when the benefits are paid, such as the $50,000 hospital bill.

Perhaps a better model is the tax application of disability plans. If the employer pays the long term disability premium with tax deductible dollars, then the benefits paid out are taxable to the employee. But, if the employee pays the premium with after-tax dollars, then the benefits paid out are received tax free. So, when designing disability plans, there are two choices involving taxes: employer-paid coverage that would create benefits taxable to the employee OR employee-paid coverage that would create benefits not taxable to the employee.

In both the retirement plan tax model and the employer-paid disability model, the benefit that is taxed is fairly low and would generally be known at the time of “purchase.”

However, if health care were treated in the same way, potentially high benefit payouts would not be known before the benefit is actually collected. Using either the retirement plan model or the employer-paid disability model would result in being taxed on that $50,000 hospital bill—clearly not a viable option. Using the employee-paid disability model – in which the average $13,000 family coverage cost would be taxable (but not the benefits) seems better. Paying taxes on the entire $13,000 might be unacceptable, but that is where you would have allowances for low income, offsetting credits, caps, etc.

Perhaps the group term life model could be used, and only the value of the coverage that exceeds a certain amount, such as $10,000 a year, would be taxed, while preserving the tax-free nature of the entire benefit that is paid out. What the employer decides to kick in (and deduct as an ongoing business expense) would be up to employers and Congress.

Who says employers should make health insurance available to employees? House Dems do

The House Democratic leaders have unveiled a draft health care reform plan that includes, among the numerous other provisions (850 pages of them), an employer mandate. A summary of the plan indicates that “employers have a responsibility to help make health insurance available for their employees. Businesses that do not offer health coverage to their workers have an unfair competitive advantage over businesses that cover their employees.”

Regarding the employer mandate, the proposal provides as follows:

• Employers would contribute 72.5 percent of the cost of premiums for all full-time employees’ health coverage and 65 percent for a family policy.

• Employers would have the option of providing part-time employees with health coverage by contributing a share of the expense, or contributing to a health insurance exchange in order for part-time employees to seek coverage there.

• In the fifth year after the exchange begins, companies that offer health insurance would have to meet minimum coverage standards like those required of plans in the exchange.

• If an employer chooses not to offer health coverage to its employees, a penalty will be assessed based on the size of payroll. That penalty will help employees find coverage in the exchange.

What about small employers? The summary of the plan indicates that employers with annual payrolls under a certain limit would be exempt from the requirement to provide health insurance to their workers. However, workers would still be eligible to get coverage through the exchange. Other small businesses would be eligible to receive a 50-percent health care credit toward the expense of providing coverage to their employees.

Would mandate end battle by the bay? The Golden Gate Restaurant Association (GGRA) has been battling San Francisco’s employer mandate since 2007. In early June 2009, the GGRA asked the U.S. Supreme Court to review the Ninth Circuit's decision in Golden Gate Restaurant Association v. City and County of San Francisco. In September 2008, the Ninth Circuit found that San Francisco's Health Care Security Ordinance, which requires covered employers to make minimum health care expenditures for their employees (either directly or by paying into the Healthy San Francisco program), was not preempted by ERISA. In October, the Supreme Court will decide whether to review the case.

Hmm . . . October. Isn’t that the deadline President Obama set for signing health care legislation?

So, if legislation containing a federally imposed employer mandate is signed before the Supreme Court decides whether to review the San Francisco case, the ERISA preemption issue on the San Francisco mandate probably would be moot. That’s if the law is written so that the new federal mandate overrides state (or city) mandates (but where would that leave the Massachusetts’ law and Hawaii’s ERISA waiver, I wonder?). If that’s how it plays out, the Supreme Court wouldn’t have to wade into the preemption morass . . . at least not in its next term.

Health reform process still in early innings

To paraphrase Mark Twain, the reports of health care reform’s death have been greatly exaggerated. This is true despite the seemingly unending line of pundits who feel that the prospects for health reform this year suddenly seem dim or even on life support. In fact Senator Lindsey Graham (R-SC) went so far as to say, on a Sunday morning talk show this past weekend, the recent cost estimates offer a “death blow to a government-run healthcare plan.”

Not so fast. Anyone who has been around the block more than once would certainly realize that this is all just a part of the legislative process. What is occurring in the health care reform process should surprise no one. In fact, the legislative process is just beginning. As is usually the case, the party in control of Congress tries to clarify its own views on a subject, attempting to manage competing views (though some might call this intra-party bickering). The party in the minority starts to sharpen its knives and tighten its objections. The special interest groups begin to increase their pressure on the legislative participants. Everyone involved tries to enlist the support of the public. It has happened before and it will happen again.

Now that legislative language has been/is being released, the legislative process can start to get down to brass tacks. As HHS Secretary Kathleen Sibelius said last week, “there will be a lot of times when it appears that everything is falling apart. Anytime specific legislative language is crafted, there’s something to hate about it.”

Baseball fan than I am, I thought a quote from White House Chief of Staff Rahm Emanuel might be an appropriate way to end today’s post. Calling haggling about cost estimates just a routine part of the legislative process, Emanuel says “since it's the first inning, I wouldn't call the game." Health care reform may not necessarily be in the first inning, but it’s still early in the game and the legislative process still has a long way to go. As Yogi Berra has said “it ain’t over till it’s over.”

The Misinformation, Disinformation, Oversimplification Campaign

Everyone everywhere is talking about health reform these days. You can’t escape it. Unfortunately, much of the discussion is focused on misinformation, disinformation, and oversimplification, depending on who’s doing the talking. Opponents of significant reform that would expand coverage and coverage affordability by offering a new federal government provided public plan continue to spread fear to undermine public plan proposals. Chicken Little move over.

Referring to a “public health insurance option” Republican Senator Lindsey Graham of South Carolina called it “government-run health care” on the Sunday June 21sth edition of ABC Television’s This Week With George Stephanopoulos. Similarly, Georgia Republican Representative Tom Price insisted on the Tavis Smiley NPR radio show on Sunday afternoon that other countries with universal coverage have poorer outcomes for major medical conditions such as diabetes and cancer. Unfortunately, these program hosts didn’t challenge their assertions.

