Public Health Insurance

Public Health Insurance Option Key to Obama Healthcare Plan

If Congress passes Obama's plan and Americans are given the choice of a public health insurance option similar to Medicare, we could all save up to 30% on our health care premiums. That's a huge savings, and we'd still get high-quality coverage and be able to choose our doctors.

And even if you choose to keep your current insurance, you'd save anyway. HMOs and big insurance companies are the only game in town right now—so they overcharge us to boost profits and pay out CEO bonuses. If Obama's plan passes, they'd have to compete with it, and their prices would have to be more honest.

Lower premiums for us means lower profits for them, so insurance companies are putting extreme pressure on Congress to drop the public health insurance option. But Americans deserve to have this choice—and it's necessary to help rein in out-of-control health care costs.

Imagine how different things would be if we all had quality health care that costs up to 30% less than what we're paying now. Would you use the money toward college for a child? A safe retirement? Or maybe you'll finally be able to afford the treatment or medicines you need.

The simple truth is that having the choice of a public health insurance option would make all of our lives better. Here's why:

Health care costs are spiraling out of control. From 2000 to 2008, health insurance premiums increased five times faster than wages.

A public health insurance option would provide an affordable, quality alternative. Two new studies show that Americans could save 25% or more off of a traditional private plan. The New York Times says this would "keep the private plans honest."They'll have to lower rates and offer better value to compete.

Plus, a public health insurance option would be reliable coverage for all.

Private insurers are notorious for dumping people with little notice. A public option would allow consumers who've been dropped—or just don't like their current coverage—to switch to a steady public choice.

Thankfully, the public health insurance option is gaining steam in Congress. The 77-member Progressive Caucus recently endorsed the policy. And the chairmen of five critical congressional committees came out in support. Now we need to get the rest of Washington on board. Click below to

Health Insurance Bailout

Is There a Health Insurance Bailout in our Future?

Governments have short time horizons. Faced with a long-term problem such as the actuarial bankruptcy of Social Security, it almost always makes political sense to stall, to find some way of putting off the political costs of dealing with it. With luck, the problem may go away. If not, the costs will fall on some other politicians in the future. Now that Obama's health care plan has passed, he will be under pressure to produce results that look to most voters better than the past, or at least no worse. In the short run that should not be a problem, since most of the provisions of the plan are set well in the future. Most of the taxes to pay for it come into effect in 2013, the requirement that health insurance companies take anyone who applies, including those with pre-existing issues, in 2014, the tax on high end health plans in 2018. The fine for not having health insurance starts in 2014 at $95 or 1% of income, and reaches its full value in 2016. For the next few years, at least through the end of Obama's current term of office, the controversy over the plan will be mostly a war of words, without much evidence on its real consequences. Eventually that will change. If, when most of the provisions of the plan are in effect, it appears to be working very badly, if health insurance is more expensive than it used to be, if many younger workers find they are being required to spend a lot of money for insurance they don't want, there will be two political consequences. One is that the Democratic party, strongly identified with the changes, will suffer a decline in its reputation. The other is that whatever politicians are in office will look bad, since voters will blame current problems on those currently in charge. The obvious solution is to find ways of pushing the costs of the program into the future. Insurance companies take in money now in exchange for the promise of future payments. Under political pressure to charge less and promise more, they may adopt the policy followed by General Motors when it solved its labor problems by paying striking auto workers with the promise of future pensions: Make promises they cannot fulfill, in the belief that when the crunch comes the U.S. treasury will come to their rescue.

The Health Care Clock

The Health Care Clock, and Why Obama Has to Act Quickly

Universal health insurance won't happen unless Obama can light a fire under the Senate Finance Committee this week. Within the next two weeks, the Committee must report out a bill that contains a public option and a credible source of money (either limiting deductions of the wealthy to 28 percent or capping tax-free employer-provided health care, or some of both). Obama then has to get both the Senate and the House (which reports out a bill today) to approve their respective bills before August 7, when Congress heads home for recess. Why is timing so important? Because the health-care clock is ticking, and doesn't have many weeks left. Universal health care is so complicated -- touching on so much of the economy, stepping on the toes of so many vested interests -- that to allow the bills to languish past recess risks the entire goal. Speed is essential. Recall that after Bill Clinton was elected, universal health insurance looked inevitable; a year later, it was doomed. As Lyndon Johnson warned his staff after the 1964 landslide, "every day while I'm in office, I'm gonna lose votes." Republicans don't want any bill. Blue Dog Democrats are afraid of the costs of any bill. The AMA, private insurers, and pharmaceutical companies would be delighted if universal health care died. If bills aren't passed in the House and Senate before August 7th, the fights in both chambers over the public option and money will carry over into the Fall, where they'll become more intense and more prolonged. Obama won't have a bill on his desk before the end of the end of the year. That's a death sentence for health-care reform. The gravitational pull of the mid-term elections of 2010 will frighten off Blue Dogs and delight Republicans.

Encouraging Advancement for Nursing Home Care

Early in my career I was the Director of Planning at a multi-level care facility in Massachusetts that included a nursing home. While the NH provided excellent care, it was still an institution. I always have thought since then that there has to be a better way. This link describes a very promising concept in MA that provides the same level of care but in a more home-like setting:

http://www.stateline.org/live/details/story?contentId=527585

Key excerpt:

Klein’s nursing home lifestyle is also notable for what it isn’t. There's no long gray linoleum corridors with doors that open onto shared rooms with nothing but a curtain between the beds. No beeping monitors or carts full of soiled linens and no patients in wheelchairs parked in the hallways. Few rules govern when, what and where residents can eat.

The brand new facility is one of a new breed of small, homey nursing facilities cropping up around the country, thanks to state collaborations with the nursing home industry, federal regulators and advocates for the elderly and disabled. It looks like a place only wealthy families could afford, but about half of its residents get their bills paid by Medicaid, the federal-state health care program for the poor.

MS Insurance Commssioner's Take on the ACA

From the Commercial Appeal in Memphis, TN:

The top insurance official in Mississippi said Wednesday that the volume of changes under the federally mandated health care reform are "mind boggling" and partly come from "pure socialist-communist ideas."

"Some of the ideas are Republican. Some of the ideas are Democratic. Some of them are pure socialist-communist ideas," state Insurance Commissioner Mike Chaney told the Olive Branch Chamber of Commerce. "It is taking money from one class of people and giving it to another. It is a socialist system and it's not going to work."

Healh Insurers Role in the ACO

As I have noted in previous posts, Accountable Care Organizations or ACOs are being heavily promoted as a way to both increase the quality of care while at the same time lowering its costs. It is a given that ACOs will have to include at least one hospital and a group of physicians. But what about health insurers? Are they guaranteed a place at the table and if they are, what will it be?

How about facilitator? With all of the stakeholders engaged in one form or another with the health plan, the health plan has the potential to be the hub for the ACO should they adopt that role. In a comment on a blog I read recently, the author suggested that an ACO is just an “HMO on steroids”. If that is the case, the health plan is certainly at the center. Unlike the HMOs of the 1990s though, an effective ACO relies on the provider physicians to police and optimize their own work rather than the payors. In a recent article by Mr. Jamie Gooch in Managed Healthcare Executive, he believes the success of an ACO is dependent upon the partners that are engaged. He suggests starting small and working with strong partners that can advance the ‘better-care-at-lower-cost’ model. Using this crawl/walk/run scenario, partners can be selected, and the program can be clinically integrated to optimize the cooperation. Again, the health plan has the opportunity of adopting a leadership role and facilitating these relationships and subsequent outcomes to meet the overall goals of the ACO program.
Additionally, I have talked previously about the critical role of evidence-based medicine in the healthcare reform debate. If we have the information from which best practice can be established, documented and communicated, we all stand to benefit by delivering better healthcare to the patients with greater efficiency and at a lower cost. Again, the health plan can play a key role here. With their reach and access to aggregated clinical information, evidence-based data can be collected, analyzed and made available for the physician and associated clinical organizations to better administer care to the patient. Models that are continuously referenced include Geisinger[3], Mayo Clinic[4] and Intermountain Healthcare[5] – they have integrated care and have created very effective ACOs.
The health plan also stands to be at the center of the operation in that it can recruit and retain members. Gaining membership in commercial health plans is a sales function. Whether they sell to employers or to individual members, membership must be recruited and becomes part of the administrative overhead of the plan. Quasi-governmental plans like Tricare, Medicaid and others may still need to recruit membership. For many ACOs, the initial covered lives are likely to come from the employers within the ACO’s provider panel. For example, a 300 bed hospital with 400 physicians and post acute care facilities may have 5000-6000 employees. If you add dependents, a ready made 10,000 member population is available. This represents lives that likely come out of an existing health plan. This is more than enough to meet the minimum requirements of an ACO. Additional membership may be driven by the community affiliation and demonstrated outcomes.
it will be interesting to track what roles health plans play in the development of ACOs, particularly the major national carriers.

