Health Care Reform Articles - October 10, 2016

Man Wakes From Coma With Ability To Understand Health Insurance Policy

The Onion

PARKER, CO—In what doctors are calling a true medical miracle, local construction worker Kal Mathyssen awoke from a week-long coma early Wednesday with the ability to fully comprehend his health insurance plan, sources at Parker Adventist Hospital confirmed.

Mathyssen, who sustained a severe head injury after a fall at a nearby job site, reportedly stunned hospital staff and family members when he suddenly regained consciousness around 1 a.m. and began confidently filling out all the paperwork required by managed care company Aetna to receive the benefits guaranteed by his insurance policy.

“I was online struggling to figure out what is and isn’t covered by our plan, and then Kal just woke up and somehow knew exactly what needed to be done,” said Mathyssen’s wife, Carol, explaining that prior to his coma, her husband had possessed only an average person’s understanding of the process required to file for reimbursement of medical expenses. “Kal was on the phone using words I’d never heard come out of his mouth before—stuff about billing codes, out-of-pocket maximums, and I don’t know what else.”

“As soon as he picked up the claim form and knew exactly what to fill in on the line marked ‘employee group number,’ I knew something was very different,” she continued. “It was just so clear that something had changed inside him.”

According to doctors, within minutes of waking up in the intensive care unit, the 38-year-old began to display an unusually strong grasp of his Aetna Preferred health plan. Astonished onlookers confirmed that after consulting his insurer’s website and listening to a series of recorded messages on a customer service line, Mathyssen determined he would be responsible for a $250 emergency room copay, the amount remaining on his policy’s aggregate family deductible, and the full sticker price of any non-formulary medications he may require during his recovery.

In addition, several of Mathyssen’s family members said they had a difficult time believing that the man who emerged from the coma was the same person they had always known, pointing out that their relative, who has seldom made use of his Health Savings Account in the past, showed a rare ability to determine which bills he would be able to pay for with his HSA debit card and which nonqualified expenses he would have to pay for with his savings or, should that become depleted, through a monthly installment plan. 

“In 21 years of practicing emergency medicine, I’ve never seen anything like this,” said Dr. Peggy Adams, who visited Mathyssen during her morning rounds, when the patient reportedly asked about receiving a flu shot and other preventative care procedures his plan covers in full. “It’s impressive that he’s so calm and lucid at this stage, but it’s truly astounding that he knew to ask proactively if the hospital was covered as an in-network facility with his HMO.”

“He even double-checked with the radiologist to make sure his CT scan would be billed correctly in case the insurance company later disputed the claim,” she added. “He certainly came out of that coma with a unique gift.”

Bedside sources said they were left shocked and speechless when Mathyssen later picked up his cell phone and not only reached the person he needed to speak with in Aetna’s benefits department, but also had a cordial conversation in which he appeared to follow everything the representative was saying, ending the call in less than five minutes with a reference number documenting the exchange.

“I’ve tried to come up with an explanation for what caused this, but I’m at a loss, other than to say it’s one of the mysteries of human cognition,” said Adams, calling Mathyssen’s case “one in a million.” “I suppose one minute you can be on a ventilator fighting for your life, and the next you can be entirely aware that your emergency room visit is covered at a different rate than your EMS transfer, and that the latter is billed directly by the ambulance company that 911 dispatched to pick you up. It’s truly remarkable.”

The physician went on to state that she expects Mathyssen to make a full recovery, and that he might one day even gain the ability to understand the paperwork he will need to fill out to file for bankruptcy once he is billed for his hospital stay.

http://www.theonion.com/article/man-wakes-coma-ability-understand-health-insurance-54099

Editor's Note -

Sometimes there's nothing left to do but laugh!

-SPC

Mylan to Settle EpiPen Overpricing Case for $465 Million

by Katie Thomas - NYT

Mylan, the maker of the allergy treatment EpiPen, said Friday that it had reached a $465 million settlement with the Justice Department and other government agencies over questions on whether the company had overcharged Medicaid for the treatment by improperly classifying it as a generic drug.

The federal government said this week that Mylan had been told multiple times that it was wrongly classifying the EpiPen, which led the Medicaid and Medicare programs to overpay for the product. Although it has not been disclosed how much it had overpaid, officials said spending on the EpiPen totaled nearly $1.3 billion from 2011 to 2015.

Mylan has been under intense scrutiny since the summer for raising the price of EpiPen to more than $600 for a pack of two from about $100 since it bought the product in 2007.

In a statement, Mylan said the settlement did not imply any admission of wrongdoing. It also said the settlement had not been finalized, and that it expected to enter into a corporate integrity agreement with the Office of the Inspector General for the Department of Health and Human Services.

“This agreement is another important step in Mylan’s efforts to move forward and bring resolution” to the EpiPen issue, the chief executive, Heather Bresch, said in the statement.

The settlement represented a remarkably fast resolution to an issue that first surfaced over the summer and a handful of United States senators wrote to the Centers for Medicare and Medicaid Services, the agency that oversees the Medicaid program, asking questions about the issue.

Whether a drug is classified as a brand-name or a generic makes a big difference. The makers of generic drugs pay rebates to the government of 13 percent of the average manufacturers’ price. But manufacturers of brand-name drugs must offer discounts of about 23 percent off that average price, or the difference between the average price and the best price they have negotiated with any other American payer, whichever gives the bigger discount.

In addition, brand-name manufacturers must pay more in rebates if their products’ prices rise faster than inflation, as EpiPen’s did.

When the Centers for Medicare and Medicaid Services responded to the senators on this issue, the agency said it “cannot comment on the total amount of rebates owed by Mylan related to this incorrect classification.”

EpiPen’s designation as a generic dates back decades, to before Mylan bought the product. EpiPen contains epinephrine, a drug that is available as a cheap generic, but Mylan has the exclusive right to sell the drug as part of a patented auto-injector.

The federal government issued a rule this year requiring all companies with drugs that have been approved under what the Food and Drug Administration calls a new drug application to either reclassify them as brand-name drugs or seek a waiver. Mylan had previously said it would seek such a waiver, but on Friday it said it agreed that the EpiPen would be classified as a branded drug beginning in April of next year.

Mylan will take a $465 million charge in the third quarter to pay for the settlement, the company said. It also lowered its earnings guidance to between $4.70 and $4.90 a share, compared to the previous estimate of $4.85 to $5.15, citing the financial implications of previously announced changes to its patient access programs for the EpiPen.

Following a public outcry, Mylan has said it will offer more help to patients with their out-of-pocket costs and expand the number of uninsured patients who can get free EpiPens. It also has announced plans to begin selling a generic version of the EpiPen at a lower list price.

Senator Amy Klobuchar, Democrat of Minnesota and one of the senators who initially raised questions, said she was pleased with the settlement. However, she said in a statement on Friday, “this must be the tip of the iceberg. If other drugs are misclassified, and surely EpiPen isn’t the only one, the public deserves to know it.”

