Oregon removes nearly 55,000 people from Medicaid after they failed eligibility checks
by Hillary Borrud - The Oregonian - September 1, 2017
Oregon has kicked nearly 55,000 people off its Medicaid program, after the state found they no longer qualified or failed to respond to an eligibility check.
The state made the announcement Thursday, after workers finally cleared a backlog of eligibility checks that built up due to technology troubles and a massive increase in Medicaid enrollment under the Affordable Care Act.
Historically, around 28 percent of Oregonians on Medicaid were found to no longer qualify at annual eligibility reviews. But when the state finished working through its backlog of 115,000 Medicaid enrollees, it took the free insurance away from nearly 48 percent of them.
Gov. Kate Brown had set Thursday as the deadline for the Oregon Health Authority to catch up on the eligibility checks, after The Oregonian/OregonLive reported on the backlog and Secretary of State Dennis Richardson issued a preliminary "audit alert" on the issue. State auditors are still looking into the state's Medicaid program.
Brown did not respond to questions Thursday about whether she has any ongoing concerns about the heath agency's administration of Medicaid, including whether it is operating efficiently.
However, press secretary Bryan Hockaday wrote in an email that Brown "expects Acting Director (Pat) Allen to move OHA forward by demonstrating accountability, transparency, and careful stewardship of every taxpayer dollar." Hockaday referred to Brown's letter to Allen earlier this month, saying his "highest priority from day one should be restoring trust with the public, legislators, stakeholders, and most importantly the clients the Oregon Health Authority serves."
In a press release Thursday, Oregon Health Authority spokesman Robb Cowie said Allen "has been charged with making organizational changes to improve the Medicaid renewal process to ensure accuracy, the wise use of taxpayer dollars, and make sure that everyone who is eligible for Medicaid has access to it."
This will include creating a new Medicaid Eligibility Compliance Office at the agency, Cowie wrote. That office will improve the follow-up eligibility checks and also work to improve quality control and data, he wrote.
The Oregonian/OregonLive has reported the state had to process hundreds of thousands of Medicaid applications by hand because an automated eligibility system failed along with the rest of the $300 million Cover Oregon project. More than 500 temporary workers were assigned to the project.
Medicaid is supposed to provide care for people with low incomes. To qualify in Oregon, single people can earn no more than $17,000 a year and a family of four no more than $33,000.
Under ‘Observation,’ Some Hospital Patients Face Big Bills
by Paula Span - NYT - September 1, 2017
In April, Nancy Niemi entered Vidant Medical Center in Greenville, N.C., with cardiac problems. She stayed four nights, at one point receiving a coronary stent.
Then she went home, but felt faint and took several falls. Five days later, her primary care doctor sent her back to the hospital. This time, her stay lasted 39 days while physicians tried various medications to regulate her blood pressure.
Though they eventually succeeded, Mrs. Niemi, 84, a retired insurance agent, had grown so weak that she could no longer walk.
“They said, ‘She really needs to go to a skilled nursing facility for physical therapy,’” recalled her son Tom Krpata, 63, who’d come from his home in Holliston, Mass., to be with her.
He agreed, but soon learned one of the brutal truths of Medicare policy: Patients can be hospitalized for days, can undergo exams and tests, can receive drugs — without ever officially being admitted to the hospital.
Instead, they’re “under observation,” which means they’re outpatients, not inpatients. That can bring financial hardships — including lack of coverage for subsequent nursing home care.
That’s why Mrs. Niemi, on observation status through both hospital stays except for one night, had to pay for rehab herself. “By declaring her an outpatient, they really took away her Medicare benefits,” Mr. Krpata said.
Patients can appeal virtually any other claim that Medicare denies. But there’s no way to appeal observation status. Even Mrs. Niemi’s congressman, contacted by her family, couldn’t help.
But a recent ruling in a case that’s bounced through the courts since 2011 may be a harbinger of changes to come.
On July 31, a federal judge in Connecticut certified a class in a class-action lawsuit: all Medicare recipients who’ve been hospitalized and received observation services as outpatients since January 1, 2009.
That means hundreds of thousands of people, Ms. Niemi among them, will be eligible to join the suit against the Centers for Medicare and Medicaid Services, with a trial expected next year. If the plaintiffs prevail, they’ll be able to appeal their observation-outpatient stays.
