Is Obamacare Responsible For the Recent Slowdown in Health Care Costs?

Is Obamacare Responsible For the Recent Slowdown in Health Care Costs?

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That is what we have been told the Obama administration will claim today as they begin the job of reselling Obamacare.

Is Obamacare even partly responsible for the slowdown in health care costs?

That is silly.

First, Obamacare is not a health care reform law; it is a health insurance reform law. No one on either side of the debate has ever argued anything different.

Does the law have some limited cost containment features in it?

Yes. But these are either pilot projects or are years from being fully implemented.

I have heard the argument that the Medicare cuts that were made to help pay for the program are examples of cost containment efforts that are having a short-term impact on controlling costs. The Democrats need to be careful with this one. I recall their countering Republican “Mediscare” claims by saying the Medicare cuts were not significant.

In a letter last year accompanying the Medicare Trustee’s report, the Medicare actuary said, “The [Obamacare Medicare cuts] will affect Medicare price levels more gradually, but a strong likelihood exists that, without very substantial transformational changes in health care practices, payment rates would become inadequate in the long range.”

Translated: The Obama Medicare provider cuts are not having a big impact in the short-run but will be unsustainable over the longer-term.

Obamacare cuts Medicare Advantage payments. But those cuts have either so far been put off or are just beginning to bite. The first real cuts hit in 2014 and the first big cuts come in 2015.

These provider cuts in their totality are a tiny percentage of health care spending in the first few years and have had almost no impact so far. The 2% across the board sequester cuts that have already hit provider payments and Medicare Advantage plans have been far more significant.

Some have argued the new Medicare Accountable Care Organization (ACO) program, that reorganizes provider payment away from fee-for-service, is having a big impact. First, private ACOs were around long before the Obamacare architects had the idea. Second, the Medicare ACO program is only a pilot program just getting off the ground. Recent reports regarding the first 32 advanced “Pioneer” ACOs only showed very limited and mixed results for the first year.

Then there is the high cost health plan “Cadillac” tax designed to discourage overly generous employer plans. It begins in 2018. We are getting indications that many employers are beginning to pare their health plans back so as not to hit the tax threshold four years down the road––but this is something that is only just beginning to happen particularly as employers announce their plan changes for 2014.

Perhaps the biggest, and most controversial, cost containment element of the Affordable Care Act is the Independent Payment Advisory Board (IPAB), which has the power to change Medicare reimbursement if costs are escalating at an unsustainable rate. But the IPAB doesn’t even begin until 2015––the board members haven’t been appointed yet. More, it appears that health care cost trend is now so low the board may not even be triggered come 2015.

Why are health care costs escalating at historically low levels?

That is a question health care economists have been debating. No one is really sure. But at least three reasons are commonly listed:

  1. The economic slowdown that has persisted. Health care cost trend has long tracked the overall economy.
  2. Health insurance plans, particularly employer plans, have been going through a multi-year push to increase deductibles and co-pays as well as put consumers in a position to be more accountable for their health care spending choices. Health savings accounts have grown markedly in recent years.
  3. Managed care companies and their provider partners have made a marked improvement in changing the way care is delivered and paid for––today’s health care delivery system, while still largely a fee-for-service system, is not the same one we had ten years ago.

Clearly, there is a lot of debate over just what is causing the slowdown in health care costs.

I guess that just creates an opportunity for eager politicians to find another thing to spin.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

 

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58 Comments on "Is Obamacare Responsible For the Recent Slowdown in Health Care Costs?"


Guest
Cam S
Dec 6, 2013

What is the level of penetration of HSA’s and other plans hinted at in 2. My understanding is that’s not significant to have a large impact on this slowdown in NHE. I tend to blame 1 the most.

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archon41
Dec 6, 2013

The architects of Obamacare were far more interested in gratifying their partisan base than reducing the cost of health care. Nothing will cause the upper lip of a “progressive” to curl quicker than the mention of “tort reform.”

Guest
Dec 6, 2013

Med Mal is a relatively tiny piece. But, I would favor “Loser Pays.”

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archon41
Dec 6, 2013

Might I inquire just how you went about ascertaining the cost of “defensive medicine”?