Yet another instance of fear mongering among opponents of meaningful health reform is pundits citing of the Congressional Budget Office’s “mark up” of the Senate Finance Committee’s health reform “proposal.” The oft-cited $1.6 trillion “price tag” for this “proposal” has given reform opponents fodder for their oppositions and nearly frozen further consideration. But, as the Century Foundation’s Maggie Mahar points out in her June 22nd Health Beat blog post, the CBO could not really “mark-up” the Senate Finance Committee’s plan because it leaves out many crucial pieces, such as a public plan option.

Ms. Mahar learned from the Office of Management and Budget about other major pieces missing from the Finance Committee plan that would affect its financials—the $300 billion in savings that can be obtained by reducing fraud and inefficiency from the Medicare and Medicaid programs, specifics of “basic comprehensive coverage provisions,” any penalties that would be imposed for noncompliance with any mandates, employer contributions, or definitions of who would qualify for hardship exemptions.

Montana’s Democratic Sen. Max Baucus who as chair of the Senate Finance Committee is heading that committee’s health reform efforts wasted no time in halting its deliberations. This comes as no surprise as Mr. Baucus receives beaucoup bucks from the insurance and health industries. So Mr. Baucus’s efforts at health reform are half-hearted at best and hardly focused on helping the U.S. population.

All of the signers of a letter to President Obama opposing a public plan option receive significant contributions from insurance and health PACs, as does Senate minority leader Iowa Republican Charles Grassley, and North Dakota Democrat Sen. Kent Conrad, the proponent of member-run health care cooperatives.

In a May 2009 survey of benefits executives at major corporations, Washington, D.C. law firm Miller & Chevalier and the American Benefits Council asked respondents to “Provide your opinion on the following approaches to the federal government's role in a reformed health care system” of “Support, Neutral, or Oppose.” Among the three options it explores are “Establish a government-administered program where individuals and small businesses can purchase from among multiple private options (like Medicare Part D or the Massachusetts connector)” and “Establish a new government-run health plan that would be available to all Americans (like the Canadian system or Medicare-for-All).” The Council report explains that “just 11% support the government establishing a plan that would compete directly with the private marketplace.” Isn't the Canadian system universal coverage, not just one choice?

Compare the Council’s phrasing with that of the New York Times/CBS poll published this past weekend, asking respondents about their support for “the government's offering everyone a government administered health insurance plan like Medicare that would compete with private insurance plans?" Nearly three-quarters (72%) of respondents across the political spectrum favored such a plan.

Half to two-thirds of the Times/CBS News poll respondents worried that if the government guaranteed health coverage, they would see declines in the quality of their own care and in their ability to choose doctors and get needed treatment. What do Americans think they have now with private health insurance?

Americans are more than ready for real health reform, but in order to achieve it, we must keep the conversation honest.

CBO reports: tiny bump or major roadblock?

As we suspected might happen, last week's initial efforts by the Congressional Budget Office to score the Senate HELP Committee's first draft of health care reform created quite a stir.

Democrats blanched a bit at the CBO's preliminary estimate that the draft proposal would add $1 trillion to the deficit over ten years, while reducing, but not eliminating, the number of uninsured. Republicans saw an opening, and pounced. According to the New York Times, criticisms at the initial mark up session last Wednesday ranged from mild cautions that the Committee's pace was "too fast to do an adequate job" (Enzi, R-WY) to dismissive comparisons (from Sen. Gregg, R-NH) of the bill's drafters to Rube Goldberg, Karl Marx and (smackdown!) Ira Magaziner (a key architect of President Clinton's failed attempt at reform in 1993-94).

Meanwhile, Senator Baucus (D-MT), confronted by the $1.6 trillion price tag CBO attached to his bill, has apparently delayed his target date for mark up of the Senate Finance Committee's bill until after the 4th of July. Some warn that this delay makes chances for August passage of a Senate bill much less likely.

So, are these events a bump in the road or a major roadblock for health care reform? Obviously, time will tell, but they may well be just a bump. They may even prove to be a blessing in disguise. Given the worries Americans have voiced in recent opinion polls over the size of the federal deficit, a reform package that includes cost saving (or revenue producing) proposals that the CBO can endorse stands a greater chance of passage.

Time To Get Off The Fence

For anyone who thought there would be much agreement on health care reform had quite a shock this week, when Republicans began to release their own outlines of health reform and tried to stall the reforms sought by the Democrats. To see how far apart some of the positions are, one need only looks at the plans envisioned this week by two separate groups.

The House Republican Health Care Solutions Group would like the following to happen:
--An "above the line" deduction that is equal to the cost of an individual's or family's insurance premiums.
--Incentives for individuals to build health savings accounts and IRC Sec. 125 flexible spending accounts.
--An option for Medicaid beneficiaries to "transfer" the value of their coverage to a private insurer.
--Allowing youths up to age 25 to remain on their parents insurance policies.
--Limits on malpractice lawsuits.
--Insurance pools that would encourage states, small businesses and others to share risk in low-cost plans.

The other group is led by three former Senate majority leaders who have published a health care reform package that would tax health benefits and includes individual and employer mandates. Tom Daschle, Bob Dole, and Howard Baker outlined their plan in a document titled Crossing Our Lines: Working Together To Reform The U.S. Health System, which included the following major elements:
--expand comparative effectiveness research (CER) relevant to patient decisions;
--reform medical liability laws;
--reform health insurance markets;
--create a network of state or regional-level health insurance exchanges;
--implement a federal fallback if states or regions do not create exchanges in a timely manner;
--provide for competing state plan options;
--establish minimum creditable coverage standards for health insurance;
--set additional standards for options available through insurance exchanges;
--limit out-of-pocket premiums to no more than 15% of income for a minimum benefit package;
--offer enhanced protections for Americans under 400% of the federal poverty level;
--create new tax credits for small businesses to purchase coverage for their employees;
--ensure low-income families have coverage through the Medicaid program;
--expect individual responsibility for obtaining basic health insurance: all Americans must demonstrate that they have health insurance coverage that meets minimum creditable coverage requirements;
--link the tax exclusion to the value of benefits received by members of Congress; and
--institute a fee for certain employers not offering or paying for health benefits.

Not much in common here—a bit of tinkering from the Health Care Solutions Group and some fairly dramatic changes envisioned by the former Senate majority leaders. Thus, while the possibilities for compromise may be dimming, at least it is now much easier to get off the fence and agree with one side or the other—the choices are clear.

Are you aboard the reform train or still in line for tickets?

Do you have health insurance? If so, do you like your coverage? What reforms do you support?