“People call in dire situations, and we have to tell them there’s no way to challenge this,” said Alice Bers, litigation director of the Center for Medicare Advocacy, which brought the lawsuit with Justice in Aging and a law firm, Wilson Sonsini Goodrich & Rosati. “Now we can tell them, ‘You’re a member of the class, so stay tuned.’”
A quick primer on a confusing situation: Medicare Part A covers hospital care for inpatients. Outpatients, including those on observation status, are covered under Part B. That distinction has generated complaints and controversy for years, as the number of inpatient hospitalizations has declined among Medicare recipients and outpatient stays have become more common.
Why does the classification matter? Outpatients can face higher payments for drugs and coinsurance, but the big-ticket item is nursing home care.
After a hospital discharge, Medicare pays the full cost of skilled nursing for the first 20 days, and most costs up to 100 days — but only for patients who’ve spent three consecutive days as inpatients. Without three inpatient days, patients are on their own.
Though most observation patients return home and needn’t to worry about nursing home costs, nearly two-thirds of those who do need skilled nursing have to shoulder the substantial costs themselves, according to a report from the AARP Public Policy Institute.
They hadn’t met the three-day inpatient requirement. Many, fearing the costs, skipped rehab in a nursing facility altogether, the researchers found.
Mrs. Niemi did go to a nursing home and now owes close to $5,000 — only because nursing homes near Greenville charge a comparatively modest $150 to $160 a day. Nationally, nursing home care cost $225 a day last year, according to the Genworth Cost of Care Study, and more than $400 a day in cities like New York and San Francisco.
Recognizing the problem, Congress passed legislation that took effect earlier this year, requiring that hospitals inform patients when they’re not inpatients but are under observation.
So while it came as news to Mr. Krpata that his mother’s status would mean no coverage for a nursing home, at least he knew what her status was — not that he could do anything about it.
Medicare administrators, who declined to comment for this article because of the ongoing litigation, tried to clarify observation status in 2013 with the so-called “two midnight rule.” When physicians expect a hospitalized patient to need care for at least two midnights, Medicare expects that inpatient care is probably appropriate; for shorter stays, beneficiaries would likely remain outpatients.
The rule hasn’t helped, though, according to a report last year from the Office of Inspector General of the Department of Health and Human Services. Inpatient stays are still decreasing and outpatient stays are growing, the report found. More of those outpatients have “limited access” to skilled nursing afterward, and pay more for it.
Gaining the right to appeal observation-outpatient classification won’t solve that problem, even if patients should win their class action suit.
“The Medicare appeals system is far from perfect,” said Ms. Bers. Patients routinely lose in the early stages, and though their odds of success improve if they pursue the appeal to an administrative law judge, many drop out before that point.
A far more effective remedy: the Improving Access to Medicare Coverage Act that Rep. Joe Courtney, Democrat of Connecticut, has introduced in each Congress since 2010. It calls for counting any consecutive three days spent in a hospital toward the requirement for nursing home benefits, regardless of whether people are inpatients or outpatients.
Not only has the bill drawn broad bipartisan support in both the House and Senate, a raft of medical and advocacy groups also have also endorsed it, including the American Medical Association and AARP.
“Going to a nursing facility is not on everybody’s wish list,” said Carol Levine, director of the United Hospital Fund’s Families and Health Care Project, who said she was not speaking for the group.
“But if it’s the best alternative for the patient, they shouldn’t have to jump over these kinds of bureaucratic rules that make it financially impossible.”
So far, though, the legislation has gone nowhere. For now, suing Medicare for the right to appeal probably offers the best route to fairer treatment for hospitalized patients.
“That’s the way these things move, in incremental steps,” Ms. Levine said. “And this could be an important one.”
Minnesota Finds a Way to Slow Soaring Health Premiums
by Robert Pear - NYT - September 2, 2017
MINNEAPOLIS — Last fall, as consumers in Minnesota were facing health insurance rate increases of 50 percent or more, Gov. Mark Dayton, a Democrat, said the Affordable Care Act was “no longer affordable to increasing numbers of people.” The state’s top insurance regulator said the Minnesota market was “on the verge of collapse.”
The outlook now is much better. Rate increases requested for 2018 are relatively modest, thanks in part to a new program under which the state will help pay the largest claims. The program, known as reinsurance, and the efforts that led to its creation hold lessons for other states where rates are rising rapidly, and for Congress, where lawmakers are considering the introduction of a similar program.
