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Population Health Insider, October 2009

Inside:

California pushes to enact strongest anti-rescission law in the nation

AHIP study: Medicare Advantage provides better care than FFS Medicare

LifeMasters files for Chapter 11 bankruptcy

Four ways to get more young adults health coverage

New efforts to insure young adults may beat reform

Feds lift WellPoint’s Medicare Advantage, Part D suspension

Hospitals could suffer from public plan

Indiana program shows health reform without individual mandate is costly

Nine health leaders respond to Obama’s reform speech

How to stop rising healthcare costs

Group charges health insurers are violating state labor code

Taxing health benefits would hurt poor working families more than the rich

Chiropractors allege ERISA, RICO violations in Blue Cross suit

Public option would add $1 trillion to deficit

Older women have more difficulty obtaining insurance

Americans doubt reform will improve quality, cost

Public plan is being Swift-boated

Inspector general criticizes three states for improper Medicaid claims

Eliminating fees for overlapping services could save millions for Medicare

California pushes to enact strongest anti-rescission law in the nation

A bill that may become the strongest legislation in the nation to prevent health plans from dropping coverage to members who become ill passed the California Senate recently and may soon be headed for the governor’s desk.

If signed by Gov. Arnold Schwarzenegger, as its sponsors anticipate, the legislation would set up an independent board, managed by two state agencies, which would have to approve any health plan’s cancellation of an enrollee’s plan. Only when insurers prove the applicant intentionally misrepresented his or her health on the questionnaire would cancellation be approved. If an insurer tried to cancel a policy without getting approval, the state Department of Managed Health Care and the Department of Insurance would impose administrative penalties.

“This legislation will ensure that health plans and insurers do not act as ‘judge and jury’ whenever they want to rescind or cancel a policy,” the bill’s author, state Assemblyman Hector De La Torre, said in a statement.

The California Association of Health Plans (CAHP) in Sacramento, which represents 39 health insurance companies, is strongly opposed to the bill not because of the requirement for panel review, but because of the difficulty of proving someone intentionally withheld health information in an attempt to deceive.

“It’s hard to prove because it’s virtually impossible to prove what was in a person’s mind or heart,” says Nicole Kasabian Evans, spokesperson for CAHP. “Setting the standard to be based on what information was known or available at the time a person applied for coverage is a more reasonable standard.”

“ Unfortunately, there are some cases where enrollees are not accurately disclosing their health status, and it drives up the cost of insurance for everybody else. It is important to note that health plans rarely rescind policies,” says Charles Bacchi, CAHP executive vice president. “Only one-tenth of 1%—a tiny fraction—of individual policies are rescinded. However, with just 5% of beneficiaries accounting for more than half of healthcare costs, it only takes a few people misrepresenting their health status to make everyone else have to pay more.”

The bill would also standardize the set of health history questions all insurance plans doing business in California are allowed to ask and require plans and insurers to complete medical underwriting prior to issuing a contract. That’s because in many cases, applicants may not know or remember what is in their medical record with enough detail to be honest about it on the application. Such cancellation practices have become increasingly common, with health insurers dumping their members on grounds that they were not forthcoming in their applications about previous health issues, regardless of whether they remembered them and whether they have any bearing on their current illnesses.

Unlike similar language in some of the national health reform bills that call for a guaranteed issue, which would not take effect until 2013, the California legislation would take effect in January 2011. De La Torre of South Gate, who sponsored the bill with the California Medical Association (CMA), says studies of such rescission practices estimate that 1,000 people in the state annually now have their insurance policies cancelled by their health plans because of such practices. Under this new law, they would have no interruption in their care.

“For example, there was a gentleman in his 50s who forgot to mention on his application for health insurance that he had knee surgery when he was 18,” De La Torre says. “They held him accountable and cancelled him after he got cancer, even though there was no connection between the surgery and the cancer. They were happy to take peoples’ insurance premiums as long as they are healthy, but not after they got sick.”

Texas and Connecticut have new rules barring rescissions, but without the teeth of the independent agency that would be required to approve any insurance plan’s petition to cancel a person’s coverage, De La Torre says.

“Insurance companies in California have a long track record of rescinding health coverage after people get sick,” says Dev GnanaDev, MD, president of the CMA in Sacramento, which helped sponsor the Assembly Bill 2 (AB 2). “The practice of rescission puts patients at risk, leading to increasing medical costs for the patient, doctor, and hospital, while the insurer makes a profit.

“Unfortunately, fines and lawsuits have not deterred such practices, and settlements amount to a slap on the wrist after the damage is already done,” GnanaDev says. “Assembly Bill 2 would protect patients when they need it most, making certain that health plans and insurers do not act as judge and jury whenever they want to rescind or cancel a policy.”

Enactment of the bill into law is not a slam dunk. Schwarzenegger vetoed similar legislation last year. However, after that veto, he and his staff worked with the governor’s office to make certain changes in the bill that resolved Schwarzenegger’s objections, De La Torre says.

“We have to hold him to his word that was why he vetoed,” De La Torre says. “Now he should not have any excuse for not signing this. And for all the health reform debate going on now about this same practice, people are all the more sure they want to protect those who have health insurance” from such arbitrary cancellations.

Current law prohibits insurers from post-claims underwriting, which includes rescinding, canceling, or limiting a plan contract due to the plan’s failure to complete medical underwriting and resolve all reasonable questions arising from the application, De La Torre said in a statement.

“It is well publicized that health plans and insurers have paid large bonuses to their employees for rescission of policies, practice illegal rescission, and put patients in harm’s way by rescinding their health coverage when they need it most.”

Last year, the state Department of Managed Health Care reached settlement agreements with some of the state’s largest health plans that were accused of illegally cancelling the health policies of some 3,400 Californians after they became ill. The agency ordered the plans to restore coverage and pay back all medical expenses the cancelled policyholders incurred in their efforts to receive treatment.

Consumer Watchdog, a Santa Monica–based advocacy group, has collected numerous stories of patients whose policies were cancelled, such as the case of Selah Shaeffer, age 4. Blue Cross allegedly cancelled her parents’ Blue Cross policy, stating that they had intentionally withheld information about her jaw tumor on their application. “However, the family doctor did not diagnose the tumor until months after the policy had taken effect,” the advocacy group said.

Another is the story of Ana Maria Simoes, who needed gall bladder surgery. Blue Shield said her husband failed to disclose his own high cholesterol on their policy and denied her gall bladder coverage on those grounds, even though her husband, a Portuguese immigrant with limited English skills, did not know he had high cholesterol at the time. “His doctor simply told him that he was prescribing Lipitor because men his age often needed it,” the advocacy group said.

“Without AB 2, insurers will continue to rescind coverage even if patients honestly filled out their applications for coverage,” says Consumer Watchdog spokesperson Jerry Flanigan.



AHIP study: Medicare Advantage provides better care than FFS Medicare

The health insurance industry’s lobbying group says new government data support its claim that Medicare Advantage provides better coordinated, more efficient care, along with its average 14% higher per-person cost.

America’s Health Insurance Plans (AHIP) says its analysis of data gleaned from the federal Agency for Healthcare Research and Quality (AHRQ) shows that seniors enrolled in Medicare Advantage programs in California and Nevada spent fewer days in the hospital, had fewer hospital readmissions, and were less likely to have potentially avoidable admissions for common conditions such as uncontrolled diabetes and dehydration when compared with seniors enrolled in traditional fee-for-service (FFS) Medicare.

The AHIP analysis comes as the health insurance industry is furiously lobbying Congress in opposition to proposed cuts to Medicare Advantage, which a March MedPAC report said cost about 14% more per person than traditional Medicare. The Congressional Budget Office estimated that Medicare will spend an additional $54 billion through 2012 for Medicare Advantage plan payments above traditional Medicare spending.