Americans already have formed opinions in support of several proposals to expand coverage that have been part of the preliminary health care reform discussions, according to the 12th annual Health Confidence Survey conducted by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates. But attitudes could change as the public learns more about the details, according to the survey’s authors.

Between 68 percent and 88 percent of Americans either strongly or somewhat support health reform ideas such as national health plans, a public plan option, guaranteed issue, expansion of Medicare and Medicaid, and employer and individual mandates, according to the survey. Reaction to capping the current tax exclusion of employment-based health benefits is mixed.

Expanding coverage. Survey respondents were asked their reaction to a number of options to expand coverage "in order to make sure all Americans have access to health insurance." Here are the results:

• 88 percent support (strongly or somewhat) allowing major health insurance companies to offer national plans that anyone can purchase.
  
• 83 percent support a new public plan option that anyone could purchase.
  
• 80 percent support requiring insurers to cover anyone who applies – so-called "guaranteed issue."
  
• 75 percent support expanding Medicare and Medicaid.
  
• 75 percent support some form of an employer mandate to subsidize coverage.
• 68 percent support a mandate requiring individuals to obtain coverage, but only 22 percent support fines for those who do not comply.

Capping the tax exclusion. On another key issue, the survey finds that if the current tax exclusion of health benefits were capped (as some have proposed), 47 percent of respondents would switch to a less costly plan if the exclusion were set at $5,000, 38 percent would keep their plan and pay the taxes, and nine percent do not know what they would do.

Are we fickle? "These opinions may change as details emerge, especially as they concern financing," write co-authors Paul Fronstin of EBRI and Ruth Helman of Greenwald.

Indeed, the June Kaiser health tracking poll found that “Overall opinion remains highly moveable, with support for many elements of reform susceptible to arguments pro and con and often moving by as much as 40 percentage points when arguments are tested.”

Kaiser found that the public remains divided in their willingness to pay more to expand coverage to the uninsured, with a slight majority (54%) saying they are not personally willing to pay more to expand coverage.

Whose opinion matters? There are a lot of players and interested parties in the health care reform debate. It seems like just about everyone is weighing in with an opinion. Often, decision makers rely on the opinions of experts to shape policy and craft legislation. But this year, on this issue, the public seems to want to raise the volume of its voice (examples include the protesters who were arrested at a Senate committee hearing on reform and the Purple Bus Tour). Are the experts and the public singing off the same sheet of music? Whose voice will (should?) rise above the din?

Drew E. Altman, Ph.D., president and CEO of the Henry J. Kaiser Family Foundation, writes that there is a “divide between what experts believe and what the public believes about some of the key issues in health reform.” He notes that if this gap between the experts’ and the public’s beliefs is not bridged, “key elements of reform will be susceptible to demagoguery and may not have the public support they deserve.”

Report: Small Business Could Save Billions Under Health Care Reform

Small businesses seem to be especially hard hit by the problems with the current health system as they face ever-increasing premiums and problems with access to health care. Despite this, some believe that health care reform could be dangerous for small firms. However, one group representing small business, the Small Business Majority, concludes that small business would be far better off under health reform, saving an estimated $855 billion over 10 years under the shared responsibility health care reform proposal advocated by President Obama.

Key findings. The Small Business Majority analysis looked at he continued impact of no reform on small business costs, jobs, wages and profits over the next ten years and contrasted that with three different reform scenarios—limited support, expanded support, or significant support—for small business owners.

According to the Small Business Majority, the study shows that over the next ten years the three reform scenarios considered would:

• Dramatically reduce the costs small businesses incur in providing health insurance to their employees;
• Save jobs for small business;
• Preserve wages for employees of small business;
• Bolster the profits and competitiveness of small business; and
• Ease, and likely eliminate, employee “job lock.

“For too long there’s been this feeling that if you’re pro business, you’re against health reform,” according to John Arensmeyer, Small Business Majority’s CEO. “Those old, entrenched views are not held by small business owners I talk with every day. Regardless of their political views, all small business owners want lower healthcare costs, so they can grow their business and offer insurance that enables them to attract and retain good employees. They want more choice and plans that are easy to understand and cover high-quality care. They want coverage options for everybody, and a fair system that helps them do their part.”

Massachusetts' Cautionary Tale

Many national health reform advocates in Congress look to Massachusetts as a model. But the Massachusetts experience signals “Proceed with Caution.”

Since the Massachusetts health insurance law was implemented in 2006, more residents have health coverage and increased access to care, but rising health care costs combined with the current economic recession could undermine some of the law's successes, according to a recent report by the Urban Institute.In the Urban Institute study, 91% of state residents reported that they now have a regular health care provider, compared with 86% in 2006.

Furthermore, many more residents in 2008 than in 2006 (75% versus 68%) surveyed said they had seen a dentist in the past year; Fewer lower-income families in 2008 than in 2006 (18% versus 27%) did not receive needed care because of costs. Although there was a slight increase in residents reporting difficulty paying their medical bills (17.9% in 2008 versus 16.5% in 2007), the Urban Institute attributes this increase to the current economic recession.

And, in spite of the fact that the Massachusetts health reform law is based principally an individual mandate, public support for the law remains strong--about 70% of people surveyed from 2006 through 2008 said they support the law.

The Massachusetts health reform law requires residents to have health insurance that meets minimum standards, or pay a penalty ($1,000 in 2009). However, while regulations prohibit caps in total annual benefits covered, they do not address caps for various services covered within plans. Many employer-sponsored health plan are taking advantage of these loopholes for limits on coverage for certain services, Massachusetts regulator have found, according to a recent news item in the Boston Globe. For example, many employer plans cap annual benefits (in the range of $5,000 to $25,000) for prescription drugs, exclude maternity coverage for dependents, and place annual caps on total annual benefits. At least 85 plans the regulators received for review contained such limitations.

The Massachusetts Connector Authority in 2008 adopted regulations that went into effect Jan. 1 of this year. The regulations define the minimum package of benefits required for adults to have in a health plan to be considered insured and not subject to tax penalties. The services required to be covered include prescription drugs, emergency care, mental health and substance abuse treatment, and doctor visits. The regulations set maximum out-of-pocket amounts that a patient can be required to pay, including a maximum $5,000 deductible.

