Healthcare, health policy, cognitive science. , and the path to Universal Healthcare..
You don’t often see a good rant of moral outrage regarding health care in the Times, so here you go!
RECENT revelations should lead those of us involved in America’s health care system to ask a hard question about our business: At what point does it become a crime?
Community Rating Under the Affordable Care Act
Under the law, an individual health plan selling policies in the small-group and nongroup market — whether it sells policies through the state’s exchange or not — will be free to set its own premium for a given policy. But within a given age group, it must apply the same premium to all comers, regardless of their health and their gender. Furthermore, the health plan cannot reject any applicant willing to pay that premium, a provision called “guaranteed issue,” or cancel existing policies.
In other words, the Xi based on the individual’s health status in the equation above will be replaced by the average expected health spending per insured, with the average calculated over the insurer’s entire anticipated risk pool of insured members of a given age. To calculate the average, the insurer must consider as one single risk pool all enrollees in all health plans offered by the insurer, whether or not they are offered on the exchange.
This form of premium setting is known as “community rating.” Because it forces healthier individuals to subsidize sicker individuals through the community-rated premiums, it has been much debated.
Community rating invites “cherry-picking” by insurers — i.e., attempts to attract mainly low-risk applicants. To limit the profit potential from cherry-picking, there will be post-enrollment risk adjustments through which funds are transferred from insurers ending up with relatively healthier risk pools to those ending up with relatively higher risk pools.
The community rating under the law is not the pure version found in the social insurance systems of Europe (e.g., Switzerland, the Netherlands and Germany) or Asia, where even age is not considered in setting premiums. Rather, the American version is called adjusted community rating, because it does allow insurers to adjust the community-rated premium for the age of the applicant.
Age-adjusting is done by multiplying the community-rated premium for the youngest members in the expected risk pool by a standard, multiplicative age ratio to be used by all insurers. Thus the quoted premium can increase step by step with age, but only up to a multiplicative factor of 3. At a given age, smokers can be charged up to 1.5 times the regular premium.
The change from what was in place before the Affordable Care Act to post-law arrangements in the nongroup market can be illustrated graphically. In the chart below, we assume initially that all members of a given population are covered by either medically underwritten or community-rated health insurance, with a given package of covered health benefits. The white line represents the premium individuals would have to pay under medical underwriting. The dashed segment of that line is meant to show the actuarial cost and the premium range in which insurers in the real world would reject applicants outright. The green line shows the community-rated premium for this same population. We assume here that age is either not factored into the premium or the population in question is all of the same age, which is why the green line is horizontal.
Premium Shock
As the chart illustrates, a switch from medically underwritten premiums to community-rated ones raises the premiums for the relatively healthier members of the insurer’s risk pool. Many of them will suffer what has come to be called premium shock.
Younger and healthier members of the pool should realize that, in effect, they are buying a call option that allows them to buy coverage at a premium far below the high actuarial cost of covering them when they are sicker. The price charged the healthy for this call option is the difference between the premium they must pay and the current lower actuarial cost of covering them.
Furthermore, for Americans in households with incomes below 400 percent of the federal poverty line, the green and red lines exaggerate the impact of the law on their spending. These Americans will be granted often quite generous, income-dependent federal subsidies toward the premiums they face on the exchanges and their out-of-pocket costs for health care. This makes it well-nigh impossible to make general statements, based on averages, about the net after-subsidy impact of the law.
‘Premium Shock’ and ‘Premium Joy’ Under the Affordable Care Act – NYTimes.com
If this health plan is ‘socialism,’ we need more of it
As Obamacare’s exchanges take shape in California, true, transparent, capitalistic competition will be seen among insurance firms, going toe to toe to win consumers.
David Lazarus
6:18 PM PDT, May 23, 2013
So this is what socialism looks like: Private companies competing for people’s business in an open marketplace.
Californians got their first glimpse Thursday of what insurers plan to charge for coverage to be offered next year to about 5 million state residents who don’t receive health insurance from employers.
In southern Los Angeles County, for example, Health Net is charging $242 a month for one of its plans. Blue Shield is charging $287 and Kaiser Permanente $325 for the same coverage.
For the first time, consumers are in a position to make an informed decision about health insurance. They can opt for the lowest-priced plan or they can factor in other considerations, such as personal convenience.
Insurers, meanwhile, are going toe to toe to win customers, keeping prices as low as possible and stepping up quality of service.
Amazingly, the sky hasn’t fallen and the world as we know it hasn’t come to an end.
