Monday, March 30, 2020

Health Care Reform Articles - April 3, 2020

Medicare for Each of Us in the Age of the Coronavirus

The U.S. public—and increasingly the business community—are becoming acutely aware of the rising costs and inadequacies of our current for-profit system, particularly as the current epidemic unfolds. There is no other choice but Medicare for All.
Over the past two weeks, the explosive growth of the coronavirus pandemic has forced nearly 10 million Americans to file for unemployment benefits. Along with their jobs, many have lost their health insurance, if they had any to begin with. Aside from possibly spelling disaster for these newly unemployed workers and their families, this situation puts both the public health and economic wellbeing of our country at great risk. A clearer rationale for universal, affordable, lifetime health coverage as exemplified under a Medicare For All framework would be hard to find.
In this article we outline the need for a universal health plan, its historical context, and the obstacles raised by the medical-industrial complex that must be overcome.
There is a large elephant in the room in the national discussion of Medicare for All: the transformation of the US health care system’s core mission from the prevention, diagnosis, and treatment of illness—and the promotion of healing—to an approach dominated by large, publicly traded corporate entities dedicated to growing profitability and share price, that is, the business of medicine.
The problem is not that these corporate entities are doing something they shouldn’t. They are simply doing too much of what they were created to do—generate wealth for their owners. Unlike any other wealthy country, we let them do it. The dilemma of the US health care system is due not to a failure of capitalism or corporatism per se, but a failure to implement a public policy that adequately constrains their excesses.
"How is it that we spend more on health care than any other nation, yet have arrived at such a sorry state of affairs?"
Since the late 1970s, US public policy regarding health care has trended toward an increasing dependence on for-pofit corporations and their accompanying reliance on the tools of the marketplace—such as competition, consolidation, marketing, and consumer choice—to expand access and assure quality in the provision of medical care.
This commercialized, commodified, and corporatized model is driving the US public’s demand for fundamental reform and has elevated the issue of health care to the top of the political agenda in the current presidential election campaign.
Costs have risen relentlessly, and the quality of and access to care for many Americans has deteriorated. The cultural changes accompanying these trends have affected every segment of the US health care system, including those that remain nominally not-for-profit. Excessive focus on health care as a business has had a destructive effect on both patients and caregivers, leading to increasing difficulties for many patients in accessing care and to anger, frustration, and burnout for many caregivers, especially those attempting to provide critical primary care.
As a result, the ranks of primary care providers have eroded, and that erosion continues. One of the major reasons for burnout in this group is the clash between its members’ professional ethics (put the patient first and “first do no harm”) and the profit-oriented demands of their corporate employers. Applying Band-Aids can’t cure the underlying causes of disease in medicine or public policy. Ignoring the underlying pathology in public policy, as in clinical medicine, is destined to fail.
Many of the symptoms of our dysfunctional health care system are not in dispute:
We must therefore ask: How is it that we spend more on health care than any other nation, yet have arrived at such a sorry state of affairs?
"The theology of the market and the strongly held—but mistaken—belief that the problems of US health care can be solved if only the market could be perfected have effectively obstructed the development of a rational, efficient, and humane national health care policy."The answer is that only in the United States has corporatism engulfed so much of medical care and come so close to dominating the doctor-patient relationship. Publicly traded, profit-driven entities—under constant pressure from Wall Street—control the financing and delivery of medical care in the US to an extent seen nowhere else in the world. For instance, seven investor-owned publicly traded health insurers now control almost a trillion dollars ($913 billion) of total national health care spending and cover half the US population. In 2019, their revenue increased by 31 percent, while their profits grew by 66 percent.
The corporatization of medical care may be the single most distinguishing characteristic of the modern US health care system and the one that has had the most profound impact on it since the early 1980s. The theology of the market and the strongly held—but mistaken—belief that the problems of US health care can be solved if only the market could be perfected have effectively obstructed the development of a rational, efficient, and humane national health care policy. 
There are three main reasons to pursue a public policy that embraces genuine health care reform:
  1. Saving lives: To simplify our complex and confusing health care system while providing universal affordable health care coverage;
  2. Affordability: To rein in the relentless rise in health care costs that are cannibalizing private and public budgets; and
  3. Improving quality: To eliminate profitability and share price as the dominant and all-consuming mission of the entities that provide health care services and products when that mission influences clinical decision making. Profitability should be the servant of any health care system’s mission, not its master as seems to be increasingly the case in the US.