In their report "Massachusetts' Plan: A Failed Model for Health Care Reform," physicians. Rachel Nardin, Steffie Woolhandler and David Himmelstein comment that “The reform has been more expensive than expected, costing $1.1 billion in fiscal 2008 and $1.3 billion in fiscal 2009….While the number of people lacking health insurance in Massachusetts has been reduced, several recent surveys demonstrate that substantial problems in access to care remain in the state. While the new health insurance improved access to care for some residents, many low-income patients who previously received completely free care under the state's old free care program now face co-payments, premiums and deductibles that stop them from getting needed care.”

Furthermore, Massachusetts has opted to pay for the shortfall in financing for the new health reform measure by cutting payments to safety-net providers for the uninsured or underinsured, including emergency room care, chronic mental health care, and primary care.

Should Congress choose to enact a Massachusetts-like plan, they’d better make sure they cross all the “Ts” and dot all the “Is”.

Is the cure worse than the disease?

There appears to be consensus for the notion that, absent change of some sort, U.S. health care costs will continue to rise. A recent study conducted by Buck Consultants confirms the trends.


Costs for the most popular types of health care coverage are projected to increase at double-digit rates through the remainder of 2009 and into 2010, according to the National Health Care Trend Survey, the 20th such survey of health care insurers and administrators conducted by the consulting firm.


"Although our survey reveals a slight decrease in cost trends since our prior study, there are signs that we’re going into another cycle of high trends," said Harvey Sobel, FSA, a Buck principal and consulting actuary who directed the survey. "Health insurers may increase costs in light of the continuing economic downturn and legislation such as mental health parity and the recent expansion of COBRA."


So, if health care costs will continue to rise if the status quo is maintained, then, as we've discussed before, the Obama Administration's choice to position its health care reform proposals in part as a way to control costs makes sense--unless, of course, a case can be made by reform detractors that the reform proposals themselves will cost "too much." Support for reform may wane if voters grow concerned that the cure may be worse than the disease.

Thus, some Congressional Democrats are described as wary of the cost estimates of health care reform expected to be released this week by the Congressional Budget Office. Why? According to The Hill, the CBO doesn't like to "count" savings achieved by preventive measures (e.g., preventive health care methods) when creating cost estimates. This reluctance isn't specific to health care issues, apparently; CBO is reluctant to include data it deems to be "anecdotal" when creating budget estimates. (That said, others also question the efficacy of prevention methods as a significant driver of health care cost savings.)

Of course, increased cost savings is just one component of the broad package of cost controls and increased revenues discussed by President Obama to pay for health care reform. So, keep an eye out this week for the reaction to the CBO's efforts to diagnose the cost of reform.

Watch The “Making” Of A Public Plan Option

Like it or not, the Internet has made it very easy to watch both the making of legislation and sausage, despite the admonition attributed to 19th Century Germany chancellor Otto von Bismarck, “To retain respect for sausages and laws, one must not watch them in the making.”*

Easy enough in health care reform, in fact, that the disagreement over a public plan option (85 million hits on Google) in Senate health reform legislation is, coincidentally, very public.

President Barack Obama on June 11 in Green Bay, Wisc., made clear that the overall goal for a public plan is increased competition:

"I also strongly believe that one of the options in the Exchange [32 million hits on Google] should be a public insurance option. And the reason is not because we want a government takeover of health care -- I've already said if you've got a private plan that works for you, that's great. But we want some competition. If the private insurance companies have to compete with a public option, it'll keep them honest and it'll help keep their prices down."

At a Senate Health, Education, Labor, and Pension Committee hearing on June 11 (1,408 articles on Google news), the resolution of the public plan option was a major feature, with invited speakers both endorsing and condemning a government-provided public plan option offered through some type of health insurance exchange.

Sen. Christopher Dodd (Conn.), chaired the hearing in the absence of Sen. Ted Kennedy (Mass.), who is battling cancer, mentioned the possibility of a compromise just offered by Kent Conrad involving the establishment of nonprofit cooperatives to compete with private plans (17,700 hits on Google).

Under Mr. Conrad's proposal, co-operatives on a state and possibly a national level could gain a federal charter, collect premiums and provide health-care benefits for its members. It would allow non-profits to negotiate directly with health-care providers for low-cost rates. The plans they offer would be sold, like private plans, through new Internet- based “exchanges” where consumers could buy insurance at lower-cost, group rates.

Mr. Conrad drew a distinction between his proposal and government-run public health insurance option, calling a public option government-controlled, government-run, while a cooperative approach would be membership-owned and membership-controlled

According to news reports (320 articles on Google News), these cooperative entities would provide their contracts through the exchange just like everyone else, be subject to the same rules as everyone else, in terms of reserve requirements, in terms of what kind of contracts they could offer.

For public plan proponents to support the cooperative idea, Sen. Charles Schumer (N.Y.) reportedly (319 articles on Google news) is pushing for the creation of a cooperative would have to be national, big enough to complete with insurance giants and command discount pricing; would require a "significant" infusion of federal money for start up; and would have to be managed in a way that walls itself off from the influence of the private insurance industry.

Both the Senate Finance and HELP Committees are hoping to mark up health reform legislation starting next week—(143 articles on Google news) ‑ go ahead and watch whether and how a public plan option fits within the overall “making” of this legislation.

*A simple Google search for “making sausage” yields 259,000 hits, including 1,800 videos. A similar search for “legislative process” yields 10,200,000 hits, including How Our Laws Are Made from the Library of Congress. The “legislative process” search only yielded 583 video hits, but this clearly is a gross underestimate: it should be noted that just the House Committee on Labor and Education has a youtube page with 865 video clips of committee hearings.

Lengthy Senate committee reform bill omits public plan, employer mandate . . . for now

The Senate Committee on Health, Education, Labor and Pensions (HELP) has released a 615-page health reform bill called the “Affordable Health Choices Act.” The committee will hold a public hearing today (June 11) and mark-up will begin Tuesday, June 16, according to the committee’s press release. Although the bill does not contain a public plan option or an employer mandate, the press release indicates that “discussions between HELP Committee Democrats and Republicans on key outstanding issues continue.”

The bill, according to the press release, includes five major elements: choice, cost reduction, prevention, health system modernization, and long-term care and services. Here are some of the specifics:

Individual and group market provisions. The bill would prohibit preexisting condition exclusions and gender rating. It also contains guarantee issue and renewability provisions. Certain preventive health services, such as immunizations and preventive care and screenings for children, would be covered under the bill. The bill extends dependent coverage to age 26. It also prohibits lifetime or annual limits on benefits.

Existing coverage. The bill contains an option to retain current insurance coverage and would permit family members to enroll in that same coverage.