“The individual insurance market is stabilizing under the program here,” said Allison L. O’Toole, the chief executive of Minnesota’s state-run insurance marketplace. “Health plans are very happy about it.”
State officials and insurers say that, as a result of the program, premiums next year will be about 20 percent lower than they would otherwise have been. The program — for which Minnesota has budgeted about $270 million in each of the next two years — potentially benefits all of the 160,000 people buying insurance on their own, not just those with large claims.
But the program will be invisible to consumers. They will not have to file additional paperwork or do anything different from what they would ordinarily do.
“Reinsurance is keeping rates under control and keeping insurers in the market in counties and places where they might not otherwise participate,” said State Senator Michelle R. Benson, a Republican who is chairwoman of the Senate health and human services committee.
In Washington, Congress returns Tuesday with a list of urgent priorities that include an increase in the federal debt limit, disaster relief for victims of Hurricane Harvey, a spending plan to avert a government shutdown — and decisions about the future of the Affordable Care Act.
The Senate health committee, headed by Senator Lamar Alexander of Tennessee, a Republican, has scheduled four hearings in the first half of September to consider bipartisan proposals to steady insurance markets. A group of eight governors, led by John R. Kasich of Ohio, a Republican, and John W. Hickenlooper of Colorado, a Democrat, has suggested a package of quick fixes, including federal funds for reinsurance programs.
Minnesota’s experience with such an effort is instructive. The bill creating its reinsurance program, the Minnesota Premium Security Plan, became law within three months of being introduced — lightning speed when compared with the pace in Congress.
The Minnesota plan was a Republican initiative. Most Democrats voted against the bill, and Governor Dayton allowed it to become law without his signature. Many Democrats preferred a different approach that would have allowed consumers to buy coverage under an existing state program.
But now that the reinsurance program has been authorized by state law, members of Congress from Minnesota and state legislative leaders from both parties have joined Mr. Dayton in urging the Trump administration to grant the approvals the state needs to carry out the plan. When proposed rates for 2018 were announced at the end of July, Mr. Dayton said, “I applaud the Minnesota legislators, who worked together to pass this pioneering legislation, which is being shown to cause major reductions in the costs of health insurance next year for many thousands of Minnesotans.”
In a letter to governors in March, Tom Price, the secretary of health and human services, said the Trump administration would be receptive to such state initiatives.
“State-operated reinsurance programs may be an opportunity for states to lower premiums for consumers, improve market stability and increase consumer choice,” Mr. Price said.
HealthPartners, a Minnesota company that provides coverage to 62,000 people who buy insurance on their own, has proposed rate reductions that average 13 percent to 15 percent next year. Without the reinsurance program, it would require rate increases of 3 percent to 5 percent, it said in filings with the Minnesota Commerce Department.“We’ve had two years of very significant rate increases, and the market is still volatile,” said Andrea Walsh, the president and chief executive of HealthPartners. “But the reinsurance program promises more stability. We’ll be able to spread the cost of high-cost cases across the entire individual marketplace.”
Blue Cross and Blue Shield of Minnesota is proposing rate increases of up to 11 percent for the plans it offers in the public marketplace. Without reinsurance, it said, its rates would rise 16 percent to 32 percent, on average. By contrast, its average rate increase this year was 55 percent.
Hodan Guled, the chief executive of Briva Health, a community group that helps Minnesotans sign up for coverage under the Affordable Care Act, said the reinsurance program was “definitely helpful and beneficial” for consumers.
State Senator Tony Lourey, the senior Democrat on the health committee in the Minnesota Senate, said he voted against the legislation because it was financed mainly with money from a fund intended for a separate state health program for the working poor. But he said, “Reinsurance itself is a good tool, a valuable tool, to mitigate premium spikes, and this program does work.’’
“This is the type of risk-mitigation tool that the feds defunded in an effort to sabotage Obamacare,” Mr. Lourey said. “It’s left to states then to put this massive investment in place. The feds need to be stepping up to the plate and not leaving it to the states.”
The Affordable Care Act created a temporary federal reinsurance program, which was in effect from 2014 to 2016. But like much of the law, it became snarled in politics and legal disputes.
Under the measure adopted this year in Minnesota, the state reinsurance program pays 80 percent of the amount of a claim from $50,000 to $250,000. The insurer is responsible for any amounts over $250,000.
If, for example, a person has $60,000 in claims next year, the reinsurance program would pay the insurer 80 percent of $10,000, or $8,000. If a person has $600,000 in claims, the program would cover 80 percent of the cost from $50,000 to $250,000 — 80 percent of $200,000 — so the payment to the insurer would be $160,000.