In its letter to senators earlier this week, the Medicaid agency said it was undertaking a “comprehensive review” to see if other companies have also misclassified their drugs. But it said it could not say which manufacturers may have also wrongly identified their drugs as generics.

Erik Gordon, a professor at the Ross School of Business at the University of Michigan who studies the drug industry, said Mylan’s swift action was a good idea.

“They are smart to quickly end the uncertainty regarding past Medicaid pricing,” he said, adding, “The government was willing to quickly settle because there are questions about why it allowed Mylan to pay rebates it says it told the company were too low.”

http://www.nytimes.com/2016/10/08/business/epipen-mylan-justice-department-settlement.html

Rising Premiums Rankle People Paying Full Price For Health Insurance

by Virginia Anderson - Kaiser Health News

Shela Bryan, 63, has been comparing prices for individual health insurance plans since May, and she can't believe what she has been seeing.

"They cost a thousand, $1,200 [a month], and they have a deductible of $6,000," she said. "I don't know how they think anyone can afford that."

Bryan, who lives in Hull, Ga., a hamlet of about 200, was on her husband's insurance plan for decades. When he died in 2013, she continued his workplace coverage through COBRA, but she had to pay almost the full price of the insurance, or about $800 a month. But it was "the Cadillac of insurance," Bryan said, with low copays, prescription drug coverage and a $500 deductible.

That option will run out in a few months, so she is turning to the individual insurance market in what is shaping up to be the most expensive year for the 400,000 or so consumers in Georgia who buy their own policies but don't purchase them on the health law's marketplaces.

About 10 million Americans buy individual insurance coverage without cost-reducing federal subsidies on the marketplaces on the open market, according to the Congressional Budget Office.

In Georgia, consumers who don't get insurance through their employers or don't qualify for tax credits to help pay for policies they purchase are facing double-digit premium increases. Blue Cross Blue Shield of Georgia, the only insurer offering plans throughout the state, received an increase of more than 21 percent from the state insurance commissioner. Humana was awarded a 67.5 percent hike.

Prices are going up in other states, too. BlueCross BlueShield of Tennessee was granted a 62 percent rate hike, while state officials approved a 46 percent increase for Cigna. Florida authorities gave plans there an average 19 percent bump. And last week, Minnesota officials announced that premiums for the seven insurers on the individual market are rising 50 to 67 percent.

The insurers are now adjusting for some miscalculations, said Graham Thompson, executive director of the Georgia Association of Health Plans. "The prices are up this year, but our hope is that things will settle down after this year," he said.

While consumers have faced sticker shock, the insurers have faced what might be called "sicker shock." They are raising premiums after finding that many of the customers buying plans on the individual market were sicker and more costly to insure than expected when the health law was implemented.

Federal and Georgia officials note that customers can change plans each year to find a better price, but the switches can result in higher deductibles and changes in doctors and hospitals available to the insured.

Bryan, who makes just over the $47,520 limit for a subsidy, finds herself on her own in the individual market now. "I've worked ... all my life," said Bryan, a maintenance supervisor.. "We're the ones entitled to something, because we've worked. They tear me up in taxes and then they say my income is too high for a subsidy?"

She could end up paying as much as $14,000 in premiums for a pared-back policy, she said, which is $4,400 more than she is paying for the COBRA plan. The deductible would also rise by $5,800, and she wouldn't have drug coverage. The cheapest policies would amount to more than a quarter of her yearly income, or double her mortgage.

Bryan said she feels like she is paying for other people's subsidies with her high premium.

But Linda Blumberg, a senior fellow at the Urban Institute, says that's not how subsidies work. "It is not the people paying full premiums who are paying for the lower-income person," she said. Federal dollars are already allocated to do that.

"For a lot of modest income people, this can still feel expensive to them. I actually think we've underinvested" in the amount set aside for subsidies, she said. "I sympathize with it enormously."

Bob Laszewski, a health policy consultant in Washington, D.C., said the Obama administration needs to listen to the complaints of people who aren't getting assistance.

"These people are invisible," Laszewski said. The Affordable Care Act "is working very well for lower income people, but the Obamacare supporters missed the fact that if you're raising a family of four on $100,000, you're not rich. This is the ... guy who remodeled your house, who drives a pickup truck and he's wearing a Trump hat."

This flaw in the law needs correcting, he said. A wider range of insurance options, he said, could help more middle-class people afford coverage.

Individual insurance brokers said they are calling their clients, bracing them for higher premiums.

Athens, Ga., broker Jim Carrow said he's starting to hate his job. He once thought he was helping people. Now, he's delivering bad news.

"It's a mess," Carrow said. "I had one gentleman call me and I had to tell him that because he made $5,000 more this year, he won't be eligible for a subsidy. And who knows what he'll end up paying. It's just one string of misery after another."

http://www.npr.org/sections/health-shots/2016/10/07/497029662/rising-premiums-rankle-people-paying-full-price-for-health-insurance

Affordable Care Act Pounded by Hurricane, Bill Clinton

Former president bemoans Obamacare burdens on middle class

by Joyce Frieden - MedPage Today

As if the Affordable Care Act (ACA) didn't have enough problems, this week the 6-year-old health law was assaulted on two fronts: by a hurricane, and by former president Bill Clinton.

President Obama's plans to give a speech in Florida on the ACA on Wednesday were scuttled by the impending approach of Hurricane Matthew. Meanwhile, Clinton did some speaking of his own -- at a rally in Flint, Mich. for his wife Hillary's presidential campaign. But to the surprise of many, Bill Clinton "ripped into" the ACA, criticizing the law for flooding the market with new customers while at the same time causing premiums to go up for those who don't qualify for subsidies, according to CNN.

"So you've got this crazy system where all of a sudden 25 million more people have healthcare and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half. It's the craziest thing in the world," Clinton said at the Monday rally.

The next day he walked back his remarks a bit, saying that the law has done a "world of good" and that Republicans' efforts to repeal it were mistaken. However, he reiterated that there are still many people who don't qualify for subsidies, yet they are facing high premiums.

Most observers didn't think Clinton's remarks would end up hurting his wife's campaign. "Remember, he's talking to believers -- where are they going to go? To [Republican presidential candidate Donald] Trump? I wouldn't bet on it," Joe Antos, PhD, a scholar in healthcare and retirement policy for the American Enterprise Institute, a right-leaning Washington think tank, said in a phone interview. "All he was really doing was try to make news where there really wasn't any .... He was really saying he supports Hillary's proposals to expand Medicaid and to create something that he calls Medicare for people over 55."

"I don't think it will be damaging to Hillary Clinton's campaign," agreed David Howard, PhD, a professor of health policy and management at Emory University in Atlanta, in an email. "If Trump brings it up, she can always point to her support for even more generous subsidies."