Medicaid expansion. All individuals currently eligible for Medicaid will remain eligible for Medicaid, according to the bill. All individuals will be eligible for Medicaid at income levels up to 150 percent of poverty.

Health benefit plan choices. The bill would establish state-sponsored “Health Benefit Gateways,” which would facilitate the purchase of affordable health insurance coverage for qualified individuals and employer groups. Enrollment in a Gateway would be voluntary. Gateways must make available qualified health plans, and the coverage offered must include a public health insurance option. A Gateway may operate in more than one state, provided that each state in which such Gateway operates permits such operation.

Cost sharing. Three tiers of cost sharing for eligible individuals would be established under the bill. Under the basic plan, a qualified health plan must provide coverage for not less than 76 percent of the total allowed costs of the benefit provided. The out-of-pocket limit for the plan would not be greater than the out-of-pocket limit applicable for HSAs (in 2009, $5,800 for individual coverage, $$11,600 for family coverage). The second tier would require the cost sharing percentage to be equal to the cost sharing percentage of the basic plan increased by 8 percentage points with the out-of-pocket limit at 50 percent of the out-of-pocket limit of the basic plan. In the third tier, the cost sharing percentage would be equal to the cost sharing percentage of the basic plan increased by 17 percentage points with the out-of-pocket limit at 15 percent of the out-of-pocket limit of the basic plan.

Credits. Credits would be paid through the Gateways for individuals enrolled in qualified health plans. The credit would be an amount so that the eligible individual involved is not required to pay – in the case of an individual with a modified adjusted gross income that does not exceed 500 percent of the poverty line for a family of the size involved – an amount that exceeds 10 percent of such individual’s income.

Qualified small employers would receive credits based on a formula that is the product of:

• an applicable amount ($1,000 for each employee with self-only coverage, $2,000 for family coverage, or $1,500 for coverage of two adults or one adult and one or more children),

• an employer-size factor (from 20 percent for employers with 41-50 employees up to 80 percent for employers with 11-20 employees),

• and a percentage-of-year factor (the ratio of the number of months during the taxable year for which the employer paid or incurred qualified employee health insurance expenses and 12).

Shared responsibility. The bill would require all individuals to have qualifying health care coverage. There would be a penalty for the failure to obtain such coverage. Exemptions are allowed where affordable coverage is not available or there is an exceptional financial hardship.

Community Living Assistance Services and Supports (CLASS). The bill would establish a national, voluntary insurance program for purchasing long-term care. The average cost for enrollment in the CLASS program would be $65 a month, and employers could elect to automatically enroll employees in the program. Enrollees would have to pay premiums for five years to be eligible for benefits. Long-term care insurance could be included in cafeteria plans, according to the bill.

Standards for financial and administrative transactions. The bill would require the adoption of standards, implementation specifications, and operating rules for the electronic exchange and use of health information for purposes of financial and administrative transactions. The initial standards must include requirements for permitting electronic fund transfers and timely and transparent claim and denial management processes, including tracking, adjudication, and appeal processing (for all participants, including health insurance issuers, providers and patients).

Prevention. The bill would require the creation of the ‘‘National Prevention, Health Promotion and Public Health Council,” which would be tasked with developing a national prevention and health promotion strategy to improve the health status of Americans and reduce the incidence of preventable illnesses.

The bill also would create a “Right Choices” program to provide eligible individuals with certain services, including a one-time health risk appraisal and a risk-stratified care plan. A care plan would include recommendations for behavioral changes, referrals to community-based resources, and referrals for age and gender appropriate immunizations and screenings to prevent chronic diseases. States must reimburse health care provides that provide services to individuals under this program. In addition, eligible individuals with a family income that exceeds 200 percent of the poverty level must contribute a portion of the cost of care received under the program.

Nutrition labeling. Restaurants and retail food establishments would be required to display on menus and menu boards the number of calories contained in standard menu items and a succinct statement concerning suggested daily caloric intake. Certain vending machines also would be subject to the calorie display requirement.

Employer-based wellness programs. The bill tasks the Director of the Center for Disease Control (CDC) with providing employers with technical assistance, consultation, tools, and other resources to evaluate employer-based wellness programs, including:

• measuring the participation and methods to increase participation of employees in such programs;

• developing standardized measures that assess policy, environmental and systems changes necessary to have a positive health impact on employees’ health behaviors, health outcomes, and health care expenditures; and

• evaluating such programs as they relate to changes in the health status of employees, the absenteeism of employees, the productivity of employees, the rate of workplace injury, and the medical costs incurred by employees.

Multiple employer welfare arrangements. The bill would authorize cease and desist orders to be issued to a multiple employer welfare arrangements (MEWA) where its alleged conduct appears to be fraudulent, or creates an immediate danger to the public safety or welfare, or is causing or can be reasonably expected to cause significant, imminent, and irreparable public injury. A summary seizure order may be issued if it appears that a MEWA is in a financially hazardous condition.

Health insurance exchanges would allow for “comparison shopping”

One frequently-mentioned, but rarely analyzed, element of some of the health reform proposals is the idea of creating a national health insurance exchange at the federal level. In fact, on June 3, in his letter to Senators Ted Kennedy and Max Baucus, President Obama urged the inclusion of a health insurance exchange in health reform legislation, saying that, for those who don’t already have health insurance, “we should create a health insurance exchange--a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that's best for them, in the same way that Members of Congress and their families can.” The newly-released text for the Kennedy-sponsored bill includes health insurance exchanges, which are called "health benefit gateways."

What exactly is a health insurance exchange? Think of it as a matchmaker or a marketplace allowing individuals or small business to “comparison shop” for health insurance coverage. In its June Issue Brief, EBRI includes a detailed analysis of health insurance exchanges. According to EBRI, a health insurance exchange would be an “organized marketplace that brings together health insurers and consumers (either as individuals or through their employers)” in which the exchange’s sponsor “would set rules of engagement for participating insurers and offer consumers a menu of choices among different plans.” Further, EBRI says, “ultimately, the goal of a health insurance exchange is to shift the market for health insurance from competition based on risk to competition based on price.”

I love baseball and like to get to as many games as I can. Fortunately, I can figure out, in advance, who my team is playing on a particular day and how much the ticket will cost. Nowadays, I can decide (based on my own situation) whether I’m willing to pay more to see the Cubs play an arch rival like the Cardinals or the White Sox or pay less to see them play a less popular opponent. In many cases, I can determine what the view from a particular ballpark section looks like. In some ballparks, I can even see ahead of time what amenities are provided. Am I getting a premium buffet or in-seat service or will I have to settle for buying a hot dog and a beer from a concession stand?