Critics of Obamacare have long warned of the dire consequences of reforming the U.S. healthcare system. The federal Affordable Care Act constitutes a government takeover of healthcare, they have said. We might as well be living in Cuba.
In reality, what we’re seeing is some much-needed sunlight being cast upon a market that for too long has operated largely in the shadows, denying consumers the information they need to make choices about medical treatment.
Private insurers will have to meet minimum standards for coverage when they begin open enrollment in October, allowing people to compare apples to apples for the first time when shopping for individual or family policies.
Insurers also will have to post their prices in a clear and easily accessible fashion, introducing a long-absent element of competition to the market.
"It will be a one-stop shop for selecting policies," said Devon Herrick, a healthcare economist at the National Center for Policy Analysis. "That should make things a lot easier for people."
If this health plan is ‘socialism,’ we need more of it — latimes.com
WASHINGTON — The Obama administration said Monday that it was cutting payments to doctors and hospitals after finding that cost overruns are threatening to use up the money available in a health insurance program for people with cancer, heart disease and other serious illnesses.
The administration had predicted that up to 400,000 people would enroll in the program, created by the 2010 health care law. In fact, about 135,000 have enrolled, but the cost of their claims has far exceeded White House estimates, exhausting most of the $5 billion provided by Congress.
Under a new policy issued by Kathleen Sebelius, the secretary of health and human services, “health care facilities and providers will get paid less” for providing the same services to patients in the federal program, known as the Pre-Existing Condition Insurance Plan.
In most cases, payments to health care providers will be capped at Medicare rates, which are substantially less than the commercial insurance rates they have been receiving. The new policy generally prohibits doctors and hospitals from increasing charges to consumers to make up the difference.
Michael T. Keough, the executive director of the North Carolina Health Insurance Risk Pool, said the new policy was one of several steps taken recently by federal officials to control spending.
“They are trying to stanch the hemorrhaging,” Mr. Keough said.
The federal government notified some states last month that it was setting a ceiling on costs that would be reimbursed from June through December of this year. In effect, state officials said, the new limits shift the financial risk of the program from the federal government to those states.
Congress established the program to provide coverage to people with pre-existing conditions who had been uninsured for at least six months, and Ms. Sebelius has said, “It literally saves lives.”
The program provides a transition to 2014, when most consumers will be able to obtain insurance regardless of their pre-existing conditions.
Federal officials froze enrollment in the program in February, but costs continued to grow rapidly.
Overruns Forcing Lower Payments to Some Providers in Stopgap Health Program – NYTimes.com
It is worth remembering, that these patients had run out of options for access to treatment before the program.
Just how much premiums will change depends on the state you live in, Kingsdale said.
Individual premiums decreased when Massachusetts’ health care took effect, he said, because the state already had high-priced and insurers were not allowed to turn away the sick and could not charge large premium differences based on age, gender and health.
“Other states will see exactly the opposite happen,” he said. “Their premiums tend to be quite low, but they’re getting skimpy insurance.”
In Oregon, Ario said, large differences in premium prices have already appeared.
In one case, a 40-year-old non-smoker in Oregon could buy a low-cost or bronze-level plan for $162 a month from one company or the same plan from another for $400 a month, Ario said. Anti-trust laws prevented the insurers from comparing pricing before developing their premiums.
When the companies with the higher rates saw their competitors’ lower premiums, he said, they asked the state to allow them to file for reduced premiums.
“The good news is that in most marketplaces, there will be some carriers that will be bold and price competitively to get more market share,” Ario said.
Market, insurers will keep premiums low, analysts say
For a quick rundown on what the “gold, silver, and bronze” plans will cover, go here.
The price of Medicaid expansion opt-outs: $53.3 billion
The Supreme Court decided way back in June that the health law’s expansion of Medicaid was optional rather than required. That decision, it appears, comes with a hefty price tag: $53.3 billion.
The National Association of Public Hospitals estimates that, in light of the decision, the United States will spend as much as $53.3 billion more on bills that go unpaid by the uninsured. Their analysis uses data from the Congressional Budget Office, which estimates that six million to10 million fewer Americans will gain insurance through Medicaid after the Supreme Court decision.
“Congress certainly didn’t foresee this level of uninsured and uncompensated care when it enacted the ACA,” says NAPH president Bruce Seigel.
Keep in mind, this isn’t necessarily $53.3 billion in new spending. It’s more like a cost shift. Those who would have had their bills paid by the federal government (under Medicaid) could now have the costs covered by local governments and hospitals, which tend to foot the bill for many of the health care services that go unpaid.