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Barry Carol
Dec 6, 2013

The cost of defensive medicine is only tiny if all you look at is the total of court awards. Defensive medicine pervades the medical culture, especially in areas like diagnostic imaging and many lab tests. There may be other factors driving such testing as well like patient expectations and financial incentives under a fee for service payment model. It just doesn’t lend itself to precise quantification. It’s also quite possible that the litigation environment, at least in our more litigious jurisdictions, plays at least some role in the process the specialty societies go through as they develop suggested practice patterns.

I’ve heard primary care doctors say things like “I spend my day covering my ass” and others estimate that 15% of the cost of all of their medical decisions can be attributed to defensive medicine. It’s a big deal in this country compared to Western Europe, Canada, Japan and Australia.

Sensible tort reform can make a positive difference in lowering costs, at least over time and, by sensible, I don’t mean caps on non-economic damages. I mean safe harbor protection from failure to diagnose lawsuits when evidence based guidelines and protocols are followed and getting medical dispute resolution out of the hands of juries and using specialized health courts instead.

Guest
Dec 7, 2013

Loser Pays. Take the extortion out of it.

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Barry Carol
Dec 7, 2013

The problem with loser pays is that most low to moderate income plaintiffs couldn’t afford to pay the defendant’s legal costs. Presumably, the lawyer or law firm would have to be responsible for them and, if the lawyer is a solo practitioner or a member of a small firm, the lawyer and/or his firm couldn’t pay the bill either. It can cost quite a lot of money to bring a malpractice case to trial but insurers often settle marginal cases rather than go to trial, especially in plaintiff friendly jurisdictions.

I actually favor loser pays as a concept. However, I think the payment would have to be capped at somewhere between $25K and $100K in order to give insurers some incentive to fight marginal cases and to dissuade plaintiffs from bringing them while maximizing the probability that the plaintiff’s lawyer or law firm would be able to pay if they lose the case. This approach would be more useful in the personal injury and product liability areas, in my opinion.

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Peter1
Dec 7, 2013

“Sensible tort reform can make a positive difference in lowering costs, at least over time”

Where is the proof Barry? Many states now have “tort reform”.

http://www.statesman.com/news/news/local/new-study-tort-reform-has-not-reduced-health-care-/nRpcp/

Providers are human and like all humans never want to give anything up unless forced. It’s always better to keep the savings than to pass them on.

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Barry Carol
Dec 7, 2013

Most states that have tried so-called tort reform implemented caps on non-economic damages. I’ve consistently said that isn’t the answer. Doctors want malpractice rules that are clear and consistently applied at least within a jurisdiction if not across the country.

There is a big difference between a botched surgery and not making a cancer diagnosis three months earlier because he didn’t order that one extra test that evidence based guidelines and protocols didn’t call for. This mentality among the public and the legal profession that doctors aren’t allowed to miss anything contributes to excessive testing.

Not long ago, blog contributor, legacyflyer, a radiologist, said he thought that as much as half of all imaging is unnecessary. Defensive medicine, along with patient expectations and some money driven testing by doctors who own their own equipment, drive it. That culture is very different in other developed countries.

Guest
Dec 7, 2013

I suppose it would be gauche to mention that trial lawyers make generous campaign contributions to Democrats.

When some physicians are paying as much as $200,000 a year for malpractice insurance, it is sophistry to propose that this has little to do with pricing.

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Peter1
Dec 7, 2013

“I suppose it would be gauche to mention that trial lawyers make generous campaign contributions to Democrats.”

Who would have known that the insurance and health care industry is not making counter contributions. Thanks for that.

Guest
Dec 7, 2013

Other than vigorously resisting “universal single payer,” I am hard pressed to think of ways insurers have obstructed attempts to contain provider costs.

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Barry Carol
Dec 7, 2013

Peter1 –

The key difference is that, according to former Senator Bill Bradley, trial lawyers are one of the three most important core constituencies for Democrats. The other two are labor unions, especially the teachers, and racial minorities, especially African Americans but also Hispanics. While the business community is an important Republican interest group, their interests often diverge, especially between big business and small business and businesses who have to deal with significant foreign competition and those who don’t. The other important Republican constituency is social conservatives who have a completely different set of priorities.