When it comes to buying baseball tickets, I can find out, ahead of time, exactly what I’m getting but, when it comes to health insurance, this type of transparency is often lacking today. It’s tough to compare the costs and features of a “skybox” type of health plan against those in a “bleacher” type of plan to get the best deal for a particular situation. It makes a lot of sense to allow the health plan consumer, as many other shoppers already can, the ability to comparison shop. Sometimes, it’s hard to believe that something like a health insurance exchange has not already been done at the federal level.

At the state level, though, health insurance exchanges are starting to be developed. For instance, as part of its 2007 health reform activities, the state of Massachusetts has been using the Connector, a health insurance exchange that breaks health plans down into three categories, bronze, silver, and gold. Minnesota’s 2008 health reform initiative includes “baskets of care.”

Many experts think the health insurance exchange is a good idea. Arguing in favor of an insurance exchange, one expert, for example, cites consulting firm McKinsey and Company's estimates that health insurance exchanges could save $70 billion or more. However, not everyone shares the same optimism for health insurance exchanges. One critic, for instance, likes the idea of a health insurance exchange but thinks it should be done at the state, not federal, level to allow for “state-level experimentation.”

Americans like to “comparison shop” to get the best deal but will they go for the idea of health plan comparison shopping via a health insurance exchange? As the committees start to roll out their legislative language on health care reform in the next few days, it will be interesting to see what role, if any, health information exchanges will play.

Think You're Protected? Think Again.

We expect our employer-sponsored health insurance, health insurance in general, to protected us from excessive medical costs of a serious illness or injury. After all, isn’t that the purpose of health insurance? But two new studies show that the health insurance safety net is seriously weakening. Workers with employer-provided health insurance face underinsurance and unaffordability as their insurance costs more, covers less, and care costs rise, thus forcing more families to declare personal bankruptcy. These findings of two separate studies were published in the June 2nd online issue of Health Affaris and in the June issue of The American Journal of Medicine, the official journal of the Association of Professors of Medicine

In the Health Affairs study on underinsurance, Jon R. Gable, a well-respected economist and senior fellow at the National Opinion Research Center, and Roland McDevitt, director of research for Watson Wyatt Worldwide, and colleagues, found that expected out-of-pocket expenses for all adults rose 34%, from $545 to $729 in 2007. But for the highest cost 1% and 10% of adults, out-of-pocket expenses rose by 42% and 39%, respectively. Even for the lowest half of spenders, out-of-pocket expenses rose by 23%. “The considerable increase in out-of-pocket spending with slight decline in actuarial values [the extent of insurance coverage] suggest that substantial increases in overall claims expenses are responsible for much of the overall increased out-of-pocket spending,” Mr. Gabel and his colleagues concluded.

In what ways did our out-of-pocket costs rise? In 2007, 58% (up from 45% in 2004) of workers in large firms faced a deductible. “The average actuarial value for plans with deductibles is considerably less (76.1%) than that of plans without deductibles (85.6%),” the authors explained. Although health insurance pays a greater share of claims costs for adults with chronic conditions, these patients also pay higher “absolute amounts” in out-of-pocket costs. Of patients afflicted with five common chronic conditions, breast cancer patients experienced the highest out-of-pocket costs (an average of $6,250).

Of individuals with group health insurance, the following would spend more than 5% of their household income for out-of-pocket medical expenses::
--one-fifth (up from 16.5% in 2004) of people with income at 200% of federal poverty level ($41,300 for a family of four in 2007); but,
-- for people in the top one-quarter of high-cost patients, 71% of those in the 200% of FPL group and more than one-third of patients with household incomes at 400% of FPL (that’s over $80,000, a fairly high middle class income).

When premiums and out-of-pocket costs are considered together, nearly one-fifth of individuals at 200% of FPL (up from 13% in 2004) and 4% (double the 2% in 2004) of people at 400% of FPL would spend more than 10% of their income, Mr. Gabel and colleagues determined. . The Massachusetts health plan’s definition of “affordability” does not take into account insureds’ out-of-pocket expenses; if it did, coverage would be “richer,” but more expensive for the state, the authors commented. Take note, Congressional leaders considering federal health reform based on this state’s model.

About 20% of enrollees in high deductible health plans with a spending/savings account who receive an employer account contribution would exceed the 10% threshold. In fact, out-of-pocket spending is higher in these high deductible health plans for all but the lowest-cost patients,” the Health Affairs report noted. So much for high deductible health plans with health savings accounts (or HSAs) as a health reform solution.

Of all bankruptcies filed in 2007, 62.1% were medical (up from fewer than half in 2001); and the debts exceeded $5,000, or 10% of pretax family income, for 92% of these medical debtors, according to the authors of the report on medical bankruptcies, physicians and single-payer advocates David U. Himmelstein and Steffie Woolhandler and colleagues from Harvard University and Ohio University.. Most medical debtors were well educated, owned homes, and had middle-class occupations, and three quarters had health insurance.

Ultimately, it appears that Americans with group health insurance who are sick and earn a “modest” income, are probably underinsured, Mr. Gabel and colleagues concluded. “From 2004 to 2007, a period of economic expansion, financial protection eroded,” they wrote. During that time period, the economy gained more than 6.5 million new jobs, and gross domestic product (GDP) grew 11%.: In contrast, in 2008 and 2009, the U.S. lost 4.4 million jobs. “The recessions of 1991 and 2001 and jobless recoveries that followed were accompanied by increases in patient cost sharing,” the observed.. “If history repeats itself, as the most recent recession plays out, employees are likely to experience further and more serious deterioration in financial protection from their health plans. Hence, it is imperative that the health care reform debate of 2009 address the underlying rise in health spending. Failure to do so will not only render health insurance and health care unaffordable to low- and middle-income Americans in the near future, but it will also leave health reform itself unaffordable.”

Think you’re protected? Think again.

A rosy outlook from CEA

"Successful health care reform" (that is, reducing the growth rate of costs while at the same time preserving choice and expanding coverage) will create a rosy outlook for the U.S. economy in the years to come, according to a report issued last week by President Obama's Council of Economic Advisers.