What Is The Best Approach To Reform? 

It is not an exaggeration to say that no reform other than publicly financed, single-payer universal health care will solve the problems of our health care system. This is true whether we are talking about a public option, a Medicare option, Medicare buy-in, Medicare extra, or any other half-measure. The main reason is because of the savings that are inherent only in a truly universal single-payer plan. Specifically, the administrative and bureaucratic savings gained by eliminating private insurers are the largest potential source of savings in a universal single-payer framework, yet all the “option” reforms listed above leave largely intact the tangle of wasteful, inefficient, and costly private commercial health insurers. The second largest source of savings comes through reducing the cost of prescription drugs by using the negotiating leverage of the federal government to bring down prices, as is done in most other developed countries. The ability, will, and policy tools (such as global budgeting) to restrain these and other costs in a single-payer framework are the key to reining in the relentless rise in health care expenditures and providing universal coverage.
"The real struggle for a universal single-payer system in the US is not technical or economic but almost entirely political."The various “option” reform proposals will not simplify our confusing health care system nor will they lead to universal coverage. None have adequate means to restrain health care costs. So why go down this road? Is it too difficult for the US to guarantee everyone access to affordable care when every other developed country in the world has done so?
The stated reason put forth in favor of these mixed option approaches is that Americans want “choice.” But choice of what? We know with certainty from former insurance company executives such as Wendell Potter that the false “choice” meme polls well with the US public and was used to undermine the Clinton reform efforts more than 25 years ago. It is being widely used today to manipulate public opinion. 
But choice in our current system is largely an illusion. In 2019, 67.8 million workers across the country separated from their job at some point during the year—either through layoffs, terminations, or switching jobs. This labor turnover data leaves little doubt that people with employer-sponsored insurance are losing their insurance constantly, as are their spouses and children. And even for those who stay at the same job, insurance coverage often changes. In 2019, more than half of all firms offering health benefits reported shopping for a new health plan and, among those, nearly 20 percent actually changed insurance carriers. Trading off choice of doctors or hospitals for choice of insurance companies is a bad bargain.
The other major objection to a universal single-payer program is cost. Yet, public financing for health care is not a matter of raising new money for health care but of reducing total health care outlays and distributing payments more equitably and efficiently. Nearly every credible study concludes that a single-payer universal framework, with all its increased benefits, would be less costly than the status quo, more effective in restraining future cost increases, and more popular with the public—as 50 years of experience with Medicare has demonstrated. 
The status quo generates hundreds of billions of dollars in surplus and profits to private stakeholders, who need only spend a small portion (millions of dollars) to influence legislators, manipulate public opinion, distort the facts, and obfuscate the issues with multiple competing reform efforts. 


The real struggle for a universal single-payer system in the US is not technical or economic but almost entirely political. Retaining the status quo (for example, the Affordable Care Act) is the least disruptive course for the existing medical-industrial complex, and therefore the politically easiest route. Unfortunately, the status quo is disruptive to the lives of most Americans and the least effective route in attacking the underlying pathology of the US health care system—corporatism run amok. Following that route will do little more than kick the can down the road, which will require repeatedly revisiting the deficiencies in our health care system outlined above until we get it right. 
The US public and increasingly the business community are becoming acutely aware of the rising costs and inadequacies of our current system, particularly as the current epidemic unfolds. It is the growing social movement, which rejects the false and misleading narratives, that will lead us to a universal single-payer system—truly the most effective way to reform our health care system for the benefit of the American people.

Editor's Note - 

On March 25 I posted two essays written by me and Peter Arno. The preceding clipping from Common Dreams is based on one of them, previously pubished in the Health Affairs blog, They all deal with the corrosive effects of the takeover of the American health care industry by large national and international publicly-traded companies. A similarly worrisome trend, going on in parallel is the purchase of components of our healthcare delivery system, such as specialty practices, by private equity groups (hedge funds).

 As a follow-up, I have posted a few stories written by Harris Meyer in Modern Healthcare magazine last year that I think demonstrates the scope of this problem. Hedge funds are probably even more focused on the bottom line than are publicly traded companies, if that's possible.