It’s also important to note that many politicians are themselves lawyers by training. This includes the current Senate Majority Leader, Harry Reid and President Obama.

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Peter1
Dec 7, 2013

“Other than vigorously resisting “universal single payer,” I am hard pressed to think of ways insurers have obstructed attempts to contain provider costs.”

I am hard pressed to recognize ways they have, seeing the steady increase in premiums.

Insurers and self insured business always seem to enlist patients to reduce provider costs; higher deductibles, narrow networks, reduced coverage, HSAs, the so called consumer directed movement. I guess they fear providers more than they fear premium payers.

Here in NC BCBS pays double digit bonuses to executives all while they raise premiums every year. Non-profit BCBS does not have Wall Street shareholders to satisfy. I’d pay those bonuses for actually lowering premiums, but there seems a cozy relationship with local providers. The line of least resistance (least power) is premium payers – what else should I think from my observations?

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Saurabh Jha
Dec 6, 2013

Regression to the mean, anyone?

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Barry Carol
Dec 6, 2013

The most intriguing part of this issue to me is the slowdown in Medicare spending. People who have Medicare don’t lose it if the economy falters. Deductibles and beneficiary premiums change very little from year to year. Spending for the program net of beneficiary premiums was less than expected for four straight years now. For fiscal 2013, spending only rose by 2.9% which translates to about flat on a per capita basis after enrollment growth,

According to CBO’s Monthly Budget Review released today, Medicare spending for the first two months of fiscal 2014 actually declined by 7% or $7 billion dollars. Even after adjusting for a payment timing difference of $4 billion between the two years, it still declined by $3 billion or 3%. Maybe people don’t need as much care as they once did. Maybe they are getting more of their care from more cost-effective high quality providers. I know that more prescription drugs are generics than five years ago. Maybe more people are choosing hospice care at the end of life.

I don’t think the ACA is much of a factor so far but some of the new initiatives could make a positive contribution to medical cost growth reduction by the end of this decade. There is a lot going on in the commercial insurance market that covers the younger than 65 population as well including higher deductibles and copays, narrow, gated and tiered networks, and greater penetration of payment models other than fee for service including bundled payments, shared risk / shared savings and capitation + a performance bonus incentive. The bottom line is that there is lots of reason for optimism here.

If we could get sensible tort reform including safe harbor protection from failure to diagnose lawsuits for doctors who follow evidence based guidelines and protocols where they exist and good price and quality transparency tools for both patients and referring doctors, I would be even more optimistic.

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Jeff Goldsmith
Dec 7, 2013

There is the million person a year increase in Medicare Advantage enrollment to consider, subject of a recent blog posting. Most of those Medicare Advantage plans are HMO’s. However, since the conventional wisdom runs that those plans don’t save any money, that couldn’t possibly be the reason.

Chanticleer thought the sun rose because he crowed. That’s the logic behind the ACA/cost slowdown argument. This was my take on the causes.

http://thehealthcareblog.com/blog/2012/05/08/barking-up-the-wrong-tree-affordability-not-cost-growth-is-the-policy-challenge/

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spike
Dec 9, 2013

You’re wrong Barry. The most intriguing part is the slowdown in Medicaid spending per enrollee. Explain that one.

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Barry Carol
Dec 10, 2013

Spike –

There are more moving parts to Medicaid so it’s harder to explain what’s really driving per capita costs. For example, as enrollment grew during the weak economy, new enrollees were skewed toward children and young women who are much cheaper to cover than the aged, blind and disabled (ABD) segment. As the ACA goes into effect on January 1, 2014, that trend will be even more prevalent. As I understand it, the number of births in the U.S. has declined in recent years and Medicaid pays for slightly over 40% of those. Also, more states are embracing managed care to insure Medicaid members which has reduced costs somewhat. Finally, there is a lot of potential to improve care coordination among the super expensive 9 million dual eligible beneficiaries.

To the extent that hospitals are getting better at reducing hospital acquired infections and cutting preventable readmissions through better discharge planning that should contribute to cost mitigation across the entire population.

