While the COVID-19 pandemic rages, the past two years have seen
another epidemic of a far different type—in financing and acquisitions
of firms focused on serving Medicare beneficiaries. These firms include
physician practices, notably primary care practices (PCPs); management
services organizations (MSOs) that aggregate practices; and Medicare
Advantage (MA) insurers. In this arena, the combined activity of private
equity and venture capital firms, initial public offerings, special
purpose acquisition companies (SPACs), and insurance company purchases
of MA-focused firms has soared: more than $50 billion in valuation has
been created in the past 18 months, dwarfing the speculative bubble for physician practice management companies in the 1990s.
One indicator of the exuberance underlying this “Medicare Gold Rush”
is the amount per covered life implicit in a firm’s overall valuation.
Historically, per-life valuations in MA have ranged from $4,000 to $10,500. Exhibit
1 shows per-life valuations for a sample of recent transactions. The
average is $87,000 per beneficiary. Most of the firms acquired or
financed are PCPs or MSOs that typically produce no margins—just an
average take-home income of $240,000 per physician. The first six are
participants in the Centers for Medicare and Medicaid Services’ (CMS)
new Direct Contracting Model, which we shall discuss further in Part Two of this post.
If these valuations for PCP Practices and MSOs look hard to believe,
that is because they are. Annual Medicare Part A and B spending per
individual is roughly $12,000. PCPs typically receive only 5 percent of
that amount. By what logic would an investor pitch in at a rate equal to
almost eight times the total annual health care expenditure per capita
for PCPs with no margin? Investment at this level is smoke; what is the
fire?
In this two-part post, we will attempt to explain the perverse MA
business model that underlies this elevated level of investment, and we
will explore its connection to the Direct Contracting model now being
tested by CMS. The story is complex, but we think it is worth telling
because the stakes for beneficiaries, the public treasury, and our
health care system are very high. This business model is distorting
health care delivery, creating excessive costs for taxpayers and
Medicare beneficiaries, draining the Medicare Trust Fund, obstructing
the badly needed value transformation of American health care, and
diverting the money needed to fund other social services and goods.
Four main business realities drive the interest in Medicare-related
acquisitions. First is the expected doubling of Medicare spending from
$800 billion in 2019 to $1.6 trillion in 2028 as Baby Boomers age.
Second is the reality that MA harbors an arbitrage game in which CMS consistently overpays MA Plans with no demonstratable clinical benefit to patients.
Third is the heavily subsidized and distorted market dynamics that
result from these overpayments. Fourth is the Trump administration’s
creation of the Direct Contracting Model as a vehicle for privatizing
Medicare’s projected 2028 $1.6 trillion spend.
As exhibit 2 shows, the Medicare Payment Advisory Committee (MedPAC) has documented approximately $140 billion in MA overpayments
over the past 12 years. MedPAC further concludes that risk adjustment
overpayments are currently increasing. Kronick and Chua have estimated savings at $355 billion over the next eight years if just risk-score related overpayments were eliminated. (Exhibit 3)
MedPAC has documented MA plans’ ability to obtain overpayments by
cherry picking counties with favorable benchmarks and escalating quality
bonus payments through contract manipulation. These tactics add 8 percent in program costs in 2021, leading to MA payments 2 percent above fee-for-service (FFS) Medicare payments. MedPAC has made important recommendations to
Congress to address these issues. We will focus primarily on the
“risk-score gaming” that increases MA payments and the resulting
marketplace dynamics impacting health care delivery across America.
The shortcomings of CMS’s Hierarchical Condition Category (HCC) risk adjustment system have been well described since
its full implementation in 2006. Simply stated, MA plans can draw
enormous overpayments by submitting diagnosis codes that create more
HCCs per person. While the codes are, presumably, accurate, the dollar
coefficients used in MA payment logic are inflated because they were
modeled using markedly under-coded FFS data. “Risk-score gaming”
overpayments come from inaccurate pricing of HCCs. Congress and every
administration since 2006 have avoided fixing this inaccuracy, in part
because of plans’ enormous political clout.
Exhibit 4 illustrates how the MA bid model rewards increased coding.
(Part D costs are excluded). Total CMS Premium includes two pieces.
One is the Plan bid to provide A and B services including profit and
administration, multiplied by the risk score. The other is a rebate
Medicare pays to the plan, calculated on average as 65 percent of the
amount it bids below the risk adjustment benchmark; CMS retains the
other 35 percent. Both pieces increase as the risk score goes up. The A
and B Medical Expense in each column is unchanged since the population
is the same.
Column A shows the resulting financials for a 2021 average plan
described by MedPAC. Despite the 1.0 Risk Score, Medicare pays roughly 1
percent more than FFS, due to the benchmark and quality issues noted
above. Column B illustrates the theoretical results for a very highly
competitive market where the Plan uses most extra revenue to increase
rebates, not profits. CMS overpayments increase by $58 million
annually per 100,000 beneficiaries, with beneficiaries paying $12
million more in Part B Premiums.
The Demographic Estimate of Coding Intensity (DECI) estimates in
exhibit 3 include a 2021 MA coding intensity difference of approximately
0.13. Projected across the MA population of 26 million, each 0.1
increase in risk scores in our model results in an additional $15
billion in overpayments and $3.5 billion in additional MA plan profits
at current enrollment levels. CMS would pay $13 billion of the
overpayments and Medicare Part B beneficiaries would pay the other $2
billion in inflated Part B premiums. Risk-score gaming creates a major
transfer of wealth from taxpayers and Medicare beneficiaries to MA
plans, and it lies at the heart of the business model for most MA plans.
Supporters of MA point to the program’s growth as evidence that the
privatized model works. The reality is that MA grows because the
structural and risk-score gaming overpayments subsidize MA plans to
offer some improved benefits, lower Part D costs, an average $5,000
out-of-pocket cap, and underutilized supplemental benefits. Low-income
beneficiaries remain underinsured and subject to significant copayments
and deductibles. As plans code more, risk scores go up, CMS provides
more subsidies, benefits and premiums get better, and buyers choose the
improved plans that cost taxpayers more. This is one distorted dynamic
in the MA marketplace: the costlier the plan is to the payer (CMS), the
easier it is to sell it to the customer, and the greater the profit.
This subsidized marketplace is the major reason that over the past 15
years MA plans have been by far the most popular form of health
insurance company start-ups. Firms that initially targeted other
segments, such as the exchanges (viz. Bright and Oscar) or Medicaid
(viz. Centene and Molina), have all found their way to MA as their
preferred business opportunity. Most recently new MA startups have been
prominent, including Clover Health, Devoted Health, and Alignment
Health.
One potential restraint on risk-score gaming is that as risk scores
go up plans begin approaching the 85 percent Minimum Loss Ratio
requirement under the Affordable Care Act. Plans have found a solution
for that, which we label the “MA Money Machine,” the next major
component of the distorted MA Marketplace.