Good Article on Formation of CA Health Exchange

California is one of the first out of the gate in forming its health insurance exchange. This article is a good summary of a conference that talked about the lessons learned by CA officials:

http://www.commonwealthfund.org/Content/Newsletters/Washington-Health-Policy-in-Review/2010/Nov/November-8-2010/Lessons-from-the-California-Exchange.aspx

Good summary paragraph:

So what does California's experience thus far suggest? Among the lessons from a recent forum on the subject: If possible, get outside advice to help with the highly technical process of creating an exchange; be careful how you pick its board; make it easy for the public to understand what the exchange is doing, and spur the kind of competition that is going to make premiums affordable.
On Sept. 30, California became the first state in the nation to pass a law creating an exchange under the health care overhaul law.

VA Anthem Leads the Way for Health Care Reform

The VP of PR at Anthem VA must be thrilled about this puff piece of an article:

The Anthem CEO said that his company is moving away from just being a payer of claims to one that helps its members manage their health. He also talked about the need to become more efficient. The end of the article also mentions the strength of the BC/BS brand which i s going to be a huge advantage for Blues Plans as the market shifts more and more to individual coverage in the coming years.

Update on MA's Cost Control Efforts

As I have noted many times, the health care scene acts as an excellent bell weather on how health care reform will play out throughout the country, This article from the Boston Globe provides the latest update (http://www.boston.com/news/health/articles/2010/11/05/us_watching_mass_fight_on_health_costs/?rss_id=Boston.com+--+Health+news )

Interesting excerpt:

Patrick is ready to move forward with a “global payment’’ plan that is supported in principle by most of the state’s health care companies, though they have yet to agree on the elements.

The plan, in broad form, would put hospitals and doctors on an annual budget for each patient’s care. Providers would be expected to assemble into partnerships — known as accountable care organizations — to coordinate care and distribute payments. It would replace the current “fee for service’’ system in which providers are paid negotiated fees for each visit and procedure.

Your Pharmacist: The Center of Your Medical Care

I saw Walgreens present this concept at an AHIP Conference two years ago:

Walgreens will "step up investments in services to help Americans manage chronic diseases," the drugstore chain's CEO announced, because "the company wants to capitalize on what he called the 'retailization' of the nation's health care system." The pharmacy giant "increasingly has been lobbying to give pharmacists a greater role in medical care such as providing immunizations in its stores as well as establishing retail health clinics staffed by nurse practitioners." Walgreens' health professionals could help "provide certain primary medical care service amid a national shortage of primary care doctors" and assist patients in managing chronic conditions like diabetes, hypertension, and high cholesterol, the company's CEO said.

Given the predicted stress on the primary care network once ACA kicks in beginning in 2014, this actually makes some sense. Of course I am sure the AMA would disagree.

CMS Must Launch Physician Comparison Site by 1/1/11

This is a great article on the issues that CMS faces in launching its website on physician comparison (http://www.healthleadersmedia.com/page-2/PHY-258341/CMS-Under-the-Gun-to-Launch-Physician-Compare-Site). It is not going to be easy. The biggest concern continues to be risk adjustment. According to an AMA official:

"But our concern is that individual doctor level data right now is not read for prime time, especially in complex situations. The attribution of who's really responsible for that care is not worked out."

Risk adjustment is still a big problem as well. "Some elective claim submission forms are limited in the number of co-morbid conditions they'll accept. Some take 4, 6, but the patient has 10."

This is really going to be interesting.

State Mandates: Do They Increase the Cost of Health Insurance?

This article examines what effect mandates have on health insurance costs in a particular state (http://www.aishealth.com/Bnow/hbd110410.html). One health insurance executive believes that mandates add 17% to the cost of coverage in Maryland. mandates vary from 13 in Idaho to 69 in Rhode Island. The most expensive mandate is fertility coverage. Coverage for autism has also increased nationwide.

Rhode Island Hospital Payment Innovation

The Providence Journal (http://www.projo.com/news/content/LIFESPAN_BLUE_CROSS_CONTRACT_10-29-10_KVKKJMB_v17.1ebf635.html) has an interesting article on payment agreement between BCBS of RI and hospitals in the state:

Rather than paying for each procedure or each day in the hospital, Blue Cross will provide a flat fee to cover all care for a given condition. That way, the hospital doesn’t make more money if it does more tests and procedures or keeps the patient longer.

Other insurers in the state will also be making similar arrangements.

Update on State Health Exchange Funding

In another bid to help states implement the new healthcare law, the Obama administration Friday unveiled a new competitive grant program that will give five states money to develop Internet-based insurance exchanges. ... Administration officials said they hope the winning states will come up with systems that could serve as models for the remaining states. The grants follow awards of $1 million to 48 states and the District of Columbia to help set up the online market places -- Minnesota and Alaska refused the money.

I can understand Alaska returning the money but what is up w/MN?

Value Based Benefit Design: It's a Break Even Proposition

Here is the link to a major research study of a value based benefit design, specifically reduced RX copays for a major employer group: http://content.healthaffairs.org/cgi/content/full/29/3/530.
The study reveals it is a break even result though it does not take into account the benefits from reduced absenteeism and higher productivity among employees.

ACOs: Some Thoughts

I have blogged in the past about how ACOs might be a good answer to lowering health care costs and increasing quality at the same time. However there might be two factors that get in the way of this. First is that there are no penalties for missing quality targets. Given this, one could see how FFS payment would continue to be more appealing to providers. Second is that spending targets are calculated on past spending patterns so previous inefficiencies are "baked" into the calculations. Thus prospective ACOs even have an incentive to spend more before onset of the program to build up their historical spending base. Theoretically, a program that offers shared savings without any financial downside provides weak incentives for providers to change behavior.

And it looks like health insurance companies are concerned about being cut out of the picture (http://www.healthleadersmedia.com/page-2/HEP-258288/Could-Health-Plans-Derail-ACOs).
Key excerpt:

But the reality is that everyone will protect their own interests, which has health plans knocking on doors not only at the Centers for Medicare & Medicaid Services (CMS), but also at the Federal Trade Commission (FTC) and Department of Justice (DOJ), making sure they're aware that collaboration among already powerful healthcare providers under the ACO model also includes the risk collusion.

As I have said in the past, health plans owned by a provider group have the best chance of partnering to form an ACO.

The Quest for Cost Data Continues

Interesting article on California hospital costs disparity in Kaiser Health News (http://www.kaiserhealthnews.org/stories/2010/october/17/california-hospital-costs.aspx) A critical excerpt:

The hospitals haven’t made it easy for consumers to comparison shop. State law requires hospitals to reveal their charges for specific services. But those charges don’t reflect the lower negotiated rates insurers actually pay – rates hospitals usually insist be kept secret. The California Hospital Association has opposed legislation to ban such "gag clauses"; the most recent of these bills died in the state Assembly in August.

Hospitals have also resisted a four-year campaign by the Pacific Business Group on Health, a large employer coalition, and CalPERS to create a "hospital value initiative" that would allow hospital comparison based on and quality of care.

Rarely able to evaluate hospital costs and quality, patients often defer to their physicians when deciding on a hospital. Rochelle N. Doble had a seriously infected toe amputated at Sutter Delta Hospital in Antioch in 2007. Her doctor told her the bill would be about $1,400, but when she arrived at the hospital, Doble says Sutter told her it didn’t contract with her insurer and that she would be billed for the full amount—more than $5,400.

Doble, 54, says the only reason she went to Sutter was because her doctor chose it for its convenience. "His practice is in Antioch," she says. "He did it five minutes from his office."

Doble refused to pay and her account was sent to collections. In July, Sutter agreed to lower the bill to $1,400 after JustHealth, a Santa Rosa-based advocacy group, helped her protest it, according to correspondence from Sutter provided by Doble.

