The financial impact 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 yesterday 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, and was co-funded by America's Health Insurance Plans, 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 impacts 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, and state psychiatric facilities.
Financial data was obtained from Office of Statewide Health Planning and Development, a California state agency whose data is "widely recognized as among the most complete and robust publicly available all-payer health finance data."
"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."
The problem is that reimbursements to care for patients in a public plan are not likely to cover much more than costs, the authors wrote.
"Predictions about the number of privately insured people who will enroll in a public plan vary greatly," the report said. 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 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 impact 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 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 impact 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. health care 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."
The health insurance industry's lobbying group says new government data support their claim that Medicare Advantage provides better-coordinated, more-efficient care, along with its average 14% higher per-person cost.
America's Health Insurance Plans says its analysis of data gleaned from the federal Agency for Healthcare Research and Quality shows that seniors enrolled in Medicare Advantage programs in California and Nevada spent fewer days in the hospital, had fewer hospital re-admissions, and were less likely to have potentially avoidable admissions for common conditions like uncontrolled diabetes and dehydration when compared with seniors enrolled in traditional fee-for-service 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 (see p. 252) said cost about 14% more per person than traditional Medicare. The Congressional Budget Office estimated that Medicare will spend an additional $54 billion from 2009 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/CEO of AHIP. "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, 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 predate 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, Steinberg says, 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 KP so effective.
The AHIP study analyzed hospital admissions in California and Nevada compiled by AHRQ and compared utilization rates among enrollees in Medicare Advantage plans and in Medicare. AHIP says their study factored in age, sex, and 70 Hierarchical Condition Categories that are used in Medicare risk adjustment.
AHIP said the AHRQ data shows 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 ARHQ 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 emergency room than those seniors in Medicare
Experienced a 42% lower rate of hospital re-admissions than those seniors in Medicare
Had avoidable admissions that were 13% lower than those Medicare
ARHQ officials did not dispute the AHIP report, and said they had found similar results on preventable admissions for 13 states. However, the agency added its latest research—which is still under review—did not find the same favorable results for Medicare Advantage enrollees as in other studies.
ARHQ 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, spokesman for AHIP, says California and Nevada was 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. 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."
In a speech to the nation's largest labor federation, Obama urged members to get behind his proposal to overhaul the healthcare system, which he vowed would pass in the next few months. Obama reiterated his support for including a government-run insurance plan, or public option, among the choices for consumers—a top priority for AFL-CIO leaders.
The top Republican on the Senate Finance Committee said that he could not support healthcare legislation drafted in more than three months of bipartisan negotiations by the chairman of the panel, and several liberal Democrats criticized the bill from the other side of the political spectrum. The statement by the Republican, Senator Charles E. Grassley of Iowa, came just as the chairman, Senator Max Baucus, put the final touches on his bill to provide health benefits to millions of the uninsured, according to the New York Times.
Washington, DC-based Children's National Medical Center will receive $150 million from the government of Abu Dhabi, a gift that the hospital hopes to use to dramatically change pediatric surgery. The donation has the potential to transform Children's Hospital, enabling it to hire more than 100 surgeons, researchers and staff members over the next few years, hospital officials said. The hospital treats thousands of children and performs 15,000 surgeries each year.
As businesses contend with rising costs, many workers face an erosion of health benefits next year, according to an annual survey released by the Kaiser Family Foundation and the Health Research and Educational Trust. Forty percent of employers surveyed said they are likely to increase the amount their workers pay out of pocket for doctor visits. Almost as many said they are likely to raise annual deductibles and the amount workers pay for prescription drugs.
Health Care for America Now, made up of more than 1,000 labor unions and Democratic groups, has started a new advertising campaign on in which it advocates for a government-run health insurance plan by demonizing the health insurance industry. HCAN is spending $1.2 million for a commercial to run for two weeks on national cable television and local Washington, DC, stations. It has also started a round of print advertisements in publications that specialize in coverage of Congress.
As lawmakers debate legislation aiming to extend coverage to the country's 46 million uninsured, one of the most sweeping proposals has so far stoked relatively little debate: a requirement that nearly all Americans carry health insurance. Subsidies for premiums would help low-income families gain coverage, while the prospect of fines would prod others to buy insurance. But some people show how difficult it could be to bring into the insurance pool the millions of consumers who make too much money to qualify for assistance, yet not enough to bear the full cost of new policies on their own.
A 75-year-old Marietta woman's case is now before the Georgia Supreme Court, which considered for the first time the constitutionality of the centerpiece of the state's 2005 tort reform law: caps on jury awards in medical malpractice cases. A lawyer for her surgeon's practice told the court that the Legislature properly imposed the caps to keep doctors from leaving the state in droves because their malpractice insurance premiums were too high. The woman's lawyer countered that the law punishes those who suffer the greatest malpractice injuries to the benefit of those who caused the most harm.
The head of Emory University's Winship Cancer Institute has stepped down, following a tumultuous year that included both recognition and criticism for the center. Brian Leyland-Jones, MD, had been director of the cancer center since early 2007. The university said the 60-year-old executive director is stepping down to pursue his research interests. He will be replaced by Walter Curran, MD, the center's chief medical officer.