Specialty physician groups attracting private equity investment

by Harris Meyer - Modern Healthcare - August 31, 2019
The 18 physician shareholders at Beacon Orthopaedics in Cincinnati decided last year they needed an outside investor to help them grow and compete more effectively in the rapidly consolidating healthcare market.
After interviewing about 15 private equity firms, the Beacon orthopedists selected Denver-based Revelstoke Capital Partners to help them launch a management services organization that takes over the business functions of the practice. That structure sidesteps rules in most states barring nonphysicians from formally owning medical practices.
The MSO, which started in July, will serve as the foundation for a new network of orthopedic groups across the region and perhaps even nationally that would share management, billing, staffing, credentialing, accounting, and other services. The 26-physician group says it’s already in talks with more than a dozen other orthopedic practices interested in joining the MSO.
Orthopedists, along with gastroenterologists and urologists, are among the newest targets in the rush of private equity firms investing in physician specialty groups over the past few years. These firms are attracted to specialties that promise rich revenue from ambulatory surgery centers, lab, imaging and other ancillary services. The trend is already far along in dermatology, ophthalmology and dentistry.
Other orthopedic and gastroenterology groups acquired by private equity firms over the past two years include the Phoenix-based Core Institute, the Orthopaedic Institute in Gainesville, Fla., Atlanta Gastroenterology Associates, and Texas Digestive Disease Consultants in Dallas-Fort Worth.
The proliferation of these deals has raised alarm about whether ownership of physician practices by investors eyeing a 400% return on their cash investment within a few years will affect overall healthcare spending and quality of care. It’s set off an emotional debate within medicine about potential pressure to provide unnecessary care and loss of professional autonomy.
“It’s appropriate to be wary of new people coming in and gobbling up practices,” said Dr. Arash Mostaghimi, co-author of a recent JAMA Dermatology study on private equity acquisitions of dermatology practices. “If you promote care that’s focused only on money, humanity is lost,” he continued. “But there’s a lot to be gained from good business practices and consolidation that produce better, more efficient care. Probably both things will happen.”
Revelstoke paid the Beacon shareholders an undisclosed amount for a majority share of the management services organization, with the physician group keeping ownership of the practice itself and paying the management services organization a fee.
“The key to our decision to go with Revelstoke was the ability of physician leadership to continue to manage and be advocates for the care of our patients,” said Dr. Peter Cha, Beacon’s president. “Time will tell whether we can take this into national markets.”
The big potential payday for both the doctors and Revelstoke comes three to seven years down the line, when Revelstoke sells the expanded business to another investor, most likely another private equity firm but possibly an insurer, hospital system or another physician company. Then the orthopedists will find themselves working with a new managing partner.
“We’re not speculating as to who would take over from Revelstoke,” said Cha, whose group also serves Dayton, Ohio, and northern Kentucky. “We’re simply focused on growing the business and consolidating the market in orthopedic surgery in the best interests of our patients.”
Keeping autonomy, deep pockets
Despite the concerns, medical groups are rushing into the arms of private equity investors. They see this as an alternative to ownership by hospital systems or insurers that they believe will preserve their professional autonomy and enable them to serve a much larger market.
There were 181 private equity deals for all types of physician practices last year, according to an analysis published in Bloomberg Law. In dermatology alone, there were nearly 200 practices acquired by private equity firms over the past six years, according to the JAMA Dermatology study.
We’re not in the business of telling doctors how to practice medicine; we’re in the business of taking away roadblocks and making the practice easier and better for providers. The experience is better for patients, and payers like it as well.”
Andrew Welch, managing director, Revelstoke Capital Partners
