Love it or hate it, Obamacare’s spurring interest in the pathology of health care
Posted Jan. 16, 2014, at 11:04 a.m.
Love it or hate it, even if ObamaCare never fully achieves its intended benefits, it has already had some unintended ones.
First, it has destabilized our deeply dysfunctional health-care system. By doing so, the law has created a real opportunity to fundamentally restructure the way we finance and deliver health care.
Second, the troubled rollout of the Affordable Care Act has shined a spotlight on how unnecessarily complicated our fragmented health insurance system is, and how great is the need to fundamentally reform it. That in turn has reignited public interest in further reform, and strengthened a growing popular movement.
For example, this past October well over 100 people turned out in Portland on the second night of the World Series to view a movie and discussion about health-care reform. Here in the heart of Red Sox Nation, that is notable.
Last week, Maine’s legislature held a hearing on LD 1345, a bill that would create a path to a state-level single-payer system for Maine. Such proposals have been around for years, met with tepid interest from the public and vigorous opposition from insurance companies and other corporate interests.
This time it was different. The hearing room was packed to overflowing with enthusiastic supporters. Forty-five members of the public took the day off and traveled to Augusta to testify in person. Another 15 to 20 submitted written testimony. Of those, 57 testified in favor of the proposed legislation, two against and one undecided. Only representatives of the health insurance industry openly opposed the bill.
The media frenzy surrounding the troubled rollout of the ACA since early October has provided commentators (including myself) many opportunities to point out publicly that although the functionality of the ACA’s websites fell short in many states, the underlying problem is not bad software. It is the expensive complexity baked into the law. That level of complexity can only be justified by politics — the perceived need to preserve a central role for private health insurance companies, despite their widespread unpopularity, as a means of financing health care.
A simple expansion of Medicare, at the federal or state level, would eliminate 95 percent of that complexity, and with it much of the public confusion and distrust surrounding health-care reform. Largely because of its requirement that people, including large employers, buy private health insurance, the ACA has forced large numbers of people who, to date, have had little reason to care about health-care reform to pay attention.
The level of public apathy in Maine about the pathology in our health-care system has been significantly reduced. That has created new opportunities for public education. For example, one of the health insurance lobbyists testifying at last week’s hearing complained that the proposed legislation would provide “free health care” to lawyer-lobbyists, such as himself. He thought that was unfair. That has provided me and people like me an opportunity to point out that we agree.
Single-Payer Activism Gets Boost from Obamacare
Dr. Richard Propp and Alice Brody thought Obamacare might sink their movement.
Instead, based on the interest they say they are getting, the federal Affordable Care Act has buoyed their cause of universal health coverage, or “improved Medicare for all,” they said.
At the heart of the new federal law are government-run online markets that provide one-stop shopping to public and private insurance plans for previously uninsured people. The intent was to improve access to health care.
But confusion over the insurance websites and disappointment with the coverage offered has fueled interest in something the activists say is simpler and better — a national health system supported with tax dollars. On Tuesday, they’re screening a documentary about the issue at the First Unitarian Society in Albany.
Recently joining the ranks of single-payer promoters are young adults and labor unions, they said. Both have been dismayed by the trend toward higher-deductible health plans, whether through the new government-run health exchanges or from private employers.
“We’re really surprised at how much new interest there is in this issue,” said Brody, 69, who is active in Single Payer New York, which has supported a proposed state law that would create universal health coverage for New Yorkers.
Propp, 79, launched the Capital District Alliance for Universal Healthcare in 2005. The group is an affiliate of Healthcare-Now!, a national grass-roots advocate that supports similar federal legislation.
The trouble with the Affordable Care Act, single-payer proponents said, is that lawmakers gave too much weight to the concerns of the industries that profit from an overpriced medical system. The result, they say, was a convoluted law that perhaps no one understands completely.