And the former president was pointing out a valid problem with the law, Howard said. "As people make more money, the assistance they receive drops off quickly.... [But] I doubt Congressional Republicans will support more generous subsidies. It will really increase the cost of the law."

Actually, President Clinton "did the nation, particularly Democrats, a great service by pointing out the saber-tooth tiger in the room," Kip Piper, president of Health Results Group, a consulting firm in Washington, said in an email. "Since the ACA was passed in March 2010, Democrats have worked hard to stay on message and avoid giving Republicans new ammunition. Politically, that is understandable but it makes for bad policymaking in the long run."

"Fixing the ACA will require an admission by Democrats that key parts of the law were ill-advised or unworkable in practice -- and this time be genuinely willing to compromise with Republicans,” Piper continued. “Meanwhile, Republicans will need to acknowledge that aspects of the ACA are likely permanent but use ACA reform negotiations as the opportunity to reintroduce market-based reforms to health care, modernize Medicaid, and de-nationalize health insurance reform, allowing genuine state-led models to flourish."

However, "where the two parties are now, compromise on a meaningful scale is hard to imagine. The Left is eager to double down on the ACA through a government-run health plan option … Meanwhile, the Right is divided, hugely frustrated by the expansion of government power, and eager for a dramatic rollback."

Clinton's remarks presage what is going to happen after Nov. 8, according to Robert Laszewski, founder and president of Health Policy and Strategy Associates, an Alexandria, Va., healthcare consulting firm. "I expect to see the ACA's staunchest supporters to pivot in their support just after the election," he wrote in an email.

"While they have strongly defended the insurance exchanges as offering low-cost insurance to people on subsidy, the fact is that only about 40% of the subsidy-eligible have so far signed up. The half of the individual health insurance market that doesn't get a subsidy are really taking it on the chin with huge premiums and deductibles."

"After the election I expect to see more and more of these supporters acknowledge these problems by using them as a catalyst to begin to push for at least the public option if not for an expansion of Medicare," he continued. "Post November, about everybody, on the left and right, will be talking about Obamacare's exchange problems. However, conservatives will continue their arguments that the law needs to give people more market-based options, while progressives will be talking about more government-run solutions."

http://www.medpagetoday.com/Washington-Watch/ElectionCoverage/60620?xid=NL_MBstandard_2016-10-06&eun=g415976d0r

Can’t Find a Plan on HealthCare.gov? One May Be Picked for You.

by Robert Pear - NYT

WASHINGTON — The federal government will choose health plans for hundreds of thousands of consumers whose insurers have left the Affordable Care Act marketplace unless those people opt out of the law’s exchanges or select plans on their own, under a new policy to make sure consumers maintain coverage in 2017.

“Urgent: Your health coverage is at risk,” declares a sample “discontinuation notice,” drafted by the government for use by insurers. It tells consumers that “if you don’t enroll in a plan on your own, you may be automatically enrolled in the plan picked for you.”

That may make for a jarring start to the health law’s fourth annual open enrollment period, which starts Nov. 1, a week before Election Day, and runs through Jan. 31. While the administration says 20 million people have gained insurance through President Obama’s signature health law, it has suffered setbacks: Nonprofit health insurance co-ops created by the law have shut down; major health insurers have withdrawn from its marketplaces; and the ones that remain have raised premiumssharply.

Now, as the administration struggles to adjust to those changes, consumers may be surprised to learn that they have been placed in a health plan offered by a different insurance company, which is likely to have different doctors, benefits and drugs that are covered.

Consumers in discontinued plans will often receive a welcome kit from the new company, with a bill for the January 2017 premium.

“Without health coverage or an exemption,” the discontinuation notice says, “you may have to pay a penalty of $695 or more when you file your taxes.”

Assigning consumers to alternate plans, the Obama administration says, will protect them from coverage lapses. And, it notes, consumers are free to choose another plan if they do not like the one chosen for them. But the alternatives may be limited. In Maricopa County, Ariz., which includes Phoenix, the number of insurers in the public marketplace may drop to one, from eight this year.

Brett Barry, 51, of Phoenix, had coverage last year from a nonprofit co-op, Meritus, but it closed, forcing 59,000 Arizona residents to shop for another plan. Mr. Barry is covered now by UnitedHealth, one of the nation’s largest insurers, but he recently received a notice that it would no longer be available.

“It’s really frustrating,” Mr. Barry said. “The marketplace here is in a meltdown.”

UnitedHealth is pulling back from Affordable Care Act marketplaces, saying it has lost hundreds of millions of dollars.

Kevin J. Counihan, the chief executive of the federal insurance exchange, said the administration’s policy on automatic re-enrollment would promote “continuity of coverage and the availability of subsidies through the marketplace.”

“We expect most enrollees to actively select a qualified health plan via HealthCare.gov, as they have in prior years,” Mr. Counihan wrote in a letter to the Wisconsin insurance commissioner, Theodore K. Nickel.

Mr. Nickel objected to the federal policy, saying it could “sow chaos” and confusion among consumers, obliging them to pay for insurance chosen by the government. Consumers may be confused when they receive bills from a different insurance company, Mr. Nickel said.

Ben Wakana, a spokesman for the Department of Health and Human Services, said consumers would not be enrolled in any plans without their consent since they would generally have to pay the first month’s premium to activate coverage.

Federal officials say consumers should actively shop for a plan in the marketplace and update their income information so subsidies can be properly calculated. In the last open enrollment period, they said, 43 percent of consumers returning to HealthCare.gov switched plans.

Fighting for passage of the Affordable Care Act in 2009-10, President Obama promised that “if you like your health care plan, you can keep your health care plan.”

But that promise may be difficult to keep in 2017 as major insurers like Aetna, Humana and UnitedHealth leave the public marketplace in many counties and as most of the nonprofit co-ops have collapsed, leaving consumers with fewer choices.

In prior years, if consumers with marketplace coverage did not return to the exchange, they could be enrolled by default in the same plan or a similar plan from the same insurer. Next year, if consumers take no action and no plans are available from their current insurer, they can be placed in a plan from a different insurer.

In reassigning a consumer, the government will try to select a plan similar to the person’s current one, but that may not always be possible. Even if a similar plan is available, the insurance company may not have the ability to absorb all of the people being dropped by insurers leaving the market.

Accordingly, federal officials told insurers last month that they would not take enforcement action against health plans that could not meet certain customer-service standards because of a surge in enrollment in 2017. However, they said, health plans must still make reasonable efforts to address consumers’ complaints.

Blue Cross and Blue Shield of Minnesota is terminating health plans that cover 103,000 people. Those consumers can shop for coverage, but most of the other carriers are limiting enrollment for 2017. Medica, for example, says it will accept about 7,000 people, in addition to the 43,000 it now insures.

