the business of healthcare
So many old rules in health care and insurance no longer seem to apply.
I keep stumbling upon situations, where, what used to be up is now down and what used to be down is now up.
No one seems to know for sure how things will settle out under the new reality created by Obamacare and the even more unpredictable reactions to the law by health care companies, employers and, most especially, you and me.
I’ve started using the term “weightlessness” to describe this state we’re in. Picture the astronauts on the international space station, floating through a room, flipping at will, as likely to settle on a wall or on the ceiling as on the floor.
That’s what life is like under Obamacare now—for physicians, hospital administrators, insurance executives, benefits brokers and employers.
Here are a few examples:
1. I wrote last week about how a chunk of workers, even at large employers with generous benefits, would actually get a better deal on health insurance from the Obamacare exchanges than from their employers. So their employers are starting to consider whether they should deliberately make health benefits unaffordable for those low-wage workers, so they can qualify for Obamacare’s tax-subsidized insurance.
That could be good for both employers and employees. The effect on taxpayers, which would switch from granting a tax credit to employers to instead granting it to the employees, is unclear.
2. Even though insurers were certain that price would be king on the Obamacare exchanges, that hasn’t led most customers to buy the plans with the cheapest premiums. As I wrote Friday, 76 percent of those shopping on the exchanges in my home state of Indiana have picked the higher-premium silver and gold plans, with only 24 percent picking bronze plans.
“There are a few geographies where we believe we are gaining share despite lower price competition which points to the value of our local market depth, knowledge, brand, reputation and networks,” WellPoint Inc. CEO Joe Swedish said during an January conference call with investors.
It’s possible that’s a result of older and sicker patients being the earliest buyers on the exchange, and that as healthier people buy coverage, they’ll gravitate to the low-cost bronze plans. But that hasn’t happened—which, as I wrote on Friday, has proved wrong hospitals’ concerns about the super-high deductible bronze plans.
Continue reading “The Weightlessness of Obamacare”
Filed Under: Uncategorized
Tagged: Benefits, Employers, Insurers, J.K. Wall, Milliman, Obamacare, Risk adjustment, Subsidies, the business of healthcare
Feb 18, 2014
When envisioning what public insurance exchanges of the future can and should look like when it comes to technology and structure, one only needs to look at the successful private exchanges that have paved the way over the past several years.
This experience has taught those who administer private exchanges that open enrollment—the phase that the federal government’s Health Insurance Marketplace is struggling through currently—is only the beginning. Public exchanges could benefit from lessons already mastered by private exchanges—starting with open enrollment but extending to even more complex technology-based transactions.
There are 10 scenarios that vendors must be able to handle.
1. Life Events. In today’s individual Health Insurance marketplace, consumers can generally add or drop coverage for themselves or their dependents anytime they want. In other words, it’s a relatively “rule-free world.” In January 2014, that world changes to look more like the current group health marketplace in which many rules are defined by the federal government’s existing tax code (e.g., Section 125) and HIPAA requirements, and consumers must select and “lock in” their coverage once a year for the following 12 months, unless they experience a qualified life event.
As a result, each qualified life event – e.g., marriage, divorce, birth of a child, loss of spouse’s coverage and many more – must be configurable within the Exchange technology to enforce the appropriate rules. For example, if a person gets married, is that person allowed to drop coverage or change plans and carriers? How about with the birth of a child? Or with a loss of spouse’s coverage? For a truly scalable Exchange technology, thousands of scenarios must be configured in advance to enable consumers to make enrollment choices online without administrator involvement.
Continue reading “What Public Insurance Exchanges Will Look Like 5 Years From Now”
Filed Under: Uncategorized
Tagged: Health Insurance Exchanges, Health Plans, Open Enrollment, Robert Gallun, the business of healthcare
Dec 4, 2013
As of last week, the heart of Obamacare is upon us with the opening of the health insurance exchanges (HIXs). And while some think this represents the heart of darkness, it is hard to imagine that anything will stop January 1, 2014 from coming and, with it, a new legal requirement for all Americans to have health insurance.