The state is counting on the federal government to pay about half of the cost for the reinsurance program, using money the federal government is expected to save because of lower premiums here.
Under the Affordable Care Act, the federal government offers subsidies, in the form of tax credits, to lower- and moderate-income people to help them pay premiums for insurance that they are generally required to buy.
“Higher premiums mean higher federal tax credits,” the state said in its application to the federal government. “Lower premiums mean lower federal tax credits.”
In Congress, House and Senate Republicans say the Affordable Care Act has failed to hold down premiums. As part of their bills to repeal the law, they would provide tens of billions of dollars that states could use for reinsurance programs in the coming decade. Two Democratic senators, Thomas R. Carper of Delaware and Tim Kaine of Virginia, have introduced legislation that would provide money for reinsurance programs without dismantling President Barack Obama’s health law.
In Maryland, CareFirst BlueCross BlueShield, the dominant insurer, has just received approval from the state insurance commissioner for rate increases averaging 34.5 percent to 49.9 percent next year.
Chet Burrell, the president and chief executive of CareFirst, said the rate increases were unsustainable and would drive healthier people from the market, leaving a pool of sicker customers. “A few more years of this,” he said, “and there will be no more market left.”
Mr. Burrell said that a federal reinsurance program — to help pay for the “really high-cost cases” — would help stabilize the market.
In July, the Trump administration approved a reinsurance program proposed by Alaska, where health care and coverage are particularly expensive. The program helps pay claims for people with certain high-cost medical conditions like metastatic cancer, H.I.V. and AIDS.
Editor's Note:
Please note that the reinsurance program described in the preceding NYT article does not appear to do anything to slow the continuing increase in year-to-year costs of health care in Minnesota. It simply creates another creative way to disguise them. No wonder the "health" plans are "very happy" with it.
-SPC
Our View: Decline in health linked to drop in workforce size
by Editorial Board - Portland Press Herald - September 4, 2017
With Maine’s unemployment rate near historic lows, and the state’s economic output climbing back to pre-recession levels, there is a lot to celebrate this Labor Day. But what about the people that the unemployment rate doesn’t count?
People of prime working age have dropped out of the workforce at levels not previously seen by labor economists, especially outside Greater Portland. According to a forthcoming study by the Maine Center for Economic Policy, just under 30 percent of 25-54-year-olds without a college degree in rural Maine have dropped out of the workforce, twice the 15 percent rate in 1997.
Clearly this is a product of the changing Maine economy, in which thousands of good-paying jobs have disappeared, replaced with low-paying jobs in retail or tourism. But intertwined with the loss of manufacturing jobs is a question of declining health.
Sickness, including chronic conditions like diabetes, is the top reason people give for stopping their job search, according to U.S. Census data evaluated in the study. That rate has climbed steadily since 2011, even though the rate of people who receive disability income from the government has not changed.
It’s easy to see how these two trends are connected. Rural Maine has lost 40,000 middle-income jobs since 2011, and they have mostly been replaced by low-wage jobs.
The new jobs often don’t provide health insurance, sick days, paid vacation or incomes that keep families out of poverty. And there is ample evidence to show that being poor is bad for your health.
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People with incomes under $25,000 a year are twice as likely to smoke as people whose incomes are higher than $25,000. They are almost three times more likely to have diabetes, and 30 percent more likely to have high cholesterol. They are also twice as likely to report being depressed, abuse alcohol and drugs and have a much higher suicide rate.
It’s important to remember that workers lost more than income when the local paper mill shut down. They also lost health insurance for themselves and their families.
Getting sick is not just a result of longterm unemployment, it’s also something that will keep you unemployed.Expect this dynamic to interfere with Maine’s economic growth in the years ahead unless there are changes in the way health care is delivered.
Businesses report being unable to fill good-paying jobs that require high levels of education and training. But those jobs won’t be filled if prime age workers keep dropping out of the labor force.
Relying on employers to provide health insurance worked well when jobs were stable and people could work their whole careers in one place.
But today’s economy requires workers to be more nimble. Health coverage that does not end when the job goes away is essential if we are going to have workers who can retool themselves and apply themselves to new lines of work.
On Labor Day, we should celebrate the great strides made by American workers, but we should not forget those who are being left behind. Health care should be considered part of any economic development plan.