In these deals, the shareholder physicians receive a large cash payment upfront—which is particularly attractive to older doctors near retirement—with the prospect of a much larger bonanza when the private equity firm sells to another buyer. The initial payment is based on a multiple of the practice’s earnings before interest, taxes, depreciation and amortization, ranging from low single digits to as much as 12 times EBITDA.
The doctors generally pay for their equity interest by taking up to a 30% cut in their compensation, said James Heidbreder, managing director of Coker Capital Advisors, which has brokered nearly a dozen of these deals. They also contribute valuable practice assets such as ancillary services to the new management firm.
A number of medical groups, particularly in dermatology and ophthalmology, are already on their second private equity owner, following a “liquidity event” in which the first owner cashed out. There is little public information on how lucrative these transactions have been for investors and physicians.
In one deal, Varsity Healthcare Partners sold its ownership interest in Forefront Dermatology to OMERS Private Equity in 2016 for a reported $450 million, 15 times the medical group’s EBITDA, according to PitchBook. Forefront now has 130 clinics in 16 states.
Private equity firms say these deals are proving successful financially, and the proof is that many are eager to keep investing in medical groups.
Advocates say private equity partners can help physician groups grow and improve their efficiency and quality of care through better management and technology, as well as readying them for new value-based payment models. They also can help the practices become one-stop shops for all needed services, and speed the shift to lower-cost outpatient settings.
“We’re not in the business of telling doctors how to practice medicine; we’re in the business of taking away roadblocks and making the practice easier and better for providers,” said Andrew Welch, Revelstoke’s managing director. “The experience is better for patients, and payers like it as well.”
Docs keep equity
On the other hand, private equity investors like Welch structure the deals to ensure the physicians have a strong stake in the business’ profitability. “We don’t want a situation where the doctors just run clinical and we run the business and we’re not aligned on the overall strategic direction,” he said. “We try to keep the physician leadership very active on the business side as well.”
With their improved quality, larger size, and expanded services and locations, the private equity-backed groups also have more clout to negotiate better deals with payers, though they downplay this to avoid attracting attention from antitrust regulators.
“The goal is to develop market leverage,” said Bill Brown, a healthcare strategist with Nashville-based A2B Advisors. “It’s a war of who can get big enough in any area to get payers to treat you with respect.”
Some observers say private equity-backed management firms also bring practice standards that protect patients from lesser-quality practitioners.
“In small practices, if one doctor is a bad apple, it’s almost impossible for the others to do anything about it,” said Dr. Lawrence Casalino, a health policy professor at the Weill Cornell Medical College who’s studying private equity deals with physicians. “Whereas (the private equity firm) can get rid of the bad apple or make him behave.”
There are few published studies so far on the impact of these deals, though researchers are gathering data and promising results within the next year.
In small practices, if one doctor is a bad apple, it’s almost impossible for the others to do anything about it. Whereas (the private equity firm) can get rid of the bad apple or make him behave.”
Dr. Lawrence Casalino, a health policy professor at the Weill Cornell Medical College who’s studying private equity deals with physicians
Some early studies, however, already have raised concerns about private equity ownership of dermatology groups leading to loss of physician autonomy, conflicts of interest, increased utilization of high-cost services and inadequate supervision of midlevel clinicians.
A recent editorial in JAMA Dermatology urged a halt to private equity acquisitions of dermatology practices until more data is available on cost and quality outcomes.
“This does not seem to be a step in the direction of value-based, lower-cost care,” said Dr. Joshua Sharfstein, vice dean for public health practice at Johns Hopkins University who co-wrote the editorial.