Ushering in this new world order, the HIXs are essentially a “Match.com” to put people together with insurance products, representing a way that, for the first time, Americans will directly purchase healthcare without the prospect of being denied coverage or having their employers buy on their behalf.
In fact, the new HIXs create a direct relationship between consumers and health insurers in a way that has never existed before, and with that comes the need to fundamentally disrupt traditional methods of delivering health insurance products. Not since the advent of employer-paid health insurance after World War II or the start of the Medicare program in 1966 has there been such a broad-scale opportunity for health system transformation.
There are few markets that are mandated by law to include virtually every single American man, woman and child, making the opportunity particularly juicy to investors. For those entrepreneurs who figure out how to transfer the secret sauce from cheeseburgers that impair health to insurance-related products and services that improve it, the next few years offer an opportunity to turn market confusion into gold.
Among the biggest opportunities are investments in technologies and services that power the new healthcare exchanges. Venture-backed companies, such as GetInsured.com, have emerged to provide the various state-sponsored exchanges with the back-end technology that enable comparison-shopping, financial transactions and enrollment support essential to operating the HIX marketplaces.
But while state and federal healthcare insurance exchanges are the main topic of conversation this week, much of the real action has and will continue to take place in private exchanges serving the large and small employer market, particularly as employers do the math and figure out it may be in their financial best interest to end their role as benefit plan intermediaries.
Continue reading “Out of Chaos, A New Beginning”
Filed Under: THCB, The Business of Health Care
Tagged: Entrepreneurs, Health Insurance Exchanges, Lisa Suennen, Private Exchanges, the business of healthcare
Oct 7, 2013
On July 16, the CMS Innovation Center reported the first-year results for the Pioneer Accountable Care Organization program: 13 Pioneers, or about 40 percent of the participants, earned bonuses. The program saved Medicare a gross $87.6 million before bonus distributions, cutting the rate of growth in Medicare spending by 0.5 percent, from 0.8 percent to 0.3 percent annually.
However, nine of the 32 members dropped out and press reports hinted at a contentious relationship between the Pioneers and a well meaning but green and overtaxed CMS staff. It was not an auspicious beginning for a program whose advocates believed would eventually replace regular Medicare’s present payment model. There immediately followed a blizzard of spin control from ACO “movement” advocates stressing the need for patience and highlighting first year achievements.
What was irritating about the Pioneer spin is it treated the ACO as if it were a brand new idea with growing pains. This studiously ignores a burned out Conestoga wagon pushed to the side of the trail: the Physician Group Practice demonstration CMS conducted from 2005-2010. The PGP demo tested essentially the same idea — provider bonuses for meeting spending reduction and quality improvement targets for attributed Medicare patients. The pattern of arrow holes and burn marks on the PGP wagon closely resemble those from the Pioneer’s first year, strongly suggesting more troubles ahead for the hardy, surviving Pioneers.
The PGP Precedent. Like the Pioneers, PGP participants were not ordinary community hospitals or freshly formed physician groups or IPA’s. Rather, most were “high functioning” organized clinical enterprises, some with decades of global risk contracting or health plan operating experience. Particularly in light of the degree of clinical integration and care management experience of its participants, the PGP results were extremely disappointing; only two of the ten participants were able to generate bonuses in each of the program’s five years, and one, Marshfield Clinic, earned half the total bonuses. Managed care veterans like Geisinger Clinic and Park Nicollet earned bonuses in only three of their ten program years. Two other high-quality multi-specialty clinics had even rougher sledding, with Everett Clinic getting one year of bonus ($126,000) and Billings Clinic completely shut out.
The pattern in the first Pioneer year is remarkably similar. While thirteen of the Pioneers earned bonuses, it appears from press reports that four of them generated 2/3 of the savings. It is likely not coincidental that three of those four participants (Massachusetts General, Beth Israel Deaconess’ physician organization, and New York’s Montefiore) either run or practice at some of the most expensive hospitals in the country, in two of the country’s highest per capita Medicare spending markets. Orchards full of low hanging fruit (e.g. very high levels of previously unexamined Medicare spending) appear to be an essential precondition of ACO success.