Given the dollar magnitude, risk-score gaming becomes a central part
of every MA plan’s strategy. The starting point is to get as many
diagnosis codes as possible. An entire industry been created to do just
that, leading to billion dollar valuations for firms, like Signify Health, that provide analytical tools to enable coding efforts or make home visits for plans and providers. Most Plans now use Artificial Intelligence (AI) HCC Tools to identify coding opportunities.
In a recent investor call, United Health remarked on the importance
of home visits, noting that, as the COVID pandemic waned, their HouseCalls nurses were back in the home collecting diagnoses that should lead to improved profits in their MA plans. MedPAC and the HHS Inspector General
have identified these home visits as key drivers of overpayments. But
MA plans know that the best sources of more codes are providers. They
have developed three well-established schemes to get more codes directly
from providers, which we call “Deal 1,” “Deal 2,” and Deal 3.”
Many MA insurers distort the value-based care (VBC) contract model to
make it a vehicle to drive more coding. Column A in exhibit 5
illustrates the results of a legitimate value-based contracting approach
similar to that used in Medicare ACOs. A medical expense target is set
based on historical experience. If actual costs are less than historical
costs, the provider keeps a portion of savings, contingent on
quality-of-care metrics. ACOs operating under VBC models have saved CMS
$1.9 billion in 2020 and more than $4 billion over the past eight years.
Column B, C, and D in Exhibit 5 show how MA plans distort VBC
contracts to increase CMS costs. These MA “non-value-based care”
contracts sets the target based on a percentage of the premium the plan
receives for a provider’s panel of patients. The provider has good
reason to focus on increasing the risk score. In column B, the
risk-score increase of 0.1 drives higher premium, the target goes up,
and the resulting contrived “medical cost savings” of $56 PMPM, without
any actual change in costs or care, “drop through” to become provider
profits. Insurer profits increase as well, since insurers collect 15
percent of a larger premium. CMS ends up paying $120 million more and
beneficiaries pay for $14 million in Part B premiums.
Columns C and D show how each 0.1 RAF increase creates $87 PMPM more
in Part A and B revenue, with $71 going to the provider and $15 to the
plan, which can use it as profit or to improve benefits. Rebates go up
$14 PMPM as well, due to the benchmark increase. Column D also shows
that, any decrease in medical costs just becomes additional profit. CMS
shares in none of the savings, and costs still go up $370 M in total per
100,000 beneficiaries.
These MA Percentage of Premium contracts create a continuous “Money
Machine,” that allows the provider firm and plan to harvest a financial
windfall just by finding more codes. As a result, providers look hard
for diagnoses using various AI-enabled platforms. A current popular
tactic, for example, is to screen beneficiaries for peripheral vascular
disease (HCC 108), which delivers an extra $2,800 per year per patient,
by ordering carotid ultrasound studies, even though the US Preventive Services Task Force recommends against such screening for the general population.
Key points comparing Deal 1 provider payment tactics (in exhibit 4)
to Deal 2 Percentage of Premium contracts (in exhibit 5) include the
following:
Recognizing that the largest share of the MA Money Machine profits
goes to providers, some insurers have decided to own the providers
outright. This tactic ensures optimal use of their sophisticated AI
coding by employed staff. The parent collects both the insurance profits
and the Money Machine profits. MedPAC raised the issue of
whether plans with Deal 3 arrangements may be inaccurately reporting
related provider incentive payments in ways that overstate medical
expenses. The final row in exhibit 5 demonstrates that if such claims,
which could ultimately result in profits for the plan, were excluded,
the actual MLR could be in the low 70s.
United Healthcare, the most profitable of the large national MA
Plans, seems to have used Deal 3 for seven years following the purchase,
through its OptumHealth subsidiary, of Monarch and Applecare PCP
Networks in 2014. With over 50,000 physicians owned or in affiliated
independent practice associations (IPAs), United may today be the
largest employer of physicians in America, and it plans to add 10,000
more physicians in 2021. The Money Machine model was described as a core
driver of profitability in a recent United Healthcare C-Suite fireside chat: “OptumHealth
. . . revenue per consumer served increased 29 percent for 2020 driven
by expansion . . . in value-based care arrangements and increasing
acuity of the care services provided.”
Over the past 15 years, the MA Money Machine has been growing as an
essential business model component for many prominent physician groups,
IPAs, PCP/MSOs and even some integrated systems. United Healthcare and
Humana today control 12 million MA lives, almost 50 percent of the
national total. Both are rapidly expanding their use of the MA Money
Machine. Humana reports
that two-thirds, or 2.4 million, of its individual beneficiaries are in
these models. They have relied on Deal 2 historically, but recently
announced the creation of Centerwell as their new Money Machine Deal 3 vehicle. United Healthcare,
with a particular focus on acquiring non-profit physician groups like
Reliant and Atrius Health, has said that Optum now has 2 million of its
MA lives in “Value-Based Contracts” and is rapidly increasing that
number. Thus at least 4.4 million people, or 17 percent of all MA
members, and almost $60 billion, are involved in Deal 2 or Deal 3 Money
Machine contracts today, with rapid growth ahead.
Exhibit 6 (modeling a hypothetical physician’s panel of 400 MA
patients) illustrates how these contracts turn break-even primary care
practices into very profitable “assets” that have attracted the
attention of private investors
Over the past eight years a number of new start-up venture capital
backed PCP firms have been created using the Money Machine as their core
business model. They share many common features:
Recent PCP and MSO partnerships with Humana, for example, include
Iora, Oak Street, Agilon, Cano Health, and Landmark. VillageMD has
partnered with Aetna/Anthem, and ChenMed has partnered with Independence
Blue Cross. As shown in Exhibit 1, financing for these firms has been
extraordinary. Another set of PCPs and MSOs are following closely
behind, including Miami Beach Family Practice and several other Direct
Contracting Entities (DCEs). The primary business model for all is the
MA Money Machine.
Why the rush of investors into MA primary care space? Because it is
an MA Money Machine. While all can agree that we should improve
compensation for primary care, these extraordinary profits are more
likely to be captured by the for-profit parent entities rather than
passed through to physicians delivering care.
The toll of the MA coding game, though high, has heretofore been confined to the MA portion of Medicare, that is 42 percent of all CMS beneficiaries. Under the Trump Administration, that changed. The Trump Administration avowed its intention to de-risk CMS by
moving the 58 percent of Medicare beneficiaries who chose traditional
coverage into MA-like full risk capitated arrangements. This full
privatization of Medicare coverage would require new entities to act as
financial intermediaries between CMS and non-MA beneficiaries. CMS
officials decided that the same firms that benefited from risk-score
gaming overpayments in MA—insurers and MA-focused Primary Care Firms
(PCF’s)—should be given the opportunity to manage the $350 billion in
Medicare spending for the majority of beneficiaries not in Medicare
Advantage. They needed a new program to accomplish this overarching
goal. The Direct Contracting Model was announced in April of 2019 as the vehicle.