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spike
Dec 20, 2013

Exactly. My point is that Obama critics wants to attribute the slowdown in cost increases to economic factors outside of the healthcare system. The slowdown in Medicaid indicates that the system is actually improving and that it’s not just due to declined discretionary income.

Disability has grown just as much as poverty among children so I don’t think you’re right that the influx of Medicaid enrollees necessarily skews towards children and pregnant women.

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archon41
Dec 6, 2013

One thing I’ve noticed, just during the last year or so, is a proliferation of “walk-in clinics,” staffed by nurses. I assume they tend only to minor ailments. Every CVS Pharmacy in my area has one. I think a lot of treatment is now being delegated to nurses. I went to a nearby “primary care clinic” the other day, and was told a doctor could see me in 5 days. I went instead to an “urgent care clinic,” and was seen immediately by a nurse (never saw a doctor.) This has to be holding down costs.

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Peter1
Dec 7, 2013

The minor walk-in/walk-out clinic, PCPs, urgent care clinic/office is not what is driving costs – it is hospitals and specialists. I go to a local private walk-in urgent care doc who charges $67 for care. I go if I need a script, otherwise I wait for nature and my immune system to fix me.

These “clinics” have no effect on hospital charges as they do not “compete” in the same market segment.

Guest
It Depends
Dec 7, 2013

It depends on how you calculate healthcare cost. Is it calculated by the actual hospital cost of providing a service or is it calculated by how much the cost to Medicare or any other third party spends. I am going to hypothesize that the actual cost of providing a service has not changed and perhaps it has gone up and only that there has been a cost shift onto the patient via higher deductibles, limiting services, limiting pharmaceutical brands, contractual reimbursement agreements with hospitals etc…and only the expenditures/payments of third party payers have gone down, thereby inferring a reduction in the cost of healthcare. The actual price per unit cost to provide a service likely has not gone down. Hospitals have just not raised their rates as much and instead choose to cut someplace else.

The reimbursement/regulatory/legal aspects of the “system” in the USA is so complex it takes an extraordinary amount of energy (in the form of people) to run it. This is highly inefficient and expensive and the true cost to provide a service will not change unless drastic changes to the system make it more efficient take place. The ACA does not change the complexity aspect of the system and only perpetuates it.

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Peter1
Dec 7, 2013

“This is highly inefficient and expensive and the true cost to provide a service will not change unless drastic changes to the system make it more efficient take place.”

“Efficiency” has little to do with health care prices. In my Raleigh/Durham/Chapel Hill Area the same, that is the SAME procedure can vary by $60,000. Same rents, taxes, salaries (at least for lower level employees).

Guest
It Depends
Dec 7, 2013

The overall system, of securing reimbursement contracts, credentialing, billing, pre-authorization, denial, re-submit, denial, figuring out why it is being kicked back, request for records, denial, resubmit. finally send an extra letter reexplaining yourself. Then only to have a review 2 years later claiming overpayment. This process takes a multitude of people to navigate. this takes time. It takes money to pay the people to do this. This is a time consuming complex system that is anything but efficient.

You also have to consider that even though a hospital charges $60k more, that does not mean they get paid that amount. A hospital only brings in what they get paid , not what they charge and they likely do not get paid what they charge. Certainly if providers are being paid via Physician Fee Schedule they are getting a fixed payment per unit CPT code that does not vary no matter how much they tell you it costs. So the difference in advertised cost for the SAME procedure may be $60K but if they both bill via PFS they are getting paid the exact same amount

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Peter1
Dec 7, 2013

“The overall system, of securing reimbursement contracts, credentialing, billing, pre-authorization, denial, re-submit, denial, figuring out why it is being kicked back, request for records, denial, resubmit. finally send an extra letter reexplaining yourself. Then only to have a review 2 years later claiming overpayment. This process takes a multitude of people to navigate. this takes time. It takes money to pay the people to do this. This is a time consuming complex system that is anything but efficient.”

Not present in single-pay systems.