The limits were negotiated with Minnesota’s top insurance regulator, Commerce Commissioner Michael Rothman, who wanted to be sure carriers had the capacity to serve new customers.

Molly K. Eckley, 32, of Otter Tail County, Minn., said her family paid $1,100 a month for a Blue Cross and Blue Shield policy covering her, her husband and their two children, ages 5 and 8. With Blue Cross pulling out, she said, “I am scared for next year.”

Minnesota officials have approved rate increases averaging 50 percent or more for other insurers, and because of the enrollment caps, she said, she felt compelled to choose a plan as fast as possible, before insurers reached their capacity limits.

The Obama administration has developed two new tools to help consumers pick plans, but they will be available in only a few states, as part of a pilot project. Federal officials will try to determine the size of the networks of doctors and hospitals available through health plans in Maine, Ohio, Tennessee and Texas. Provider networks will be labeled “larger,” “smaller” or “medium.”

In a separate test, federal officials will assess the quality of health plans in Virginia and Wisconsin, using clinical data and surveys of patients. The quality ratings, on a five-star scale, will be displayed on HealthCare.gov.

http://www.nytimes.com/2016/10/09/us/politics/cant-find-a-plan-on-healthcaregov-one-may-be-picked-for-you.html?&moduleDetail=section-news-3&action=click&contentCollection=Politics&region=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article

A Single-Payer Plan From Bernie Sanders Would Probably Still Be Expensive

by Margot Sanger-Katz - NYT

Bernie Sanders’s chances at enacting a “political revolution” are all but gone. But that doesn’t mean his policy agenda won’t continue to be felt in this election or future Democratic platforms.

One of his signature proposals is to move the country’s health care system to a government-run, single-payer system. Last week, Hillary Clinton nodded in that direction, suggesting that she would be open to allowing Americans older than 50 to buy into the government Medicare program that currently covers those 65 and older.

But also last week, a detailed analysis of the Sanders health care plan from researchers at the Urban Institute showed that it would probably cost the government double what the campaign proposed. It is the second credible analysis to suggest that the Sanders plan costs more than advertised. (The other comes from the Emory health policy professor Kenneth Thorpe.)

The Sanders plan is light on some key details, but even in sketch form, it seems clear that it would require even bigger tax increases than the sizable ones the campaign has called for.

If you look around the world, lots of countries have single-payer systems. And all of them pay substantially less for health care than we do in the United States. I am reminded of this often, in the comments by readers in some of my articles. So how could a single-payer system here still be so expensive?

One reason is that the Sanders plan covers far more than typical insurance plans in the United States — or abroad. The Sanders plan would charge no premiums, require no out-of-pocket spending and would pay for services like dental care and long-term nursing home stays. Those things boost the total price tag.

But imagine a universe where we had a single-payer health plan that was more like normal insurance. Perhaps it would be a true “Medicare for all,” where everyone has exactly the insurance that the federal government currently provides to older people and the disabled.

That Medicare-for-all plan would still cost more than single-payer plans in other countries. Here’s why: Medicare pays doctors and hospitals higher prices than single-payer systems do in other countries.

“The big thing is that providers here make quite a bit more money than they do anywhere else, and in order to get in the ballpark of where these other countries are, you’d have to reduce payment rates to physicians to much, much lower levels,” said John Holahan, one of the authors of the Urban analysis. “That’s just hard to do.”

The Organization for Economic Cooperation and Development, which looks at a group of developed countries, has found that the United States pays substantially higher prices for doctors, hospital stays and prescription drugs than the rest of the group. Medicare pays less than the United States average, but not enough less to make up that difference.

Making the American health care system significantly cheaper would mean more than just cutting the insurance companies out of the game and reducing the high administrative costs of the American system. It would also require paying doctors and nurses substantially lower salaries, using fewer new and high-tech treatments, and probably eliminating some of the perks of American hospital stays, like private patient rooms.

The average family physician in the United States earns $207,000, according to the Medscape Physician Compensation Report. General practitioners in Britain, which has a single-payer system, earn an average pay of around $130,000. The gaps in pay for specialists are even bigger.

The Urban Institute report assumes that the Sanders plan would cut pay for doctors substantially, but not by half. That’s a reasonable assumption.

We also pay more for drugs than the rest of the world, but many experts think that a single-payer health plan could push down drug prices because drug companies earn such high profit margins. The Urban analysis assumes that the country could quickly get to prices 25 percent lower than what Medicare pays. (That change assumes a political revolution, of course, because the pharmaceutical companies are an extremely effective lobby.)

The Sanders campaign and its academic allies dispute some of the Urban Institute’s assumptions. A critique of the Urban analysis from David Himmelstein and Steffie Woolhandler, professors of public health at the City University of New York, argues, for example, that drug prices could be pushed even lower. And the Sanders team says that the researchers overestimated the costs associated with administering the government program. But it doesn’t argue that the prices paid to medical providers could be cut more sharply.

The same problem exists for other attempts to reduce health spending in the United States. Efforts by the Obama administration to pay doctors and hospitals differently are designed to squeegee some waste out of the system, by eliminating extra care that may not help people’s health. But it has done little to change the prices paid for medical care. That means that its best hope is to “bend the cost curve,” or reduce the rate that health spending grows.

Republican proposals to make health care into more of a free market also tend to assume that they will slow spending growth, not actually reduce it.

The Sanders plan would require a huge reorganization of the country’s health care system. Overnight, it would put the private insurance industry out of business, along with many other businesses that support it. It would shift billions of dollars of spending from individuals, workers and states into the federal budget. Doing that might well reduce some of the country’s health care spending that is going toward insurer profits and paper-pushing.

But more than 80 percent of the dollars we currently spend on health care actually go toward health care. And making big cuts all at once to doctors and hospitals could cause substantial disruptions in care. Some hospitals would go out of business. Some doctors would default on their mortgages and student loans. Even if the country decided that medicine should become a more middle-class profession — not an obvious outcome, given the substantial public support for the medical professions — it would be difficult to get there at once.

All of that means that bringing a government-run, single-payer health care system could achieve many of the goals of its advocates: more equity, lower complexity and some reductions in cost. But the United States would probably continue to have the most expensive health care system in the world. And we’d have to raise taxes high enough to pay for it.

http://www.nytimes.com/2016/05/17/upshot/why-single-payer-health-care-would-probably-still-be-expensive.html?ref=policy

Expanding Medicare Would Solve Some Problems, Create New Ones

by Margot Sanger-Katz

In 1998, President Bill Clinton suggested a partial solution to help millions of Americans without health insurance: The country should let those 55 and older without employer coverage buy into the government Medicare system.

A few weeks ago, Hillary Clinton brought the idea back. It’s a proposal she’s talked about before: It was part of her 2000 Senate campaign platform and an option she mentioned for health insurance expansion when she ran for president in 2008.