“The reason Obamacare is so complex is it’s so gerrymandered,” said Dr. David Ray of Albany Medical Center, who is active in CDAUH and heads the local chapter of Physicians for a National Health Program, a Chicago-based advocacy group. “The power of the moneyed interests — specifically the insurance industry and the pharmaceutical industry — was not taken out of the equation.”
By contrast, Medicare is easy to apply for and use, they said.
“You can understand Medicare,” Brody said. “The main problem with Medicare is it only serves the elderly, who are very sick. That’s why costs are high on Medicare.”
Another group whose support of universal health coverage may be surprising is doctors. Close to 60 percent of doctors support a single-payer health system, according to PNHP. Doctors support universal health coverage because it would make their business operations simpler, Ray said. Instead of meeting the requirements of dozens of insurance contracts, they would have to handle just one — with the government.
Global Amnesia: Embracing Fee-For-Non-Service—Again
David U. Himmelstein, MD and Steffie Woolhandler, MD, MPH
The City University of New York School of Public Health, New York, NY, USA.
The City University of New York School of Public Health, New York, NY, USA.
J Gen Intern Med
DOI: 10.1007/s11606-013-2745-1
© Society of General Internal Medicine 2014
Let’s hope that Orwell’s memory hole remains in good repair. As 1984 fans will recall, that appliance incinerated reminders of things more conveniently forgotten.
Today we need it to cleanse memories of managed care’s profit-driven abuses, so we can proceed, unimpeded by history, with accountable care organizations (ACOs) and bundled payment—the linchpin of reforms recommended by the Society of General Internal Medicine (SGIM)’s National Commission on Physician Payment Reform (and endorsed, in this issue of JGIM, by Drs. Ho and Sandy1).
We support The Commission’s calls for rebalancing compensation for cognitive vs. procedure-related work, and reforming the Relative Value Scale Update Committee (RUC) and Medicare’s sustainable growth rate (SGR). But its main prescription echoes the 1971 “Health Maintenance Strategy” proposal that ushered in the managed care fiasco.
Back then, Ellwood and colleagues proffered health maintenance organizations (HMOs) as the market-based alternative to national health insurance.2 They argued that fee-for-service “works against the consumer’s interest ... the greater the number of contacts and days used, the greater the reward to the provider.” Their solution: HMOs paid “a fixed annual fee... The economic incentives of both the provider and the consumer are aligned...[with] A performance reporting system of proven reliability...[providing] accurate information on the com- parative performance of alternate sources of health care” and “surveillance of the characteristics of populations served and services provided” to guard against cherry- picking and care denials.
That same year president Nixon made HMOs the centerpiece of his healthcare agenda, because (as captured on tape) “this [HMO strategy] is a private enterprise one... the incentives are toward less medical care, because the less care they give, the more money they make.” Employers and insurers soon followed Nixon’s lead, and by the mid-1980s, many providers rushed to create their own HMOs.
But egregious abuses followed. Headlines blared; pa- tients sued over vital services denied; and HMO whistle- blowers told horrifying tales of office celebrations triggered
DOI: 10.1007/s11606-013-2745-1
© Society of General Internal Medicine 2014
Let’s hope that Orwell’s memory hole remains in good repair. As 1984 fans will recall, that appliance incinerated reminders of things more conveniently forgotten.
Today we need it to cleanse memories of managed care’s profit-driven abuses, so we can proceed, unimpeded by history, with accountable care organizations (ACOs) and bundled payment—the linchpin of reforms recommended by the Society of General Internal Medicine (SGIM)’s National Commission on Physician Payment Reform (and endorsed, in this issue of JGIM, by Drs. Ho and Sandy1).
We support The Commission’s calls for rebalancing compensation for cognitive vs. procedure-related work, and reforming the Relative Value Scale Update Committee (RUC) and Medicare’s sustainable growth rate (SGR). But its main prescription echoes the 1971 “Health Maintenance Strategy” proposal that ushered in the managed care fiasco.