Stacey Wells, a Sutter spokeswoman, said the hospital couldn’t discuss Doble’s case. She said the bill for this kind of procedure would be determined by the number of hours spent in the operating room and recovery areas and charges for all supplies.

John Metz, JustHealth’s executive director, says few people bother to challenge their bills as Doble did. "Most people trust hospitals are going to treat them right," he says. "When they get these bills, they are literally impossible to understand, and people just accept them."

Given this difficulty on obtaining good info on price and quality, I think it is nearly impossible to expect consumers to make informed decisions when it comes to their health care. So what is the answer? Push subscribers to use providers in designated high performing networks.

Provider Pricing: The Elephant in the Room

Most everyone agrees we spend too much on health care in this country with poor results. One of the main reasons for this high cost is what we pay providers for their services. And this may just get worse in the future as more and more providers consolidate and exert hteir power when negotiating fees. From the Health Affairs blog:

A growing imbalance between payers and providers. As MacGillis notes, the market imbalance between payers and providers may be getting worse due to increasing provider market and consolidation, a phenomenon that has been discussed by other Health Affairs authors. For example, in an April 2010 Health Affairs article focusing on market conditions in California, Robert Berenson, Paul Ginsburg, and Nicole Kemper wrote that “providers’ growing market power to negotiate higher payment rates from private insurers is the ‘elephant in the room’ that is rarely mentioned.” The authors warned that, unless precautions are taken, the Affordable Care Act’s push toward “accountable care organizations” and other integrated care models could increase prices:

If accountable care organizations lead to more integrated provider groups that are able to exert market power in negotiations—both by encouraging providers to join organizations and by expanding the proportion of patients for whom provider groups can negotiate rates—private insurers could wind up paying more, even if care is delivered more efficiently.

Republicans, who seem poised to make big gains in next week’s elections, have argued for shifting more power in health care decision making, and more risk, to consumers. That would “only make the fundamental imbalance of information, power, and expertise” in favor of providers even worse, Vladeck said in his presentation at the Health Affairs event.

Berenson, Ginsburg, and Kemper concluded: “Unless market mechanisms can be found to discipline providers’ use of their growing market power, it seems inevitable that policy makers will need to turn to regulatory approaches, such as putting price caps on negotiated private-sector rates and adopting all-payer rate setting.” In the September-October 2009 Health Affairs issue, Robert Murray, executive director of the Maryland Health Services Cost Review Commission, wrote that had the state’s all-payer rate-setting system for hospitals been adopted nationwide, it might have saved $1.8 trillion over three decades.

The Polls and Health Care Reform

From the New Republic:

Polling on health care reform remains as reliable as ever, which means that you shouldn't consider it particularly reliable. Voters have mixed feelings and few actually understand what it's in the law, which means answers depend a lot on how the survey firms word their questions.

But the polls do provide some insights. And they've consistently undermined the claim that Americans are clamoring to scrap the Affordable Care Act because it tries to do too much.

The latest evidence comes from the new Associated Press-GfK poll, which Greg Sargent flagged on Friday. In the survey, 32 percent of registered voters responding said they wanted to repeal the law completely while another 9 percent said they wanted to revise the law so it did less. But 39 percent said they wanted to revise the law so it did more and 18 percent said they wanted to leave it as is. Opinion tips more towards scaling the law back if you consider only likely voters, but even then only 37 percent want repeal and less than 50 percent want to scale the law back at all.

Put it together with polling that shows Americans overwhelmingly favor the individual elements of health care reform--like guarantees of coverage for people with pre-existing conditions--and it's hard to make a credible argument that most Americans want repeal. As Steve Benen, who also noticed these new results, says

I wonder what the discourse would be like if equal attention were paid to those who want even more ambitious health care reforms as compared to those who think the Affordable Care Act some sort of secret communist plot.

Good Series of Posts on HC Quality

Defining quality is the "holy grail" in health care. Here is a series of posts looking at it in the US:

http://theincidentaleconomist.com/how-do-we-rate-the-quality-of-the-us-health-care-system-introduction/

Two surprising findings: Japan is more CT and MRI crazy than we are. Also the US does not have an inordinate amount of specialists.

Anthem Premium Increases in Connecticut

CT regulators have come under criticism from HHS for approving premium increases of up to 39% by Anthem for their various individual plans. In response the CT regulators said they thoroughly reviewed the requests and said that the increases were justified as Anthem made benefit changes to comply with the PPACA. Specifically:

In his letter, Sullivan noted that because of some provisions of the federal reform law, insurers had to raise several of their benefits to be in compliance. This, he wrote, was a contributing factor to the premium increases. He cited as an example one of Anthem’s prescription drug benefits that previously had a maximum limit of $500 annually and now has been raised to $750,000 to be in compliance with the reform law. According to Sullivan, this hike alone will result in a nearly 23% cost increase for that plan.

Another Call for Pricing Transparency

The leader of the St. Louis Business Group on Health makes yet another plea for pricing transparency: http://www.commonwealthfund.org/Content/Blog/2010/Oct/Time-to-Unmask-the-Price-Differences-in-Health-Care.aspx

While pricing transparency would help consumers make better choices, what is really needed is for health insurers to identify high performing providers and then through benefit incentives "push" their members to use them. Expecting consumers to make cost and quality decisions on their own is not just realistic.

Subrogation: Health Insurers Need to Give It More Attention

Good article on the latest developments in subrogation that could lead to increased recoveries:

http://www.aishealth.com/Bnow/hbd102510.html

Great Idea for Malpractice Reform

Peter Orszag's proposal for medical-malpractice reform is pretty clever. As I read it, in fact, it's not primarily a malpractice-reform proposal at all. It's a proposal for spreading evidence-based medicine through a vehicle that conservatives and doctors find congenial.

Quick background here: "Right now, health care is more evidence-free than you might think," Orszag writes. "And even where evidence-based clinical guidelines exist, research suggests that doctors follow them only about half of the time. One estimate suggests that it takes 17 years on average to incorporate new research findings into widespread practice." And that gets to Orszag's broader take on controlling costs in health care: If we can get doctors to stop doing the stuff we don't need, we can control costs without rationing in a way that harms anybody's care.

Of course, defining the stuff we don't need is more difficult than it sounds. And when evidence-based medicine became something Democrats wanted to do, Republicans decided it was something they opposed. Using research to decide what works and what doesn't is rationing, you know.

Orszag sees medical-malpractice reform as a way to get around this debate. Instead of protecting doctors from lawsuits by capping damages or limiting the ability of plaintiffs to sue, you could protect them by charging the American Medical Association or the Institute of Medicine with creating standard lists of best practices and then providing immunity to doctors who can show they followed them. That's easier said than done, but if you could manage it, it would give doctors a reason to follow the best practices and, in theory, drive down overall health-care costs. That would be much more effective than just attacking malpractice suits, which aren't a large contributor to spending and are often quite warranted.

Personal Responsibility for Health

During the debate over health care reform much of the focus was on how we needed to reduce the amount of unnecessary care in this country. Estimates of this "wasted" care are has high as 33% which comes out to over $800B! To reduce this waste a major recommendation has been to change the way providers are reimbursed, that is to shift away from fee for service structure to a global payment one. While I agree this is necessary, there also needs to be a focus on an individual's own responsibility for taking care of him or herself.

Is it right for someone who exercises five days a week, eats right, doesn’t drink or smoke to pay the same health insurance premium or pay taxes in universal health care for someone who can afford to chain smoke, eat out, drink a six-pack every other day yet can’t afford to pay for health insurance?

Of course, this is an example of two extremes. Unhealthy lifestyles receive little to no scrutiny but are detrimental when speaking about health care reform. In an ideal world, health care would be used for those with unpreventable conditions such as age, genetic conditions, etc. Health care reform cannot supplant the personal responsibility to care for ones self.

I’m not advocating a “no” vote for universal health care coverage. I’m saying that for it to work and be cost effective, we need to simply re-examine our life choices to decrease our hospital visits from costly preventable conditions.

During this tough economy, where many people cannot afford health insurance, universal health care is necessary to fulfill our basic ethical promise to help our fellow man, but we must first take personal responsibility in caring for our own bodies.

Study: HC Costs for Insurers Increasing Faster than for Medicare

For the 12-month period ending in August, the average per-capita cost of health care services covered by commercial health insurance plans, which include self-funded employer plans, climbed 8.66%. That compares with an average increase of 5.08% for patients covered by the traditional Medicare program, according to S&P Healthcare Indices, which Standard & Poor’s Corp. developed in consultation with Health Index Advisors, a joint Aon Hewitt Inc. and Milliman Inc. venture.