“You also have to consider that even though a hospital charges $60k more, that does not mean they get paid that amount. A hospital only brings in what they get paid , not what they charge and they likely do not get paid what they charge. Certainly if providers are being paid via Physician Fee Schedule they are getting a fixed payment per unit CPT code that does not vary no matter how much they tell you it costs. So the difference in advertised cost for the SAME procedure may be $60K but if they both bill via PFS they are getting paid the exact same amount”

Are you condoning this?

http://www.wral.com/new-hospital-transparency-rules-show-charges-vary-widely/13090602/

In a single-pay system each hospital in a local market would be held to the same price for the same procedure unless they could demonstrate what value added they can actually deliver for the higher charge. The amount charged would be the actual amount billed. None of this “where’s the peanut” financing BS designed to confuse everyone and in the end charge/bill/co/pay/deductible everyone a higher amount.

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Barry Carol
Dec 7, 2013

Peter1 –

According to recent data from UnitedHealth Group, 64% of commercially insured members who get their insurance through an employer are now in self-funded plans. This percentage has been rising for years. Insurers make as little as $20 per member per month (PMPM) in revenue and a 15%-20% pretax profit margin ($36-$48 per year) on this fee based business. They make far more on fully insured risk based business which is steadily shrinking because it’s becoming less and less affordable for employers. For employers big enough to take the risk, self-funding is 6%-10% cheaper than going the fully insured route because they don’t have to pay state premium taxes and they are exempted from state benefit mandates thanks to the 1974 ERISA legislation. For the large non-profit Blues like the one in NC, I suspect that the numbers are similar. Strategies like tiered and narrow networks are intended to create countervailing power against market dominant hospital systems and physician groups by steering patients to the most cost-effective high quality providers.

With respect to the individual market, the Blues are often the insurer of last resort and, I suspect, tend to attract a sicker than average risk pool. As healthier members find cheaper alternatives or forgo insurance altogether, the risk pool worsens and premiums rise, sometimes substantially. We’ll see if the ACA improves this situation any but I’ve said for some time now that the two biggest risks for the ACA are adverse selection and fraud due to inadequate tools to verify income for those applying for subsidies.

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Peter1
Dec 7, 2013

As usual Barry, It’s “not my fault.” Look to the other guy”. “We’re all starving here.”

“the Blues are often the insurer of last resort and, I suspect, tend to attract a sicker than average risk pool.”

Barry, that is not true in NC. BCBS is a virtual monopoly here. It holds ALL the state employee business. Its cross section of insured covers the whole spectrum. It is no more risk exposed than the other guys. It also does a good job of lobbying state government. We have few independent hospital systems, at least in my area code and surrounding, with UNCH and Duke owning clinics and stakes in other hospitals – “Rex Healthcare is proud to be a member of the UNC Health Care family.” For UNC and Rex, they call themselves “non-profit”, but in health care that means little except to hoodwink the general public.

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Barry Carol
Dec 7, 2013

Peter1 –

Yesterday, I was helping someone look up health plans on the healthcare.gov website. This person is 52 and was looking for a policy just for himself. In Monmouth County, NJ the premiums for a 52 year old ranged from $427 to $898 per month. Today, I checked prices for a person of that age in Wake County, NC. The premiums ranged from $300 to $668 per month with all but three of the offerings from BCBS of NC. Comparable coverage appears to be 25%-30% cheaper in NC despite your local Blue’s monopoly power.

When powerful hospital systems make large profits by exploiting their market power, they tend to plow it into expansion and new equipment thereby increasing their cost base and, they hope, their market share. When non-profit insurers make more than nominal profits and their capital ratios hit the upper end of what the state regulators consider reasonable, they will most likely use the surplus to lower premiums the following year or at least raise them less than they otherwise would. When employers and individual market customers are complaining loudly about the increasing unaffordability of health insurance, insurers presumably don’t have any interest in paying hospitals and other providers any more than they absolutely have to.

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Peter1
Dec 7, 2013

“Comparable coverage appears to be 25%-30% cheaper in NC despite your local Blue’s monopoly power.”

Barry, I have not yet shopped healthcare.gov. Coverage cost is very county sensitive. General reports show NC with some of the highest rates, I believe mostly in rural counties.

“Based on a Manhattan Institute analysis of data released by the Department of Health and Human Services, insurance rates for younger men will increase by an average of 97 to 99 percent, while they will increase by an average of 55 to 62 percent for younger women.