Continue reading “Pioneer ACO’s Disappointing First Year”
Filed Under: THCB, The Business of Health Care
Tagged: ACOs, CMS Innovation Center, Jeff Goldsmith, Medicare Advantage Program, Physician Group Practice, Pioneer ACO, the business of healthcare
Aug 16, 2013
The following was drafted quite a few months ago, and had its genesis in a list of recommendations for improving the health care system that David Dranove solicited from a number of academics for an issue of Health Management, Policy and Innovation. I’ve dawdled in finishing and polishing it up, but seeing the stimulating reform proposal posted recently by Jay Bhattacharya, Amitabh Chandra, Mike Chernew, Dana Goldman, Anupam Jena, Darius Lakdawalla, Anup Malani and Tom Philipson motivated me to return and finish it; so here it is finally.
One can hardly say that there’s been too little discussion of health reform recently. However, much of the discussion is focused on the ACA and its details. That’s fine, but we’ve gotten very far away from thinking about overarching principles that we think should guide the design of a health system, and what that implies for what it would look like . What follows are some thoughts on what such a health reform might look like. They are informed by my read of the research evidence, and my observations of the U.S. health care system over a long period of time, but should be understood as representing only my personal opinions.
This is not intended as a criticism of the ACA. While the ACA certainly isn’t perfect, in my opinion we’re better off as a country with it than without it. However, there will be modifications to the ACA and other changes to the health system as we move forward, so having a framework to structure our thinking will be useful as we consider these inevitable changes.
What I propose below is guided by the following. First, economic efficiency is a goal. This simply means avoiding waste, i.e, trying to generate the maximum benefits net of costs. The second goal is that no American is exposed to excessive risk to their health or finances due to medical expenses. Last, the overarching design principle is to create basic ground rules for the system and then let the system run, avoiding heavy handed regulation or micro management. The key objective of these ground rules is to give participants the right incentives insofar as possible, while achieving insurance objectives. With that in mind, compassionate, efficient health reform would do the following.
Health Insurance Reform
First, eliminate the tax exclusion of employer sponsored health insurance. The exclusion of employer sponsored health insurance from income taxation distorts the demand for insurance. This leads to people with employer sponsored health insurance holding excessive coverage, which drives up medical spending and thus insurance premiums. Ironically, not taxing health insurance ends up making both health care and health insurance less affordable. Eliminating the tax exclusion of employer sponsored health insurance will eliminate a major distortion in health insurance, health care, and labor markets. It can generate substantial tax revenues (it’s estimated that the value of the state and federal income tax exclusion for 2009 was $260 billion), while potentially allowing for lower income tax rates. It’s also worth pointing out that the subsidy is biggest for those who face the highest marginal tax rates, i.e., it’s regressive.
Continue reading “Beyond the Affordable Care Act: A Framework for Getting Health Care Reform Right”
Filed Under: Economics, OP-ED, THCB
Tagged: Costs, Economics, Health Care Reform, Martin Gaynor, The ACA, the business of healthcare
Aug 9, 2013
In his “The Great American Health Care Divide,” Brad DeLong laments the great ideological divide that has so long prevented this great country from developing a coherent national health policy.
I am glad to have Brad’s company, because I have whined about the same divide for several decades now, as evidenced by my “Turning Our Gaze from Bread and Circus Games,” penned in 1995 and “Is there hope for the uninsured?”
Finally, after a nice visit with my friends at the Cato Institute and reading the often amazing commentary on John Goodman’s NCPA blog , I was moved to pen a post on The New York Times blog Economix entitled “Social Solidarity vs. Rugged Individualism.” It was inspired by the often hysterical description of the Affordable Care Act (ACA) as a government takeover of U.S. health care or a trampling on the freedom of Americans, as in mandating individuals to have minimally adequate health insurance, lest they become freeloaders on the system.
The basic idea of my proposal is simple.