In Part one
of this two-part post, we explored the reasons for surging growth and
profits in the Medicare Advantage (MA) program and the dynamics, largely
related to risk-coding games, that make MA a costly form of transfer of
public and beneficiary dollars into private hands. In Part two below,
we explore the approach fostered originally by the Trump Administration
to implant those same dynamics into the traditional Medicare side of the
Centers for Medicare and Medicaid Services (CMS) ledger in the form of
the misnamed “Direct Contracting”
model. We then offer policy recommendations to restore balance and
efficiency to MA and further alternative payment models for traditional
Medicare.
Direct Contracting: The Path To Medicare Privatization
Given an Orwellian title, Direct Contracting, launched by Center for
Medicare and Medicaid Innovation (CMMI), was anything but direct.
“Indirect Contracting” would have been a far more accurate name, since
the cornerstone of the program was CMS’s opening the door to
non-provider-controlled “Direct Contracting Entities (DCEs)” to become
the fiscal intermediaries between patients and providers.
Originally CMS proposed three Direct Contracting Models:
Professional, Global, and Geographic (GEO). The GEO Direct Contracting
model was the most extreme, proposing to auto-assign every
fee-for-service (FFS) beneficiary in a number of large geographic
regions into a fully capitated MA-like “Geo DCE.” Beneficiaries were not given the right to opt out.
GEO DCEs were expected to assume total responsibility for all FFS
beneficiaries in their region. This responsibility included
beneficiaries in any accountable care organizations (ACOs) or other
Alternative Payment Models (APMs), except those assigned to other types
of DCEs. With full capitation, as with MA, GEO DCEs would be responsible
for most claims payments as well as medical management. This was,
therefore, straightforward privatization of traditional Medicare,
differing from MA only in that GEO Direct Contracting beneficiaries
retained the right to see any Medicare provider under standard Medicare
coverage.
The Global and Professional Direct Contracting models, combined as
GPDC, offered alongside GEO DC, look like an extension of the ACO
approach. Like ACOs, DCEs create a defined provider network.
Beneficiaries are either auto-aligned via claims history or voluntarily
enrolled. Members maintain access to all Medicare providers under
standard benefits. Benchmarks or capitation rates will include a defined
discount to CMS. But GPDC DCEs differ in important ways from ACOs. GPDC
DCEs can select varying degrees of capitation up to and including full
capitation. Full capitation would require them to pay DCE preferred
provider claims. Although beneficiaries do have the right to opt out of
CMS data sharing, they remain aligned with the DCE for purposes of
capitation payments and ultimate financial reconciliation.
The ACO model was built as a direct contracting relationship between
CMS and providers. ACOs were required to have 75 percent provider
governance control. In Direct Contracting, CMS established a stated aim
of bringing “organizations that currently operate exclusively in
Medicare Advantage” into traditional Medicare, targeting the very MA
insurers and investor-controlled provider firms that are driving the MA
overpayments explored in Part One of this post. To help accomplish this, CMS decreased the provider governance requirement to just 25 percent.
CMS created other policies that were favorable for “New Entrants” in
the Direct Contracting program. Liberalized marketing and sales
opportunities, along with the ability to offer additional benefits, play
to the sales strengths of MA firms. The New Entrant benchmark
methodology was based more on an MA rate-book approach than the ACO
historical cost-blended model that nets out prior savings. New
voluntarily enrolled beneficiaries, expected to be the majority of
beneficiaries for New Entrants, were excluded from the risk coding
constraints for several years.
Another publicly stated Direct Contracting aim was to accelerate
progress of Medicare coverage away from FFS payment toward value-based
contracting (VBC) “alternative payment models” (APMs). The illogical
hypothesis was that MA firms, so expert at driving costs up, could do a
better job controlling costs than existing ACOs. While savings from ACOs
have been modest (MedPAC reports 1 percent to 2 percent), accurate evaluation has been difficult,
and the level of ACO success has been controversial, momentum has built
every year in this voluntary program. CMS recently announced that ACOs
in 2020 decreased costs by over $4 billion and saved CMS almost $2
billion. MedPAC projects that, at a minimum, MA will cost CMS $8 billion
more than FFS in 2020.
Notwithstanding ACO success, the prior CMS administration also
introduced their “Pathways to Success” ACO policy, which created more
stringent requirements for provider-led ACOs and triggered a 15 percent
decrease in the number of ACOs. The net result is that experienced MA
firms are attempting to pull ACOs apart by soliciting ACO physicians to
join their DCE networks.
Ironically, this is all reminiscent of the original, well-intended
strategy for privatized Medicare: to bring health maintenance
organization (HMO) savings and care improvements to Medicare. But the
Direct Contracting model seems to have ignored the lessons learned from
the experience of MA and its predecessors at a cost to CMS and taxpayers
of hundreds of billions of dollars. As MedPAC confirmed recently, over 35 years, privatized Medicare has always cost more than traditional Medicare, not less.
Current Status Of Direct Contracting
The Trump Administration’s CMS attempted to launch GEO Direct
Contracting in its waning days, but the Biden administration paused it.
In January 2021, CMS announced the selection of the first tranche of 53
GPDCEs spread across 38 states, which, combined, hold 30 million of the
36 million FFS beneficiaries. A second tranche of DCEs, number unknown,
were approved by CMS but elected to defer their start dates to January
1, 2022. CMS paused further entry into this 2022 tranche, with the
exception of Next Generation ACOs, but is believed to be considering an
additional solicitation for another set of DCEs.
The January tranche did include some traditional, provider sponsored
DCEs. However, a majority of the DCEs (28) are investor-, not provider-,
controlled, most with roots in MA. Six of these, owned by four
different MA insurers, are approved to operate in 19 states, with
potential access to over 20 million traditional Medicare beneficiaries,
over 60 percent of the national total. (See exhibit 1)
Exhibit 1: Examples Of MA-focused and investor-controlled DCE firms.
|
MA Insurer-Sponsored GP DCEs
|
|
MA PCP/MSOs
|
|
MA Insurers
|
# of States
|
Status
|
|
MA PCP/MSOs
|
# of States
|
Status
|
|
Aetna
|
NA
|
Deferred
|
|
Agilon
|
3
|
Active
|
|
Alignment Health
|
2
|
Active
|
|
IORA
|
10
|
Active
|
|
Anthem
|
5
|
Active
|
|
Landmark
|
NA
|
Deferred
|
|
Clover Health
|
10
|
Active
|
|
OakStreet
|
11
|
Active
|
|
Humana
|
8
|
Active
|
|
BestValue Health
|
1
|
Active
|
Source: Authors’ analysis. MA = Medicare Advantage; DCE = direct
contracting entity; PCP = primary care practice; MSO = management
services organization.