Worst of all states, North Carolina will see individual market rates triple for women and quadruple for men.”

“RALEIGH, N.C. (AP) – New estimates show North Carolina residents shopping for health insurance coverage on the state’s federally run online marketplace could pay more and have fewer choices than the national average.

The U.S. Department of Health and Human Services said Wednesday that premiums in North Carolina for a mid-range health insurance plan sold on the health exchange will be $369 a month on average. That will vary based on where a buyer lives and other details.

The average monthly cost for mid-range coverage across 48 states will be $328 when new health insurance markets start in every state next week.”

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Aurthur
Dec 10, 2013

Thank you Mr. Carol. I miss Nate.

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Barry Carol
Dec 10, 2013

I miss Nate too, especially his knowledge about the health insurance business and market.

Guest
Dec 7, 2013

The only reason Obama, Reid & Co. didn’t ram through “universal single payer” is that they knew they would be summarily tarred and feathered (if not defenestrated.) Outraged providers would have led the charge.

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Peter1
Dec 7, 2013

I fully agree, but health care needs a revolution and revolutions take time to develop from outrage, you see, premium payers can have outrage as well and they hold the votes. If the ACA facilitates employees being moved to the individual market that will increase their voting strength.

Maybe not in my lifetime (not much time left anyway) but it could happen.

If current cost trends continue patients/premium payers will eventually want something different, not something the same that’s billed as different. Where will all these outraged providers go – to Canada, to Germany, to Briton, to France?

Guest
Dec 7, 2013

This sucka’s goin’ down. Revolutions require present, not future, support. Read the polls. Obamacare was hawked to the middle class on the fallacy that the insurers would be forced to fund it from their vast profits. Said middle class is now bleating loudly, finally aware that it is they who are to be shorn. Most of them do not share your resentment that some can afford better health care than others. We should have focused on improving the quality of care of the indigent and uninsurable. But that would have required an upfront disclosure of the costs, wouldn’t it?

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Peter1
Dec 7, 2013

“We should have focused on improving the quality of care of the indigent and uninsurable.”

First we had to get them actual care as it’s hard for them to assess quality from outside the system. At least the subsidies attempt that.

“Most of them do not share your resentment that some can afford better health care than others.”

You’ll have to define “better care” in respect to also wanting to “improving the quality of care of the indigent and uninsurable”. I don’t know, would affording better mean fighting cancer with every known tool, while those with “worse care” get the 50% try? Or does better include the daily massage and facial?

Guest
Dec 8, 2013

I heard an OWS type the other day insisting that everyone has a “right” to “the best legal representation.” (I suspect some of his more boisterous activities had landed him in legal difficulties.) Well, he has a point, no? I mean, preserving one’s liberty to move about is pretty “fundamental.”

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David Auerbach
Dec 7, 2013

Robert, as Barry notes, the slowdown in Medicare has been even more dramatic than in the under-65 sector, which seems to rule out #2 of your 3 explanations and to take a huge dent out of #1 as well (elderly incomes are less affected, and as the stock market has reached new highs, the slowdown in Medicare costs seems to accelerate). Most evidence seems to point to the supply side. If you talk to hospitals and physicians these days, many truly feel that fee for service, or the old way of doing business, is gradually going away (and the ACA certain pushes in that direction; and btw, ACOs are not a pilot. They are a permanent feature of Medicare). That they had better get control of their costs (rather than merely focus on growing revenues (i.e. what looks like health care costs to everyone else) or they won’t be able to survive in the future. And that feeling is not unfounded – 6 years after its own health reform legislation, Massachusetts passed cost-control legislation. The rest of the US may soon follow.

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Bob Hertz
Dec 8, 2013

Some of the decline in Medicare costs may come from classifying more and more hospital visits as “observation only.” This means that Medicare Part A does not have to pay for them. Of course some of the bills are shuffled off to Part B.

As to Peter’s defense of single payer leading to less paper-pushing and exhaustive claim contests — I wish he were right but in the American context he may not be right.

Medicare right now is our closest thing to single payer, and it has millions of denied and challenged claims every year. If Medicare really cracked down on provider fraud in Part B it would have even more denials.