But a lot has changed with the passage of the Affordable Care Act, leading several health policy experts to wonder whether a Medicare buy-in would be a welcome new option, or a confounding misfit.

Medicare for more, as I’ve been calling it, would require significant adjustments to the Obamacare new markets for regulated insurance, which are currently set up for everyone under 65. It would require a new system for calculating and awarding subsidies to low-income purchasers. It would probably require changes to Medicare’s standard package of benefits. And it runs the risk of destabilizing the Obamacare marketplaces, several of which are already somewhat precarious.

A Medicare buy-in could well work, but it wouldn’t easily coexist in post-Obamacare times the way it might have in the 1990s.

“It is an approach that is somewhat inconsistent with the Affordable Care Act,” said Caroline Pearson, a senior vice president at the health care consulting firm Avalere Health, who recently published an initial analysis of the idea. That analysis found that the program could be an option for as many as 13 million Americans.

The Clinton suggestion was raised in response to a voter question, and the campaign hasn’t released any sort of formal plan. As a result, it’s hard to know how Medicare for more might actually work. Here are some important questions that would have to be resolved.

Is Medicare good insurance?

Medicare is an incredibly popular program, providing health insurance for nearly all Americans 65 and older. But it actually wouldn’t count as health insurance under the Affordable Care Act, because it has too many holes. Patients can be asked to pay basically unlimited out-of-pocket costs — Medicare asks them to pay a daily fee when they are in the hospital for a long time and 20 percent of the cost of doctors’ visits. For people who are very sick, those costs can add up to tens of thousands of dollars.

For Americans under 65, insurance has to cover all catastrophic costs. No insurance plan sold in an Obamacare marketplace can ask its customers to pay more than $6,850 a year out of pocket for covered medical services.

A Medicare buy-in could provide an exception to the regular rules, and allow Medicare to include its usual gaps in coverage. But that would undermine the idea of the Obamacare marketplaces, where insurance plans are expected to compete on equal footing. A Medicare buy-in might include additional financial protections not offered to older Americans, but that would mean younger people would get a better version of Medicare than older ones.

The one big advantage Medicare has over commercial insurance, however, is its broad network of doctors and hospitals. Most Obamacare plans limit their customers’ choice of medical providers. But every hospital and most doctors accept Medicare. That means that patients would have more choices with Medicare, even if they might incur higher costs if they need a lot of treatment.

Would the option make Obamacare less expensive?

When Obamacare was being debated in Congress, many Democrats believed that new insurance markets should include a “public option,” a government insurance plan that would compete alongside private offerings. The proposal ended up being cut from the final legislation, but advocates thought the plan would help increase insurance choices for consumers and would help put downward pressure on prices for private companies, since the government plan would lack a profit motive.

Advocates continue to make these arguments. Mrs. Clinton raised the Medicare for more idea when she was asked about strategies to drive down the cost of insurance for small business. The implication was that a public option might be more affordable than the current private options.

It’s really hard to know just what Medicare for more might cost compared with the private plans now on the market. (A lot depends on technical questions about how the prices would be calculated.) But the evidence from the current Obamacare market is that most private insurers are already feeling substantial pressure to keep prices low.

Obamacare customers seem to be choosing the cheapest available plan each year, and a large number have been willing to switch plans each year to get a better deal, so plans need to be competitively priced to get customers. Many insurers appear to have priced their products so competitively that they lost money on them in the marketplaces’ first few years. Several have gone out of business or are bowing out of the markets because of losses. If the Medicare for more plan cost more than a typical marketplace plan, it probably wouldn’t impose much new pricing discipline. If it cost less, it might drive more insurers out of the markets.

Could Medicare for more wreck the Obamacare marketplaces?

This leads to another possible problem with Medicare for more: If successful, it will pull people out of the Obamacare markets. When the health law passed, everyone expected that some employers would stop offering health coverage and the new markets would be large. That hasn’t happened, and, in some states, enrollment in Obamacare plans is substantially smaller than forecast. The smallness of the markets is one reason that insurers say the markets aren’t a great bet for them. It takes a certain amount of volume for it to be worth investing in this new population.

There are optimists who think that Medicare for more could be tailored to help the Obamacare markets by making them more attractive to young customers who haven’t yet signed up. By pulling older Americans out of Obamacare, that theory goes, the remaining customers would be younger and healthier. Those younger, healthier customers would mean lower premiums for everyone. And lower premiums could bring in more young customers, completing a virtuous cycle.

But, essentially, every person who buys Medicare will be one fewer person in the Obamacare markets, so new enrollees would have to make up that difference. Medicare for more would draw out only older Americans — Mrs. Clinton suggested that only people starting at age 50 or 55 would be eligible. But it could still make the remaining pool of people small enough that insurers simply leave the market. That could have the perverse effect of reducing choices and raising premiums.

In the 1990s, a Medicare for more plan would have been nearly as simple as it sounded. In a world with the Affordable Care Act, expanding Medicare would require careful policy design to avoid being counterproductive.

http://www.nytimes.com/2016/06/02/upshot/expanding-medicare-would-solve-some-problems-create-new-ones.html?ref=policy

The U.S. Is Failing in Infant Mortality, Starting at One Month Old

by Aaron Carroll - NYT

Many more babies die in the United States than you might think. In 2014, more than 23,000 infants died in their first year of life, or about six for every 1,000 born. According to the Centers for Disease Control and Prevention, 25 other industrialized nations do better than the United States at keeping babies alive.

This fact is hard for some to comprehend. Some try to argue that the disparity isn’t real. They assert that the United States counts very premature births as infantsbecause we have better technology and work harder to save young lives. Therefore, our increased rate of infant death isn’t due to deficiencies, but differences in classification. These differences are not as common, nor as great, as many people think. Even when you exclude very premature births from analyses, the United States ranks pretty poorly.

Even among those people who accept the statistic, most assume that high infant mortality is because of poor prenatal care. But new evidence is coming to light that contradicts that conclusion. The problem appears to be focused on what happens after birth, not before. This new evidence could change our thinking about how to fix the problem.

Infant mortality is not distributed equally in the United States. In 2013, the infant mortality rate among non-Hispanic whites was 5 per 1,000 births, as was the infant mortality rate among Hispanics. The rate among non-Hispanic blacks, however, was more than 11 per 1,000 births.

A number of other factors seem to play a role. Mothers younger than 20 years or older than 40 have children with a higher infant mortality. First babies have a higher chance of death than later siblings. Unmarried mothers also have a higher rate of death in their children, more than 70 percent higher than that of married mothers.

The No. 1 cause of infant mortality among newborns is premature birth, which has traditionally been linked with inferior prenatal care. That may not be the case in the United States. A 2006 study published in Epidemiology looked at how preterm delivery occurred among women in active-duty military installations.

Such women receive the same prenatal care regardless of race, or even socio-economic status. Because they were guaranteed care, their overall risk of premature delivery was low, just over 8 percent. But even among these women, black women were more than two times as likely as white women to deliver prematurely, regardless of military rank.