Back then, Ellwood and colleagues proffered health maintenance organizations (HMOs) as the market-based alternative to national health insurance.2 They argued that fee-for-service “works against the consumer’s interest ... the greater the number of contacts and days used, the greater the reward to the provider.” Their solution: HMOs paid “a fixed annual fee... The economic incentives of both the provider and the consumer are aligned...[with] A performance reporting system of proven reliability...[providing] accurate information on the com- parative performance of alternate sources of health care” and “surveillance of the characteristics of populations served and services provided” to guard against cherry- picking and care denials.
That same year president Nixon made HMOs the centerpiece of his healthcare agenda, because (as captured on tape) “this [HMO strategy] is a private enterprise one... the incentives are toward less medical care, because the less care they give, the more money they make.” Employers and insurers soon followed Nixon’s lead, and by the mid-1980s, many providers rushed to create their own HMOs.
But egregious abuses followed. Headlines blared; pa- tients sued over vital services denied; and HMO whistle- blowers told horrifying tales of office celebrations triggered
when reviewers discovered loopholes allowing the denial of
transplants.
Physicians were pressured to withhold care, and to hide that pressure from patients; bonuses of up to $150,000 annually were offered to doctors who minimized specialty referrals, inpatient care, etc.3 Our protest of those incen- tives, and a contract provision forbidding their disclosure (a “gag clause”) led to “delisting”. Award-winning physicians—who often attract unprofitably sick patients—were also delisted. An academic leader admonished physicians: “[We can] no longer tolerate having complex and expensive-to-treat patients encouraged to transfer to our group.”4
In the end, Americans concluded that fee-for-NON- service was even worse than fee-for-service.
HMOs lived on, but retreated from shifting risk to providers, relying instead on mother-may-I-style cost containment, like pre-authorization.
Now SGIM’s Commission has joined the growing policy bandwagon to reanimate the HMO strategy. There are semantic changes—ACO has replaced HMO, and when insurers drop expensive doctors (e.g. the 1,000-member Yale Medical Group5), it’s called “network optimization” not “delisting”. In a new twist on gag clauses, today’s ACO patients (e.g. seniors in Medicare’s Pioneer ACOs) aren’t told they’re enrolled. But the diagnosis and prescription are unchanged.
As in 1971, fee-for-service is the culprit. A shift to “bundled payment, capitation, and increased financial risk sharing.” is the solution, with “risk adjustment... to avoid physicians and other providers cherry-picking the healthiest patients”; and “quality measures... to assure that evidence- based care is not denied as a cost-saving mechanism.”
Twentieth century risk adjustment and quality monitoring were overmatched by HMOs’ gaming and deception. Despite additional decades of work to devise bullet-proof risk adjustment, gaming remains so powerful and pervasive that cost and quality rankings are often distorted, or even inverted. No solution is on the horizon.
http://org.salsalabs.com/o/307/images/JGIM%20ACOs%20and%20HMOs_Himmelstein%20Woolhandler.pdf
Medicare’s Rollout vs. Obamacare’s Glitches Brew
Physicians were pressured to withhold care, and to hide that pressure from patients; bonuses of up to $150,000 annually were offered to doctors who minimized specialty referrals, inpatient care, etc.3 Our protest of those incen- tives, and a contract provision forbidding their disclosure (a “gag clause”) led to “delisting”. Award-winning physicians—who often attract unprofitably sick patients—were also delisted. An academic leader admonished physicians: “[We can] no longer tolerate having complex and expensive-to-treat patients encouraged to transfer to our group.”4
In the end, Americans concluded that fee-for-NON- service was even worse than fee-for-service.
HMOs lived on, but retreated from shifting risk to providers, relying instead on mother-may-I-style cost containment, like pre-authorization.