Dentists to poor people: Drop dead
by Alex Beam - Boston Globe - September 5, 2017
Dentists, who seem like perfectly nice people when you meet them at after-school events or at the grocery store, are carving out a bizarre public persona that is a mixture of Simon Legree, Snidely Whiplash, and Dr. Evil.
The women and men who fix your teeth now make more money per capita than doctors. To preserve their high incomes, dentists have historically refused to participate in Medicare because of low reimbursements, and ditto for Medicaid. Now dentists are resolutely — some would say fanatically — opposing efforts to let dental hygienists and dental therapists deliver prophylactic care to children, the elderly, and to poor and underserved regions in America.
The shocking outcome of dentists’ apparent indifference to the less fortunate came in 2007, when 12-year old Deamonte Driver died of an oral infection in Maryland’s affluent Prince George’s County. How unpleasant for the nation’s lawmakers to read the next day’s Washington Post headline: “For Want of a Dentist: Prince George’s Boy Dies After Bacteria from Tooth Spread to Brain.”
Staff writer Mary Otto wrote that story, and later left the paper to research her just-published book “Teeth: The Story of Beauty, Inequality, and the Struggle for Oral Health in America.” It’s an ungainly title, and it’s a subject that probably feels as foreign to you as it does to me. I bet that most Globe readers brush regularly and make sure their children show up for dental appointments, terrifying though they may be.
Otto’s book is about the other one-third of the country: the uninsured elderly (Medicare doesn’t cover dental check-ups), the tens of millions of children underserved by Medicaid (two-thirds of dentists don’t accept Medicaid patients), and the residents of the 400-plus rural counties that have no dentist at all.
Some dentists and public health types have a solution for these problems: They want to license lower-paid hygienists and dental therapists, so-called “mid-level” practitioners, to deliver baseline care to the needy. Dental associations have been fighting against them tooth and claw, forever.
Earlier this summer, The Washington Post compared the American Dental Association to the National Rifle Association in its relentless, single-issue attack on state legislators who support mid-level care. The ADA worked hard (and unsuccessfully) to scuttle a plan to let dental therapists treat Alaska Native tribes. “They went after these Alaskan therapists like they were ISIS,” dentist Jack Dillenberg told the Post. “It was embarrassing.”
A similar scenario is playing out in Massachusetts. The Massachusetts Dental Society is opposing Senator Harriette Chandler’s Senate bill 1169, which seeks to allow dental therapists to treat patients under the “general supervision” of a dentist, after 500 hours of training. The MDS is promoting a more restrictive bill that imposes limits on where therapists can practice, and on how they can be reimbursed.
“The battle going on in Massachusetts mirrors the battle going on in other states across the country,” says Otto, who will be speaking at the Harvard Dental School on Sept. 12, the same day that Chandler’s bill is scheduled for a joint hearing on Beacon Hill.
Last month the Boston City Council urged the Legislature to pass the Chandler bill. “More than 530,000 people in Massachusetts live in areas with a shortage of dentists,” Jamaica Plain councilor Matt O’Malley said in an accompanying statement. “Boston residents deserve better, and these mid-level providers can help bring cost-effective dental care to children, seniors, and people with disabilities currently going without it.”
Democratic Group Plans Attacks on G.O.P. Efforts to Undermine Obama Health Care Law
by Michael Shear - NYT - September 5, 2017
WASHINGTON — For years, Republicans successfully battered Democrats for supporting the Affordable Care Act.
But now, a coalition of Democratic organizations believes public opinion has swung their way, and they plan to spend the fall attacking President Trump and Republican lawmakers for attempting to undermine the success of a law that provides health insurance to millions of Americans.
Encouraged by the failure of Republican efforts to repeal the law, considered former President Barack Obama’s most consequential domestic legislation, a group called Protect Our Care said it intends to spend more than $1 million on digital ads in states across the country accusing the administration and its congressional allies of working to sabotage the Affordable Care Act.
The group will soon launch a new website that will be highly critical of Tom Price, the secretary of health and human services. And it will be organizing rallies and protests in ten states aimed at highlighting the votes that Republican lawmakers took in the failed bid to repeal the law.
“For the first time, since 2010, we are on offense on health care and we are going to prosecute a campaign on offense to ensure the law never faces the threat of repeal,” said Brad Woodhouse, a veteran Democratic operative who is joining the group to oversee the day-to-day operations on behalf of the health care law.