“The entire Medicare program, including Medicare Advantage, should be carefully evaluated as part of comprehensive healthcare reform,” says Karen Ignagni, president and CEO of AHIP in Washington, DC. “However, seniors in Medicare Advantage should not be forced to fund a disproportionate share of the costs to reform the healthcare system.”

AHIP says Medicare Advantage is cost-effective because its emphasis on preventive care and disease management for seniors with chronic illnesses keeps their conditions under control and reduces hospitalizations and potentially harmful complications.

Marc Steinberg, deputy director of health policy at Families USA in Washington, DC, says singling out California and Nevada as examples of Medicare Advantage effectiveness is misleading because both states have a long history with Medicare managed care that predates the 2003 creation of Medicare Advantage.

“They are looking at a very specific geographic area that is not representative of the nation as a whole,” Steinberg says. “There are plans in California like Kaiser Permanente that do get pretty good results, and if we could replicate that model across the nation, we might have something. You would hope you would get something for 14% extra.”

The problem is that new Medicare Advantage plans—lured by the higher profit potential—often lack the expertise, staff, capital, networks, and coordination of care that makes Kaiser Permanente so effective, says Steinberg.

The AHIP study analyzed hospital admissions in California and Nevada compiled by AHRQ and compared utilization rates among enrollees in Medicare Advantage plans and Medicare. AHIP says its study factored in age, sex, and 70 Hierarchical Condition Categories that are used in Medicare risk adjustment.

AHIP said the AHRQ data show that:

  • Hospital days were reduced by 30% in California and 23% in Nevada for Medicare Advantage beneficiaries when compared with traditional Medicare enrollees
  • Medicare Advantage readmissions in the same quarter for the same condition were 15% less often in California and 33% less often in Nevada compared to Medicare
  • In both states, Medicare Advantage seniors were 6% less likely than seniors in Medicare to be admitted to the hospital for conditions described by AHRQ as “potentially avoidable,” such as dehydration, urinary tract infection, or uncontrolled diabetes

AHIP says the AHRQ data also found that Medicare Advantage seniors with chronic conditions in California and Nevada:

  • Spent an average of 18% fewer days in the hospital than seniors in Medicare
  • Had an average of 27% fewer visits to the ER than those seniors in Medicare
  • Experienced a 42% lower rate of hospital readmissions than seniors in Medicare
  • Had avoidable admissions that were 13% lower than those seniors in Medicare

AHRQ officials did not dispute the AHIP report, saying they had found similar results on preventable admissions for 13 states. However, the agency added that its latest research—which is still under review—did not find the same favorable results for Medicare Advantage enrollees as in other studies. AHRQ also noted that several studies show Medicare Advantage plans don’t follow the same random selection process that is used for traditional Medicare enrollees, making any accounting for risk variability difficult.

Robert Zirkelbach, spokesperson for AHIP, says California and Nevada were chosen because “those are the only states that have the data publicly available where you can actually track patient readmissions.

“We are trying to see if we can get into other states,” says Zirkelbach. “Right now, California has historically had some of the best data sets in the nation to allow these analyses. We are going to continue to try to get as much data as we can nationally.”



LifeMasters files for Chapter 11 bankruptcy

One of the leading population health management companies announced it has filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. LifeMasters® Supported SelfCare, Inc., based in South San Francisco, alleges that the costs associated with participating in CMS’ demonstration projects is one reason for the decision.

George Pillari, the new LifeMasters president, says LifeMasters owes CMS $125 million for participating in three demonstration projects during the past four years, as well as “another few million” to other creditors.

Pillari, managing director at Alvarez & Marsal Healthcare Industry Group, LLC, has been working with the company and its board as a restructuring advisor prior to the filing, and replaces Christobel Selecky, an industry leader and longtime president and CEO of the company. Selecky will remain on the company’s board of directors and will work as a senior advisor on a consulting basis for the company.

Over the past four years, LifeMasters has participated in three CMS demonstration projects that tested disease management (DM) in the senior and dual-eligible populations, most notably the Medicare Health Support demonstration project, in which CMS reported that the DM programs did not demonstrate success based on CMS’ study design and measurement methodologies.

“Rather than endure a costly and time-consuming legal path to challenge CMS, we have chosen to restructure
our CMS and other liabilities through the Chapter 11 process,” Pillari says. The company, along with others involved in the Medicare Health Support project, which tested DM in the senior population, need to repay fees to CMS “earned in excess of savings generated during the multiyear projects.”

Pillari says the Chapter 11 process will give LifeMasters “resolution with CMS” and allow the company to move forward “just fine.”

LifeMasters has to transition from a company that a year ago had one-third of its business coming from Medicare to moving forward without any Medicare business because its demonstration projects have ended.

The commercial business is progressing, and LifeMasters cut staff associated with Medicare. “I think the rest of our business runs pretty well,” Pillari says.



Four ways to get more young adults health coverage

Health insurers know the importance of signing up so-called “young invincibles” to their health plans, but many of these sought-after individuals are not interested—either because they can’t afford health insurance or they simply think they don’t need coverage.

Health insurance companies understand that having these low-cost prospective members paying into the system could decrease member health insurance costs across the board.

Young adults aged 19–29 are one of the largest segments of the U.S. population without health insurance, according to The Commonwealth Fund’s Rite of Passage? Why Young Adults Become Uninsured and How New Policies Can Help.

A whopping 13.2 million, or 29%, of young adults lacked health insurance coverage in 2007. Many of them lost coverage at or after age 19 when they graduated from high school or college. In fact, turning 19 increased the uninsured rate nearly threefold, according to the report. Young adults might think they don’t need insurance, but The Commonwealth Fund thinks otherwise. Not having insurance creates barriers to care and leaves young adults and their families exposed to hefty out-of-pocket costs, according to the report.

There are also health reasons for why young adults need insurance. Fifteen percent of young adults have at least one chronic health condition, such as asthma, cancer, or diabetes; young adult mothers gave birth to 2.6 million children in 2007; and injury-related visits to the ER are more common among young adults than any other group (1,453 per 10,000), according to The Commonwealth Fund.

How can health insurers and policymakers change this trend? Here are two ways health insurers can do it:

Promote individual health insurance to young adults and their parents. Health insurers need to do a better job at promoting their offerings. This goes beyond creating a cute, fuzzy mascot to preach the importance of Acme Health Insurance. That may make young adults aware of you, but that still doesn’t mean they know that they are eligible to sign up for those plans. They may view health insurance as something for their parents.

One way to promote your services to young adults and parents is knowing state-dependent laws and reaching out to parents and children about individual health insurance options when children reach their late teens.

After you have informed them, it’s time to take the next step. When the child exceeds the dependent age and loses coverage, the insurer should create a mechanism (e.g., a phone call, e-mail, or traditional mail) to reach out to parents and young adults about their health insurance options. Many don’t realize there is an individual insurance option available to them, so it’s up to insurers to tell them.

Not only would you benefit from gaining young adults as members, but your company could also acquire a lifelong member.

Make individual health insurance more desirable. Once young adults have signed up for insurance, it’s important to give them what they want and in the form of communication they want.

This means investing in technology and allowing young adult members to work with their health insurer on their own schedule via the Web; venturing into the social media world of Facebook and Twitter; and creating applications that allow individualized communication.

Every industry is moving toward individualism. Young adults will expect it from their health insurers, too. That’s the best way to reach them.

The following are two pieces of state legislation that could improve health coverage access to young adults:

Increase the age that young adults can be considered dependents for insurance purposes. New Jersey and New Hampshire allow residents to include their children under their health insurance up to age 30. Another 24 states have similar laws with less liberal age requirements. Most of them allow parents to cover their children until age 25.