In 2009, Paul Starr had warned Democrats of a potential voter backlash against the individual mandate and proposed instead a nudging arrangement. Uninsured Americans would be auto-enrolled into health plan, if they chose not to select one, but could opt out of it with the proviso that for the next five years they could then not buy insurance through the insurance exchanges established by the ACA at community-rated premiums, and potentially with federal subsidies.
My proposal is to make that a lifetime exclusion. An individual would have to choose one or the other system by age 25. Should individuals opting out fall seriously ill and not have the means to pay for their care, we would not let them die, of course, but to the extent possible we would cover their full bill – possibly at charges — by expropriating any assets they might have and garnishing any income above the federal poverty level they subsequently might earn. Something like that.
As Jay Gaskill’s somewhat opaque reaction in “RUGGED INDIVIDUALLISM is NOT the Essential Value of Freedom” suggests, people who oppose the ACA as trampling on their freedom are not comfortable with my prescription, which does not at all surprise me.
Continue reading “A Health Plan for Rugged Individualists”
Filed Under: OP-ED, THCB
Tagged: Economics, Individual mandate, Insurance, The ACA, the business of healthcare, the uninsured, Universal coverage, Uwe Reinhardt
Aug 5, 2013
Uwe Reinhardt is one of the nation’s most respected health care economists, professor at the prestigious Woodrow Wilson School at Princeton, fellow of the Institute of Medicine, and one of the shining lights in health policymaking circles.
But alas, even the best and the brightest are wrong sometimes. Case in point: Reinhardt’s recent comments in the New York Times on the role of the American business community in fueling our nation’s health care problems. To paraphrase, Reinhardt believes that employer purchasers of health care are 1) dim bulbs and 2) responsible for the escalating costs of care.
This seemed puzzling coming from Reinhardt, whose views are widely respected by purchasers. But I was able to diagnose the problem by drawing on insights from social psychology.
Social psychology investigates “attribution,” our mind’s process for inferring the causes of events or behaviors. It’s how we describe why things happen — to us or to someone else. It turns out, we humans aren’t very accurate in our attribution processes because all of us suffer from at least one of the following problems. In his New York Times piece, poor Professor Reinhardt appears afflicted by all three at the same time. Let’s take a closer look at each:
1. Actor-Observer Bias: This is the notion that when it comes to explaining our own behavior, we tend to blame external forces more often than our own personal characteristics.
Reinhardt is rightfully troubled by a decade of escalating health care cost growth under employment-based health insurance. But seized by Actor-Observer Bias, Reinhardt blames this problem not on the world of health care that he played such an influential role in over the past few decades, but on external forces, the employers who purchase health care.
Continue reading “Three Reasons Uwe Reinhardt Blames Purchasers for Everything”
Filed Under: Economics, OP-ED, THCB, The Business of Health Care
Tagged: Bias, Costs, Economics, Employers, Leah Binder, social psychology, the business of healthcare, Uwe Reinhardt
Jun 28, 2013
The Next Health Care calls for very different strategies and tool sets. Many systems are acting as if they read a manual on how to do it wrong. How many of these critical strategic and tactical mistakes is your system making?
So I was beta testing FutureSearch, this cool new Google add-on app I’m writing with a coder, and I found an article that I wrote in 2025. My first thought was, “Cool! It works!” My second thought was, “I’m still working at the age of 75?” It was only then that I focused on the title of the article: “Fail: The 16 Steps by Which Hospitals Failed in the Post-ACA Risk Environment — An Analysis.”
The article detailed a dispiriting history from 2013 to 2020. More important, it listed the 16 most common mistakes that hospitals and health systems made while trying to navigate the new risk environment of the Next Health Care.
I found this interesting because of course right at this moment much of the health care industry, in many different ways, is trying to move away from the traditional fee-for-service payment system, which has given the whole industry adverse incentives, leading to much higher costs, poorer quality and restricted access. The rubric of the day is “volume to value.” And I see many different institutions and systems across the country making exactly these mistakes already in 2013.
As you read this list, ask yourself in what way you and your institution might be making the wrong decisions, and ask yourself what they will look like looking back from 2025.