While CMMI has not identified firms that have deferred until 2022,
Cigna is currently recruiting DCE providers. Aetna’s Activehealth
subsidiary was originally approved, and United Healthcare is rumored
to be acquiring Landmark, which had also been announced as a DCE. In
short, the largest national insurers are positioning to become DCEs.
Each of these national MA companies has a broad national network. The
possibility of their using these networks to enroll millions of
Traditional Medicare beneficiaries is very real. Currently, CMS has
stated publicly no limits on the growth of DCE networks and geographies.
Direct Contracting Implications For Beneficiaries
DCEs have the option of selecting varying degrees of capitation from
CMS, up to and including full capitation for DCE participating provider
services. It is likely that insurer DCEs will choose this approach given
their history and operating capabilities. Insurer DCEs then will be
responsible for paying claims, and they will bring their MA-based
medical, claims payment and possibly other managed care administrative
practices into Direct Contracting. This environment will be even more
confusing than MA, with three different parties processing claims: the
DCE, CMS, and the Medicare supplemental insurance payer. In short,
millions of traditional Medicare beneficiaries, who made a specific
choice not to enroll in MA, will find themselves in an MA-like managed
care environment.
Direct Contracting And The Medicare Money Machine
There was a catch in CMS’s strategy to enlist MA firms in Direct
Contracting. Would the firms accept the risk without the ability to
increase risk scores? CMS seems to have been trying to finesse this
issue for the past 18 months. Direct Contracting does have significant
constraints on risk score increases. For individuals aligned via claims,
there is a 3 percent symmetrical cap on risk adjustment factor (RAF)
score increases year to year. However, there is no cap on the base year,
so DCEs can increase their score over time. A program-wide Coding
Intensity Factor (CIF) does retrospectively adjust the capped risk
adjustment scores for DCEs to correct for aggressive coding at the
overall program level. The base year for the CIF is fixed. Thus, while
the CIF will decrease code creep for CMS, it will allow the most
aggressive coders to benefit at the expense of those who are less
aggressive. This reality will lead to major retroactive adjustments to
risk scores, financial reconciliation changes, and likely program
instability. Alternatively, it is possible that CMS will decide to not
enforce the CIF, thereby rewarding gaming.
Originally, voluntarily enrolled individuals who are not aligned with
claims, expected to be the majority for new DCEs, would have been
excluded from these controls for several years. In response to input
from concerned policy and industry experts, CMS has now decreased that
exclusion to one year. However, how the voluntarily enrolled individuals
will be treated under the cap and the CIF adjustment remains unclear.
DCEs over the past year have already begun evading these constraints
by simply increasing risk scores for people before they enroll them.
This is exactly what MA firms do with their 64-year-old commercial
members prior to enrolling them in MA. As we have heard said by industry
insiders, “There is no bad time to work on risk scores.” Overall, it
appears that, under current DCE rules, aggressive risk coders might
still garner 20-40 percent of MA Money Machine profits. That at least
seems to be the story DCE representatives are telling PCPs and
investors. The other commonly heard story line is that, even if Direct
Contracting does not prove profitable, it provides a perfect pathway for
wholesale movement of beneficiaries into MA at a much lower cost of
sales.
MA Plans are required to use at least 85 percent of premium revenues to pay for claims. As we showed in Part one,
the Money Machine eliminates that constraint in MA. Direct Contracting
does not have an explicit MLR requirement. The only limit on profits is a
risk corridor methodology that provides for graduated CMS sharing in
savings or losses that are greater than 25 percent of the Benchmark, a
level DCEs are unlikely to attain without risk score gaming. The net
result is that Direct Contracting has an implicit but irrelevant MLR
requirement of approximately 60 percent, leaving DCEs well positioned to
keep virtually all savings as profits.
The Medicare Gold Rush
MA-focused firms, insurers, and investor-controlled primary care
practices (PCPs)/management services organizations (MSOs), can now add
Direct Contracting profits to their financial prospectus, and they have.
The first six firms in Exhibit 1 in Part One
of this post are all investor-controlled DCEs that were recently
financed at extraordinary levels. All have cited DCE participation in
their investor road shows. Clover Health attributed about 70 percent of their $3.7 billion valuation to Direct Contracting.
These favorable MA and Direct Contracting business model dynamics are
enhanced by the strong ambient tailwinds in the Medicare space. One special purpose acquisition company (SPAC) pitch deck
highlights the reality that growth in the MA and Direct Contracting
market segments, driven by baby boomer aging and increasing per capita
costs, will exceed $600 billion in annual Medicare premiums over the
next 5 years. This is probably the largest short-term revenue growth
opportunity of any current US industry sector. With such massive
financial opportunity available, it is no surprise that speculative
fever runs high on Wall Street. The evident lack of political will to
address the distorted, subsidized MA marketplace and the growing power
of the artificial intelligence- (AI) enabled MA Money Machine add fuel
to the speculative fire. The result is IPO, SPAC, and private equity
investments that have pushed billions of private investment dollars into
acquiring MA-focused firms at prices-per-patient-life that beggar
imagination. From early April, 2010 through the end of August, 2021, the
average stock price
for five MA-focused insurers—United Health, Humana, Cigna, Anthem, and
CVS/Aetna—increased 825 percent (compared to 280 percent for the entire
S&P 500), and the market capitalization
for the same five entities increased by 497 percent (as opposed to 245
percent for the S&P 500 as a whole). The market thus seems to affirm
MA as the must place to be.
The Risks Of Insurer-Controlled And Investor-Controlled DCEs
Risk-score gaming in Medicare Advantage, now encroaching into Direct
Contracting, is creating an accelerating immediate threat to our health
care system. Traditional health care providers typically have a
longstanding commitment to their patients and communities. The large
national MA plans have shown a distinctive ability to destroy value by
increasing costs, not adding value, with little local community
commitment. As DCEs they will likely find ways to profit through coding
or alternatively attempt to move beneficiaries into their MA plans.
Either way they will increase Medicare costs at a time when the Trust
Fund is in severe jeopardy.
New start-up MA-focused plans are likely short-term players and
unlikely in the long run to be able to match the economies of scale of
the large national insurers. They will use risk-score gaming to increase
rebates, attract new customers, burn through their start-up money, and
ultimately be acquired by large insurers.
Investor backed PCP/MSO firms are playing a short-term game. Several
offer innovative variations on the intensive PCP clinical-care model
that probably deliver better, more convenient care and improved
utilization. But all are dependent on the Money Machine to cover their
added service costs and their owners’ profits. None offers a sustainable
competitive advantage. They likely face either financial failure,
rollup, or acquisition by larger firms. This happened in 1990s with Physician Practice Management Companies—the same hype, investment froth, story lines, and then roll-up followed by bankruptcy.