States have created these laws because many young adults lose their parents’ coverage once they graduate from college. The transition from school to the workforce often includes low wages and no health benefits and leaves many young adults without health insurance. Providing a safety net by increasing the dependent health insurance age could resolve that issue.

Allow mandate-lite health plans. Some states have options that allow insurers to offer health plans with few state mandates, which reduces the costs of offering those plans.

There are about 2,000 mandated healthcare benefits and providers throughout the country, and those mandates increase healthcare costs by more than 50% in some states, according to the Council for Affordable Health Insurance.

Some of these mandates include services such as hair and limb prostheses, bone mass measurement, and care for TMJ disorders; providers such as dentists, optometrists, and marriage therapists; and covered persons such as noncustodial children and adopted children.

The benefit of mandate-lite plans is that they are low-cost options for young adults who simply want preventive and catastrophic coverage. The downside is that they might not cover certain services, such as maternity care. Educating young adults about these plans is critical if your state provides mandate-lite options.

These are a mere four ways health insurers and policymakers can tackle the issue—short of implementing a federal individual mandate that would require all Americans to have health insurance. All four ideas could be implemented without much difficulty or capital.

In a time when the healthcare industry is facing fewer employer-based members and a potential public insurance option, think about how the infusion of millions of uninsured young adults would benefit health insurers. These proposals could add new members who are lower cost than the general member population—especially elderly and sick members.



New efforts to insure young adults may beat reform
proposals to the punch

One of the largest groups of uninsured in the country today is young adults—those aged 19–26. Although they make up about 18% of the adult population, they account for up to 28% of the uninsured: an estimated 10.3 million young adults—or about one in three (32%)—lacked health insurance coverage this year, according to figures from the Urban Institute.

“Because young adults face so many transitions—graduation, job changes, and in this economy, unemployment—they are especially vulnerable to the risks of being uninsured,” Commonwealth Fund President Karen Davis said earlier this summer in response to a study of this group. Davis noted that “comprehensive health reform would go a long way toward ensuring that young adults have stable, affordable health coverage” that would give them access to the care they need.

It appears that the dilemma of young people has not been far from the minds of health reform–makers on Capitol Hill. For example, in the healthcare reform bills approved by the Senate Health, Education, Labor, and Pensions Committee and the House, provisions were included that call for:

  • Allowing young adults to stay on their parents’ health insurance policies until age 26—during the years when they are least able to afford their own coverage
  • Using an insurance exchange to give young adults the option of enrolling in lower-cost insurance plans—with recognition that young adults often have few health needs and are less able to afford coverage at the start of their working careers
  • Making health insurance available to those without job‑based coverage, with premium assistance available to those who can’t afford it

However, even if reform measures are approved at the federal level, it will take time for these provisions to be enacted. Actions have been going on elsewhere to provide younger individuals with healthcare coverage.

Earlier this summer, New York became one of about two dozen states requiring commercial insurers and managed care organizations to offer an option to continue coverage for unmarried young adults—in this case, through age 29—regardless of financial dependence under a parent’s group health insurance policy. This adult child does not have to be a student, must not be eligible for other coverage, and must either work or reside in the state.

Florida, New Mexico, and Washington also have extended insurance coverage to adults who are not students up to age 25. In Florida, a provision is available to extend that coverage until children reach age 30.

But changes also are occurring at the collegiate level. For example, at 11 campuses of the University of North Carolina (UNC) this fall, students who do not have their own coverage or coverage through their parents will be required to have coverage, which can be obtained through a new plan “designed to leverage the UNC system’s buying power,” according to UNC. This coverage will be factored into financial aid packages.

Students will have a $300 deductible and be covered for up to $100,000 under the UNC package. A 2008 study by the General Accountability Office found that more than half of collegiate plans had a maximum benefit of less than $29,000.

Young adults who are not in school full‑time after graduation from high school are much more likely to be uninsured primarily because it is much more difficult for them to obtain access to employer coverage: 37% of part‑time and nonstudents aged 19–23 were uninsured, compared with 18% of full‑time students, according to a recent study from The Commonwealth Fund.

“Loss of health insurance coverage impedes young adults’ access to the health system at precisely the time they should be establishing their own relationships with physicians and puts them and their families at significant financial risk,” said study author and Commonwealth Fund vice president Sara Collins.

Although young adults are healthier than older adults, about 15% have chronic conditions such as asthma, and more than half weigh more than what is considered to be healthy. In addition, 2.7 million births are attributable to women in this age group, and young adults have the highest rates of injury-related visits to the ER of any age group, according to the study.

In the absence of comprehensive change or reform in the health insurance system, the following three policy changes could “incrementally extend coverage” to a portion of uninsured young adults and prevent others from losing coverage in the future, according to the study:

  • Extending eligibility for Medicaid/State Children’s Health Insurance Plan public coverage beyond
    age 18.
  • Having states ensure that all colleges and universities require full‑ and part‑time students to have health insurance and offer health insurance coverage to both.
  • Extending eligibility for dependents under private coverage beyond age 18 or 19.



Feds lift WellPoint’s Medicare Advantage, Part D suspension

WellPoint, Inc., will resume marketing its Medicare Advantage and Medicare Part D health plans October 1 and begin enrolling new customers November 15 for the 2010 contract year after CMS lifted a nine-month ban on new enrollments.

In a letter to WellPoint, CMS program compliance and oversight director Brenda J. Tranchida noted, “WellPoint has made sufficient progress in correcting its deficiencies to merit lifting the marketing and enrollment sanctions.” However, Tranchida also noted that “a recent CMS audit identified some continuing deficiencies in WellPoint’s appeals and grievances processes.”

As a result, WellPoint will remain under its existing corrective action plans for its appeals and grievances processes, she said. The insurer will also disclose to CMS any new significant compliance issues. CMS will periodically ask WellPoint for specific data to ensure that the deficiencies do not recur.

CMS also told WellPoint that it will not be automatically assigned new low-income subsidy members, although those low-income members can again choose WellPoint products during the upcoming Annual Enrollment Period. CMS imposed the sanctions January 12 after a rash of consumer complaints about cost hikes and denied drug benefits. WellPoint blamed the snafus on a series of computer glitches, but CMS said at the time that it was suspending enrollment because the health insurer had failed to take corrective measures.

A CMS review of the insurer in January found “widespread and continued failures by WellPoint to properly administer their contracts in accordance with CMS requirements.” CMS had identified WellPoint’s noncompliance in several areas, including enrollments and disenrollments; benefits administration, including determining premiums and copays; grievances and appeals; marketing; claims processing; coordination of benefits; billing; and meeting call center and customer service requirements.

Indianapolis-based WellPoint is the nation’s largest health benefits company, with more than 34 million members in its affiliated health plans. It owns Blue Cross and Blue Shield plans in 14 states. In January, WellPoint had 1.9 million beneficiaries in its Part D plans and 472,000 in its Medicare plans.



Hospitals could suffer from public plan

The financial effect of a public plan on private insurance premiums depends in large part on how many currently insured enrollees are allowed to migrate to a government exchange, according to a report published in the online edition of the journal Health Affairs.

On the plus side, the rapid increase of uninsured people in a government-run plan, with no enrollment of those who currently have private insurance, would be a big win for hospitals that now must pay costs of caring for the uninsured from other funding sources.

“However, as the privately insured enroll in the public plan in rising proportions, this positive effect is eventually reversed, and hospital patient revenue margins decrease,” the report warned.

The study was conducted by Allen Dobson and colleagues of Dobson DaVanzo and Associates, LLC, in Washington, DC, and cofunded by America’s Health Insurance Plans (AHIP), which is adamantly opposed to a public plan. However, in a disclosure, the authors noted, “The study was completed under contract between AHIP and Dobson DaVanzo and Associates” and “none of the authors has an individual financial interest in, relationship with, or affiliation with AHIP outside of the contract.”