The biggest difference in cost increases between patients covered by Medicare and commercial health care plans were for hospital services. In that same 12-month measuring period, hospital costs for patients enrolled in commercial health care plans rose an average of 9.66%, nearly double the 4.48% increase for Medicare patients.

NCQA Study of Health Care Plan Spending: More is Not Better

The NCQA released results from a study of health care plan spending and found that you "don't get what you pay for." his conclusion emerged from the organization's 2010 State of Health Care Quality report that analyzed performance measures from more than 1,000 plans providing coverage to nearly 120 million Americans to determine the overall quality of American healthcare.

By comparing quality measures with what NCQA calls Relative Resource Use data—an evaluation of how extensively plans within a certain region leverage healthcare resources relative to the populations they serve—NCQA was ultimately afforded a glimpse into the value a health plan offers. In fact, it determined that more use of resources, such as inpatient bed days or procedures, is actually often associated with poorer quality, translating into a bad value for consumers and employers.

The report also had advice for health plans on what they can do to create better value for their members. Among other measures, improvements in the following areas will affect RRU scores:

1. Plan design and copays: Are copays set at levels that encourage preventive care? How does the plan design encourage employees to select cost-effective providers?

2. Appropriate levels of care: What are the recommended care standards for the most frequent chronic conditions? How is compliance monitored, and how well do providers meet expectations?

3. Overall utilization management: Are utilization trends monitored by provider and by patient details such as age, gender and chronic condition? What happens when outliers are identified?

4. Local practice patterns: How does the health plan monitor providers' practice patterns and encourage providers to adopt cost-effective techniques?

5. Use of technology: What are the standards of use, and how are they monitored? How does the plan instruct providers about appropriate use?

RRU improvements also could be facilitated by encouraging high-volume providers to enhance continuity of care by creating incentives to adopt patient centered medical home (PCMH) and accountability care organization (ACO) care delivery models.

ACOs in Massachusetts: An Update

As I have said frequently, tracking the latest developments in Massachusetts is very likely a good bell weather on how how health care reform will play out in the rest of the country. Here is the latest from the medical director of Health Integrated on his company's plans to become an ACO in the next five years:

The strategic plan includes centralization of the full range of medical services. This goal was to be accomplished by:

• Increasing provider accountability and consumer education
• Rewarding physicians for delivering high quality care
• Providing incentives for efficient, appropriate care
• Structuring the care continuum to align incentives for all participants
• Integrating existing CHA ACO elements

In order to drive this kind of change, a new payment model was required. This new model had several priorities regarding payment and incentives, many of which are aligned with our previous discussions concerning successful ACOs. These have included:

• Alignment of all stakeholder financial interests including improved outcomes in patient health and expenses
• Creation of a global payment structure
• Preparation to accommodate an all-payor system

The development of strategic partnerships will be important. These could be with other private payors, like NH for example. Massachusetts has already adopted and implemented this innovative healthcare reform model. In doing so, they are leading the nation in healthcare reform. As you may have also experienced, consolidation of the industry is already beginning and relationships with providers, particularly the tertiary care institutions in the state, are necessary. Additionally, the development of select provider networks is desirable and possible. As the state of Massachusetts is already moving toward global payments, this must continue to be a priority.

Within the managed care plan, Network Health brings specific competencies to the partnership including:

• Data
• Care management
• Cultural transformation support
• Existing provider network

The Patient Centered Medical Home (PCMH), is expected to be a strategic tool for both care delivery and effectiveness. The PCMH is expected to be the vehicle to accomplish many tasks including the improvement in:

• Preventive care
• Primary care
• Care coordination and management
• Access
• Patient/care team relationships
• Patient experience
• Consumer involvement
• Identification and management of high risk populations
• Payment structures

In conclusion, Dr. Yeracaris summarizes that although the journey to becoming a high-performance ACO is complex, health plans, specifically those that are provider-sponsored can play an important role in assisting providers with the transition. It is encouraging to see that global payment arrangements and primary care medical homes offer significant theoretical opportunities to improve care and truly “bend the cost curve”, but the thesis has yet to be proven.

On a closing note, it should be noted that the prediction of 5 yrs. for the complete formation of this ACO shows how difficult and complex this task is and makes one wonder if their formation will take as long in other parts of the country.

Update on Health Insurance Exchanges: Oregon's Strategy

Oregon has decided that its exchange will not be an arm of the state but independent:

http://health.newamerica.net/blogmain

Health Insurers: We Need More Time to Meet MLR Requirements

AHIP is asking for more time through a transition period (perhaps up to 2014) to enable many of its member carriers to meet the 80 and 85 MLR ratios required by the ACA. Those who do not meet these requirements will have to issue rebates to their members (see my earlier posts about the Blues Plan in NC). Implementation of this requirement can also be problematic because as many as 17 state insurance commissioners may be new to their offices come January 1st.

The NAIC meets in Orlando this week to approve the regulations for the new MLRs. For more details please click on this link: http://money.cnn.com/2010/10/15/news/economy/health_care_MLR_vote_impact/

The large carriers will have no problem meeting these new standards. It will be the smaller ones that have the issues. If these carriers leave the market Like Principal did it will mean that the big carriers have less competition. On the other hand the new MLR requirements will force the carriers to be more efficient which is a good thing.

UHC Proposes Joint Medicare/Medicaid Program

This makes senses:

UnitedHealth Group Inc. is proposing a managed-care plan for dual recipients of Medicare and Medicaid. The insurer said the plan would "save as much as $1.62 trillion in the U.S. over 25 years," Bloomberg reports. "Almost 9 million Americans receive coverage from both Medicare, the U.S. health plan for the elderly and disabled, and the Medicaid program for the poor. UnitedHealth proposed in a report today to combine benefits of the programs into a single plan to better coordinate patient care. ... Such a change would increase the number of government beneficiaries on UnitedHealth's rolls, [Simon Stevens, executive vice president of UnitedHealth] said, without providing a specific estimate. ... The current payment structure creates a 'tangled web of responsibilities between Medicaid and Medicare' because each program covers different expenses, medical providers must bill separate programs, and no one is accountable for tracking the care patients receive or how much is spent, UnitedHealth said in its report. Providing Medicare and Medicaid benefits through a single insurance plan would simplify coordination of care among doctors, hospitals, nursing homes and other providers and would save money by eliminating inefficiencies, the report says"

Tax Credits Act as Disincentive for Costs

Interesting take on the tax credits that will be issued to help individuals afford coverage under the ACA:

http://www.healthleadersmedia.com/page-1/LED-257781/Tax-Credit-Hides-True-Cost-of-Healthcare

New Federal Board on Compartive Effectiveness

From the Washington Post:

Reports on a new entity: the Board of Governors of the Patient Centered Outcomes Research Institute. "If you're not familiar with the board, you're not alone. Created by the health-care overhaul law, it's one of the newest and least known panels in government. But the work of its 21 members, if successful, could increase the public's knowledge of medical treatments for everything from attention deficit and hyperactivity disorder to cancer. And it could dramatically change how you discuss treatments with your doctor when the law is fully implemented in 2014." Tasked with helping patients, doctors and purchasers make informed decisions on quality and health care effectiveness, the board will "direct the institute's researchers to examine mounds of comparative effective research undertaken by schools, hospitals and medical companies to study the benefits and detriments of medical treatments".

This Board is one of the major tools in reducing the cost of health care. It amazes me that we still really do not know what the best ways to treat certain diseases are. And when we learn what is, that it takes 18 yrs for it to become stand practice. This Board shouls really move things along hopefully.

Commonwealth Fund Report:: ACA Will Improve Health Access

A new report says that by 2014 as many as 12.1 million now-uninsured young adults — of an estimated 14.8 million – may get some kind of subsidized coverage under provisions of the new health-care overhaul law.

The Commonwealth Fund issue brief says 7.2 million young adults could gain health coverage under Medicaid, which is expanding under the health law, and that 4.9 million may receive subsidized private coverage under the new insurance exchanges. Those provisions don’t kick in until 2014.

Another million young adults are expected to be covered by their parents’ health policies between now and 2014, as a result of the now-in-effect provision requiring plans to cover adult children up to age 26.

About 30% of the 32 million additional people expected to come into the insurance fold as a result of various health-law provisions are between the ages of 19 and 29, the brief says.