A study by Yale University researchers published last year found that two large, private equity-owned medical groups, TeamHealth and EmCare, aggressively used out-of-network billing tactics to boost revenue. Insurers and other groups have pointed to private equity ownership as a culprit in the current congressional battle over legislation to end surprise out-of-network medical bills.
“My biggest concern is private equity firms aren’t focused on making healthcare better,” said Zack Cooper, an associate professor of health policy at Yale who co-authored that study. “They are focused on hunting out narrow slivers of the healthcare system where they can make significant amounts of money by exploiting loopholes.”
Questioning the model
Another looming question is whether the private equity business model is sustainable for medical practices, particularly after the first buyer cashes out. Observers wonder how much growth and greater efficiency can be achieved to enable subsequent investors to continue to pull large profits out of the practices.
“Who’s going to be the ultimate buyer?” Casalino asked. “If there is no ultimate buyer, then things don’t turn out so well.”
Buyers and sellers say they’re acutely aware of the disastrous experience with the wave of investor-owned physician management companies in the 1990s. A number of those companies, along with the physician practices they acquired, went bankrupt. Some have called those ventures Ponzi schemes.
But today’s environment and deals are sharply different from the ’90s in key ways, private equity investors and consultants say. “Everyone is positioning for value-based payment initiatives and population health, and smaller medical groups see they need capital and expertise to succeed in that,” said Gary Herschman, an attorney at Epstein Becker & Green who advises clients in these transactions.
Instead of putting physicians on salary as earlier management companies did—and as some hospital systems still do—smart private equity firms now structure deals to make physicians business partners with strong financial incentives to boost productivity and revenue, said Nader Naini, managing partner at Seattle-based Frazier Healthcare Partners. His firm closed a deal with Atlanta Gastroenterology Associates last December to form a management services organization platform called United Digestive.
Also unlike before, investors are bringing in experienced medical executives to provide management and technology help in integrating practices.
Still, Naini worries some private equity investors continue to see this as a pure financial play, with the goal of acquiring more and more practices rather than building high-quality, integrated medical groups. “If you don’t integrate, you are slapping s*** on top of s***,” he said. “There are still people in the market who have that mentality of the ’90s, and we’ll have circumstances that don’t work out.”
My biggest concern is private equity firms aren’t focused on making healthcare better. They are focused on hunting out narrow slivers of the healthcare system where they can make significant amounts of money by exploiting loopholes.”
Zack Cooper, associate professor of health policy at Yale
Chris Gordon, managing director at Bain Capital Private Equity, who also lived through the 1990s fiasco, wonders whether private equity investments in medical practices are moving too far and fast. He’s particularly skeptical about orthopedic group deals because market power in that specialty depends on specific physicians and referral patterns.
“People are deciding every specialty should be rolled up into a physician practice management platform,” he said. “I wouldn’t say it’s a bubble but it’s probably a little euphoria. It’s still not obvious that the whole world of physicians should be moving toward” practice management companies.
He’s one of many observers who see the rapid growth of these deals as a risky national experiment that could produce both successes and disasters.
Even so, Weill Cornell’s Casalino said many physicians believe they have no good alternative to accepting the uncertain outcome of private equity investment, given doctors’ often-negative experiences with hospital ownership of practices.
“Once you do it, you don’t know what life will be like in five years, because you’ve given up control of your destiny,” he said. “But that may be fine with some doctors, as opposed to selling to their local hospital, where they know all too well what their destiny is and they may not like it much.”