Mr. Woodhouse said the Trump administration underscored the need for the group’s new mission last week, when officials announced that they plan to slash the government’s advertising budget for encouraging people to enroll in the health care marketplaces created by the Affordable Care Act. Officials at the Department of Health and Human Services said the advertising budget for the open enrollment period that starts in November would be cut to by 90 percent, to just $10 million.
Democrats believe the reduction is an effort to destabilize the already shaky insurance markets by making sure that fewer people sign up for coverage. Officials countered that the spending was not necessary because most Americans already know about that the health insurance options that are available.
President Trump and Republicans have made no secret of their desire to get rid of the health care law. And they have repeatedly said they believe the insurance markets are failing. In March, Mr. Trump tweeted that “Obamacare is imploding. It is a disaster and 2017 will be the worst year yet, by far!”
But now that congressional attempts to repeal the law have failed, the Democratic operatives are betting that Mr. Trump and Republican lawmakers will take steps to weaken it administratively, including withholding subsidies that keep premiums low and failing to invest in keeping the HealthCare.gov website running during peak periods of enrollment.
Protect Our Care, which ran a campaign-style war room during the congressional repeal debate earlier this year, now plans to focus on publicizing those efforts.
“We will highlight stuff like the website going down” if it happens, Mr. Woodhouse said. “We will take our people out in the states and protest in front of Republican offices. We are going to create a hue and cry.”
Mr. Woodhouse takes over from Leslie Dach, a former Obama administration health care official who started the group the day after the November election. Mr. Dach, who will continue to advise the group as its campaign chairman, said the group will repeatedly highlight the Republican efforts to make the health care law fail.
“The public clearly thinks that’s a bad idea, clearly thinks the administration wants this law to fail, and they don’t like it,” Mr. Dach said.
The group’s strategy is driven in part by Democratic polling that suggests Americans in both parties would be bothered by efforts to sabotage the health care law, Mr. Woodhouse said. A memo to be released Tuesday by Geoff Garin, a Democratic pollster, concludes that “continued efforts by Trump and congressional Republicans to undermine the Affordable Care Act will be deeply unpopular with voters, including many rank-and-file Republican voters.”
Protect Our Care, which gets its money from labor groups, wealthy individuals and foundations, has already begun spending small amounts of money to buy online ads. Last month, the group circulated a video in ten Republican House districts urging them to “stand up against Trump’s sabotage of the health care system.”
The group also placed banner ads on websites in those districts. For example, the group targeted Representative Peter Roskam, Republican of Illinois, with an ad that asked: “Will Rep. Roskam Stand Up to Trump’s sabotage.”
Protect Our Care also intends to target Mr. Price, a former member of Congress and an orthopedic physician who has become the chief health care spokesman for Mr. Trump’s administration. The Democratic group plans to highlight what Mr. Price says about the Affordable Care Act and efforts he makes to undermine it.
In addition to a website about Mr. Price, the group plans to begin a begin an aggressive media campaign designed to make people question Mr. Price’s statements and actions.
“We want to make him as least credible on these issues as we possibly can,” Mr. Woodhouse said. “Putting Tom Price in charge of the health care law is no different than putting the Cookie Monster in charge of dessert rationing. He doesn’t want to support the health care law. He wants to get rid of it.”
The Real Reason the U.S. Has Employer-Sponsored Health Insurance
by Aaron Carroll - NYT - September 5, 2017
The basic structure of the American health care system, in which most people have private insurance through their jobs, might seem historically inevitable, consistent with the capitalistic, individualist ethos of the nation.
In truth, it was hardly preordained. In fact, the system is largely a result of one event, World War II, and the wage freezes and tax policy that emerged because of it. Unfortunately, what made sense then may not make as much right now.
Well into the 20th century, there just wasn’t much need for health insurance. There wasn’t much health care to buy. But as doctors and hospitals learned how to do more, there was real money to be made. In 1929, a bunch of hospitals in Texas joined up and formed an insurance plan called Blue Cross to help people buy their services. Doctors didn’t like the idea of hospitals being in charge, so some in California created their own plan in 1939, which they called Blue Shield. As the plans spread, many would purchase Blue Cross for hospital services, and Blue Shield for physician services, until they merged to form Blue Cross and Blue Shield in 1982.
Most insurance in the first half of the 20th century was bought privately, but few people wanted it. Things changed during World War II.