ACOs and DCEs both acquire aligned beneficiaries through their
participating PCPs. PCPs cannot be in both for traditional Medicare
patients. DCEs are now actively soliciting PCPs to drop their ACO
affiliations and join them. Across the country, well-funded DCEs are
offering PCPs and ACOs multi-million dollar guarantees. Some are holding
out the allure of MA Money Machine-like coding opportunities. Thus, in
yet another ironic twist, CMS is enabling the agents of MA cost
increases to undo the ACO initiative, which has decreased costs. The
Direct Contracting program poses a direct threat to the ACO experiment
now underway in the nation.
A Policy Agenda For Reform
For 35 years, privatized Medicare plans have failed to achieve their
primary objective of controlling costs while preserving the quality of
care. Aside from some notable exceptions with group model and staff
model HMOs, capitation of privatized Medicare plans has simply allowed
insurance companies to collect from CMS a toll of 15 percent or more on
the total cost of care, to deny or downgrade provider claims, and then
to pass through the dollars they finally pay using Medicare’s FFS
payment systems and prices. Their ability to game the Medicare “star
quality rating” system rivals Lake Wobegon: most plans are now rated above average.
It is far easier to game the codes than to improve the care or change
health care delivery. Based on this track record, insurers should be
eliminated from the Direct Contracting initiative.
Risk-score gaming is today necessary for business success in MA. Low
risk scores lead to higher prices and lower benefits, a recipe for
health plan failure. It is extremely costly to continue to ignore the
corrosive, insidious effects of the defective MA HCC risk adjustment
system. It undercuts the many dedicated hardworking plan and provider
teams caring for MA patients. It is fundamentally redefining our primary
care networks, turning PCP practices into insurer-owned or
investor-owned coding shops, and impacting large integrated systems the
same way. If this trend is left unchecked, CMS will witness even more
rapid MA growth and, with it, a more rapid approach to Trust Fund
insolvency.
Direct contracting should be indeed “direct,” that is, an arrangement
with provider-governed organizations, not financial intermediaries. If
primary care needs invested capital, that capital should be tied to the
expectation that providers will control how it is used. If CMMI wants to
test investor-backed start-up firms, it should do it only at the
limited scale needed for the test and only through direct providers of
care, not through reconstituted or renamed MA Plans. If the scale of
Direct Contracting outpaces the evidence, the Direct Contracting model
will instead be what the Trump Administration seemed to intend: an
effort, driven by ideological doctrine to turn over to private hands
Medicare, the nation’s most popular universal public program.
Our health care system has responded to the COVID pandemic with
heroic work by nurses, physicians, hospital employees, and leaders. We
will continue to need all of those services in the future. But we also
need to redesign our care system. A far better system is not hard to
imagine. It would be based in homes and community settings, using
hospitals only as a last resort. It would invest heavily both in primary
prevention—addressing the true social drivers of illness, injury, and
disability—and secondary prevention, helping people with chronic illness
anticipate and intercept deterioration. It would focus sharply on what
matters to patients. It would assure continuity of care for patients
across time and among care settings. The Triple Aim—better care for
individuals, better health for populations, and lower per capita
cost—can be, and should be, its North Star. That can only be achieved
through major changes and improvements in the actual delivery of care,
itself, not through financial gaming.
Change Medicare Advantage
The MA program is fundamentally flawed. Most sensible business-minded
large employers in America do not give an insurer all their health care
money upfront. They know that would cost them more. Instead, they hire
administrators, not financial optimization firms. Although politically
difficult, the following changes in policy would better position the
Medicare Advantage program to meet its original, valuable objectives: to
foster innovation in care and coverage, to improve the quality of care,
and to reduce per capita costs without harm to patients.
MA overpayments are the consequences of policy decisions, and those
decisions could be changed. Congress should instruct CMS to announce an
intention to replace the current Hierarchical Condition Category (HCC)
RAF scoring system in the next three years. It should sponsor a major
developmental effort to design a replacement risk adjustment methodology
that does not rely on provider reporting and that is resistant to
gaming. The model would need to address plan-specific and
contract-specific risk scores. Potential approaches could include the DECI
approach, expansion of the Beneficiary Survey, or potentially the use
of small-area social determinants of health models such as the Area Deprivation Index (ADI) and the Child Opportunity Index (COI).
Congress should order CMS to follow the MedPAC recommendations for fixing the structural overpayments related to benchmarks and the Quality Bonus Program.
In the absence of eliminating the HCC system, CMS should move
immediately toward a more realistic Coding Intensity Factor (CIF),
increasing it by at least the 1 percent per year differential between MA
and FFS coding creep. This would freeze MA RAF overpayments at the
current level, eliminate the threat of benefit cuts from MA Plans, and
provide significant out year savings. CMS should also constrain the MA
Money Machine contracting approaches that incent and reward coding and
ensure that such incentive payments to owned physician groups are
excluded from MLR calculations.
Importantly, CMS should assure a level playing field for comparing
and transparently reporting results in beneficiary care, disease
prevention, and total per capita health care costs between the ACO
programs and Medicare Advantage.
Replace Or Redesign The Direct Contracting Model Experiment
The best way to mitigate the undesirable effects of Direct
Contracting would be to stop the program. Ideally, CMS should announce
that the Direct Contracting Model will be replaced in 2023 by a new
Medicare Shared Savings Program (MSSP) model that uses CMMI authority to
create more advanced tracks for providers, including full capitation.
Features should include:
- Primary Care Capitation
- Use of the taxpayer identification number-national provider identifier combination
- Upfront discount and 100 percent of savings option
- Full capitation
- A way to let new entrants into the program
- Easier voluntary enrollment per the Direct Contracting model
- Enhanced benefits for beneficiaries; and extended care delivery waivers
- More upfront investment for providers without access to capital.
The HHS Secretary should pursue a path to mandating ACO participation
by hospitals, physicians and other providers over five years using CMMI
authority based on evidence of success from Pioneer, MSSP, and other
ACO models. The MSSP advanced tracks should include only entities that
follow the 75 precent provider governance rule, and they should provide
guardrails for MA-focused investor-backed entities.
If CMS cannot simply stop the Direct Contracting experiment, at a
minimum CMS should make clear that Direct Contracting is a small
experiment, not a path to replacement of ACOs. (See Appendix 1) The
number of beneficiaries should be limited to 1.3 million, (about the
size of the Next Gen ACO test, or about 10 percent of the MSSP) and CMS
should limit the size of any specific DCE. CMS should also establish
disincentives and rules for DCEs to prohibit movement of beneficiaries
to MA, such as fixing the risk score of beneficiaries that move from
Direct Contracting to MA at 1.0 in perpetuity.