A Cochrane Systematic Review of the additional support women received during at-risk pregnancies included 17 studies and more than 12,000 women. Additional care was not associated with any improvements in any perinatal outcomes. C-sections were less common, as was hospital admission after birth, but infant mortality was not affected.

Another such review examined how the number of prenatal visits affected infant mortality. Seven studies involved more than 60,000 women in countries of varying income. There was no difference in high-income countries in the number of deaths of those who had more or fewer visits (although the number of deaths over all was low). In low- and middle-income countries, perinatal mortality was higher in groups with reduced visits, but the overall difference was small. The authors concluded that in places where the number of visits was already low, reducing the number of visits further was a bad idea. This doesn’t necessarily apply to standard care in the United States, though.

A recently published paper in the American Economic Journal: Economic Policy adds to this discussion. Alice Chen, Emily Oster and Heidi Williams combined data from the United States with data from Finland, Austria, Belgium and Britain. As other studies have done before, they adjusted for differences in coding of very premature births. And as other studies found before, the United States has a significant infant mortality disadvantage.

This study was different, however. It used microdata, or individual records of birth and death, as opposed to the aggregate data usually employed for cross-country comparisons. First, the researchers differentiated between neonatal mortality (death before one month of age) and postneonatal mortality (death between 1 and 12 months of age). The results showed that when it comes to neonatal mortality, the United States and other countries were pretty similar. If anything, the authorsreport, the United States might have a mortality advantage during this period.

Differences in postneonatal mortality, or from one month to one year, however, were much more stark. In fact they begin to accelerate at one month of age.

One explanation could be that this is just a delay in deaths. Perhaps the United States is simply better at keeping these babies alive a little while longer than other countries are. Differences are seen all the way to one year, though, making this unlikely. This difference also doesn’t appear to be because of race. A sub-analysis that excluded blacks from the sample still found a similar postneonatal mortality disadvantage in the United States. Racial differences may be more applicable to neonatal mortality.

Deaths in the postneonatal period are due, in large part, to sudden infant death syndrome (SIDS), sudden death and accidents. Moreover, they seem to occur disproportionately in poor women.

It’s not clear that “health care” is what might reduce deaths in this group. That doesn’t mean there’s nothing we can do. It might even be cost-effective to try. The authors of this paper estimated how much we might consider spending. They calculated that decreasing postneonatal mortality to that of comparable European countries might lower the death rate by 1 in 1,000. Assuming a standard value of $7 million per life, it might make sense to spend $7,000 per infant. That might seem like a lot of money, but it’s not out of the realm of what we spend on many other medical interventions.

What exactly we might do with that money is up for debate. One suggestion made by the authors, with which I agree, is that we consider programs of home nursing visits to reduce the incidence of SIDS and accidents. But some things do seem evident. The first is that our constant calls for improved and more prenatal care may not significantly improve our disadvantage in infant mortality. The second is that spending a significant amount of money on poor women to improve the health of their 1-month to 1-year-olds might not only save lives; it might be cost-effective, too.

http://www.nytimes.com/2016/06/07/upshot/the-us-is-failing-in-infant-mortality-starting-at-one-month-old.html?ref=policy

An Investor’s Plan to Transplant Private Health Care in Africa

by Landon Thomas - NYT

NAIROBI, Kenya — The eyes of the private equity investor lit up as he strode across the empty floor of a recently built hospital here. There was not much to see: a stretch of unfinished concrete, and steel bars pushed into a corner.

But Khawar Mann of the Abraaj Group, an investment firm based in Dubai that specializes in developing markets, saw something else.

Room for more patients — and a nice return on his investment.

“You could squeeze another 50 beds in here, easy,” he said. “That will really improve profits.”

Abraaj is trying to do something that hasn’t been tried before: build a global network of hospitals across cultures and in some of the poorest parts of the world — including India, Pakistan, Ethiopia and here in Kenya. Mr. Mann’s new fund has just bought a fast-growing hospital in India and is now trying to export its business model to Africa.

Even in rich countries with sophisticated medical markets, it can be tricky, given vastly different regulatory regimes and national quirks, for a hospital to go global. Few have done it. Abraaj, however, is betting that Indians, Nigerians and Pakistanis, who in many cases have annual incomes of no more than $1,000, will dip into their savings to pay for an angioplasty or some other necessary, but not necessarily cheap, procedure.

The process is further complicated by cultural differences. The Abraaj-owned hospital chain in Hyderabad, India, for instance, is run by a doctor so revered locally that he approaches “guru” status. Some patients refer to him as a god.

As a business model, that might not scale.

Still, India, Kenya and other less-developed economies share crucial similarities. Government-run hospitals offer cheap or even free care, but they can be extremely overcrowded and grim. With personal incomes rising, Abraaj thinks an emerging middle class of teachers, small-business owners, call-center workers and others will be eager to pay private doctors for better care.

Metropolitan Hospital, located in the rough eastern section of Kenya’s capital, is no Mt. Sinai. The operating theaters are rudimentary. Some rooms, while clean, lack curtains for windows and patients alike. Outside, children play barefoot soccer on a stony field in a suburban sprawl that not long ago displaced the big game that once grazed here.

But in a country where the main afflictions are malaria, meningitis and road accidents, the 150-bed hospital has become a destination for people willing to pay for decent medical attention. And then there is the rapid rise of unfamiliar ailments in poorer countries — diabetes, heart disease and obesity. They, too, are a byproduct of booming economies and rising wages, which enable unhealthier diets.

“Nairobi is a sweet spot for us,” Mr. Mann said. “There is a big population that is growing. You have emerging middle incomes. And there is a massive need for health care.”

He was in town to — he hopes — clinch a deal to buy Metropolitan for the $1 billion health care fund that Abraaj started this year. Mr. Mann is not the only one with this idea: Eight other private equity investors have visited recently, according to Metropolitan’s chief executive.

Abraaj’s fund includes money from the Bill & Melinda Gates Foundation, the medical parts companies Philips Healthcare and Medtronic, as well as other big institutional investors. “There will be some heavy lifting ahead — $1 billion is a lot of money to deploy in these types of markets,” said Maria Kozloski, who oversees private equity investments at the International Finance Corporation, the finance arm of the World Bank, which has also invested in the fund. “The opportunity is compelling, but it’s going to take some time.”

The fund’s size also reflects investors’ appetite for new ways to invest in emerging markets — an asset class that represents one-half of the global economy — after four years of so-so returns in publicly traded markets.

Abraaj is not well known in the usual private equity circles of New York and London. But with $10 billion under management, among the most any private equity firm has invested in these markets, its name is well traveled in the Middle East, South Asia and Africa. For years now, its founder, Arif Naqvi, has been pushing the notion that the best way for long-term investors to benefit from core emerging market themes — growing urbanization and consumption — is through long-term private equity investments that target specific business sectors, as opposed to volatile stock and bond market bets.