This occurs because Medicare is paying charges from hundreds of thousands of individual profit centers, including hospitals, clinics, rehab facilities, and individual doctors who practice within these but submit separate bills.

The only way to escape this would be what Canada has done:

– the government owns the hospitals and gives them an annual budget;
there are no claims to contest.

– the doctors agree to a binding fee schedule that applies to all of them,

I see no prospect that either of these conditions would apply to an American single payer plan. George Halvorson described this problem in his book Strong Medicine almost 20 years ago.

Guest
Dec 8, 2013

Given the constants of human nature, it’s not immediately apparent how you can retain a fee-for-service plan (as in Canada), without attempts to “game the system.” According to the Canadian Health Care Anti-fraud Association, health care fraud is alive and well in Canada, even “rampant.”

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Peter1
Dec 8, 2013

“According to the Canadian Health Care Anti-fraud Association, health care fraud is alive and well in Canada, even “rampant.”

And that would mean?

Don’t know where you got the “rampant” word from but under the heading:

“The Problem of Health Care Fraud” was this;

“While estimates vary, it can be safely stated that health care fraud costs Canadians billions of dollars each year. Like other types of fraud, it is a complex problem, as it comes in a variety of forms that can be difficult to detect. What makes health care fraud so pervasive is the fact that it can be perpetrated by virtually any user of the health care system, such as patients, health care providers, staff and administrators, and medical device manufacturers. Whatever the source, health care fraud comes at a high cost to us all.”

But no actual “evidence” to back the “billions” number. Most of their blog/posts were about other countries. But yes, I bet there’s health care fraud in Canada, just like any other country. How high a number do you think it is in the U.S. and what would that mean?

Guest
Dec 8, 2013

I’m simply pointing out, in response to a comment made above, that incorporating fee-for-service plans in a single-payer collectivized health care scheme (as in Canada) does not remove the need for “paper pushing” and “claims contesting.” Otherwise, you are giving providers draft authority on your bank account. As for “evidence,” just what do you require, in the wake of the findings of Dr. Gawande?

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Peter1
Dec 8, 2013

#41, since we’re on to Canada you might want to get some info from this site: http://www.cihi.ca/CIHI-ext-portal/internet/EN/Home/home/cihi000001

You can look at all sorts of cost data. One section gives cost of hospital stays in all regions of the country. Look in “Health System Performance – Our Health System” I can’t link because this site restricts double links.

Average Cost of hospital stay – $5300. How does that compare to U.S.?

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Barry Carol
Dec 8, 2013

There are companies called Recovery Audit Contractors (RAC’s) that can audit provider charges billed to Medicare up to three years after the date of service. The RAC’s earn a 9% commission on any money recovered from providers due to errors that can be caused by anything from outright fraud to innocent mistakes regarding missing or improper billing modifiers.

As a taxpayer, I certainly don’t want Medicare to be a big dumb payer that promptly pays provider bills without question. Indeed, I wish CMS made more aggressive use of data analytics and other techniques to identify suspicious bills before they are paid and deny the claim until legitimacy is clearly demonstrated. For far too long, Medicare has basically followed a “pay and chase” approach to fraud which limits recoveries to a tiny fraction of improper payments.

While I have no data to prove it, I strongly suspect that fraud is more prevalent in the U.S. than in other developed countries where a collective attitude of solidarity presumably mitigates the inclination to impose improper and unreasonable costs of fellow citizens. This difference in attitude also extends to medical spending related to end of life care, in my opinion.

Guest
Dec 8, 2013

Perhaps it would be more effective to put physicians on straight salary, and assign them quotas of “throughputs.”

Guest
Dec 8, 2013

the bottom line is health care costs have slowed down and that is a good thing which ever way you turn it around

Guest
Dec 9, 2013

While I find the imperfection of Obamacare as well thought out as an episode of Honey Boo Boo, I have to disagree that Obamacare has not set in motion changes that have contributed to lower costs.

First of all, consumption is down while unit costs in the commerial side co he to rise. RX costs, as much as 20% of costs have dropped temporarily as brand named drugs lose patent protection and get hit with generic competition. Employers are more engaged — especially larger employers over 500 employees who tend to be self insured.