Congressional Study: Big 4 HIs Denied 1 in 7 Applicants

From the WSJ:

The four largest for-profit health insurers in the U.S. -- Aetna Inc., Humana Inc., UnitedHealth Group Inc., and WellPoint Inc. -- "on average denied policies to one out of every seven applicants based on their prior medical history," according to a congressional investigative report released yesterday by Henry Waxman (D-Calif.), chairman of the House Energy and Commerce Committee, and Rep. Bart Stupak (D-Mich.). The carriers collectively denied coverage to more than 651,000 people from 2007 to 2009 due to pre-existing conditions. "While most Americans have coverage through their employer or Medicare, an estimated 15.7 million adults under age 65 received coverage through an individual policy as of 2008, the congressional report said. Those are the customers who can be denied coverage because they have a past illness." Under the new healthcare reform law, insurers will no longer be able to deny coverage on the basis of pre-existing conditions beginning in 2014 (Adamy, 10/13). Bloomberg: "Insurers agreed to end denials for pre-existing conditions early in the health-care debate last year, said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's trade group in Washington. Until all consumers are required to buy health insurance, the coverage restrictions are needed to keep people from gaming the system, he said. 'In the current individual market, applicants undergo an underwriting process to discourage people from purchasing coverage only after they need medical services, which drives up costs for all policyholders,' Zirkelbach said.

I thought the ratio was surprisingly low.

Blues Plans and Reform

In an earlier post I mentioned that the Blues Plan in NC had to refund $156 M to its members that have individual coverage based on the new MER requirements for such coverage. What about other Plans and reform? Here is a summary:

• Meanwhile, some Blues plans and other insurers have withdrawn from child-only coverage, citing issues with reform provisions related to pre-existing condition exclusions. The insurers said they no long would sell such policies as of Sept. 23, when they may no longer reject applicants up to age 19 based on pre-existing conditions. In Colorado, for example, WellPoint, Inc.’s Anthem unit and several other carriers, including Aetna Inc., CIGNA Corp., Humana Inc. and UnitedHealth Group’s Golden Rule Insurance Co. subsidiary, said they would drop new sales of child-only policies while continuing to cover current child-only enrollees and to accept children with pre-existing conditions in new family policies. Insurers in several other states also reported that they would withdraw child-only products.Under rules issued in June that take effect for plan years beginning on or after Sept. 23, 2010, insurers may no longer exclude pre-existing conditions from coverage for enrollees under the age of 19. In an effort to address concerns regarding adverse selection, HHS issued guidance July 27 authorizing insurers to restrict enrollment of children under age 19 “to specific open-enrollment periods,” if permitted by state law. But the open-enrollment period must apply to healthy as well as sick children, while the insurers — and some state insurance commissioners, preferred to allow acceptance of healthy children year-round. HHS signaled that it would try to adjust open-enrollment periods to address the risk of adverse selection, but no deal had been reached by press time.
  

• Meanwhile, insurers in several states blamed reform for premium rate hikes. The Rhode Island Blues plan, for example, reportedly told customers it would raise premiums by a few percentage points on top of already approved rate hikes to account for additional benefits mandated by the reform law. BCBSRI and other Rhode Island insurers that planned to impose similar rate hikes came under fire from Insurance Commissioner Christopher Koller. In a Sept. 9 letter to chief executives at the state’s three largest insurers, Koller said that any changes to approved premium rates “as a result of PPACA [i.e., the reform law] will be considered material and an exception to the OHIC’s previous decision….They may not to be applied in quotes to customers unless and until approved by this office.” The insurers also must submit “analysis supporting the additional premium rate charge anticipated for each contemplated change and why it should cause average rates to increase by more than the amount approved.” BCBSRI spokesperson Kimberly Reingold told The AIS Report that “the guidelines under federal health care reform will add cost to employers and we currently are working with them to understand the specific impact to premiums, which will vary based upon benefits selected by each employer. Every time an employer changes their coverage, or we are mandated to cover new services…rates are adjusted.” She added that “those rates could be anywhere from 1.8% to 3% more depending upon plan design.”

NY VNA Study: Home Visits Reduce Hospitilaztion Rates

Well you have to consider the source here but this study(http://www.healthleadersmedia.com/page-2/TEC-257573/Predictive-Modeling-May-Reduce-Hospitalizations) seems very positive. Key article takeaway:

Preliminary analyses from their investigation revealed that patients who received physical therapy were 37% less likely to be hospitalized compared with patients who did not receive physical therapy services."

What Employees Will Find at OE This Year

This is a good article (http://www.kaiserhealthnews.org/Features/Insuring-Your-Health/open-insurance-season.aspx) on open enrollment issues this year. It notes that family coverage has increase 12% over last year and with employees picking up more and more of the cost of their coverage, paychecks will be smaller for many next year.

It also notes how more and more employers will offer incentives for healthy activities such as an health assessment.

Despite Patient Interest Few Doctors Use Email

The Center for Studying Health System Change released a report (http://www.hschange.org/CONTENT/1159/)that showed less than 7% of physicians use email to communicate with their patients. Why is this figure so low? Lack of reimbursement was cited as one of the issues. What a surprise

Aetna Study: Account Funded Plans Save Money

Aetna just released a five year study that showed customers who replaced their previous plan options with an Aetna HealthFund (AHF) Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA) experienced lower annual cost trends over five years, producing savings of nearly $18 million per 10,000 members.

While this obviously is positive news for supporters of this kind of coverage, this article (http://www.sacbee.com/2010/10/04/3077647/price-comparisons-nearly-impossible.html) does a good job of showing how difficult it still is for consumers to obtain medical procedure cost information. Until easy to understand and easy to obtain medical cost and quality information is available, it will be hard for these types of plan to dominate the marketplace.

Good Article on Mini Med Plans

The NY Times (http://www.nytimes.com/2010/10/06/business/economy/06leonhardt.html?_r=1&ref=business) has a good overview of mini-med plans and how they do not fit in the future of health insurance once the Affordable Care Act kicks. Last week it was major news that McDonald's was ready to drop such coverage for their employees. The benefit limits for these plans was either $2,000 or $10,000/yr. The article noted this really was not coverage since a major procedure would easily pass either amount.

Mini med plans really are not a good alternative to standard HC insurance. However as the article notes, standard HC coverage is too expensive for most people to afford. In 2014 both the mandate for HC coverage and subsidies to help pay for the premiums kick in. Until then, people will have to muddle through with either no coverage or mini med coverage which is really not a good scenario.

More Updates on Health Insurance Exchanges.

From various sources:

NAIC publishes draft legislation for comment
Monday, the National Association of Insurance Commissioners (NAIC) published its draft model legislation to assist states in establishing insurance exchanges by January, 2014. Under PPACA and the NAIC draft legislation, a state may establish an exchange within or outside of state government or a combination of the two. NAIC will accept comments until October 6.

HHS awards grants to assess data requirements
Thursday, HHS awarded $1 million grants to 48 states and DC to assist in preparation for health exchanges infrastructure. The initial funds will be used to assess information and data requirements in each state.

California accelerates exchange timetable
Thursday, Gov. Arnold Schwarzenegger (R) signed two bills that will make California the first state to establish a health insurance exchange per PPACA (Utah, Massachusetts had exchanges pre-PPACA). The exchange will create a web-based insurance plan marketplace for residents, offering standardized and detailed information about available plans, as well as a toll-free hotline to help consumers understand their options. Approximately 8.3 million Californians are expected to be eligible for coverage through the exchange. The program is expected to bring as much as $10 billion in subsidies for the state over ten years. An independent, five-member board will oversee the California exchange with responsibility for naming insurers that will participate, eligibility, and enrollment processes.

Congressional Research Service report: Can state exchanges prohibit plan participation?
According to the Congressional Research Service (CRS) analysis of PPACA, a state exchange could deny participation by every plan submitting certification if the exchange were to determine that every plan is not in the “interest of plan participation.” However, CRS analysts concluded the HHS Secretary could use her authority to prevent such a scenario.

The Challenges of Creating Health Insurance Exchanges

The Commonwealth Fund has just released a report (http://www.commonwealthfund.org/Content/Publications/Fund-Reports/2010/Sep/Health-Insurance-Exchanges-and-the-Affordable-Care-Act.aspx) on the eight difficult issues that have to be resolved in the creation of health insurance exchanges.