As with Medicare Advantage, CMS should take specific steps to
eliminate risk-score gaming opportunities for DCEs, and to substitute an
alternative risk adjustment methodology as discussed above. CMS should
assure public transparency for the progress and results of the Direct
Contracting model, including access to primary data to facilitate
independent evaluations. As detailed in Appendix 1, CMS should also
create guardrails for remaining investor controlled DCEs.
In any event, CMS should eliminate all insurers from the Direct
Contracting model. MA insurers should focus their attention on
delivering the Triple Aim (not higher costs) in MA, not to invading the
traditional Medicare space. CMS and CMMI should proceed cautiously in
any new Direct Contracting model test to avoid excessive and unwise
distortions of investment and impediments to the (simultaneous) ongoing
development, improvement, and expansion of ACO models, built on the
decade of ACO experience so far. CMS should reinstate the 75 percent
provider governance rule for DCEs. Direct Contracting should be with
providers, not investors. It would take a major redesign, addressing
many of the issues identified above, to make Direct Contracting the
future path for provider-based value transformation.
Advance And Build Upon The Accountable Care Organization Experience
Health care costs as a percent of gross domestic product have
flattened since the ACA. While spillover effects are hard to measure
and many components of the ACA affected Medicare spending, Medicare per
capita spending growth since ACOs were introduced has been the lowest in decades,
notwithstanding the higher trend in MA spending per capita. In their
first eight years, ACOs have brought tens of thousands of providers and
virtually all segments of the health care industry toward population
heath management. CMS data shows that ACOs, which care for over 12
million beneficiaries in 2021, have now generated gross savings of
nearly $14 billion and net savings to CMS of over $4 billion.
Some observers have
questioned those numbers and recommended significant changes to
encourage more ACO engagement and investments by providers. As CMS Administrator Chiquita Brooks-LaSure and coauthors recently wrote on Health Affairs
Blog, “While voluntary models can demonstrate a proof of concept, they
limit the potential savings and full ability to test an intervention . .
. “ We believe the MSSP ACO program, further adapted, is poised to
expand rapidly toward global payments and population-based payments,
with many participants now ready to accept full risk, exiting at last
from the shackles of FFS. CMS should, as fast as is feasible, develop
more advanced MSSP ACO models using CMMI authority to include global
payment models, and make the MSSP model more inclusive of physician
practices at the threshold of participation.
Providers have vacillated for 10 years between FFS and an
accountable, value-based care business model. While results from
accountable care have not yet been optimal, enough ACO success is in
hand to support the belief that providers would be successful if the
models were further developed and made mandatory. CMS should provide a
multi-year strategy to make FFS less attractive and the ACO opportunity
more attractive, leading ultimately to a mandatory ACO program. That
commitment would also discourage ACOs from trying to succeed simply by
cherry picking efficient providers, rather than trying to improve the
mainstream.
CMS should ensure that advancing other payment models, especially
Direct Contracting, does not block or impede further development of
ACOs, drawing on lessons learned so far.
Support A Constructive Role For Private Investment:
Change requires capital. Creating the health care delivery of the
future requires investment, public and private, to help incumbent
providers develop new skills and systems, and to help create new
entrants with care designs usefully disruptive to legacy models. The
non-profit health care sector (especially its primary care components)
has had difficulty finding that capital. Investors backed such
investment in ACO-enabling firms. These firms and their investors are
now being lured into the MA world by easy money. It is essential to
correct the HCC Risk Score system to appropriately align capital. We owe
entrepreneurs a fair opportunity for return commensurate with risk. We
do not owe them fish in a barrel, as MA offers.
As CMS becomes even more effective as a sponsor for care innovation,
it will need the savvy and skills to distinguish between helpful private
investment and exploitative private investment. Fixing the costly
defects in MA and forbidding the importation of those same defects into
traditional Medicare, while authentically testing new models of payment,
is a good place to start.
Appendix 1: Direct Contracting Model Guardrails
Guardrails For The Global Professional Direct Contracting Model
- Direct Contracting Entities:
- Limit additional new entrants for 2022 to those who serve vulnerable
communities with demonstrable health inequities and can demonstrate
ability to improve care for beneficiaries.
- No further opening for new DCEs if targeted numbers cited below are met in 2021.
- Eliminate the insurer DCEs from the GPDC experiment.
- Reestablish the 75 percent provider-controlled requirement, as instituted in the original ACO regulations, for all DCEs.
- Overall Size of the Model Test:
- Limit the total size of the Direct Contracting model to
approximately 1.3 million, the same as Next Generation ACO program, or
to 10 percent of the MSSP
- Only exceptions to size should be for DCEs serving vulnerable populations with health/health care inequities.
- Primary consideration of size should be the number needed to get an overall evaluation of the model.
- Limit the geography and the number of providers for each DCE to that submitted in original application
- Confirm that GPDC is a limited test of a new model. It is not the major pathway for advanced ACOs
- No DCE should be larger than 100,000 = $1 B in potential capitation
- Limit auto-alignment of beneficiaries to 75,000 per DCE
- Limit Actual Capitation Payments to individual DCEs to $500 M.
- Risk-Score Gaming:
- Eliminate all potential for DCEs to engage in risk-score gaming by
using risk scores from 2 years prior for voluntary enrolled
beneficiaries and including voluntarily aligned beneficiaries in the
risk-score caps and Coding Intensity Factor adjustments from the time
they are aligned. (No one-year delay for voluntary enrolled
beneficiaries.)
- Adjust the risk adjustment model to eliminate the ability of DCEs to
gradually increase their reference year risk score for the 3 percent
cap adjustment
- Develop DCE-specific CIF methodology that ensures overall program
neutrality while adjusting for each DCE’s contribution to overall
program coding increase.
- CMMI should be explicit in saying it will hold the line on risk
adjusting e.g. - it will not hold DCEs harmless, as has been done in
other circumstances, when the ultimate determination of risk scores is
completed.
- CMMI should be explicit that it expects to move to an alternative
risk adjustment methodology in the next three years that does not
provide any coding gaming opportunity.
- Transparency:
- Publicly confirm which DCEs are already approved for the 2022 cohort.
- Confirm current populations for DCE and continuously update.
- Commit to providing public access to primary data to allow broad-based understanding of results and independent evaluations.
- Capitation:
- Require DCEs to pass all PCP capitation payments down to the PCP group level.
6. MA Conversion
-
- Prohibit any direct MA marketing to DC-aligned beneficiaries,
whether targeted or market-wide activity, with elimination from the
program as a penalty for violations.
- Fix the risk score of any DCE beneficiary converted to an MA plan at 1.0 in perpetuity.
- Create conversion monitoring system to report and review MA conversion rates by DCE.
- Create an explicit Capitated Care Monitoring System to monitor
patient access to and use of high-cost services including biologics,
cancer care, etc.