The threat of coronavirus medical bankruptcy

Allison K. Koffman - The Hill - April 1, 2020

With three relief bills passed, Congress addressed the most immediate health and economic threats from COVID-19. Yet, it has neglected a secondary threat that follows just behind. Many Americans will face unmanageable medical bills for coronavirus care.
The relief legislation that Congress passed over the past two weeks addressed only a small sliver of the costs of COVID-19 medical care, primarily to remove financial barriers to testing. The second and third relief bills required health plans to cover COVID-19 testing and medical visits related to that testing without any cost to patients. It also did the same for future preventive care or a vaccine, if either becomes available. These are laudable steps, but not enough.
Congress must address the debt that many Americans will face for medical care when they become infected with COVID-19. More than 180,000 Americans have tested positive, and the number of new cases grows exponentially. Early estimates of the cost of intensive inpatient COVID-19 care range from $20,000 to over $70,000. Many people will be left with a sizable part of that bill, or all of it, possibly at the same time that they lose their jobs (3.3 million people already have filed for unemployment). Unless Congress acts, the costs of coronavirus medical care will cripple many American families.
People in the U.S. are financially vulnerable to coronavirus because of four deeper problems with how we pay for health care.
The first is cost sharing. People in the U.S. face higher cost sharing than in most of our peer nations, which means that even after paying premiums, they are still responsible for more of the costs of their care. This problem is especially acute for someone who does not have insurance through work. For someone who buys a health plan directly, such as through an Affordable Care Act (ACA) exchange, the average annual deductible, or the amount of money she must pay for health care on her own before the insurance plan starts to pay, can be upwards of $4,000 for single coverage and more than twice that for family plans.
For those with insurance through an employer, over fifty percent have deductibles of $1,000 for single coverage and the average deductible for family coverage is nearly $5,000.  Even once a deductible is exhausted, people are often still responsible for a share of the costs of their care. The ACA caps total out-of-pocket spending on health care, but this out-of-pocket maximum ($8,150 for an individual and $16,300 for a family in 2020) does not apply to all spending. For example, it largely does not apply to bills for out-of-network care. Aetna was the first insurer to voluntarily waive cost sharing for coronavirus care, but only for some of its plans and only in-network care. Humana and Cigna followed. These private, voluntary efforts are meaningful but will reach only some insured.
Second, overall prices for medical care in the U.S. are high compared to peer nations. This means a high baseline on which cost sharing is calculated.
The third is the especially high price tag for out-of-network medical care. Insurers negotiate prices with in-network providers. Otherwise, the sticker price, or “chargemaster” price applies, and it can be many times higher than already high negotiated rates (see point two). Some uninsured face chargemaster rates subject to ACA limitations, and even people with insurance might be subject to them for out-of-network care.
Even in normal times, someone might use out-of-network care without intending to do so. He or she might go to an in-network hospital but receive treatment from an out-of-network doctor or be transported by an out-of-network ambulance to the hospital. This care can result in extremely high surprise medical bills. By one estimate, 18 percent of in-network admissions for pneumonia with major complications led to an out-of-network bill. Even more, as hospitals reach capacity, someone might not have the choice of an in-network hospital. Congressional efforts to stop surprise medical bills have stalled out.
The fourth is lack of insurance. Even 10 years after the ACA was passed, 10 percent of the population under age 65 remains uninsured, many of whom cannot afford insurance and are the least able to pay for unanticipated medical care.
These problems will be counterbalanced if intensive care is more common among older Medicare beneficiaries, who are the best insured population. But even they face cost sharing in some cases, and most are retirees with fixed incomes.
With the third relief bill, the Coronavirus Aid, Relief, and Economic Security Act (CARES), Congress provided needed aid to families through cash and unemployment support. But this support is temporary and for most families will pay for basic needs like food and housing. Many families lack reserves for unplanned medical care expenses.
The legislation that House Democrats proposed as an alternative to CARES, Take Responsibility for Workers and Families Act, addresses these gaps to some degree. It eliminated cost-sharing for coronavirus care and complications, providing federal funds to reimburse private insurers these costs. It also attempted to increase the number of insured Americans. It gave states the option to cover COVID-19 care for the uninsured through Medicaid, provided premium assistance for people who lose a job to keep their health plan under COBRA, and created special enrollment periods to sign up for an ACA plan or, for Medicare enrollees, to sign up for supplemental insurance coverage.
Even this proposed bill, a significant step forward overall, left gaps. For example, it recognized but did not fix surprise medical billing, and it left some Americans uninsured. But it offers a starting place for round four of relief legislation. Congress cannot devise a quick fix to these four large structural problems, but it can and must act now to head off avoidable coronavirus bankruptcies and financial stress.

Coronavirus May Add Billions to U.S. Health Care Bill

Insurance premiums could spike as much as 40 percent next year, a new analysis warns, as employers and insurers confront the projected tens of billions of dollars in additional costs of treating coronavirus patients.
by Reed Abelson - NYT - April 1, 2020