Of the eight issues, the most important one is guarding against adverse selection. If the exchanges only attract the least healthy risks, they certainly will fail. Therefore it is imperative that the same kinds of policies be offered both in and outside of the exchange to guard against this.

Massachusetts and the Movement Towards Developing Global Payments

I have blogged in the past about how health care reforms efforts in MA are a good harbinger of what the rest if the country will face in the next few years as the ACO is enacted. While reform efforts in MA increased access as hoped, costs have continued to sky rocket. Earlier this year the MA DOI denied rate health insurance company premium increases for both the individual and small group markets saying they were too high. HIs took the state to court saying the denials were illegal. Both parties reached a compromise that allowed an average increase of 12%. This settlement of course did nothing to address the issue of increasing medical costs.

One of the major reasons health care costs have continued to grow is the reimbursement system for providers, fee-for-service. Simply put providers are rewarded for how much health care they provide so over utilization results. A change in the reimbursement structure is therefore required that would reward providers for the quality of the care they provide. One such alternative is a global payment which would be given to an ACO responsible for the care of its members.

Both state and HI officials have been working on establishing such a system. So what is the latest in the state?

Dr. Judy Ann Bigby, secretary of health and human services for Massachusetts heads a working group of state officials and healthcare executives tasked with doing just that. They met this month to begin drafting a payment reform plan.

Some private insurers in the Bay State are already trying out global payments for the care of chronic conditions such as diabetes and high blood pressure. Blue Cross Blue Shield of Massachusetts, which covers three million Mass. residents, has moved 32% of its HMO business to global payments. Tufts Health Plan says that 20% of its business, mostly through its Medicare Advantage program, is contracted on a global payments basis, according to the Boston Business Journal.

This is going to be a long slog but it will be interesting to see where things go and what lessons can be learned for the rest of the country.

More News on MLR Regs and State Exchanges

The National Association of Insurance Commissioners, which is working with the Department of Health and Human Services on implementing key parts of the health law, is still considering how to determine the kinds of insurers' expenses that are considered medical care.

The Hill's Healthwatch blog: Brian Webb, of the NAIC, said commissioners are still debating three topics -- If insurers should be able to aggregate their ratios nationwide or state by state; how taxes from premiums should be handled; and how to avoid penalizing plans for fluctuations in revenues. "The draft is expected to be adopted as is on Monday by an NAIC panel, but it could change before the whole body votes on it in mid-October. The health reform law mandates that health plans spend at least 80 percent of premiums on care (85 percent in the large-group market) or pay rebates to customers. The NAIC is tasked with writing the regulation, to be certified by Health and Human Services Secretary Kathleen Sebelius" (Pecquet, 9/28).

Marketplace/American Public Media: "The intent of the rule is to make sure most of the money paid for health insurance is spent on health care. Not advertising, not salespeople, not CEO salaries, not profits. ... The biggest question: What exactly qualifies as a health care expense? Insurers and their lobbyists want as broad an interpretation as possible. Consumer advocates are on the other side. ... But under the [NAIC] proposal, insurers can't count things like fighting fraud as a health care expense. Marketing doesn't count, either. So, it might be harder for insurers to count brochures that promote wellness, for instance, as care" (Marshall Genzer, 9/28).

In the meantime, Bloomberg reports that health insurance exchanges are opening a new market for Internet-based vendors. "The federal government is preparing to award states up to $1 million each next month to study setting up the exchanges. The health legislation requires they be operating by 2014. States can run the sites themselves under the law signed by President Barack Obama in March, or leave the task to the U.S. government. EHealth, which reported $134 million in revenue from its insurance-shopping business last year, already has gained from the law, winning a $19 million U.S. contract to help build and operate a federal website where users can review state-by-state insurance options. ... The Congressional Budget Office estimates 24 million Americans will buy coverage through the exchanges." Only Massachusetts and Utah have statewide exchanges already in place (Edney, 9/29).

CA Moving on Health Insurance Exchange

The states that are resisting the new health-care law are getting a lot of press lately. But on some level, that's a sideshow. The more consequential story is what's happening in the states that are implementing the new law. And here, as is often the case, California is leading the way from the Washington Post:

Under two bills that the California legislature passed and Schwarzenegger is apparently expected to sign, the state's exchange authority would have explicit permission to “contract with carriers so as to provide health care coverage choices that offer the optimal combination of choice, value, quality, and service.” That mandate, combined with the bills' other provisions, means the exchange authority would be able to negotiate pretty aggressively over price and quality, excluding plans that don't serve consumers well. That's more or less what corporate benefit departments and the managers of public employee programs, like the Federal Employee Health Benefits Program, do for their members.

A wide array of interest groups, including consumer advocates like Health Access and nonprofit insurers like Kaiser Permanente, support the measure because they believe it will reward quality and help hold down the price of insurance--a verdict that a new market analysis from Citi seems to confirm:

“Limiting the number of companies that participate would seem give the exchange the power to negotiate more favorable terms with the plans as a basis for selection. In addition, the legislation appears to put significant focus on premium rates, with measures in place for premium rate reviews that will attempt to limit the magnitude of future rate increases.”

Chart on NIH Funding by Disease Prevalence

I blogged about an ongoing series by economist Aaron Carroll the other day. This chart is from his discussion of investment in health which includes such things as NIH funding and money for community health. The following chart just amazed me:

While funding for HIV/AIDs research is important, is it over 200 times more important than the research for heart disease?

Some State Commissioners Want to Phase In MLR Requirements

From the Commonwealth Fund website:

Two states—Maine and Iowa—have asked the Obama administration for more time in implementing a key provision in the health care law that spells out how much health insurers must spend on medical care and quality improvements, state insurance commissioners said after a White House meeting with the president on Wednesday.

A third state, Florida, is gathering additional concrete information and evidence to submit to the administration to bolster its case.

Leaders of the National Association of Insurance Commissioners (NAIC) said at a news briefing that President Obama told them during the meeting that he wants the federal government to be "thoughtful" and "realistic" as the difficult work of the health law's implementation goes on.

The commissioners said their concern is that small companies in the individual market, especially in smaller and more rural states, may founder if they must too quickly meet regulations dealing with what are known as medical loss ratios, or MLRs.

http://www.commonwealthfund.org/Content/Newsletters/Washington-Health-Policy-in-Review/2010/Sep/September-27-2010/State-Insurance-Commissioners-Suggest-Phase-in.aspx

Poll Results Show Majority of People Think HC Reform Did not Go Far Enough

With the earliest provisions of the ACA kicking in last week I thought it was interesting to see how the law is being perceived by the public. So here are some results:

The Associated Press: As Republicans seek to use the health law as a major talking point to help them win more seats in Congress, a "new AP poll finds that Americans who think the law should have done more outnumber those who think the government should stay out of health care by 2-to-1." The poll found four in 10 adults think the law didn't go far enough to change the system "regardless of whether they support the law, oppose it or remain neutral. On the other side, about one in five say they oppose the law because they think the federal government should not be involved in health care at all." The AP poll was conducted by Stanford University and the Robert Wood Johnson Foundation and has a margin of sampling error 3.9 percentage points (Alonso-Zaldivar and Agiesta, 9/26).

USA Today: In the meantime, another poll -- this from the Kaiser Family Foundation -- has found that the health law "regained support among more Americans this month," but opponents are more likely to vote in November. (KHN is a program of the Kaiser Family Foundation.) "As some initial provisions took effect six months after its enactment, the law was favored by 49% to 40% in the [KFF] monthly tracking poll. That margin shrunk to 46%-45% among likely voters." Democrats remain the more trusted party on health care and Medicare, according to the poll, and four in 10 Republicans said they were more likely to vote because of the law, compared with three in 10 Democrats. "Seniors continued to oppose the law, 49% to 38%, and to view the parties equally on health care issues" (Wolf, 9/27).

NPR's Shots Blog: "Perhaps it's not so surprising that Americans would be a little happier about overhaul in the same month that some of the first changes, such as an end to lifetime limits on coverage, start to kick in. But they're still not a majority. ... About one-quarter of Americans -- 26 percent -- believe health overhaul should be repealed, the [Kaiser] poll finds. And the thing that most people seem to agree on is that they really don't understand what overhaul is all about. Some 53 percent said they feel that way, up 8 percentage points from August" (Hensley, 9/27).