Here's a partial list of the positive economic outcomes forecast by the CEA:

--Slowing the annual growth rate of health care costs by 1.5 percentage points would increase real gross domestic product (GDP), relative to the no-reform baseline, by more than 2% in 2020 and nearly 8% in 2030.

--For a typical family of four, a slowing growth rate implies that income in 2020 would be $2,600 higher than it would have been without reform (in 2009 dollars), and that in 2030 it would be almost $10,000 higher.

--Slowing cost growth would lower the unemployment rate consistent with steady inflation by approximately one-fourth of a percentage point for a number of years.

Well, gosh. That all sounds really good. But how do we pay for it? CEA implies in its report that much of the cost will be absorbed, albeit not immediately, by the "savings" generated by structural changes and reducing inefficiencies.

Well, maybe. But won't new sources of revenue be needed as well? Voices on the left and on the right ask the same question (although the tone of their headlines is perhaps predictive of their positions on whatever the answer to that question will be). According to Bloomberg News, President Obama may finally be ready to address that question in the next couple of weeks.

The "Health Care" In Health Care Reform

More than 30 years ago, German and Japanese automakers began to produce cars with better quality, better fuel economy, and often better prices than their American counterparts. The market responded appropriately, some would say, and that is at least partially why two of the three big three American automakers have gone into bankruptcy and foreign automakers now dominate. Some have assumed that if GM and Chrysler begin to produce cars with better quality, better fuel economy, and better prices, they can succeed in the future.

In the health care industry, organizations such as the Mayo Clinic for more than 30 years also have provided medical care with better quality and at lower prices than many other providers.

If health care was a commodity like an automobile, I could read about it in Consumer Reports, check out which vendors were selling the best and least expensive product, buy it online, and pick it up at the nearest dealer. Obviously, that is not the case, and it will not be achieved simply by letting the market react. After all, while the Mayo Clinic and others have been holding down costs and improving care, Securities and Exchange Commission filings indicate that profits at 10 of the country’s largest publicly-traded health insurance companies rose 428% from 2000 to 2007, from $2.4 billion to $12.9 billion. Unlike GM and Chrysler, the biggies in health care are doing just fine.

As President Obama noted in a June 2 letter to Sens. Max Baucus and Edward Kennedy:

"We must attack the root causes of the inflation in health care. That means promoting the best practices, not simply the most expensive. We should ask why places like the Mayo Clinic in Minnesota, the Cleveland Clinic in Ohio, and other institutions can offer the highest quality care at costs well below the national norm. We need to learn from their successes and replicate those best practices across our country. That's how we can achieve reform that preserves and strengthens what's best about our health care system, while fixing what is broken. "

For more than 20 years, the Dartmouth Atlas Project (run by the Dartmouth Institute for Health Policy and Clinical Practice) has known about the problem the President elucidates and also has known the answer to his question, why some institutions can provide better care at less cost.

As noted in a 2009 Dartmouth Atlas briefing,

“Medicare spending in 2006 varied more than threefold across U.S. hospital referral regions. Research has shown that some of the variation is due to differences in the prices paid for similar services, and some is due to differences in illness; but even after accounting for these factors, twofold differences remain….The differences in spending are almost entirely explained by differences in the volume of health care services received by similar patients.”

The root causes for this overspending (and what needs to be fixed) are as follows, according to the briefing:

Lack of accountability for the overall quality and costs of care—and for local capacity;

Inadequate information on the risks and benefits of many common treatments and the related assumption (on the part of most patients and many physicians) that more medical care means better medical care; and

A flawed payment system that rewards more care, regardless of the value of that care.

You can prove to yourself how unevenly medical care and costs are delivered with a simple test—the next time you talk about a medical procedure or service you think you need with your employer, you health care plan, your plan administrator, you doctor, or your hospital—ask this question:

What is the national standard of care being used in regard to this procedure or service that assures me this is the highest quality service at the lowest cost?

More times than not, you won’t get a satisfactory answer, and that’s one of the primary reasons lasting health care reform should start with “health care.” Possibly the President can prevent the “health care” in reform from being relegated to platitudes and promotions—but so far it looks like quality health care provided efficiently and effectively will be a voluntary effort—and more than not an afterthought in health care reform.

Health groups try to show us the money

Six major health care associations have issued proposed savings plans as a follow-up to their May 11 pledge to help decrease the annual health care spending growth rate by 1.5 percentage points. The groups include the American Medical Association (AMA), the American Hospital Association (AHA), America's Health Insurance Plans (AHIP), the Service Employees International Union (SEIU), Pharmaceutical Research and Manufacturers of America (PhRMA) and the Advanced Medical Technology Association (AdvaMed).

The groups’ letter to President Obama states, “Each group has identified changes in its sector that will reduce costs, strengthen quality and improve access to care through the following key areas:

• Utilization of care: Providing clinicians and other providers with the tools to address utilization and to improve quality and safety will help ensure that patients receive the right care at the right time in the right setting and will lower costs.

• Cost of doing business: Innovative approaches to reducing the growing costs of providing health care services are essential and will benefit all stakeholders in the health care system.

• Administrative simplification: Streamlining the claims processing system will allow clinicians and other personnel to spend less time and fewer resources on paperwork, lowering costs for everyone.

• Chronic care: We are identifying significant opportunities to better manage chronic disease, which accounts for 75% of overall health care spending. We are also looking at more effective approaches to health promotion and disease prevention, with a special focus on obesity.”
  

Cost savings estimates. The associations indicate the potential savings as follows:

• Utilization of care: $150 - $180 billion.
• Chronic care: $350 - $850 billion.
• Administrative simplification and cost of doing business: $500 - $700 billion.

Specific proposals. AHIP proposes “a comprehensive overhaul of administrative processes to standardize and automate five key functions—claims submissions, eligibility, claims status, payment, and remittance.” AHIP indicates that HHS should require the adoption of the CAQH Committee on Operating Rules for Information Exchange (CORE). The group also suggests updates and expansion of the administrative simplification provisions of HIPAA and indicates it supports comprehensive reform of market rules.

The AMA seeks to reduce hospital readmissions and unnecessary utilization of certain services or procedures, including diagnostic imaging. It also will focus on medication reconciliation “to reconcile multiple prescriptions for individual patients treated by different physicians. This program of medication reconciliation is designed to avoid potential adverse events and inappropriate prescriptions.”

SEIU’s initiatives focus on expanding home and community-based services, Medicare and Medicaid chronic care and prevention, and post-acute care payment reform.