Stick with fee-for-service. Though they included various incentives and kickbacks, most accountable care organizations and ACO-like structures built in the 2012–2014 period were based on a payment system that remained stubbornly fee-for-service. Systems continued to make more money if they checked off more items on the list (and more complex items), rather than solving their customers’ problems as well and as efficiently as possible.
Continue reading “How to Fail at the Next Health Care”
Filed Under: OP-ED, The Business of Health Care
Tagged: ACOs, Costs, Fee-for-service, Hospitals, Joe Flower, The ACA, the business of healthcare
Jun 11, 2013
Oct. 1, 2013 is a focus of increasing anxiety in this country. That’s the date when enrollments begin for the federally run health insurance exchanges, created under the Affordable Care Act (ACA). No one really knows what to expect, but it could be far worse than advertised —and for a reason that has more to do with the federal deficit than health care.
What’s anticipated is unsettling enough. President Obama speaks of inevitable “glitches and bumps” in the implementation. Senate Finance Committee Chairman Max Baucus (D-Mont.) sees the possibility of “a huge train wreck” if the public isn’t adequately educated and prepared. Supporters of the ACA, especially Democrats in the Congress, are nervous about taking the blame if the exchanges don’t unfold as intended.
All these worries are legitimate. The American people, already burdened by a numbingly complex, inefficient and inequitable tax system, now wonder if an increasingly government-run health care system will follow suit. Many are concerned that some employers will dump their current health care plans and pay the relatively modest fine. There’s also worry that young people will opt out of the exchanges (preferring to pay the small penalty), leaving the exchanges with a disproportionately older and sicker pool. Then there’s the very real uncertainty surrounding the ACA’s ultimate cost — illustrated by the impact of Medicare alone, which the Office of the Chief Actuary of Medicare estimates could cost cost $10 trillion more than claimed.
Amid all these concerns and speculations, almost no attention is being paid to the opportunity that the ACA’s insurance exchanges could represent for state and local governments’ retiree health care programs. It’s time to think about it because the consequences could be far-reaching.
States in a deep hole
We already know that many state and local governments are in a financial hole that keeps getting deeper. A newly released report by the U.S. Government Accountability Office (GAO) makes clear that, absent significant reforms, the fiscal picture for most state and local governments will steadily worsen through 2060. A main cause, in addition to Medicaid, is the cost of health care for state and local government retirees. These largely unfunded obligations are similar to the pressures on the federal government to fulfill its unrealistic Medicare promises.
Continue reading “When Retiree Benefits and Obamacare Collide”
Filed Under: THCB, The Business of Health Care
Tagged: David M. Walker, Health Insurance Exchanges, Health Plans, Medicaid, Medicare, retirees, risk pools, The ACA, the business of healthcare, The States
Jun 7, 2013
It was bound to happen.
By “it,” I mean that the small group of speciality hospitals (usually orthopedic or cardiology-focused) across that country that are owned by doctors were going to have their “See! We Told ‘ya so!” moment.
Doctor-owned hospitals: How many are there? Two hundred and thirty-eight of them in the whole country (out of more than five thousand)–somewhere between four and five percent of the total in the U.S. (numbers courtesy TA Henry from this excellent piece).
What are the issues?
- ObamaCare effectively bans doctors from owning hospitals in the U.S.
- Those already in existence are grandfathered in under the law.
- We know that doctor-owned hospitals have higher average costs–hence the rationale for banning them under a law with the intent of “bending the cost curve.”
Cue the iron-o-meter:
In the most recent Medicare data (December 2012 report on “value-based purchasing“), doctor-owned hospitals did well in terms of achieving quality milestones.
Really well. Physician-owned hospitals took nine out of the top ten spots in the country. And in spite of their low relative number, forty-eight out of the top one hundred.
Continue reading “Doctors and the Means of Production”
Filed Under: Physicians, THCB
Tagged: doctor-owned hospitals, Hospitals, John Schumann, Physicians, The ACA, the business of healthcare
May 7, 2013