Roll Call: Democrats, however, are hoping for a bump in the law's popularity ahead of the midterm elections after several consumer-friendly provisions took effect last week. "House Democrats said they don't know whether it was the result of luck or strategic planning that widely supported consumer protections in the health care bill are kicking in as lawmakers enter the final stretch of campaigning. ... Couple these changes with a renewed push by the Obama administration and outside advocacy groups, and voila: Many Democrats are ready to publicly embrace an issue they largely ceded to Republicans and their accusations of a costly, big-government takeover." Democrats are using the provisions to paint the differences between themselves and Republicans (Bendery, 9/27).

NAIC MLR Regulations: Score One for the Health Insurers

The NAIC released a draft of its regulations for determining medical loss ratios. According to Reuters the HIs fared well:

Under a draft plan released on Thursday, insurers would be allowed to deduct nearly all federal and state taxes except for federal income taxes on investment income and capital gains in making their calculations.

"It's written the way insurers wanted it to be written, and so that is good for the insurers," said Amy Thornton, an analyst at Concept Capital's Washington Research Group.

The Healthcare law, passed in March, sets strict limits on how insurers allocate customers' premium dollars toward medical care versus administrative costs and profits, spending levels known as the medical loss ratio (MLR).

MLR is seen by Wall Street as an important indicator of a company's profitability. The new limits are due to go into effect in January.

Insurance companies have urged broad definitions that they say offer flexibility to provide better care while strict rules could force some to exit the market. Consumer advocates and Democrats want tighter limits to ensure that insurers spend enough on patient claims.

The plan was put forth by a committee at the National Association of Insurance Commissioners (NAIC). NAIC is comprised of state insurance commissioners from across the country.

NAIC spokesman Jeremy Wilkinson said the plan was a draft of what the organization intends to give the U.S. Department of Health and Human Services (HHS). It must be finalized by the NAIC and formally adopted by HHS.

Under the Healthcare law, large insurance plans must spend 85 cents of every premium dollar on health care while smaller plans can spend 80 cents on the dollar.

Ipsita Smolinski, a healthcare analyst for Capitol Street, said NAIC's proposal contained no major surprises and gave insurers "a fairly generous definition" of what counts as medical expenses that can raise the quality of care.

However HIs will have to account for their so-called "medical loss ratio" at each plan, rather than as an overall company. That stings, because the ratios vary widely across company's many offerings. For example, in New Jersey, Aetna has a plan that spends only 70 percent of its premium revenue on medical care, and one that spends a whopping 139% of revenue on care.

The regs will now go to HHS for final approval by the end of October.

Great Series of Post Explaining Why US HC Costs Are So High

I think this is a must read given the first three blogs in this series that I have read. (http://theincidentaleconomist.com/wordpress/what-makes-the-us-health-care-system-so-expensive-introduction/) The posts are to the point and well illustrated with charts and graphs. So far the author, Aaron Carroll, has covered inpatient care, outpatient care and drug costs with more posts to come. Really good stuff.

New CMS Chief: Let's Work Together to Reform Health Care

From a speech given by Donald Berwick at a recent AHIP sponsored function:

My door is wide open," Berwick said, to anyone "who will join authentically join" the administration to update the health care system. "Those who welcome change and will agree to meet it will find a friend."

However, he said, "Those who wish only to preserve the status quo . . . cannot be effective partners."

At one point during the meeting, tensions between Obama administration health officials and the health insurance industry became clear when an industry representative questioned Berwick. He asked what the new CMS administrator would do to alleviate the image within the administration as a "villain," change the culture within CMS to "acknowledge there are forces for good within the insurance industry," and reduce the "tone of hostility" shown toward health plan executives.

"Let's look ahead, not back," answered Berwick, who was sworn in two months ago. He said that if the administration and insurers steadily work together to make care better, "trust will resurface . . . If we do this together and make care better, the rest will follow."

I think this is a good message. Fighting the reform measures after the legislation will not do health care plans any good. HC Plans are going to have 39 M new potential customers. That really is not a bad situation. To make it the best it can be carriers should work w/CMS not fight them.

BCBS of NC Refunds Premiums

Health insurance regulators in North Carolina have identified nearly $156 million in refunds owed to Blue Cross policyholders because of changes coming under the nation's new health law. Consumers with policies at other companies across the nation also may deserve refunds, says North Carolina Insurance Commissioner Wayne Goodwin. ... The health care law will dramatically change how health policies are sold in 2014, and many plans in effect now will cease to exist that year in their current form. Yet state regulators who scrutinized a recent rate increase request by Blue Cross and Blue Shield of North Carolina say they discovered the insurer was collecting reserves to pay claims beyond 2014. ... The result: Blue Cross has agreed by year's end to send refunds to more than 215,000 North Carolina policyholders with individual plans in force on March 23 -- the date the new health law was enacted.

Accountable Care Organizations (ACOs): A Good Primer

ACOs are seen by many as being the answer to controlling health care costs and improving the quality of delivery. But what are ACOs and how do they differ from HMOs? Here is a post that provides good background on the concept (http://blog.healthintegrated.com/index.php/2010/09/16/the-aco-how-big-a-role-will-it-play/#more-691).

Two comments I have to make about the post. While the author notes that providers not only are responsible for care but also the risk for it, he does not note the difficulty in coming up with a payment structure acceptable to these providers. He also talks about how Kaiser has this concept in hand. However when I worked at Kaiser there was no proof (much to the chagrin of the sales force) that the ACO model provided better care at lower cost.

HI Claims Expected to Rise 10% in the Next 12 Months

In a survey of about 60 health organizations around the country earlier in the year, Aon Consulting, a subsidiary of insurance broker Aon Corp., found that insurers expect to pay out 10.7 percent more in claims for preferred provider organization, or PPO, managed care. Many factors contribute to the rising cost of providing insurance, including expensive medical treatment, health issues related to obesity and an aging population, the number of unemployed taking advantage of short-term benefits and the effect of the new health care law.

To combat this increase, insurers say they will negotiate better rates with providers and move towards having their accounts use select networks which provide high quality care at an efficient price. Some companies are even having their CFOs sit in on the provider negotiations.

Health Insurance Costs: Not Going Down Yet

One of the challenges with health care reform was that it was sold as a way to reduce the cost of health care in this country. Given this, consumers are expecting their health care costs to drop in the next few years. Unfortunately, since the major cost containment provisions of the act will not take place until 2014 and then on a pilot basis, it will be awhile before we see the cost curve "bent".

Some of the provisions that are now available, like tax credits for small (25 or less employees) employers are now available, However, a recent Commonwealth Fund study estimated that although more than 16 million workers are employees of businesses that will be eligible for the tax credit, only 3.4 million work for business that will take advantage of the credit to stabilize or expand coverage. This is a significant number of people, but it represents only about 2 percent of the current U.S. civilian labor force.

There are other provisions of reform that should help to lower the cost of insurance. The reinsurance program to assist employers with retiree health costs may indirectly lower costs to employees, and the high-risk pools may marginally reduce the cost shift from uncompensated care. Over the long-term, the cost-controlling provisions linked to reform of the medical delivery system should provide enormous benefits to employers and employees and taxpayers.

Although the absolute costs to employers and employees will rise, so will the value that they get for this spending due to provisions such as eliminating caps on lifetime benefits. Often overlooked in conversations about the cost of health insurance is the quality of coverage. Though the average cost of health insurance is predicted to rise in response to new regulations and people’s electing to choose more comprehensive coverage, the cost for comparable health insurance will fall. This is a subtle distinction and, as such, has been the subject of much unsubtle political debate.

Commonwealth Fund Study: We Need Better Criteria in Selecting Physicians

A study released by the Commonwealth Fund (http://www.commonwealthfund.org/Content/Publications/In-the-Literature/2010/Sep/Associations-Between-Physician-Characteristics.aspx) found that the normal ways people select their doctors ( e.g., medical school, malpractice history, board certification) have little correlation with the type of care they will receive. Given this the authors say it is important that consumers look at clinical quality measures when selecting a physician instead. Unfortunately, this data is not easily accessible.

Kaiser Survey: Employees Paying More for Coverage

The Kaiser Foundation just released its annual survey of employer health insurance costs and how these costs were shared. The major finding was that while the cost of coverage went up 3 percent, employee contributions towards their coverage increased 14 percent.

http://www.kff.org/insurance/090210nr.cfm

Since 2005, workers’ contributions to premiums have gone up 47 percent, while overall premiums rose 27 percent, wages increased 18 percent, and inflation rose 12 percent.