With so much still uncertain about how widespread hospitalizations for coronavirus patients will be around the United States, a new analysis says premiums could increase as much as 40 percent next year if the pandemic results in millions of Americans needing hospital stays.
“Health plans went into 2020 with no hint of coronavirus on the horizon,” said Peter V. Lee, the executive director of Covered California, the state insurance marketplace created under the Affordable Care Act, which conducted the analysis. To protect businesses and individuals from sharply higher rates, he supports a temporary federal program that would cover some of these costs.
“No insurer, no state, planned and put money away for something of this significance,” Mr. Lee said.
So far, some 94,000 people have become infected in the United States, according to official counts, and at least 1,400 have died. In New York state alone, nearly 1,600 patients were in intensive-care units as of Friday morning and the numbers have been rising all week.
Mr. Lee’s organization estimated the total cost to the commercial insurance market, which represents the coverage currently offered to 170 million workers and individuals through private health plans. The analysis does not include costs for people enrolled in government programs like Medicare and Medicaid.
Depending on how many people need care, insurers, employers and individuals could face anywhere from $34 billion to $251 billion in additional expenses from the testing and treatment of Covid-19. according to the analysis. At the high end, the virus would add 20 percent or more to current costs of roughly $1.2 trillion a year.
“There’s a lot we don’t know,” Mr. Lee said. “These are ranges.”
While the bill before Congress would provide hospitals some financial relief, it may not result in any change to how much hospitals charge private insurers and employers for care, he said.
Insurers and employers are already prodding Congress to consider helping them pay for the crisis by setting up a special reinsurance program that would cover the most expensive medical claims. The federal government would fund the program to lower the amount being paid by employers and insurers.
While insurers have enjoyed strong profits in recent years, they say the cost of the pandemic could be overwhelming, especially to employers and workers already struggling to pay for coverage.
“As more people seek coverage and care due to this pandemic, this temporary, emergency program would protect Americans from the consequences of potential catastrophic costs,” the executives of the two major health insurance trade groups wrote Congress earlier this month.
Employers and others have launched a new group, the Alliance to Fight for Health Care, that includes many of the same parties that worked together to defeat the enactment of the so-called Cadillac tax on high-cost employer plans. They, too, recently told lawmakers they think a federal reinsurance program might make sense.
Without help lowering their costs by having the government pay for the most expensive hospital stays, Mr. Lee warned that insurers are likely to seek rates that are double their additional costs from the virus. If their costs go up 20 percent, Mr. Lee says rates could jump as much as 40 percent in 2021.
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“These increased costs could mean that many of the 170 million Americans in the commercial market may lose their coverage and go without needed care as we battle a global health crisis,” Lee said in a statement, outlining his group’s proposals.
While state government insurance officials may push back, they may be inclined to allow the increases if they believe companies would need the additional revenue to pay medical claims. “Regulators would take a sharp eye to big premium increases,” said John Bertko, Covered California’s chief actuary, but if insurers “chew up half or more of their solvency reserves, regulators will say they need to build them up.” The group warned that smaller insurers could be especially at risk.
Rate increase requests still might be difficult for some states and consumers to swallow. The nation’s largest insurers, which include giant for-profit companies like Anthem, CVS Health and UnitedHealth, reported billions of dollars in profits last year, and analysts say these companies have abundant capital to absorb any losses because of the pandemic. Since the enactment of the Affordable Care Act, health care inflation has remained in the single digits.
Increases in medical costs of 3 to 4 percent “would be manageable by most insurers,” concluded a recent analysts at S&P Global Ratings. If costs were to go up by 10 to 12 percent, the analysts say the stress on the companies would be greater, with insurers reporting losses and forced to use their capital reserves to pay claims.
But some actuaries are predicting costs are likely to be much lower. One actuary said insurers have told him that they have no plans to raise rates sharply because the do not think the pandemic will change their predictions about ongoing medical expenses once it has run its course.
And other actuaries are coming up with estimates that are lower because they have different assumptions about how many people might be hospitalized and whether that would be offset by the declines in medical care for other illnesses or surgeries as people stay home and elective procedures are postponed indefinitely. The cost of the epidemic could be tempered if people don’t seek other kinds of care, like a routine check up or hip replacement. That also happened during the 2008 recession, when people postponed any type of care and procedures.
“We think claims are really going to drop off over the next month or two,” said Edward Kaplan, a senior vice president at Segal, which advises clients on their health benefits. He thinks his clients in New York, which is being particularly hard hit by the virus, could see additional costs of 4 to 5 percent. In other areas, if there are many fewer cases, costs could be less.
Another big unknown is whether people will be able to get treatment for Covid-19 or other illnesses, in spite of needing care. Depending on the course of the pandemic, health systems could become so overwhelmed that they have no available hospital beds or staff to treat patients who would otherwise receive care.
If patients can’t get care, overall costs could be much lower than they would otherwise be, said Trevis Parson, chief actuary for Willis Towers Watson, which advises companies on benefits. His group is estimating costs could increase by as much as 7 percent because of the pandemic.
Even then, how much the private sector will pay is unclear, especially if the government starts setting up hospital beds and temporary hospitals in various regions, and supplying staff to treat patients.
Another unknown factor is how much it will cost to treat those coronavirus patients who are hospitalized. “Everybody is still guessing what a coronavirus hospitalization stay looks like,” said Mr. Lee of Covered California.
While there are some estimates hovering around $20,000 for a hospital stay based on a typical pneumonia case, his group is estimating that the average could be closer to $72,000 for severe cases. New York State is already reporting that patients with severe cases are staying on ventilators much longer than those with pneumonia might.
How employers and insurers will ultimately react to any spike in costs is also unclear. While health care costs have historically risen by double digits in any given year, companies have been caught off guard by the dramatic change in circumstances. “It’s hard to think of anything that rivals this,” Mr. Parson said.