The study, which included five scenarios illustrating various effects on hospitals, was based on statistics from 282 California hospitals, including 91 that receive disproportionate share funds through contracts with the state. It excluded federal, Kaiser Permanente, and state psychiatric facilities.

Financial data were obtained from Office of Statewide Health Planning and Development, a California state agency whose data are “widely recognized as among the most complete and robust publicly available all-payer health finance data,” according to the report.

“California contains more than 10% of the U.S. population, and its healthcare system has often indicated trends to come in the rest of the nation—from the growth in managed care in the 1980s to the rapid increase in the number of uninsured people in the 1990s.”

“Predictions about the number of privately insured people who will enroll in a public plan vary greatly,” the report stated. Key unresolved issues include the size of employers allowed to access the national insurance exchange, the shape and scope of play-or-pay provisions for employers, and whether the government-run plan will pay at Medicare rates or a negotiated rate.

Further, by year three, according to the proposal in the current House bill, the U.S. Department of Health and Human Services will determine the size of firms whose employees will be allowed to switch over to a proposed insurance exchange.

The report also suggests a negative effect on the 91 hospitals in California that receive so-called DSH funds, or disproportionate share money, allocated to facilities with significant numbers of the uninsured.

“Disproportionate share hospitals might lose patients as the previously uninsured become covered by the public plan. This loss of patient revenue and the resultant decrease in the scope of operations would reduce safety-net hospitals’ ability to provide critical services, such as outreach, transportation, language services, and special programs for the disadvantaged,” the report stated. “The shift of patients out of disproportionate share hospitals into other hospitals because of public plan coverage would likely increase those other hospitals’ revenue; to what extent is unknown.”

Further, the report noted, the negative effect on these hospitals would increase if DSH payments are taken away at the same rate as the number of uninsured enroll in a public plan.

“A government-run plan that is aggressively implemented to include large proportions of the privately insured could test the U.S. healthcare financing system,” the paper concluded. “Rising hospital private payer payment-to-cost ratios could be followed by rising private insurance premiums. The result could be the antithesis of what advocates say is the advantage of a public plan: to curtail cost growth for the average citizen.”



Indiana program shows health reform without individual mandate is costly

Everyone knows about the highs (more insured) and lows (higher costs) in the Massachusetts reform program, but there are other states that have their own reform plans, albeit on a smaller scale. To create a health reform plan that will insure more Americans, improve quality, and lower health costs, Congress and policymakers must learn from successes and failures in state health reform programs.

One program they can learn from is the Healthy Indiana Plan (HIP), a Medicaid expansion program that is operating under a federal waiver allowing the state to cover the uninsured who don’t qualify for Medicaid. Unlike the Massachusetts plan, which features an individual mandate that requires nearly all residents to have health insurance, Indiana’s plan focuses on getting coverage to a needy population that isn’t eligible for Medicaid.

Massachusetts has experienced growing pains as the individual mandate has brought previously uninsured people, many of whom had delayed care, into insurance. But demanding that nearly all buy health insurance has also allowed insurers to balance the costs of the more expensive members with healthier individuals who are paying into the system but not using many services.

In Indiana, HIP covered more than 35,000 previously uninsured individuals by the end of its first year. Many had delayed medical care and preventive services before signing up for HIP. Milliman recently released a review of the program’s first year, which shows the dangers of health reform programs. One problem is anti-selection. Anti-selection relates to the highest-risk, most expensive people seeking healthcare care as soon as they get coverage, which brings higher health costs initially. The good news is that after these sicker people get the care they need, their health costs decrease over the year—and healthier individuals come aboard within a few months.

Anyone creating a health reform plan must understand that the first year, especially the first few months, will bring in people with the most serious medical problems and who will require the most expensive medical care, says Rob Damler, FSA, MAAA, principal and consulting actuary at Milliman in Indianapolis.

Milliman compared Indiana’s HIP population against the typical commercial population and found much higher inpatient services, ER visits, and pharmacy costs. Milliman discovered the HIP population was more likely to have chronic diseases, such as asthma, depression, and diabetes, than the typical commercial population. The first people to enroll in the program in the first few months had a higher morbidity rate. (See Figures 1 below and 2–3 on p. 12.)

Milliman’s research found that inpatient, outpatient, pharmacy, and physician expenditures peaked around the second and third months and then decreased over the year. This shows that the sickest previously uninsured Hoosiers jumped at the new offering and received care immediately. Those in better health waited until later in the year to join.

Milliman found that inpatient use decreased in the seventh to ninth months of enrollment, outpatient costs dropped after the third month, and pharmacy costs increased steadily in the first nine months.

Damler warns that any health reform plan should take anti-selection into account. He also suggests that an individual mandate, which is in place in Massachusetts and has been debated as part of federal health reform, would have brought a broader cross section to HIP from the start. Any health reform plan would be “difficult to protect against anti-selection in insurance without the use of some type of mandates,” he says.

An individual mandate coupled with personal responsibility and spending appropriate levels at the initial periods are keys to health reform’s success, Damler says.

Mandates have been debated by federal lawmakers, but there has not been broad support for requiring health insurance for all Americans.

However, as the Milliman study shows, if you are going to bring the healthy into the health insurance pool, policymakers will need to find ways to woo them into the water. Without demanding they buy coverage, don’t expect the healthy to buy health insurance.



Nine health leaders respond to Obama’s reform speech

In an attempt to guide the healthcare debate that has veered off the tracks in recent weeks, President Obama spoke to a joint session of Congress July 22 about a comprehensive health reform bill.

Obama discussed the need for cooperation and improving the current healthcare system rather than creating a new one, such as a single-payer system. The president’s plan would include three basic goals:

  • More security and stability for those with health insurance
  • An insurance exchange for those without insurance
  • Slowing healthcare costs

Obama didn’t touch upon one of the more controversial parts of the healthcare reform debate, the public insurance option, until 30 minutes into his speech. He described a public option as part of an insurance exchange.

Throughout his speech, Obama took aim at the health insurance industry, such as its costs to consumers and employers, insurers not providing coverage to those with preexisting conditions, and the subsidies given to private insurers that provide Medicare Advantage.

The 45-minute speech was Obama’s first in-depth national speech about healthcare reform after spending the previous few months on the sidelines as Congress worked on multiple reform proposals. So after finally hearing directly from the president, what do health leaders think? Following are thoughts from nine health leaders.

Ken Graham, CEO, El Camino Hospital

President Obama’s message reminded us all that health reform is crucial to the economic health of America, and that the goal is not to reinvent the system, but to improve upon what is working and fix the inefficiencies that exist.
As such, we embrace reform and the opportunities it presents for innovation, which not only leads to a higher quality of care and healthier lives, but also has the ability to decrease waste in the system. Closely tied to innovation is the adoption of evidence-based measures.

This will allow us to identify the inefficiencies, correct them, and reduce variation in the system, thereby reaching a level of care that works for both providers and patients. Embracing innovation, I believe, will be essential to finding a solution that achieves the larger goals: cutting costs, raising quality of care, and advancing healthcare delivery.

Doug Hawthorne, president and CEO,
Texas Health Resources

Obama did an excellent job of assessing the current landscape and acknowledged that fixing healthcare is central to fixing our economy. He clarified for the audience his interest to build on what works with our system and fix only what is broken. He provided a clearer definition of a public plan, although it is still not convincing. He attacked the insurance industry and stated that it would have to comply to certain changes or it would be out of the picture.

In summary, the president was determined in his words, but it is not definite what a plan would do and very unrealistic as to how it will be paid for. His most effective statement for me from a provider point of view was his desire to create safer care and a more coordinated and integrated model.