The health care fund, which Mr. Naqvi conceived, is a prime example.

Most emerging market investors tend to get their exposure via public stock and bond markets, for instance, by buying shares in Brazilian oil companies or Russian government bonds. But these investments tend to be extremely volatile, shooting up and down in tune with ever shifting risk perceptions in a given country.

Abraaj, by contrast, tries to spot investment ideas less likely to be whipsawed by the headlines. In an interview, Mr. Naqvi cited a recent investment in a Turkish dairy company — made at a time when Turks were protesting against their president, Recep Tayyip Erdogan.

“Turks will drink milk irrespective of who governs them,” Mr. Naqvi said.

Selling beer to thirsty Ethiopians or dairy products to Turks is a fairly simple proposition. And it gets at the core thesis of investing in these markets, which is to take advantage of young and growing populations in rapidly developing economies.

The trick, of course, is to pick the right companies — because there is no quick and easy way to dump a stake in a private company, as you can with a stock on a public exchange.

On the Hunt for Hospitals

It is this fundamental challenge — finding the right company, with the right management team — that has kept emerging-market private equity funds from growing like their larger peers in more developed markets. After all, it can be hard to get a true reading of your business partner in Jakarta, Indonesia, if you are sitting in New York, London or Hong Kong, as is the case with most private equity shops.

Abraaj tries to solve that by being based in Dubai and maintaining 20 regional offices, in places like Cairo and Karachi, Pakistan. Its principals also hail from these markets. In addition to Mr. Naqvi, who is from Pakistan, the firm’s senior partners are citizens of Egypt, Ghana, India, Mexico and Turkey.

The 48-year-old Mr. Mann is typical in this respect. Born in the dicier precincts of Birmingham, England, to parents who had recently immigrated from Pakistan, Mr. Mann went to Cambridge, won a scholarship to the Wharton School and dropped his plan to become a doctor, switching to law and finance.

Today he lives in Dubai and spends at least three weeks a month searching for hospitals and health clinics to buy in places like Ethiopia, Nigeria and Pakistan. He wears the tightfitting suits of a money-center banker, carries a fancy handbag and converses fluently in Urdu and Hindi.

Mr. Mann, who works with a large team of bankers and health professionals in managing the fund, cuts a striking figure in Nairobi, pacing the halls of the two hospitals he’s scouting out — Metropolitan and Nairobi Women’s Hospital. Nairobi Women’s is one of the city’s largest private hospitals, originally founded by an ambitious entrepreneur, Dr. Sam Thenya, to provide care to women experiencing domestic abuse.

With his slick suit and practiced smile, Dr. Thenya seems more a deal maker than a doctor. Both he and Mr. Mann caused a bit of a stir, rushing up and down the hospital’s spartan hallways and bursting into crowded patient rooms.

Mr. Mann brimmed with questions about how to get doctors to see more patients and provide them with more profitable services. In a laboratory where blood samples from patients are analyzed, Mr. Mann asked how long each test took.

Between 15 to 30 minutes, he is told.

“That’s good,” he replied. “You want to get the tests back as quickly as possible.”

Then Mr. Mann poked his head into the room housing the hospital’s single CT scanmachine. The room was empty but for a bored-looking attendant hunched over a computer. These machines are a rarity in Kenya, and for hospitals looking to maximize profits, they are crucial pieces of equipment.

Mr. Mann asked the doctor how many scans he performed in a day.

About seven, came the reply.

He shook his head. “You could be making a lot more money out of that machine,” Mr. Mann said. “You could be doing as many as 15 to 20 patients a day. A machine like this can really drive profitability.”

‘Not Mother Teresa Stuff’

Mr. Naqvi, in marketing Abraaj’s health fund, has insisted that its emphasis will be to have a positive social impact first and make money second. He refers to this mix of capitalism and social good — a bit majestically — as “partnership capital.” Nevertheless, both he and Mr. Mann know that any vision of a benevolent health conglomerate will not materialize unless they can find hospitals that are financially sound.

Perhaps the greatest tension for Abraaj to resolve is pricing. Few patients in India or Africa have health insurance. In Kenya, 67 percent of health expenditures are paid out of pocket. And in India — the fund’s central focus — that number is 60 percent.

This makes for extremely price-sensitive patients.

For example, the Hyderabad hospital chain that Abraaj recently bought, Care, has a business model that relies on patients paying $3,000 for a heart bypass operation, even though average income per capita in India is half that amount. (In the United States, similar treatment might cost $40,000, although insurance would help.)

“Look, this is not Mother Teresa stuff — we have a responsibility to our investors,” Mr. Mann said. “But in this case, I really think that you can do good and make money.”

That has been a driving philosophy behind Care Hospitals, India’s fifth-largest private hospital group. Founded by a team of Hyderabad cardiologists in the 1990s, Care has been a darling of private equity investors for the better part of 10 years. Last year, when Care again hit the market, Abraaj had to beat out a scrum of competing institutions.

The Guru Will See You Now

When Mr. Naqvi hired Mr. Mann to head the new fund in 2014, their first challenge was to find a country, and a hospital, that would serve as the driving force for the project. Because of India’s 200-million-person middle class and its wealth of doctors and surgeons trained to world standards, it was a logical place to start.

Mr. Mann had long been aware of the niche that Care had carved out for itself, with its 16 hospitals serving a wide area in and around Hyderabad and other parts of central India. Mr. Mann knew, too, that to make the dream work across countries and continents, it would not be enough to swoop into Nigeria, buy the best hospital he could find and hope for the best.

Training Nigerians and Kenyans how to use a CT scan or conduct a routine heart operation would be critical. If he could tap into the programs for professional advancement that Care had already built, he theorized, perhaps he could train his new doctors at a fraction of the cost it would take to send them to Europe or the United States.

These doctors would then return to their home countries grasping not only the latest medical techniques but how to get people to pay for them — a sensitive dynamic that has been at the root of Care’s success.

Leading Care, spiritually as well as medically, is its popular chairman, Dr. B. Soma Raju, a 69-year-old cardiologist. He made his name developing an affordable coronary stent many years back when they cost too much to import to India.

A quiet, stooped man, Dr. Soma Raju mumbles, making it hard for his fellow doctors and patients to hear him. But they hang on his every word, and he has been known to treat as many as 100 patients in a day.

For a number of years now, the vast majority of those who come to see him have illnesses related to diabetes. Close to 70 million people in India — second only to China — have been found to have the disease as a growing number of Indians lead more sedentary lives and eat more processed foods.

The result has been a sharp increase in what medical experts call truncal obesity, where fat is stored mainly around the waist. That can lead directly to heart problems, kidney disease and loss of sleep.