Now SGIM’s Commission has joined the growing policy bandwagon to reanimate the HMO strategy. There are semantic changes—ACO has replaced HMO, and when insurers drop expensive doctors (e.g. the 1,000-member Yale Medical Group5), it’s called “network optimization” not “delisting”. In a new twist on gag clauses, today’s ACO patients (e.g. seniors in Medicare’s Pioneer ACOs) aren’t told they’re enrolled. But the diagnosis and prescription are unchanged.
As in 1971, fee-for-service is the culprit. A shift to “bundled payment, capitation, and increased financial risk sharing.” is the solution, with “risk adjustment... to avoid physicians and other providers cherry-picking the healthiest patients”; and “quality measures... to assure that evidence- based care is not denied as a cost-saving mechanism.”
Twentieth century risk adjustment and quality monitoring were overmatched by HMOs’ gaming and deception. Despite additional decades of work to devise bullet-proof risk adjustment, gaming remains so powerful and pervasive that cost and quality rankings are often distorted, or even inverted. No solution is on the horizon.
http://org.salsalabs.com/o/307/images/JGIM%20ACOs%20and%20HMOs_Himmelstein%20Woolhandler.pdf
Medicare’s Rollout vs. Obamacare’s Glitches Brew
Posted By David Himmelstein On January 2, 2014 @ 11:12 am In All Categories,Health Reform,Insurance,Medicare,Policy,Spending | 6 Comments
The smooth and inexpensive rollout of Medicare on July 1, 1966 provides a sharp contrast to the costly chaos of Obamacare.
We won’t rehearse the chaos part here, just the costs.
As of March, 2013, federal grants for Obamacare’s state exchanges totaled $3.8 billion [1]. Spending for the federal exchange is harder to pin down because funding has come from multiple accounts, including: the $1 billion Health Insurance Implementation Fund; DHHS’ General Departmental Management Account and General Departmental Management Account; CMS’s Program Management Account and the Prevention and Public Health Fund. CMS estimates fiscal 2014 spending for the federally-operated exchanges at $2 billion [2]. So it’s safe to say that the costs of getting the exchanges up and running, and (hopefully) enrolling 7 million people in the program’s first year will exceed $6 billion.
Bear in mind that the exchanges won’t actually pay any medical bills, just sign people up for coverage. So billions more in overhead costs will show up on the books of the private insurers and state Medicaid programs that will actually process medical claims.
Back in 1966, Medicare started paying bills for 18.9 million seniors (99 percent of those eligible for coverage) just 11 months after Pres. Johnson signed it into law. Overhead costs for the first year totaled $120 million [3] (equivalent to $867 million in 2013 – all subsequent figures are given in 2013 dollars). But that figure includes the cost of processing medical bills, not just the enrollment costs.
Moreover, Medicare and Medicaid (which was passed at the same time) displaced several smaller federal health assistance programs, saving about $376 million on their overhead costs.
Signing up most of the elderly for Medicare was simple; they were already known to Social Security Administration, which handled enrollment. To find the rest [4], the feds sent out mailings to seniors, held local meetings, and asked postal workers, forest rangers and agricultural representatives to help contact people in remote areas. The Office for Economic Opportunity spent $14.5 million to hire 5,000 low income seniors who went door-to-door in their neighborhoods.
Despite predictions of chaos, and worries that the newly-insured seniors would flood the health care system, there were few bottlenecks. Hospitals continued to operate smoothly and no waiting lists materialized. The only real “glitch” was that many hospitals in the Deep South initially refused to integrate their facilities – which Medicare required for certification and payment. But by the end of the first month, 99.5 percent of hospitals had signed on.
Obamacare’s start-up has been rocky because complexity is “baked in” to the design, just as simplicity was “baked in” to Medicare. Obamacare’s exchanges must coordinate thousands of different plans, with premiums, co-payments, deductibles and provider networks that vary county-by-county; Medicare offered a single, uniform plan. The exchanges must calculate subsidies for each applicant after first verifying income, family size and immigration status; Medicare offered free hospital coverage, with a minimal ($22) uniform premium for doctor coverage. Instead of setting up a new bureaucracy to collect premiums from millions of enrollees and funnel them to private insurers, Medicare relied on the existing payroll and income tax system to garner funds.