Tim Size, executive director, Rural Wisconsin Health Cooperative

The president made it clear he stands on common ground for our country by “building on what works.” A new government-run plan that undermines the private sector now seems less likely. A major shift of patients into
a plan paying Medicaid- and Medicare-type rates would harm rural patients’ access to local healthcare. Reform affecting rural communities must and can be built on quality outcomes and efficiency while delivering care locally. As the president concluded, “I believe we can replace acrimony with civility, and gridlock with progress.”

Karen Ignagni, president and CEO,
America’s Health Insurance Plans

We agree the status quo is not sustainable. That is why health plans last year did something industries rarely do: stepped up and offered solutions to address the healthcare concerns raised by the American people. We proposed health insurance reform to guarantee coverage to all Americans, eliminate preexisting condition exclusions and rescissions, and no longer base premiums on a person’s health status or gender. To keep coverage as affordable as possible, these reforms must be paired with an effective coverage requirement to get everyone into the healthcare system.

New health insurance reforms and consumer protections will solve the problem without creating a new government-run plan that will disrupt the quality coverage that millions of Americans rely on today. We share the concerns that hospitals, doctors, employers, and patients have all raised about the significant unintended consequences of a government-run plan.

Healthcare reform must also include a serious commitment to cost containment to ensure that coverage is more affordable and to put our healthcare system on a sustainable and fiscally responsible path. New taxes on healthcare coverage will have the opposite effect by making coverage less affordable for families and small businesses across the country.

Health plans will continue to work with policymakers and stakeholders to advance comprehensive, bipartisan healthcare reform. The nation cannot afford to let this historic opportunity pass us by.

Bruce McPherson, president and CEO, The
Alliance for Advancing Nonprofit Health Care

We are pleased that the president is seeking to exercise greater leadership in crafting healthcare reform legislation, and many of the principles he outlined,suchas health insurance market reforms,are needed and appropriate. Clearly,more details of his plan need to be unveiled, including medical malpractice tort reform, healthcare delivery reforms,and precisely how to pay for his $900 billion plan. Our one major disappointment in his speech was his apparent unwillingness at this pointtoremove from the tablethe public health plan option or similar ideas. Hopefully, he will drop this unnecessary and inappropriate concept in the weeks ahead, and in the process achieve bipartisan support and substantially enhance the odds of the passage of reform legislation this year.

His claim and example in the speechof a lack of adequate private insurance competition in many states is not supported by the facts, nor common sense.

If there are real competition problems that wouldn’t already be resolved through the insurance market reforms he outlined, then there is an existing, appropriategovernment solution—referral of any allegations to federal or state antitrust regulators for investigation.

Tracey Moorhead, president and CEO,
DMAA: The Care Continuum Alliance

We welcome the president’s support for expanded coverage of preventive care and his recognition of prevention and wellness as important tools for controlling the cost of chronic illness. But improving quality and reducing costs require broadscale reform that moves our system from reactive care to promotion of health as a shared national resource. This will require payments and incentives aligned across all providers, purchasers, and consumers toward a goal of improved health.

Joseph Kvedar, founder and director,
Center for Connected Health

I have never heard President Obama give a poor address. He gave a fine address. It was, however, long on discussion of improving access. He gave great detail on access. When it came to cost reduction, the details were frighteningly lacking. For instance, there are credible data that screening tests he referred to do not in fact reduce costs but probably add to them.

My other observation is that the whole speech was based on the construct that illness is the accident. I tend to be more concerned about the 50% of costs that are based on unhealthy behaviors or the part of healthcare that is less of an accident and more from irresponsibility. Any program that will truly affect cost must address this.

I’d say a very compelling case was made for health reform 1.0. These are important reforms and hard to get done, but they should only be viewed as a first step.

Bob Stone, cofounder and executive vice
president, Healthways

The president outlined a clear set of principles for what has now clearly been acknowledged as health insurance reform rather than healthcare reform. Arguably, a bill that included these provisions would go a long way toward addressing the issues of the uninsured, the underinsured, and those with insurance who have been treated less than scrupulously by bad actors among the insurance industry. It is less than clear, however, whether this plan will do anything to lower healthcare costs.

In fact, the absence of any reference to meaningful health promotion, prevention, or chronic care management plans was disappointing given the years of evidence that supply-side and financial fixes—other than price controls—don’t work (and even price controls didn’t work long). Without a commitment to making America
a healthier country—not just one where illness is more affordable to treat—it is unlikely that real cost savings or quality improvement will manifest. Unfortunately, that commitment was absent from the president’s speech.

There are also clearly inappropriate and unnecessary costs in the current system, and all should support the president’s call to weed those out so that those dollars can be applied to the cost of his proposed plan. I am less than sanguine, however, that such an effort will have any great or sustained success. Even if it does, you can only capture those dollars once.

Although that may help defray costs over the next decade, what happens after that if the plan doesn’t actually reduce cost? And while we’re on the financial points, if my math is right, the $1,000/year currently being paid by the insured to subsidize care for the uninsured totals about $1.5 billion per year (assuming 155 million commercially insured, which may be a little light), or about $1.4 trillion over the next decade. Are all the insured folks going to get that money back? If not, what will it be used for? Are the insurance companies going to pay it to the government to fund the new plan?

Stan Nowak, CEO, Silverlink
Communications, Inc.

The president delivered a powerful speech on the critical need for healthcare reform. He’s right to focus on the issue of access and the costs of doing nothing. But it’s just as perilous to our country to do nothing about the true drivers of healthcare costs—the personal health decisions made daily by all Americans.

By incenting individuals to make better health decisions, we can save our country millions of lives and billions of dollars, ultimately bending the cost curve to make real progress in healthcare reform.



How to stop rising healthcare costs

The usual short-term measures to address rising healthcare costs, such as reducing prices, will not be sufficient to bend downward long-term healthcare spending. Instead, President Obama and Congress should use more aggressive reforms that will slow spending growth while improving quality, a group of 10 national health policy experts is recommending. The group’s effort was convened by the Engelberg Center for Health Care Reform at Brookings in Washington, DC, with support from the Robert Wood Johnson Foundation. In their plan, called “Bending the Curve: Effective Steps to Address Long-Term Health Care Spending Growth,” they call for transitioning to a “system of greater accountability,” which will provide greater flexibility for private and public stakeholders “to experiment with programs and measure results—to see what works best.”

As a foundation for improving value, all stakeholders in the system need better information and tools to be more effective, they propose. Provider payments then should be “redirected toward rewarding” all improvements in quality and reductions in cost growth.

In addition, the group calls for health insurance markets to be reformed and government subsidies restructured “to create competition and improve incentives around value improvement rather than risk selection.” And they suggest that individual patients be “given greater support for improving their health and lowering overall health care costs.”

To get there, the group is calling for a series of steps to accomplish those goals:

  • Building a foundation for cost containment and value-based care. Holding spending growth while improving value will require information and tools, such as health information technology systems, they said. However, providing these tools is not enough; stakeholders will also need better incentives to use them.
  • Reforming provider payment systems to create accountability for lower-cost, high-quality care. Reorienting providers’ financial incentives and support toward improving value is essential and requires a short- and long-term strategy, the experts noted.
  • Improving health insurance markets. “Governments should ensure proper incentives for nongroup and small group health insurance markets to focus on competition based on cost and quality rather than selection,” they said. Achieving this will require near universal coverage and insurance exchanges, they added. Also, lawmakers should reform Medicare Advantage to improve incentives for lowering costs.
  • Supporting better individual choices. Individuals need support for “making better choices as patients and consumers,” they said, that would enable them to get better care and stay healthier at a lower cost.



Group charges health insurers are violating state labor code

A California-based consumer group is asking the state’s attorney general, Jerry Brown, to investigate health insurance companies that have asked their employees to lobby against healthcare reform.