Obamacare Markets Will Not Reopen, Trump Decides

The move would have made it easier for people who have recently lost jobs to obtain health insurance.
by Margot Sanger-Katz and Reed Abelson - NYT - April 1, 2020

The Trump administration has decided against reopening the Affordable Care Act’s marketplaces to new customers, despite broad layoffs and growing fears that people will be uninsured during the coronavirus outbreak.
The option to reopen markets, in what is known as a special enrollment period, would have made it easier for people who have recently lost jobs or who had already been uninsured to obtain health insurance. The administration has established such special enrollment periods in the past, typically in the wake of natural disasters.
The administration had been considering the action for several weeks, and President Trump mentioned such conversations in a recent news briefing. But according to a White House official, those discussions are now over. The news of the decision was previously reported by Politico.
The decision will not prevent Americans who recently lost their jobs from obtaining health insurance if they want it. Under current law, people who lose job-based insurance already qualify to enroll for health insurance on the marketplaces, but are required to provide proof that they lost their coverage. A special enrollment period would have made it easier for such people to enroll, because it would not require that paperwork. It also would have provided a new option for people who chose not to buy health insurance this year but want it now.
Though the administration continues to run the Affordable Care Act marketplaces, it has taken numerous steps to weaken them, and President Trump continues to call for the health law’s elimination and replacement. The administration has joined a lawsuit with a group of Republican states that calls for the entire law to be overturned, which the Supreme Court will consider in its next term. Mr. Trump recently told reporters that he continues to support the suit, and would like to replace the law, though he has not specified a preferred policy alternative.
“What we want to do is get rid of the bad health care and put in a great health care,” he said, in response to a question on March 22 about the lawsuit.
So far, the administration has declined to publicize the existing options for Americans who have recently lost health benefits through job reductions.
Eleven states and the District of Columbia have established special enrollment periods to allow people to obtain new insurance coverage. The states are California, Colorado, Connecticut, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont and Washington, and they control their marketplaces. But federal action would have been required to allow customers to re-enter the markets in the 38 states with markets run by or that use the federal platform. (Idaho, which also runs its own marketplace, has decided against a special enrollment period.)
Insurers, which had been arguing in favor of the enrollment period, had been hopeful just a few days ago that the White House might announce such a step. But the situation suddenly became “fluid,” in the description of one executive. Another described the administration as divided about whether to proceed, especially given the president’s support for the lawsuit that would overturn the law.
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Numerous other health care provider and consumer groups, including the American Diabetes Association, Families USA and the New Hampshire Nurses Association, wrote a joint letter to the administration last month asking it to establish a special enrollment period. The groups argued that forcing people to verify eligibility “would not only delay care receipt, it would deter enrollment by healthy customers, endangering the individual-market risk pool,” the grouping of customers that determines what the insurers charge for a policy.
Governors of several states also asked the administration to grant a special enrollment period, including Republican governors in Arizona and New Hampshire, and Democratic ones in Oregon, Michigan and New Jersey.
Many Democratic politicians criticized the decision Wednesday as insensitive to the needs of the public in a crisis, including Joe Biden, who leads the race for the Democratic presidential nomination. The Democratic Congressional Campaign Committee also released a statement, suggesting it may become a campaign issue. Democrats made health care a centerpiece of many House races in the 2018 midterm elections.
“In the midst of a global pandemic, Washington Republicans continue their crusade against the health and safety of the American public,” said Fabiola Rodriguez, a spokeswoman for the group, in the statement. “By blocking uninsured Covid-19 patients from getting health care, Trump and his allies have decided to bankrupt American families. The American people deserve to know if House Republicans will stand up for the millions of Americans who face the challenge of being jobless and uninsured during the Covid-19 pandemic.”
Both Democratic and Republican members of Congress had also urged the administration to consider a special enrollment period. But Congress declined to require such an enrollment period in its last round of coronavirus legislation, instead leaving the decision to federal officials.
In a statement Wednesday, Senator Cory Booker of New Jersey recommended that Congress include a special enrollment provision in its next round of coronavirus legislation. He had also proposed such language be included in the last bill. “At a time when our health care system is already under enormous strain, it makes no sense to willingly allow even more individuals to go without coverage,” he said.
Even though the White House official described the matter as decided, officials have the capability to establish a special enrollment period at any time.