8. Financial Benchmarks and Reconciliation:
-
- Create common methodology for standard and new entrants.
- Revise Global risk corridors to provide 50 percent sharing of
savings and losses at 15 percent of benchmark and a minimum MLR of 80
percent.
Guardrails For Investor Direct Contracting Entities
- Limit the size of Investor DCEs:
- Limit the total beneficiaries assigned to all investor DCEs to
250,000 now and 250,000 more for 2022 class for a total of 500,000.
- Limit assignment of beneficiaries to 50,000 per DCE.
- Limit Total Capitation Payments to individual investor DCEs to $500 million.
- Limit the growth of PCP network to only owned sites with employed physicians in existing region.
- Create Risk-Based Capital Reserve requirements for investor DCEs
that accept more than 50 percent of the total medical cost in capitation
payments.
3. Require CMS Approval of DCE Acquisitions
-
- No automatic assignment of DCE contracts. CMS must review and approve all.
- Prohibit acquisition by or assignment of DCE contract to any insurance company or subsidiary.
- Limit the ultimate size of any DCE resulting from acquisition to 75,000 beneficiaries.
- Include review of history of prior interactions with CMS or other
regulators or history of problematic marketplace behavior by firm or
executives.
Authors’ Note
Dr. Gilfillan was the CEO of Trinity Health System from 2013 until
2019. He is a Trustee for United States Pharmacopeia; a Director for
the Health Care Transformation Task Force; a member of Advisory
Committees for the Institute for Exceptional Care and several Robert
Wood Johnson Foundation programs addressing health equity and SDOH (all
uncompensated). Dr. Gilfillan also recently consulted for an integrated
health system (compensated). Dr. Gilfillan was the Director of CMMI
during the roll-out of several ACO Models and was involved in the
development of CMS ACO regulations. He has also been a leader and
member of teams that managed multiple ACOs and Medicare Advantage plans.
Dr. Berwick served as Administrator of the Centers for Medicare and
Medicaid Services from July, 2010, to December, 2011, during which he
oversaw the issuing of the initial CMS regulations for Accountable Care
Organizations, as well as numerous other regulations devolving from the
Affordable Care Act. He serves on the boards of LumiraDx (stock option
compensation); Virta Health (stock option compensation); NRC Health
(stipend and stock option compensation); Institute for Exceptional Care
(uncompensated); CareVisor (stipend) Partners in Health (uncompensated);
Results for Development (uncompensated). He also serves on Advisory
Boards for the National Institute for Health Care Management Foundation,
Datavant, and the Institute for Accountable Care, and on the American
Medical Association Journal Oversight Committee Dr. Berwick occupies
multiple committee positions with the National Academies of Sciences,
Engineering, and Medicine.
https://www.healthaffairs.org/do/10.1377/forefront.20210928.795755/full/
Court Battle Over a Ventilator Takes a Patient From Minnesota to Texas
By Maria Kramer - NYT - January 21, 2022
Scott Quiner, an operations manager at a transportation company in Minnesota, became sick with Covid-19 in October.
Mr.
Quiner, 55, who was unvaccinated, was hospitalized the next month, and
his case became so severe that he had to be placed on a ventilator,
according to court records. For weeks, he remained on the ventilator at
Mercy Hospital in Coon Rapids, Minn., a city of 62,000 people about 16
miles north of Minneapolis.
Then, on Jan. 11, hospital officials
told Mr. Quiner’s wife, Anne, that they would be removing him from the
ventilator in two days, over her objections.
What followed was a
legal case that raised questions over who has the right to make
wrenching life-or-death decisions when patients cannot speak for
themselves. It also underscored the tensions between people who refuse
the coronavirus vaccine and the hospitals that have been filled with
patients sick with the virus, a majority of them unvaccinated.
In
court papers, Mercy Hospital did not provide specific reasons for why
it moved to take Mr. Quiner off the ventilator. Allina Health, which
oversees the hospital, declined to comment on Mr. Quiner’s case, citing
patient privacy. Ms. Quiner did not respond to messages seeking comment.
On
Jan. 12, Ms. Quiner pleaded for a lawyer’s help on the “Stew Peters
Show,” a podcast whose host has falsely called coronavirus vaccines
“poisonous shots” and given a platform to pandemic conspiracy theories.
She
said that aside from her husband’s lungs, his organs were functioning
and “there was nothing wrong with his brain.” Only a couple of days
earlier, she said, her husband had opened his eyes “and was more alert.”
“I’m thinking, ‘Why are you killing him?’” said Ms. Quiner, whose husband had made her his health care agent in 2017. Under Minnesota law, that means she has the authority to make medical decisions on his behalf if he is unable to himself.
The day of her podcast appearance, she found a lawyer, Marjorie
Holsten, who immediately filed a motion for a restraining order to keep
the hospital from taking Mr. Quiner off the ventilator.
Judge
Jennifer Stanfield, of the Tenth Judicial District Court in Anoka
County, granted the order. On Jan. 15, Mr. Quiner was flown to a
hospital in Texas, where, Ms. Holsten said, his condition has improved
significantly. She declined to identify the hospital.
Ms. Holsten
said: “He was cognizant until they administered a ton of sedatives.
That was when he was put on the ventilator.” In Texas, she said on
Wednesday, “the doctor said he was moving his hand” and “nodding and
blinking his eyes in response.”
Mr. Quiner, who remains on a
ventilator, had lost 30 pounds and was described as the “most
malnourished patient” a doctor at the Texas hospital had ever seen, Ms.
Holsten said.
Allina Health said in a statement that it “has great
confidence in the exceptional care provided to our patients, which is
administered according to evidence-based practices by our talented and
compassionate medical teams.”
“Allina Health continues to wish the patient and family well,” the statement said.
In
court papers, lawyers for Mercy Hospital said Mr. Quiner’s treatment
was based “on best available medical science and authority.” In a
motion, the lawyers asked Judge Stanfield to issue an order that said
the hospital had the authority to remove the ventilator.
Specialists
were consulted and the treatment was “in compliance with Mercy’s
policies and procedures regarding medically nonbeneficial
interventions,” the lawyers wrote.
Mr. Quiner did not
specify whether he wanted to be kept alive on machines in his advance
directive, a legal document declaring what treatments he does and
doesn’t want.
On the form, he specified his wishes only under a section that asked about spiritual and religious beliefs.
“Request prayer from family and friends at bedside,” he wrote.
Hospitals
in Minnesota have been overwhelmed by a combination of patients with
Covid-19 and those with other conditions, particularly in the
Minneapolis and St. Paul area, according to the Covid-19 Hospitalization Tracking Project at the University of Minnesota.
On Thursday, only 1 percent of adult beds in the intensive care unit were available, according to the Minnesota Department of Health.