Consumer Watchdog singled out UnitedHealthcare and WellPoint/Anthem for their national campaigns to help employees write and speak out against health reform, including at town hall meetings. The group charges that the insurers’ actions are “almost certainly illegal under the California Labor Code.” Consumer Watchdog research director Judy Dugan said California’s employee protections “against coerced participation in politics are the strongest in the nation.”

“Both companies are urging their employees to lobby members of Congress and offering corporate assistance in doing so, including talking points and even the placing of phone calls for the employees,” Consumer Watchdog wrote in its letter to Brown.

“WellPoint and UnitedHealthcare are no doubt tracking which employees respond to their demands,” Dugan said in a statement. “To call such action ‘voluntary’ defies common sense.”

The Wall Street Journal reported in August that the health insurance industry has been sending thousands of employees to town hall meetings and other forums to petition members of Congress to not support the public insurance option. America’s Health Insurance Plans (AHIP) also issued a “Town Hall Tips” that warns health insurance employees who attend the meetings to expect harsh criticism directed at them and asks employees to remain calm and not yell at the elected officials. Robert Zirkelbach, AHIP’s director of strategic communications, told the paper that about 50,000 employees have written letters and made phone calls to politicians or attended town hall meetings.

Consumer Watchdog alleges that these actions by the insurers violate Sections 1101 and 1102 in the state’s Labor Code, which forbid companies from preventing employees from taking part in politics or directing them in political activities.

Although UnitedHealthcare labeled employee participation as “voluntary,” Consumer Watchdog said the company was able to “monitor compliance,” and its “instruction to take action on company time override any such disclaimer.”

The health insurers’ efforts are merely a way for them to squelch health reform, Dugan said.

“These companies are intent on preserving their profitability, wastefulness, and inefficiency, at the cost of taxpayers and patients,” said Dugan. “Now, in addition to their multimillion-dollar lobbying campaigns in Washington, they are enlisting their tens of thousands of employees to lobby as individuals.”

The health insurance industry has been working cooperatively on health reform to “advance bipartisan, comprehensive healthcare reform” and has proposed guaranteed coverage, eliminating the preexisting condition exclusion, and an individual mandate to require all Americans to have insurance, according to AHIP.

“The men and women in our community are proud of the work they are doing every day to help make the healthcare system better.They want to be constructive participants in the healthcare reform discussions, and they have a right to have their voices heard,” Dugan said.

In response to the charges, UnitedHealth Group said in a statement that it is proud of its employees’ involvement in the healthcare reform debate and it has not encouraged employees to attend anti–health reform rallies:

We have stressed repeatedly that we strongly support bipartisan reform efforts to modernize healthcare and improve access to quality care on a sustainable basis for all Americans. We have made information available to employees for them to participate, voluntarily,only in publicly announced Congressional town hall meetings, or to write or call their elected officials. As our CEO wrote to all employees, “We encourage you to continue to lend your practical know-how and point of view to the healthcare reform debate, as always, in a respectful and collegial manner that elevates the discussion and that is consistent with the social values we hold as a company. Our mission is to help people live healthier lives. To do that, we know we have to listen closely to the people we serve and work together with them … We must remain mindful to bring that same spirit of service, respect, and cooperation to this important public discussion.”

When contacted for a statement, WellPoint responded, “WellPoint has not been contacted by the California attorney general and has not seen any complaint, therefore we cannot respond to any questions at this time. We believe it is important and permissible to provide up-to-date information about health reform to our associates.”

California Labor Code Section 1101–1102

1101. No employer shall make, adopt, or enforce any rule, regulation, or policy:

(a) Forbidding or preventing employees from engaging or participating in politics or from becoming candidates for public office

(b) Controlling or directing or tending to control or direct the political activities or affiliations of employees

1102. No employer shall coerce or influence or attempt to coerce or influence his employees through or by means of threat of discharge or loss of employment to adopt or follow or refrain from adopting or following any particular course or line of political action or political activity.



Taxing health benefits would hurt poor working families more than the rich

Imposing a tax on health benefits, as some in the health reform debate propose, would hurt lower-income people much more than it would impose burdens on the wealthy, according to a new study published online recently in the New England Journal of Medicine.

Ending tax subsidies for employer-paid health insurance “would inflict a regressive tax increase, taking a larger share of income from insured near-poor and middle-class families than from the wealthy,” wrote David Himmelstein and Steffie Woolhandler, family doctors who practice at Cambridge (MA) Hospital. Himmelstein and Woolhandler are also professors at Harvard Medical School and cofounders of Physicians for a National Health Program, an organization of 16,000 doctors and medical professionals who favor single-payer national health insurance.

In fact, it would impose a tax 140 times higher on insured, working-poor families than on Wall Street executives, such as a Goldman Sachs executive insured with his company’s $40,543 health plan and who received a subsidy of about $15,367 last year.

In a chart published with the article, they show that federal tax subsidies for employer-paid health insurance in 2004 were $953 and $2,116 for families with annual incomes under $10,000 and between $10,000 and $19,999. That represents 18.3% and 13.8%, respectively. However, for those making more than $99,999 (with a mean income of $168,987), the subsidy was $4,498, or
only 2.7%.

“Many health economists, ranging from Democratic advisor Jonathan Gruber to the Heritage Foundation, have argued that tax subsidies for employer-paid health insurance encourage over-insurance and are highly regressive, directed mainly to higher-income families,” they wrote. “We beg to differ. The subsidies meet the usual definition of progressivity; they taper down (as a percentage of income) as income rises.”

They added that the confusion may arise from “the dazzlingly large sums that high-income families gain from these tax subsidies.” They report that, according to a 2004 analysis, 26.7% of the $50 billion in federal tax expenditures for health benefits went to 14% of U.S. families with incomes of $100,000 or more. Conversely, the 57.5% of families with incomes below $50,000 received only 28.4% of the subsidies. “In other words, on average, families whose income was at least $100,000 got $2,780, while those making under $50,000 received $102 to $1,448,” according to the study.

The idea of taxing employer-sponsored health benefits has been a cornerstone of the most controversial provisions in the health reform package. President Obama recently said he is willing to consider the idea, although on the campaign trail he said he opposed it.



Chiropractors allege ERISA, RICO violations in Blue Cross suit

A class-action lawsuit has been filed against the Blue Cross Blue Shield Association (BCBSA) and 22 BCBS insurers nationwide by three chiropractic organizations looking to recover potentially hundreds of millions of dollars that were allegedly taken from them through Employee Retirement Income Security Act (ERISA) and Racketeer Influenced and Corrupt Organizations Act (RICO) violations.

In a suit filed in U.S. District Court in Chicago, the Pennsylvania Chiropractic Association (PCA), the New York Chiropractic Council, and the Association of New Jersey Chiropractors allege that the BCBSA misused postpayment audits to coerce repayments from providers for services that had already been provided to enrollees. The chiropractors allege that BCBSA worked with its state BCBS licensees in the recoupment efforts.

“In essence, the BCBS entities simply state there are overpayments and then just take the money from providers without valid due process protections,” says the plaintiffs’ lawyer Brian Hufford, Esq., of Pomerantz Haudek Grossman & Gross, LLP. “We believe this is a blatant violation of law.”

Co-counsel Vincent Buttaci, of Buttaci & Leardi, says the recovery could be considerable. BCBSA announced June 30 that its National Anti-Fraud Department had recovered nearly $350 million as a result of the anti-fraud investigations in 2008.

“We believe a substantial portion of this recovery falls within the improper practices we are challenging in this action,” Buttaci says.

BCBSA did not immediately return calls seeking comment.

The chiropractors groups claim that the postpayment audits and review process applied by BCBSA violates ERISA because the insurer doesn’t have a proper appeals process or other protections required under ERISA.