It really depends on what segment of the healthcare market you are evaluating when you suggest Obamacare has had no impact. I focus on the 50+ employer market as a consultant and I have seen demonstrable change that I attributebto the ACA. One example is the minimum loss ration rule– In the non individual insurance markets for employer plans over 50 lives, Obamacare imposed Minimum Loss Ratio requirements of 85% by state. As an ex-CEO of a health plan, I was often asked to run loss ratios below 85% to potentially make up for other regions whose loss ratios had soured due to non profit Blues pricing or poor plan management of underwriting and contracting. Once the law passed, NY and other markets were often subsidizing other regioms of the US as we used overcollected NY premiums to offset under collected Ohio premiums. Eventually, we could no longer run NY at low loss ratios to make up for Ohio’s poor performance. After fhe ACA passed, any imsured loss ratios under 85% wwere supposed to be returned as rebates to prior policy holders. The insurers hated the idea od rebates so they focused on using the loss ratio favorable development to retain and write new clients using premium holidays and/or wellness credits to reduce premiums to win business and retain business. You will see after 2012, fewer rebates have been returned by insurers. They are smarter to underwear to exactly 85% — they will run perhaps 200%-400bps below this MLR and then as the year progresses use the dollars to buy down renewals and provide incentives to renew creating lower premiums for insured clients.

Another example is the prevalence of self insurance. As PCOR taxes get levied on top of insured premium taxes, more employers will seek out self insurance. Self insurance creates greater transparency, less opaque dark art underwriting by insurers and less per employee per month profit taking by the insurer. It creates opportunities for third party vendors to help clients see the stacked deck of profit taking that arises out of insurer subsidiary services such as medical management, disease management, PBM and behavioral health programs that they essentially sell at inflated transfer pricing to their own sister company the insurer. Once self insured, employers begin to focus less on cutting benefits and co tribution cost increases but more on engagement, network econimic management, health, primary care improvement and vendor performance.

High deductible plans have been growing promotimg more judicous out of pocket, better unit cost awareness and consuming more benefits. It’s ushering in a period of thinking about what the employer should subsidize and then let employees choose between more options based on economic preference.

This has led to a proliferation of defined contribution solutions and private exchange concepts where employees are subsidized a fixed stipend and them allowed to choose between a master menu of plans based on teirown unique needs. The Cadillac tax is forcing employers to rethink the notion of defined benefits — espeially if as many as 40% of employer plans will find some aspect of the costs taxed above $10,200 per employee and $27,500 per family. The deduction for health insurance is firmly I’m the cross haird of Cngress. employees opt for cheaper high deductible plans, it will set in motion more consumerism and also force high utilizers to migrate to lower cpost plans with mote cost sharing and engagement rewards.

I do not believe the insurers have driven much of this improvement. Quite frankly, under Obamacare, they have a perverse incentive to keep costs up as they can only keep 15% for risk and profit. However, they are not dumb, they have created subsidiaries that are driving growth — subs whose costs are charged not as admin expenses against the 15% but as claims against the 85%. An employer may pay the insurer 15% for Admin and profit and the insurer may share that that only affords them a 4-8% margin. however, their subsidiaries providing health services is growing at a 20%_30% clip with god margins. If you combine the insurance and insurance services subsidiaries results, it explains why insurer stocks are at all time highs.

Bob,I don’t buy they the insurers are better,faster and cheaper. I don’t think the argument that their sentinel effect on claims and consumption is worth what we are charged. It is possible to measure. I could go on and on about the incongruous and poorly thought out aspects of Obamacare but for all it’s imperfections, it has set a process in motion. The question is whether the end result will be market based reforms and low single digit trends or it will find employers too fatigued, short staffed and cynical to really incent and push consumerism, health engagement and better procurement of insurer services.

Obamacare has driven more change than one realizes and has set us on a path. The destination will be in the eyes of the beholder. If the failure of employer sponsored insurance is considered am welcome excision of a malignant outgrowth of Obamacare, well, then you may take issue with the idea that these changes are positive. One thing is for certain, things are going to change — and they should!