Obamacare’s byzantine complexity reflects the contortions required to simultaneously expand coverage and appease private insurers. And private insurers will exact a steep ongoing toll. Medicare’s overhead is just 2 percent [5], vs. an average of 13 percent for private plans (on top of the Exchanges’ costs, roughly 3 percent of premiums). A single payer plan that excluded private insurers could save hundreds of billions in transaction costs.
http://healthaffairs.org/blog/2014/01/02/medicares-rollout-vs-obamacares-glitches-brew/print/
We won’t rehearse the chaos part here, just the costs.
As of March, 2013, federal grants for Obamacare’s state exchanges totaled $3.8 billion [1]. Spending for the federal exchange is harder to pin down because funding has come from multiple accounts, including: the $1 billion Health Insurance Implementation Fund; DHHS’ General Departmental Management Account and General Departmental Management Account; CMS’s Program Management Account and the Prevention and Public Health Fund. CMS estimates fiscal 2014 spending for the federally-operated exchanges at $2 billion [2]. So it’s safe to say that the costs of getting the exchanges up and running, and (hopefully) enrolling 7 million people in the program’s first year will exceed $6 billion.
Bear in mind that the exchanges won’t actually pay any medical bills, just sign people up for coverage. So billions more in overhead costs will show up on the books of the private insurers and state Medicaid programs that will actually process medical claims.
Back in 1966, Medicare started paying bills for 18.9 million seniors (99 percent of those eligible for coverage) just 11 months after Pres. Johnson signed it into law. Overhead costs for the first year totaled $120 million [3] (equivalent to $867 million in 2013 – all subsequent figures are given in 2013 dollars). But that figure includes the cost of processing medical bills, not just the enrollment costs.
Moreover, Medicare and Medicaid (which was passed at the same time) displaced several smaller federal health assistance programs, saving about $376 million on their overhead costs.
Signing up most of the elderly for Medicare was simple; they were already known to Social Security Administration, which handled enrollment. To find the rest [4], the feds sent out mailings to seniors, held local meetings, and asked postal workers, forest rangers and agricultural representatives to help contact people in remote areas. The Office for Economic Opportunity spent $14.5 million to hire 5,000 low income seniors who went door-to-door in their neighborhoods.
Despite predictions of chaos, and worries that the newly-insured seniors would flood the health care system, there were few bottlenecks. Hospitals continued to operate smoothly and no waiting lists materialized. The only real “glitch” was that many hospitals in the Deep South initially refused to integrate their facilities – which Medicare required for certification and payment. But by the end of the first month, 99.5 percent of hospitals had signed on.
Obamacare’s start-up has been rocky because complexity is “baked in” to the design, just as simplicity was “baked in” to Medicare. Obamacare’s exchanges must coordinate thousands of different plans, with premiums, co-payments, deductibles and provider networks that vary county-by-county; Medicare offered a single, uniform plan. The exchanges must calculate subsidies for each applicant after first verifying income, family size and immigration status; Medicare offered free hospital coverage, with a minimal ($22) uniform premium for doctor coverage. Instead of setting up a new bureaucracy to collect premiums from millions of enrollees and funnel them to private insurers, Medicare relied on the existing payroll and income tax system to garner funds.
Obamacare’s byzantine complexity reflects the contortions required to simultaneously expand coverage and appease private insurers. And private insurers will exact a steep ongoing toll. Medicare’s overhead is just 2 percent [5], vs. an average of 13 percent for private plans (on top of the Exchanges’ costs, roughly 3 percent of premiums). A single payer plan that excluded private insurers could save hundreds of billions in transaction costs.
http://healthaffairs.org/blog/2014/01/02/medicares-rollout-vs-obamacares-glitches-brew/print/
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