Southern, Western Regions Expected to Benefit Most from Health Care Reform

Lost in the midst of all the discussions regarding the details of varying health care reform proposals is a look at the impact these proposals could have on different regions in the country.

When looking at the number of residents who are uninsured, on a state by state basis, it is clear that, currently, states in the West and in the South generally have greater percentages of uninsured residents than do states in the East and Midwest. For example, though almost 92 percent of Minnesotans are covered by health insurance, only 76 percent of Texans are covered by health insurance. (An exception to these generalizations is Hawaii, which is among the national leaders in health insurance coverage rates.)

In fact, in a recent analysis, one commentator at the Washington Post suggested that the West and the South would benefit to the detriment of the East and the Midwest when it comes to health care reform. According to this reasoning, not only are the percentages of uninsured residents greater in the Southern and Western states but also, people in the Midwest and East will be likely to pick up more of the health care reform tab, if employer-provided benefits are taxed to pay for health care reform. According to the Washington Post, this is due to “pricier health care markets, higher state standards for health coverage and stronger labor unions” in the East and Midwest regions of the nation.

All of this gets back to a point I made earlier, namely that, if Congress taxes “Cadillac plans,” middle-class families in high health cost areas could be penalized because they live in “expensive” healthcare areas. If Congress chooses to tax only "Cadillac" or "gold-plated" benefits, it will need to be careful when crafting the proposal to make sure that these plans are not high cost solely due to regional health cost differences.

If health care reform successfully restrains health care costs over the long haul, people from all areas of the U.S. would benefit. This is something everyone, regardless of where they live, should hope for. We’re all in this together.

It's A Jungle Out There.

If you don’t believe that meaningful health reform is essential, now, not later, the following just might convince you.

Subscribers to our information services sometimes send us “technical questions,” which we address with references to federal laws and regulations. A subscriber posed the following question a couple of months ago.

“An employee's son committed suicide when he was still in his pre-existing condition waiting period. Can the employer’s self-funded health plan deny charges that resulted from this suicide as pre-existing or does HIPAA protect this claimant? If the son has no previous history of mental illness can the claim be denied under HIPAA?”

What’s wrong with this question?

Our answer pointed out that in determining whether or not the claim would be paid the plan must consider two issues pertaining to HIPAA rules for preexisting conditions exclusions and for source of injury. As explained in the response, HIPAA rules specify that a group health plan may impose a preexisting condition exclusion for a participant or beneficiary only if it complies with all of the following: the six month look-back rule, the 12 month limit on the exclusion, and the reduction of the preexisting condition exclusion period for prior coverage.

Assuming that in this situation the plan has followed the 12 month limit and the reduction for prior coverage rule, the six month rule requires that the preexisting condition exclusion relate “to a condition for which medical advice, diagnosis, care, or treatment was recommended or received within the six-month period ending on the enrollment date.”

To determine that an individual has a preexisting condition the plan can use medical records (such as diagnosis codes on bills, a physician's notes of a visit or telephone call, pharmacy prescription records, HMO encounter data, or other records indicating that medical services were actually recommended or received during the six-month look-back period). The plan may not determine preexisting using the "prudent person" standard provided in some state laws which would take a condition into account if a “prudent person” would have sought care, whether or not care is actually received.

This six-month "look-back" period is based on the six-month "anniversary date" of the enrollment date. For example, an individual who enrolled on Aug. 1, 2008, has a six-month look-back period from Feb. 1, 2008, through July 31, 2008.

If a doctor's recommendation for treatment occurs before the six-month look-back period, an individual can be subject to a preexisting condition exclusion ONLY if the individual receives the recommended treatment within the six-month look-back period.

All of this explanation is just for the preexisting conditions exclusion. The “source of injury” restrictions, which allow a plan to deny payment for claims incurred as result of recreational activity injuries, is yet another convoluted excuse for claims denials. However, under HIPAA plans cannot deny claims for injuries sustained as a result of a medical condition (including depression). Under the HIPAA regulations, benefits may not be denied for injuries resulting from a medical condition even if the medical condition was not diagnosed before the injury.

Imagine being the parent who has just lost a child to suicide and is then told, “Your child’s medical claims resulting from the suicide are not covered because the cause of the suicide (depression) was a preexisting condition”? And imagine the complicated avenues that your employer/insurer may be anxious to pursue to deny your claims. As you can see from this one example, it happens.

If we had a health insurance plan that covered everyone from day one, no preexisting or other excuses allowed, this complicated, and disturbing, rigmarole for patients and payers would be unnecessary.

Health care costs: “What, me worry?”

Americans who are generally satisfied with their health insurance may wonder what’s in it for them to expand coverage to those who are currently uninsured. “If it doesn’t affect my pocketbook, why should I worry,” may not be an unreasonable position to take.

(Given that, perhaps the titular reference to Alfred E. Neuman is unfair? Maybe. But I'm leaving it in--the goofy grin still makes me smile.)

But seriously, it’s in part to gain the support of the millions of Americans in this enviable position that the Obama Administration has made efforts to position health care reform as a means to control the cost of health care, as opposed to campaigning for universal coverage solely as a good in its own right.

Now, the healthcare advocacy group FamiliesUSA offers additional support for the notion that insured Americans do have a financial reason to worry about the cost of care for the uninsured. The group released a study last week it says illustrates that families with health insurance paid a “hidden health tax” in 2008 of $1,017.

So what’s this “hidden tax” all about? Well, think for a moment about people who, whether through misfortune or through choice, have no health insurance. What happens when those folks get really sick, or when they have an accident? Many of those individuals will receive at least some health care treatment, but, according to the FamiliesUSA study, they will on average be able to pay for only 37% of the cost of care out of their own pockets. Government programs and charities will pick up another 26% of the cost of that care.

What about the remaining 37% of the cost of care for the uninsured? According to the study, costs for so-called “uncompensated care” are shifted from providers to those with private insurance in the form of increased prices. Private insurers then pass that cost along to (you guessed it) insured individuals, families and employers in the form of higher premiums. (Milliman, Inc., crunched some numbers for FamiliesUSA to come up with the per-family figure of $1,017 for 2008.)

An extra thousand bucks per year is reason for many families to worry. Now, if those same families are asked, as some Congressional proposals suggest they will be, to trade this “hidden” tax for a tax “in plain sight” on a portion of their employer-provided health care, will they feel relieved that the “hidden tax” has been addressed? Or will they have simply traded one worry for another?