The suit also alleges that BCBSA frequently withheld new benefit payments for unrelated services to apply toward the alleged overpayments, even where there was no validation that any sums are in fact owed by the providers. Those practices, the suit alleges, violate RICO.

“We met on numerous occasions with Blues senior management in an effort to establish a fair and balanced approach to conducting postpayment reviews, but to no avail,” says PCA executive director Gene Veno. “The PCA elected to join this action to ensure that the rights of our members are protected.”



Public option would add $1 trillion to deficit

The long-term cost to the federal government of a healthcare reform bill that includes a public option health plan would add $1 trillion to the deficit between 2020 and 2030 because healthcare costs would outpace revenues, according to new estimates by The Lewin Group.

The report, Long-Term Cost of the American Affordable Health Choices Act of 2009: As Amended by the Energy and Commerce Committee in August 2009, found that America’s Affordable Health Choices Act of 2009 (HR3200) would constrain the growth in the federal government’s healthcare costs to about $39 billion between 2010 and 2019 but would fail to keep costs from growing faster than funding sources in the long-term, beyond the normal 10-year budget projection period. The Lewin Group, which is owned by UnitedHealth Group, one of the country’s health insurers, also estimates that:

  • 30 million people would gain insurance coverage in 2011 under the act, which would reduce the uninsured population by 60%.
  • 41 million people would obtain health insurance through newly created health insurance exchanges, including 21 million in the public plan. Medicaid enrollment would grow by 10 million.
  • Families in which all members now have insurance would save an average of about $176 under the reforms, whereas families with one or more uninsured members would, on average, see an increase in family health spending of $1,410 per family.
  • Overall, employer health spending would increase by an average of $305 per worker. Employers that now offer insurance would see an increase in health spending of $123 per worker, whereas employers that do not now provide coverage would see an increase averaging about $813 per worker. The study notes that most economists believe that employers would offset the cost increases with slower wage growth. As a result, families and individuals would ultimately bear the burden of higher healthcare costs. Small businesses that now provide insurance would save up to an average of $811 per worker due to a tax credit.
  • The number of people covered in employer-sponsored plans—outside of the health insurance exchanges—would fall by 11 million, and overall enrollment in private plans would decline by about 900,000.

The act would result in a net savings to state and local governments of about $62.6 billion from 2010 through 2019, due to savings in safety-net programs. States would save about $125.7 billion over the 2020–2029 period.



Older women have more difficulty obtaining insurance

U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius traveled to Maine in September to release a new report on health insurance reforms related to older women (aged 55–64) and senior women (aged 65 and older). The report’s message, which gave another nudge to Obama administration’s healthcare reform efforts: The current health insurance market “does not work for older women.”

The report, Strengthening the Health Insurance System: How Health Insurance Reform Will Help America’s Older and Senior Women, noted that women were less likely to be eligible for employer‑based health benefits than men and that the individual insurance market is not a reliable alternative. It said that less than half of women have the option of obtaining employer-based coverage on their own.

“Our mothers and grandmothers have unique health needs, and under the status quo, they aren’t getting the quality, affordable care they deserve,” said Sebelius, who participated in a roundtable discussion in South Portland sponsored by AARP and the Maine Women’s Lobby.

Overall, women appeared to be more susceptible to incurring high medical costs, even when they have health insurance, the report stated.

A recent study found that nearly half of all women reported problems paying medical bills, compared with 36% of men, and one-third of women were faced with making a difficult trade-off between using up their savings, taking on debt, or giving up basic necessities. The issue of high out‑of‑pocket costs was particularly prevalent among older women, who were more likely to be lower‑income than men of the same age (28% versus 23%). Also, 42% of older women had two or more chronic conditions, compared with only 32% of older men, which adds to healthcare costs.

Overall, older women were more likely to incur greater out-of-pocket costs. More than 5% of older women lived in households with high out‑of‑pocket costs, compared with 4% of older males. For older women living alone, 8% had high out‑of‑pocket costs, compared with 5.5% for men.

Among other healthcare problems affecting women:

  • Prevention is underemphasized. Measures that can go a long way to help make sure cancer is caught early, such as preventive screenings, are not being used often enough by older women. One in five women aged 50 and above have not received a mammogram in the past two years, and 38% of adults 50 and over have never received a colorectal cancer screening.
  • Access to care is difficult in rural and underserved areas.
  • Approximately 12 million seniors, of which 56% are women, lack access to a primary care provider because of shortages in their communities.
  • Long‑term care coverage is inadequate for senior women. About 77% of Medicare beneficiaries living in long‑term care facilities are women, and most of the difference in out‑of-pocket costs between senior men and women are a result of long‑term care costs.
  • Prescription drug costs are high. Rising drug costs also contributed to the high out‑of-pocket costs for senior women, even after drug benefits were added to Medicare in 2006.



Americans doubt reform will improve quality, cost

Most Americans are satisfied with the status quo for their own healthcare and are doubtful that reforming the system will create affordable or better-quality medical care, according to a recent Thomson Reuters study.

The study, which tracks consumer attitudes toward healthcare reform, addresses a wide range of issues, including the cost and quality of healthcare, the prospect of higher taxes, and satisfaction with physicians and insurance coverage.

“It’s easy to see why there is considerable disagreement about healthcare reform. People are generally satisfied with what they have, skeptical that change will improve the system, and divided on the role the government should play,” says Gary Pickens, chief research officer at the Healthcare & Science business of Thomson Reuters and lead author of the study. “And we’re seeing wide variance of opinion across demographic profiles, suggesting it will continue to be challenging for legislators to find the middle ground.”

The analysis is based on a telephone survey of 3,007 households conducted from July 28 through August 9—
a segment of the Thomson Reuters PULSE Healthcare Survey, which examines healthcare behaviors, attitudes and utilization.

The survey found:

  • Lack of faith that reform will improve cost or quality. A minority of survey respondents (37.9%) believe healthcare reform will improve the cost of care. Even fewer (30.3%) believe it will improve the quality of care.
  • Ambivalence regarding federal oversight: 44.5% believe the federal government should play an “active” or “very active” role in the oversight of healthcare, whereas 53.3% say the government should be “somewhat active” or “not at all active.”
  • Most respondents believe Americans should get the best care but don’t: 71% agree or strongly agree that Americans are “entitled to the best healthcare available.” However, fewer than half (46.3%) believe the United States has the best healthcare system. Further, more than one in four said they don’t know which country has the best care; 11.3% said it was Canada.
  • The majority it satisfied with the status quo. The survey asked respondents to rate their satisfaction with their healthcare providers, costs, and insurance coverage. About 80% said they were satisfied with their doctor, nearly 70% were satisfied with their health insurance coverage, and about 53% were satisfied with the amount they pay out of pocket for healthcare.
  • Willing to bear a tax increase. About 58% said they are willing to bear a tax increase (1% or more) to support healthcare reform.



Public plan is being Swift-boated

Jacob Hacker, the Yale professor who many consider the intellectual father of the public option, recently described aspects in current health reform proposals as “good” and “not so good,” but said he fears most the growing support for proposals that he called downright ugly.

“Americans want reform, but they’re scared now,” Hacker said in a recent news briefing. He said the reason is simple—“scaremongering and lies directed at health reform proposals on Capitol Hill.”

“We’re seeing the Swift-boating of health reform right now, and it’s not a pretty sight,” Hacker said, referring to a smear campaign to damage the 2004 presidential bid of U.S. Sen. John Kerry by attacking his military record as Swift boat commander in Vietnam, which were charges that were never substantiated.

At the Campaign for America’s Future–sponsored news briefing, Hacker was joined by Rep. Raul Grijalva (D-AZ) and Rep. Keith Ellison, (D-MN).