Scarcity of resources can be a factor in a hospital’s decision to withdraw care, but it is rarely a top one, said Thaddeus Pope, a professor who teaches health law and bioethics at Mitchell Hamline School of Law in St. Paul.
Under
Minnesota statute, medical providers who believe a health care agent is
not acting in the best interest of a patient should go before a judge,
he said.
“It’s an uncommon situation where you’re going to
overrule what the agent says,” Professor Pope said. “The hospital
doesn’t make health care decisions. The patient does, and if the patient
lacks the capacity, the health care agent does.”
Before
going to court, doctors should try to communicate effectively with a
health care agent, he said. If that fails, doctors should present their
argument before an ethics committee, which ideally would include
community members in addition to health care workers, to determine if
the health care agent’s authority should be overruled, Professor Pope
said.
The decision to take away life-sustaining machines is more
straightforward when doctors have determined that a patient meets the
criteria for brain death, said Dr. Mary Groll, a professor of health
sciences at North Central College in Naperville, Ill.
But if a
patient’s brain function is intact and a meaningful life remains
possible, the decisions about medical care fall more clearly on a
patient or that patient’s proxy, Dr. Groll said. Doctors should then
have frank conversations about the kind of future a patient may face,
she said.
Medical training has become more focused on prioritizing the medical wishes of a patient, Dr. Groll said.
“At
the end of the day, it all begins and ends with your patient,” Dr.
Groll said. “Your care begins with that person and it ends with that
person, and they should be at the center of the decision making.”
https://www.nytimes.com/2022/01/21/us/scott-quiner-covid-ventilator.html
A Libertarian Appreciates Public Health Insuranceby Health Justice Monitor - January 21, 2022 |
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| Summary: Conservative columnist Ross Douthat of the NY Times wrote this week about his shifting views on health insurance. He evolved from supporting a fully free market, to public catastrophic coverage, to more generous public coverage. But he worries that centralized universal coverage would stymie life-saving innovation. He needn’t. |
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How Being Sick Changed My Health Care Views
New York Times
Jan. 19, 2022
By Ross Douthat
[bolded subheadings by HJM, followed by article excerpts]
2013, based on Oregon Medicaid experience: access to Medicaid helped people avoid “catastrophic expenditures” and reduced their depression rates. … ideal insurance system would cover genuinely catastrophic expenses, helping people avoid bankruptcy and the worst kind of mental stress — but avoiding the overtreatment and cost inflation that you get when you earmark too many public dollars for health
2015, with an undiagnosed illness: I was sick and had absolutely no idea what was wrong with me — which meant that I went from doctor to doctor … object lesson in the ambiguities contained in terms like “overtreatment” and “unnecessary care.” Because considering my ultimate diagnosis, all of these visits were a form of overtreatment. … my perspective as a patient it was all reasonable and necessary…. Nor was I in any position to act as a discerning consumer or a good capitalist, … as a patient I was simply too vulnerable and desperate to do anything save throw myself on the medical system’s mercy.
limits of a libertarian vision of the patient as a cost-sensitive consumer. … the importance of insurance coverage for stable mental health, greater peace of mind, in situations where you’re worried that not only your body might be ravaged but also your finances as well.
But, disenchantment with official medical views: entered a world where the official medical consensus had little to offer me. It was only outside that consensus, among Lyme disease doctors whose approach to treatment lacked any C.D.C. or F.D.A. imprimatur, that I found real help and real hope. … more skeptical of any centralized approach to health care policy and medical treatment. … if I couldn’t trust the C.D.C. to recognize the effectiveness of these treatments, why would I trust a more socialized system to cover them?
Faith in profit as motivator: more free-market systems yield more inequalities but also more experiments, America [with higher drug prices] also produces an outsize share of medical innovations. Whatever everyday health insurance coverage is worth to the sick person, a cure for a heretofore-incurable disease is worth more.
The ACA insight: clearest legacy was its Medicaid expansion, and that the attempts to build a thriving individual-insurance market and rein in unnecessary spending had met with less success, … skepticism about the patient-as-consumer hopes that undergird Obamacare’s exchanges.
Cost control as impediment to cure: Once you’ve become part of the American pattern of trying anything, absolutely anything in order to feel better … the idea of medical cost control as a primary policy goal inevitably loses some of its allure, and the American way of medical spending looks a little more defensible. … sometimes what seems like waste on the technocrat’s ledger is the lifeline that a desperate patient needs. |
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Comment by: Jim Kahn
Libertarian NY Times columnist Ross Douthat describes his fascinating trajectory from public insurance skeptic to enthusiast, first supporting public catastrophic coverage and more recently – after an undiagnosed chronic illness led him to search widely for help – supporting broader coverage. He believes in the mental health and financial benefits of insurance. Yet he worries that the “medical cost control” focus of a centralized system like single payer would cost lives by disincentivizing life-saving medical discovery. He needn’t, for several reasons.
First, our biggest problem isn’t inventing life-saving drugs, it’s providing access to the life-saving treatments we already have. Single payer excels here. Remove financial barriers to care, and we avert 50,000-100,000 deaths per year. And hundreds of thousands of medical bankruptcies.
Second, single payer doesn’t focus on controlling costs. Yes, it controls costs – by removing massive spending on wasteful insurance administration and profits, reducing ineffective care, and lowering drug prices. But the focus is on providing broad access to care. The system would retain massive resources.
Third, negotiated drug prices under single payer would allow for continued substantial pharmaceutical profits. The sky-high returns in pharmaceuticalscould readily tolerate reduction to typical (substantial) corporate levels. The drug companies exaggerate their current research costs, and would continue to innovate vigorously.
Finally, Douthat’s notion that a universal system would impair access to as-yet unapproved therapies is wrong, and wrong-headed. It’s wrong because individuals will be just as able to pursue unapproved treatments under single payer as within the current fractious system, which as Mr. Douthat discovered does not pay for these therapies. Indeed, single payer with lifelong enrolment may be fairer and more generous in coverage decisions than private insurers, who have high beneficiary “churn”.
It’s wrong-headed because the processes we use to formally assess the value of new therapies – eg clinical trials overseen by the FDA – are critical to foster effective treatments, weeding out false hopes. Our system of drug evaluation is imperfect, but far superior to a less formal system or none at all. And post-marketing effectiveness surveillance should improve with excellent single payer claims data.
I’ll end with a cogent reflection by Don McCanne: The major point here is that Douthat, as a credible libertarian with a significant medical disorder, is now more comfortable with the “uneasy, unfinished place” where Obamacare has ended up. He has “more appreciation for the basic Medicaid guarantee, and more skepticism about the patient-as-consumer hopes.” Cloaked in these words is the concept that we have more security for our health care when we have a guaranteed government program of social insurance than we do when we are dependent on the marketplace for healthcare. That is quite a shift to the left for a libertarian. |
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