In 1942, with so many eligible workers diverted to military service, the nation was facing a severe labor shortage. Economists feared that businesses would keep raising salaries to compete for workers, and that inflation would spiral out of control as the country came out of the Depression. To prevent this, President Roosevelt signed Executive Order 9250, establishing the Office of Economic Stabilization.
This froze wages. Businesses were not allowed to raise pay to attract workers.
Businesses were smart, though, and instead they began to use benefits to compete. Specifically, to offer more, and more generous, health care insurance.
Then, in 1943, the Internal Revenue Service decided that employer-based health insurance should be exempt from taxation. This made it cheaper to get health insurance through a job than by other means.
After World War II, Europe was devastated. As countries began to regroup and decide how they might provide health care to their citizens, often government was the only entity capable of doing so, with businesses and economies in ruin. The United States was in a completely different situation. Its economy was booming, and industry was more than happy to provide health care.
This didn’t stop President Truman from considering and promoting a national health care system in 1945. This idea had a fair amount of public support, but business, in the form of the Chamber of Commerce, opposed it. So did the American Hospital Association and American Medical Association. Even many unions did, having spent so much political capital fighting for insurance benefits for their members. Confronted by such opposition from all sides, national health insurance failed — for not the first or last time.
In 1940, about 9 percent of Americans had some form of health insurance. By 1950, more than 50 percent did. By 1960, more than two-thirds did.
One effect of this system is job lock. People become dependent on their employment for their health insurance, and they are loath to leave their jobs, even when doing so might make their lives better. They are afraid that market exchange coverage might not be as good as what they have (and they’re most likely right). They’re afraid if they retire, Medicare won’t be as good (they’re right, too). They’re afraid that if the Affordable Care Act is repealed, they might not be able to find affordable insurance at all.
This system is expensive. The single largest tax expenditure in the United States is for employer-based health insurance. It’s even more than the mortgage interest deduction. In 2017, this exclusion cost the federal government about $260 billion in lost income and payroll taxes. This is significantly more than the cost of the Affordable Care Act each year.
This system is regressive. The tax break for employer-sponsored health insurance is worth more to people making a lot of money than people making little. Let’s take a hypothetical married pediatrician with a couple of children living in Indiana who makes $125,000 (which is below average). Let’s also assume his family insurance plan costs $15,000 (which is below average as well).
The tax break the family would get for insurance is worth over $6,200. That’s far more than a similar-earning family would get in terms of a subsidy on the exchanges. The tax break alone could fund about two people on Medicaid. Moreover, the more one makes, the more one saves at the expense of more spending by the government. The less one makes, the less of a benefit one receives.
The system also induces people to spend more money on health insurance than other things, most likely increasing overall health care spending. This includes less employer spending on wages, and as health insurance premiums have increased sharply in the last 15 years or so, wages have been rather flat. Many economists believe that employer-sponsored health insurance is hurting Americans’ paychecks.
There are other countries with private insurance systems, but none that rely so heavily on employer-sponsored insurance. There are almost no economists I can think of who wouldn’t favor decoupling insurance from employment. There are any number of ways to do so. One, beloved by wonks, was a bipartisan plan proposed by Senators Ron Wyden, a Democrat, and Robert Bennett, a Republican, in 2007. Known as the Healthy Americans Act, it would have transitioned everyone from employer-sponsored health insurance to insurance exchanges modeled on the Federal Employees Health Benefits Program.
Employers would not have provided insurance. They would have collected taxes from employees and passed these onto the government to pay for plans. Everyone, regardless of employment, would have qualified for standard deductions to help pay for insurance. Employers would have been required to increases wages over two years equal to what had been shunted into insurance. Those at the low end of the socio-economic spectrum would have qualified for further premium help.
This isn’t too different from the insurance exchanges we see now, writ large, for everyone. One can imagine that such a program could have also eventually replaced Medicaid and Medicare.
There was a time when such a plan, being universal, would have pleased progressives. Because it could potentially phase out government programs like Medicaid and Medicare, it would have pleased conservatives. When first introduced in 2007, it had the sponsorship of nine Republican senators, seven Democrats and one independent. Such bipartisan efforts seem a thing of the past.
We could also shift away from an employer-sponsored system by allowing people to buy into our single-payer system, Medicare. That comes with its own problems, as The Upshot’s Margot Sanger-Katz has written. She also has covered the issues of shifting to a single-payer system more quickly.
It’s important to point out that neither of these options has anything even close to bipartisan support.