The congressmen are among 60 lawmakers who have pledged to oppose any health reform package unless it includes a meaningful public option to give consumers a choice, which Hacker described as an essential pillar of a three-legged stool.

In Hacker’s view, the other two essential legs of the stool are a requirement for employers to contribute to the cost of coverage if they don’t directly provide insurance coverage for their employees—a so-called pay-or-play provision—and a requirement that individuals also buy coverage, perhaps with subsidies, if they don’t get coverage paid from their employers.

But with some essential political support dissipating for that most critical leg of the stool, the public plan, “many of us committed to this goal have watched with a mix of anger and despair about the way in which this debate has spun out of control in this last month,” Hacker said.

Hacker tried to parse those parts of existing health reform proposals in three categories.

Good provisions, Hacker said, are those that allow the public plan to create a provider network, pay providers using an established system similar to Medicare, is transparent, and operates as an effective competitor with private insurance plans on a level playing field. It would obtain drug price discounts and deliver value to workers, their families, employers, and the economy overall. The public plan, obviously, is in the good category.

Not-so-good parts of the health reform package, which have been gaining traction, would mean having to create a provider network for a public plan from scratch and negotiating rates directly with providers across the nation, rather than building on Medicare’s existing network and payment structure, Hacker said.

He characterized the “ugly” as the Senate Finance Committee’s cooperative model, supported by its cochairs, Max Baucus and Charles Grassley.

Hacker said a cooperative will be a much less effective and weaker mechanism for the public to obtain health insurance because it fails to perform three essential functions:

  • It does not provide a benchmark for cost reductions and quality because it would not have the necessary clout to pressure insurers to improve the value they deliver to their members, nor would it have the strength to bargain more aggressively in markets where one or two insurance companies dominate
  • It would not provide a backup that offers financial and health security to those without coverage through their employers or to small employers without access to good group health coverage plans
  • It would not be an effective backstop to bring down costs over time through innovations in payments and the delivery of care, innovations that will be available to the private sector

In a policy brief, Hacker wrote that “federally promoted health cooperatives should be understood as an effort to kill the public plan and, with it, the prospect of an effective competitor to consolidated insurance companies that have too often failed to provide affordable health security.” Cooperatives don’t have “the reach, authority, or desire to drive broadly implemented delivery and payment reforms or act as a strong public-spirited competitor that discourages private insurers from engaging in practices that undermine health security,” he wrote.

Hacker and Ellison blamed private insurance companies for creating much of the noise and dissension and deflecting support for the public plan to a cooperative.

“No doubt that the interests on the table are so great, and stakes are so high, there’s going to be a fight. It’s going to be competitive,” Ellison said. “Before we went on break, there was a general sense of a great level of confidence that the public option was going to be law one day. Then we left, and all of a sudden the other side—the side that wants the status quo, the side that profits from the status quo, and the side that survives based on the status quo—they had their say, and we should not have been surprised.”

But Ellison predicted that with voices such as Hacker’s, and the support of the 60 members of Congress who have pledged to not vote for health reform without a public option, they will “break up these monopolistic and oligopolistic healthcare markets around the country.”

“We want reform to work,” said Hacker. “And that means, above all, making sure that those who got us into this mess, mainly large for-profit private insurers who have gotten larger and larger since the failure of the Clinton health plan in the early 1990s and which are not facing competition in most parts of the country, don’t get to decide what reform is and don’t get to keep doing what they’re doing today.”



Inspector general criticizes three states for improper Medicaid claims

The Office of Inspector General (OIG) has issued lengthy audit reports for Pennsylvania, Connecticut, and Texas documenting the extent to which each state’s agencies sent in claims for more reimbursement than they could justify.

In Pennsylvania, Medicaid officials have disallowed one in 10 sampled state claims for reimbursement of case management services targeting people with mental illness or mental retardation, about $11.8 million in total, because they lacked case record support. About $6.5 million of the amount was spent from federal funds, which the OIG recommends the state should refund.

In Connecticut, Medicaid officials have questioned $19.8 million in claims for 80 contracted mental health and related social services. Connecticut’s documentation did not contain enough information to determine whether the claims qualified for payment.

“The state agency’s calculation of the CBMACs (Community Based Medicaid Administrative Claim) was based on the Medicaid-allocable costs incurred by the
80 contracted organizations ($161,480,735), which exceeded by $19 million the total amount that the DMHAS (the Department of Mental Health and Addiction Services) actually paid to these contracted organizations for both Medicaid and non-Medicaid services and activities,” the OIG audit said.

And, in Texas, 22% of sampled medical claims for care provided to undocumented immigrants did not satisfy the state’s definition of emergency care. In Texas, as in other states, coverage for medical care and prescription drugs for undocumented people is allowed only during medical emergencies. The amount in question involved 193 of 854 claims for care, totaling $262,000, which lacked documentation. Texas officials requested federal reimbursement for 7,114 claims for prescription drugs totaling $147,805 that did not meet the state’s definition of emergency care.

In addition, the program to “prevent payment of family planning services claims for undocumented aliens and legal aliens did not always operate correctly or was manually overridden to allow services to be claimed as family planning services, which are paid at an enhanced federal medial assistance rate of 90%,” the OIG said.

Perhaps more important, the OIG said, the Texas “state agency did not have adequate internal controls to ensure that, for undocumented aliens and legal aliens restricted to emergency services, federal reimbursement was claimed only for those conditions that it defined as emergency services.”

The claims are quite old. For Pennsylvania, they involve services provided between January 1, 2003, and December 31, 2005. For Connecticut, they involved spending in fiscal years 2005 and 2006, and in Texas, they covered October 1, 2004, through September 30, 2005.



Eliminating fees for overlapping services could save millions for Medicare

Medicare physician fee schedule payments may be excessive for a variety of medical services because efficiencies that occur when two or more services are furnished together are not reflected in the fee schedule, according to a new General Accountability Office (GAO) study examining Medicare physician payments and fees. GAO’s review found that expanding Medicare’s practice in this area could reduce payments by an estimated half-billion dollars per year.

Medicare essentially could end up paying twice for those overlapping services, which do not involved surgery or imaging, GAO said. For example, when two medical services are furnished together, a physician may only review a patient’s medical record once, but fees paid would reflect that Medicare paid twice for that activity with both services.

CMS has implemented what it calls a “multiple procedure payment reduction policy” for various imaging and surgical services when two or more related services are furnished together.

Under this policy, the full fee is paid for the highest‑
priced service and a reduced fee is paid for subsequent time services to reflect “efficiencies in overlapping portions of the practice expense component”—for example, clinical labor, supplies, and equipment. This time could include a nurse preparing a patient for a medical procedure or a technician setting up the required equipment is incurred only once.

This effort produced savings of about $96 million in 2006 for imaging services, GAO said. However, the scope of the policy is limited because it does not apply to nonsurgical and nonimaging services commonly furnished together. It also does not “specifically reflect efficiencies occurring in the physician work component”—the financial value of a physician’s time, skill, and effort.

GAO acknowledged that CMS is reviewing the efforts of an AMA work group, called the Specialty Society Relative Value Scale Update Committee, which was created in 2007 to examine possible duplication for services furnished together. However, GAO said the work group has not focused on services that account for the largest share of Medicare spending—a point that the AMA disputes.

GAO also noted that under the federal budget neutrality requirements, savings from reductions in fees are redistributed by increasing fees for all other services. Thus, these potential savings would “accrue as savings” to Medicare only if Congress exempted them from the budget neutrality requirement—as was done in the Deficit Reduction Act of 2005 for savings from the changes to certain imaging services fees, GAO said.

GAO suggested in its report that Congress consider exempting any resulting savings from federal budget neutrality so that savings accrue to Medicare.