And while most employees have PPO coverage (58%), it is interesting to note that HDHPs coverage increased from 8% to 13% between 2008 and 2010.

In short, employees continue to pay a greater and greater share of their coverage at a rate that far outstrips their wage increases.

How One Company Controls Health Costs

From Forbes magazine here is an article about how providing employees with an HSA accounts turned them into smart consumers and lowered their annual health costs:

http://www.forbes.com/2010/09/09/health-care-cost-containment-leadership-managing-human-capital-10-employees.html

What I found interesting was that they were able to get good data on costs and quality which often is a major isse for an employee looking to make an informed provider decision.

Employers Turning to Wellness Programs

According to an article in the Witchita Eagle (http://www.kansas.com/2010/09/09/1484748/ness-fits-strategy.html) more and more employers are instituting wellness programs for their employees--up to 81% nationally. The article provides a good summary of the issues involved in establishing a program. But it was encouraging to see more and more employers viewing the health of their employers in this way:

"Employers are starting to view health as a competitive economic advantage," he said. "They're finally starting to focus on the demand side of the equation instead of the cost side."

Healthy workers are not only less expensive they are more productive. This obviously is of great concern to small employers where an absence of just one employee is a major issue. However providing health promotion programs to small employers at no cost is an issue for most health plans. Small employers switch carriers on an annual basis and therefore the payoff of a health promotion program several years down the road makes little economic sense for a health plan who very likely no longer has the group as an account.

More Data on Doctor Quality Rankings

Kaiser Health News has a good column today on how people select physicians. It amazes me that the number one way is still "the across the fence" recommendation from friends and neighbors. Why is this when more and more insurers provide physician ratings? According to the column by Michelle Andrews (http://www.kaiserhealthnews.org/Features/Insuring-Your-Health/andrews-column-on-physician-ratings.aspx):

"Often insurers will do a two-step process," says Ha Tu, a senior health researcher at the Center for Studying Health System Change, a nonpartisan research and policy organization based in Washington. First, they "make sure doctors meet a quality threshold, but not a very high one. Then they'll weed them out further based on cost."

Complicating the situation for consumers is the fact that every insurer measures these variables differently, and there are no agreed-upon standards for which combination of attributes makes a top-notch doctor. In fact, a physician who receives a top rating from one insurer may receive a middling or even low score from another, says Elizabeth McGlynn, associate director at Rand Health, a division of Rand, a think tank based in Santa Monica, Calif.

It's no surprise then that doctors are resistant to many insurer efforts to rate physicians. In a recent letter to 47 health plans, the American Medical Association and 46 state medical societies asked the plans to improve the accuracy, reliability and transparency of physician ratings. To support this call for change, the letter pointed to research by Rand that examined physician cost profiles and found that health-plan ratings were inaccurate up to two-thirds of the time.

The quest for a common, accepted definition of quality continues.

Wellness Programs Report Key Findings

One of the major ways employers are trying to control their health care costs is through the implementation of wellness programs. However, there are many questions and issues concerning both their implementation and their cost effectiveness. The Center for Studying Health System Change has just released a report (http://www.nihcr.org/Employer-Wellness-Initiatives.html) that had the following key findings about these programs:

Programs need to be customized to suit the culture and situation of a particular employer: One-size-fits-all programs purchased off-the-shelf from health plans and wellness vendors are unlikely to make a significant impact either in participation or outcomes. Least likely to make an impact are programs consisting only of online HRAs and Web-based educational tools, with no individualized follow-up activities to engage employees.

Clarity from senior leadership in linking wellness to the organization’s business strategy is important: Organizations with successful programs tend to have senior leaders whose championing of wellness is tempered by reasonable expectations and accompanied by an ability to communicate clearly and honestly with employees about shared goals and responsibilities of health and wellness. In contrast, selling wellness to employees as initiatives for their sole benefit, or selling wellness in an environment of discord or financial turmoil, are likely to be futile. Mutual trust is key to effective wellness programs.

Effective, ongoing communication is essential at several levels: In addition to strong messaging from senior leadership, successful programs tend to have both dedicated wellness staff and informal champions within the company who are able to raise awareness, boost enthusiasm and provide peer support. Communication must be both ongoing and updated to keep the message fresh and keep employees engaged. Effective communication typically cannot be outsourced to a vendor.

Programs that are comprehensive, integrated and diversified stand the best chance of success: Behavior modification programs offered in isolation don’t have a strong track record. Participants who quit smoking or lose weight often revert to former behaviors. Without broader interventions to change the work environment and promote a culture of health, wellness programs are unlikely to make a lasting impact. Because most employers have diverse workforces and because individual needs and preferences differ, wellness programs work best when they span a wide range of activities.

Most believe financial incentives are essential, but compelling exceptions exist: The consensus in the wellness industry was that substantial cash incentives are needed to achieve strong participation, and these incentives should be designed to incrementally reward discrete activities that improve or maintain health. However, some employers operate successful programs with minimal or no cash rewards attached and believe such rewards to be counterproductive in causing employees to focus on the incentive rather than on health. Employers with successful programs emphasized the importance of non-financial incentives, such as corporate and peer recognition for wellness achievements.

Return on investment is uncertain and measurement poses many challenges: Employers should expect to invest in wellness for several years before achieving a positive ROI, if at all. Employers looking to wellness as a quick fix for high health costs are those least likely to see positive returns, as they are also the least likely to have undertaken the measures to gain true employee engagement in health. There are many challenges in accurately capturing ROI or alternative measures of impact, and because wellness programs are often implemented simultaneously with other benefit changes, isolating the impact of wellness programs on an employer’s cost trends may not be possible.

The most interesting of these to me are that cash rewards are not always necessary to have employees participate and how critical it is to have senior management involved in stressing the importance of the initiative. It just cannot come from HR.

Aetna Raises Its 2010 Profit Projections

Aetna has invested hundreds of millions of dollars in its "data mining" capability to help reduce the medical costs of its members. The big question of course is this investment actually paying off? In an earlier post I mentioned that BC of California gained substantial business from Aetna in January because its promised savings in managing care were not realized. The known savings from the superior BC provider discounts trumped the supposed ones from Aetna's ability to better manage its medical costs.

Given this Aetna's announcement today of higher profitability was of interest. Part of the reason according to the press release was:

the company improved pricing and management of medical costs, said Fred Laberge, an Aetna spokesman, in a telephone interview. “It’s working with the data and the physician groups and the hospitals to have a better understanding of what to expect.”

I wonder how much of the changed forecast was due to improved pricing versus management of medical costs. Stay tuned for future announcements from Aetna on this.

Like Teachers, Docs Don't Like Being Graded

Physician groups are reacting negatively to the increasing trend of tiered or high performing networks:

Doctor groups are slamming insurers for increasingly using rankings "to steer patients toward certain physicians based on cost or quality," The Wall Street Journal reports.

A letter, sent Monday "by several organizations including the American Medical Association, is the latest shot by doctors at such grading efforts, which have led to years of tensions between physicians and health plans. Insurers, for their part, said they are already working with doctors to ensure their ratings are accurate and transparent."

The ratings may be used to divide "doctors into tiers based on factors such as quality and cost. For example, doctors deemed to be more efficient than average, perhaps because they order fewer questionable imaging scans, might rank in a higher tier. Performance, including favorable patient outcomes, also could boost a doctor's rating. In such 'tiered,' or 'limited,' network setups, consumers may get lower out-of-pocket charges if they see a doctor in a preferred ranking. Patients would typically pay more out of pocket to see doctors who are ranked lower. At the most extreme, consumers may have to pay the full cost of seeing a physician who doesn't make the favorable list." But in their letter, doctors cite a study suggesting that the ratings are unreliable and often inaccurate (Mathews, 7/20).

The New York Times: "Citing research from Rand, the physician groups ... argue that the methods are too flawed to be used to direct patients to individual doctors. 'Physicians' reputations are being unfairly tarnished using unscientific methodologies and calculations,' the societies said." The research, "which looked at physician profiling by commercial insurers in Massachusetts, points out numerous shortcomings. The researchers conclude that 'the work strongly suggests that current methods of physician-cost-profiling are not ready for prime time'" (Abelson, 7/19).

I know every time I mentioned developing these networks at my former health plan employer owned by providers, the network director would run away. She did not want to deal with the politics of it. But it can be done. Priority Health in Michigan has had such a network in place for at least 6 yrs. And it is provider owned.