Without much pressure for change, it’s likely the American employer-based system is here to stay. Even the Affordable Care Act did its best not to disrupt that market. While the system is far from ideal, Americans seem to prefer the devil they know to pretty much anything else.
A Single-Payer Plan From Bernie Sanders Would Probably Still Be Expensive
by Margot Sanger-Katz - May 16, 2016
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.
Dream of Obamacare Replacement Fades to Bipartisan Patch Job
by Margot Sanger-Katz - NYT - September 6, 2017
This week, the Senate will do something it hasn’t done in seven years: hold bipartisan hearings on the future of the Affordable Care Act. Serious and creative ideas will be presented.
But don’t expect big policy changes anytime soon.
Experts and lobbyists close to the congressional process say that, despite consensus that Obamacare’s markets are too thin and too expensive, very few reforms have any chance of becoming law before insurers begin selling Obamacare plans for next year.
Instead, the most likely action — if there is any — will simply be to patch cracks in the market caused by President Trump and prevent him from doing more damage.
Congressional leaders are looking at a fix that would bring certainty to payments the federal government makes to subsidize plans for low-income Americans. Those payments, which are called cost-sharing reductions and go to the insurers, are outlined in the Affordable Care Act, but the law left it unclear whether the money could be distributed without a clear spending bill from Congress.
So far, the payments have been made every month. But President Trump has repeatedly threatened to stop them. Many health insurers have said their worries about the payments have led them to exit Obamacare markets or charge substantially higher insurance prices next year.
Legislation that assures the subsidies for a year or two could tie the president’s hands and reduce the uncertainty for nervous insurers. But even though some Republican congressional leaders have embraced the idea, it’s not clear whether enough Republicans will end up voting yes.Experts close to Congress have identified one other area of possible policy-making: more leeway for states that wish to manage their insurance markets in experimental ways. The Affordable Care Act already had a waiver program, but it established a very high bar for state policy experiments.
That likely package of ideas does not impress Edmund Haislmaier, a senior research fellow at the Heritage Foundation, who worked on the Trump transition team looking at regulations meant to shore up the markets. “Actually, it has nothing to do with market stabilization,” he said, noting that the subsidy payments would simply preserve the current policy environment.
Changes to the state waiver standards might change things down the road, but they are unlikely to make any difference next year. That’s because, even with new rules, states would still need to propose new plans and win approval.
On Wednesday, the Senate Health, Education, Labor and Pensions Committee, led by Lamar Alexander, will start hearing from a bipartisan group of state insurance regulators and governors, and will most likely hear a long list of other proposals. They include a request for funding to protect insurers facing huge expenses from patients with rare, very costly ailments. So-called reinsurance funds were part of Obamacare in its first three years, but they have been phased out. Many state officials think a return of the program would make the markets less risky and encourage more insurers to participate.
A reinsurance program was also part of several versions of Republican health overhaul legislation, including the bill that passed the House this spring, suggesting that Republicans are not entirely opposed to the idea. But a meaningful program would probably cost around $100 billion over a decade, a price that may be unappealing when it is untethered from the spending cuts in those bills. “That’s new money on the table with double digit B’s after it,” said Caroline Pearson, a senior vice president at the consulting firm Avalere Health.
Other ideas will be more novel still. A bipartisan group of eight governors put forward a letter to congressional leaders last week outlining a series of policy ideas. Among them: Let Americans with limited Obamacare insurance choices buy coverage through the federal employee health benefit system. Two of its Democratic authors, John Hickenlooper of Colorado and Steve Bullock of Montana, will testify before Congress on Thursday. Don’t expect that idea to go far in the short term.
Patty Murray, the ranking Democratic member of the Senate health committee, signaled as much in a recent op-ed. In The Washington Post, Ms. Murray wrote about a “multiyear solution” to the Obamacare markets. “Tying Trump’s hands in the short term is better than nothing, but without long-term solutions, insurers will likely become nervous about the future,” she wrote.
Optimistic observers say that even a small patch job for the A.C.A. this year could lead to something bigger and better. After years of partisan bickering about health reform, truly bipartisan hearings represent a change that could be more than ceremonial. Rodney Whitlock, a vice president at the lobbying firm ML Strategies, and a former aide to Senator Charles Grassley, said he could see a modest, short-term compromise to “create momentum for medium-term solutions.” He noted that the start of the 2019 enrollment period will take place just days after the November election.
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