One day this month, Dr. Soma Raju saw a patient who fit the pattern perfectly. The owner of a village rice mill, the 61-year-old man had traveled far to be seen by the doctor.

Days without sleep had inflamed his eyes. In a ragged voice, he described what ailed him. And then there was his weight: 262 pounds, far too heavy for a man standing 5 feet 5 inches tall, the nation’s average.

“He has serious sleep apnea, blood sugar is increasing, and blood pressure is up,” Dr. Soma Raju explained. He advised the patient to exercise more, but his condition was so grave that the doctor also felt that weight-reduction surgery was needed.

In the large waiting room outside his examination chamber, every chair was filled. And as was the case with the owner of the rice mill, many patients had traveled more than 400 miles to see the doctor — not only from tiny rural villages but also metropolises like Mumbai.

India is a country where a doctor’s counsel is often viewed as sacred. One patient, a 77-year-old retired farmer who also had diabetes, said that he “believed in Dr. Soma Raju like a god.” Upon leaving the office, he bowed deeply before him.

All of which is good for business at Care. The hospital’s dialysis wards are filled to capacity, and many of the doctor’s patients — like the rice mill owner, for example — are paying full price for the services they receive, reflecting the growing wealth of India’s middle classes and the dearth of government spending on health care.

Dr. Soma Raju is as fluent in the language of finance as that of medicine. And such jargon as Ebitda (earnings before interest, taxes, depreciation and amortization — or, more simply, cash), profit margins and six sigma (a management style popularized by the former General Electric chief executive Jack Welch) rolls easily off his and his fellow doctors’ tongues.

When making his rounds in Hyderabad, Mr. Mann often asks that Care doctors take him to surrounding villages, where the hospital is opening small outposts. While Care is based largely in cities, about 70 percent of India’s 1.3 billion people live in rural areas.

Recently he traveled to Kandlakoya, a hamlet of about 2,000 people an hour’s drive from the city, where cows jostle with cars for right of passage. The bare-bones doctor’s office, a single room, was stuffed with a desk, a patient’s chair and a hospital bed, and a crowd of elderly men patiently waited their turns.

Presiding was a garrulous, 73-year-old doctor, who briefed Mr. Mann on the day’s afflictions: water contamination, anemia and most of all, complications from diabetes.

Are they paying for their visits, Mr. Mann asked?

“Oh, yes, sir,” replied the doctor, G. S. N. Raju, pointing to his scribbled notations in a battered ledger. “They come to me and tell me their problems.”

Then, to Mr. Mann’s surprise, the doctor grabbed him in a tight embrace. A more buttoned-up deal maker might have stiffened, but Mr. Mann pulled the small man close.

“Profitable, impactful and outreaching,” he proclaimed, a smile breaking out on his face. “This is the essence of partnership capital.”

It was good P.R., too — an Abraaj public relations executive was quick to capture the moment on his camera. He also suggested that the ebullient doctor be flown to Dubai for the firm’s next investor conference.

Profit vs. Poverty

While the Abraaj model seems to be working in India, it is not clear yet whether the strategy will immediately transfer to poorer countries in Africa where people may have more trouble paying for their visits.

One way to start to understand why Care has so many willing customers is to visit the alternative — an Indian government-run hospital. This can require a steely stomach, particularly in urban areas, where the population is outracing already overburdened facilities.

At one children’s hospital in Hyderabad, large crowds of parents, having made the trek from distant villages, squatted recently in a concrete lot in the rain. This was essentially the waiting room. As families endured sometimes dayslong waits for their turns with a doctor, their children relieved themselves in the street.

These types of conditions replicate themselves at government hospitals across India. Treatment is more or less free, but the facilities are Dickensian in comparison with the Care hospital — teeming emergency rooms, with hundreds of parents and children pushing for a single doctor’s attention.

The Indian government spends only about 1 percent of its gross domestic product on health care, and it shows. All of this helps explain why people who can afford to do so pay for hospitals like Care.

Similar scenes play out in Kenyan public hospitals. After his meetings at the private health facilities in Nairobi wrapped up, Mr. Mann dropped in at the Mama Lucy Kibaki Hospital.

Named after a former first lady of Kenya and built with help from the Chinese government, it is in a rundown eastern suburb of Nairobi. The emergency ward of its pediatric wing was a swarm of crying infants and sickly children, packed closely together, noses dribbling and wounds open, with few doctors in sight. “Did you see all those with contagious diseases squeezed into that room?” Mr. Mann muttered.

He said he tried to stop in at state-run facilities in the countries he visited to get a better sense of how public health care was administered — to size up the competition.

Like all ambitious private equity figures, Mr. Mann finds the glory of a billion-dollar deal — and the potential for a financial reward at the end — an obvious motivation. But a large part of his job, he says, lies in making the moral case for providing high-quality health care to lower- and middle-income patients in these countries. “How often do you get an opportunity to do something like this — I mean, to really make a difference?” he said.

He is also feeling the pressure to make this grand project work. Bill Gates is watching, and so are the World Bank (via its financing arm) and, not least, Mr. Naqvi, the fund’s philosophical father, to whom Mr. Mann writes detailed mission notes describing each step taken.

“Of course I am nervous,” Mr. Mann said. “I think about this 24/7.”

To some observers, the two ideas he most frequently deploys in explaining the goals of the Abraaj fund — cash flow and care — are more contradictory than symbiotic. Among those people was Karivki Ngure, a medical student doing his rotation at Mama Lucy Kibaki Hospital.

“All these things are good on paper,” he said, after running into Mr. Mann and hearing what Abraaj was doing in Kenya. “But if you come to this facility here, you will realize that there is a real need at this level,” he said, referring to the impoverished patients. “So what do you do about them?”

It was a fair point, and Mr. Mann knew it. He knew, too, that in terms of what Abraaj was hoping to do, without the cash flow there would be no care to give.

“We can’t go to that part of the population because the business is just not sustainable,” he responded.

The delegation from Abraaj finished the day at the office of the hospital’s head, Musa Mohammed, a child of refugees from the war-torn South Sudan. Mr. Mohammed asked Mr. Mann pointed questions about the prices his privately run Kenyan hospitals were charging patients.

Mr. Mohammed, who was raised in the Nairobi neighborhood of Kibera, considered Africa’s largest slum, argued forcefully that the government needed to step in more aggressively to cap health care prices. “I know the private sector has to make a profit,” he said, choosing his words carefully. “But how much profit? But I guess this is why it is called a free-market economy.”

Mr. Mann did not agree that private hospitals in Kenya, not least the ones he was going to buy, were gouging their customers. But he held his tongue: Mr. Mohammed’s moral authority was daunting. Mr. Mann would try to win him over instead. So he asked the hospital chief if he could come by for a visit the next time he was in Nairobi.

http://www.nytimes.com/2016/10/09/business/dealbook/an-investors-plan-to-transplant-private-health-care-in-africa.html