The Congressional Budget Office estimates that, over the course of a decade, states opting out of the Medicaid expansion – and not drawing down funds from Washington – will save the federal government $84 billion.
It’s also a cost shift to those with private insurance, as hospitals charge a bit more to clients with coverage to recoup their losses on the uninsured. One study estimated that cost shifting raises annual insurance premiums by as much as 1.7 percent, or $80 annually.
Papa John’s: ‘Obamacare’ will raise pizza prices – POLITICO.com
If you thought Obamacare was going to be expensive, Papa John’s is here to show exactly how little an effect on businesses it will be to buy health insurance for employees – less than 15 cents a pizza! As Pete Townshend once said, “I call that a bargain, the best I ever had!”
Pizza chain Papa John’s told shareholders that President Obama’s health care law will cost consumers more on their pizza.
On a conference call last week, CEO and founder John Schnatter (a Mitt Romney supporter and fundraiser) said the health care law’s changes — set to go into effect in 2014 — will result in higher costs for the company — which they vowed to pass onto consumers.
“Our best estimate is that the Obamacare will cost 11 to 14 cents per pizza, or 15 to 20 cents per order from a corporate basis,” Schnatter said.
New study: Tort reform has not reduced health care costs in Texas
Medicare spending up
The researchers assumed that doctors who faced a higher risk of being sued — those in counties that had larger numbers of malpractice cases — would perform more tests and procedures than necessary to protect themselves from lawsuits. With tort reform, which limited damage awards against doctors, the need to practice such “defensive medicine” would decline, the argument goes.
But in comparing Texas counties in which doctors faced a higher risk of lawsuits with counties where the risk was lower, the researchers found no difference in Medicare spending after tort reform and indications that doctors in higher- risk counties did slightly more procedures.
“If tort reform reduces spending, it would have the biggest effect on high-risk counties,” Silver said. He noted that those tend to be large and urban.
“This is not a result we expected,” said Bernard Black, a co-author and a professor at Northwestern University’s Law School and Kellogg School of Management.
Health care spending has increased annually everywhere, the researchers said, including in the states with caps on malpractice payouts — now at 30, counting Texas, said David Hyman, a co-author and professor of law and medicine at the University of Illinois.
But, said Hyman, who worked on health policy for President George W. Bush at the Federal Trade Commission, “we found no evidence that Texas spending went up slower in comparison to all other states and may have had an increase.”
The researchers said their study suggests that Medicare payments to doctors in Texas rose 1 to 2 percent faster than the rest of the country, Black said.
Since tort reform, some Texas residents have complained that they cannot find a lawyer to pursue a malpractice case because of the $750,000 cap on payouts for pain, suffering, disfigurement and mental anguish. The limit often makes litigation cost prohibitive, patients and lawyers said. That concern was not raised in the paper, although the researchers said claims of huge malpractice payouts and rampant “frivolous” lawsuits before tort reform are greatly exaggerated by its advocates.
Silver said he was “very pessimistic” that policymakers will heed the study. “The rhetoric on both sides tends to be very extreme,” he said.
High health care costs: It’s all in the pricing – The Washington Post: Ezra Klein
…the International Federation of Health Plans — a global insurance trade association that includes more than 100 insurers in 25 countries — released more direct evidence. It surveyed its members on the prices paid for 23 medical services and products in different countries, asking after everything from a routine doctor’s visit to a dose of Lipitor to coronary bypass surgery. And in 22 of 23 cases, Americans are paying higher prices than residents of other developed countries. Usually, we’re paying quite a bit more. The exception is cataract surgery, which appears to be costlier in Switzerland, though cheaper everywhere else.
The PDF of the PowerPoint (of the trailer of the film…) from IFHP is here.
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Key Findings
Public payer fees for an office visit ranged from $34 in Australia to $66 in the United Kingdom; private payer fees ranged from $34 in France to $133 in the United States.
U.S. primary care physicians were paid an average of 27 percent more by public payers for an office visit, and 70 percent more by private payers for an office visit, compared with the average amount paid in other countries.
Public program fees for hip replacements ranged from $652 in Canada to $1,634 in the U.S. In the U.S., private health insurance fees for hip replacements were nearly $4,000—twice as high as the private rates in the five other countries.
U.S. payers paid much higher fees to orthopedic physicians for hip replacements: public payers paid 70 percent more, while private payers paid 120 percent more.
U.S. primary care physicians earned an average $186,582, compared with a range of $92,844 (Australia) to $159,532 (U.K). U.S. orthopedic surgeons earned an average $442,450, compared with a range of $154,380 (France) to $324,138 (U.K.).
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