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Why the Subsidy Gap Isn’t Actually a Gap

Mar 19, 2014• 5

By Janet Weiner

A 26-year-old man who makes $36,000 a year in Philadelphia finds out that he is not eligible for a health insurance subsidy, and must pay his $205 monthly premium without any help.

This, despite the ACA’s subsidies for people earning up to 400% of poverty (about $46,000).

Has he fallen into the subsidy gap?

The latest talk about a subsidy gap into which some millennials are falling is mystifying to me. It seems to be a product of a misunderstanding about how the subsidies are calculated.

Let’s remember that the goal of the subsidies is to ensure that people earning between 100% and 400% of the federal poverty level (FPL) pay no more than a certain percentage of income on health insurance premiums.

This cap is set on a sliding scale, so that people on the higher end of the FPL scale are expected to pay a higher percentage.

The caps range from 2% for someone at poverty level up to 9.5% for someone earning between 300-400% of poverty level. That’s how the Affordable Care Act defines “affordable.”

The amount of subsidy is based on the difference between that cap and the premiums for the second-cheapest silver plan on the market. The subsidies are not an entitlement for all people earning 100%-400% of FPL, nor should they be.

They kick in only when the premium for that silver plan exceeds the stated percentage of income.

Below that cap, the premiums are considered affordable and people are not eligible for subsidies. That’s not a gap; that’s the way the law is designed.

What Do Millennials Want from the Healthcare System?

Mar 18, 2014• 54

By Paul Keckley

The 18-34 year old segment of our population is large, growing and important in our society. They are 80 million strong. Their attitudes, beliefs, values and actions are re-shaping the way every organization, business and institution thinks about its future.

According to a Pew Research report released last week, Millennials are independents and skeptics: 50% have no political affiliation, 29% no religious affiliation, and 19% say they do not trust established institutions to do the right things (versus 40% for Baby Boomers).

Millennials worry about money. A study by the Investor Education Foundation of the Financial Industry Regulatory Authority concluded that their concerns about their auto, credit card and school debt trump other issues.

Most think economic stability should come before marriage and family life. Half who went to college have a student loan to repay, and one third moved into the homes of their parents at some point to make ends meet.

And they worry about the future. Paul Taylor’s The Next America: Boomers, Millennials, and the Looming Generational Showdown predicts economic battle between Millennials and Baby Boomers:

“Every family, on some level, is a barter between the generations…If I care for you when you’re young so you’ll care for me when I’m old…But many Millennials won’t be able to afford that…The young today are paying taxes to support a level of benefits for the old that they themselves have no prospect of receiving when they become old.”

Pew survey data supports his contention:

51% of Millennials do not think there will be any money for them in the Social Security system by the time they retire.
39% believe they’ll get reduced benefits

So what do Millennials want from the health system? Their view is likely to disrupt how industry leaders operate their businesses and how policymakers make laws that govern its commerce.

Why Bad Research Makes It into Good Medical Journals

Mar 18, 2014• 4

By Josh Herigon

Last week, a study in the New England Journal of Medicine called into question the effectiveness of surgical checklists for preventing harm.

Atul Gawande—one of the original researchers demonstrating the effectiveness of such checklists and author of a book on the subject—quickly wrote a rebuttal on the The Incidental Economist.

He writes, “I wish the Ontario study were better,” and I join him in that assessment, but want to take it a step further.

Gawande first criticizes the study for being underpowered. I had a hard time swallowing this argument given they looked at over 200,000 cases from 100 hospitals. I had to do the math. A quick calculation shows that given the rates of death in their sample, they only had about 40% power [1].

Then I became curious about Gawande’s original study. They achieved better than 80% power with just over 7,500 cases. How is this possible?!?

The most important thing I keep in mind when I think about statistical significance—other than the importance of clinical significance [2]—is that not only does it depend on the sample size, but also the baseline prevalence and the magnitude of the difference you are looking for. In Gawande’s original study, the baseline prevalence of death was 1.5%.

This is substantially higher than the 0.7% in the Ontario study. When your baseline prevalence approaches the extremes (i.e.—0% or 50%) you have to pump up the sample size to achieve statistical significance.

So, Gawande’s study achieved adequate power because their baseline rate was higher and the difference they found was bigger. The Ontario study would have needed a little over twice as many cases to achieve 80% power.

This raises an important question: why didn’t the Ontario study look at more cases?

Mixing Politics and Science Is Injurious to Public Health

Mar 18, 2014• 9

By Saurabh Jha, MD

If Obama’s nominee for the position of Surgeon General, Vivek Murthy, is not endorsed by the Senate because Senate Democrats from conservative states are too scared to vote for him for fear of losing votes from a population, egged on by the National Rifle Association (NRA), that passionately supports firearms, the first words that come to mind are ‘unfortunate,’ ‘tragic’ and ‘daft,’ although not in that particular order.

Words that do not come to mind are ‘surprising’ or ‘unprecedented.’ This is the natural result of decades of actively encouraging science to mix with politics.

In an ideal world, or I should say reasonable world, noting that perfection is not a pre-requisite to being reasonable, it would scant matter what Murthy thought about firearms.

He would be judged on his (impeccable) credentials, (unmistakable) leadership, and (imaginative) entrepreneurship not to mention his gumption in standing up for what he believes.

It would, of course, be utterly naïve to believe that in the real world his politics do not matter.

I doubt Murthy would have advanced so precociously, let alone been nominated for the position of Surgeon General, if he were a second amendment absolutist, an implacable limited government advocate or had written extensively about the role of free market in healthcare, all things else being equal.

We applaud him for standing up for his convictions not just because of his standing up but for the nature of his convictions.

This is not to suggest that Murthy’s worldview is expedient. There’s no reason to doubt its sincerity. It’s to suggest that a certain weltanschauung is incompatible with progress in academia and beyond.

That’s because despite living in an age of unprecedented reason we have been unable to render unto science what is unto science and render unto politics what is unto politics, a distinction our species has made little progress in making in the last two thousand years.

Silly Republican Insurance Reform Ideas

Mar 17, 2014• 5

By Robert Laszewski

There are news reports indicating Republicans will be proposing such longstanding health insurance reform ideas as selling insurance across state lines and association health plans.

These ideas have been around for some time and have served Republicans as convenient talking points out on the campaign trail positioned as common sense alternatives to Obamacare.

When I discuss these ideas with people in the insurance industry––people who know how their market really works––these ideas generally command plenty of snickers.

Selling Insurance Across State Lines
Presumably, Republicans are targeting the many state benefit mandates that drive health insurance policy prices up. The idea is to allow the sale of policies from states with the fewest benefit mandates to be able to be sold in a high mandate state––thereby encouraging the state with more mandates to curtail them.

There are a number of problems with this idea:

IF it did attract new carriers to a market, it would be a great way to blow up an existing health insurance market––for example, the high market share legacy Blue Cross plan whose business is in compliance with all of the existing state benefit mandates. A new carrier could conceivably come into the market with much lower rates––because it is offering fewer benefits––attracting the healthy people out of the old more regulated pool leaving the legacy carrier with a sicker pool.Stripping down a health plan is a great time tested way for a predatory insurance company to attract the healthiest consumers at the expense of the legacy carrier who is left with the sickest.
It’s a 1990s idea that that fails to recognize the business a health plan is in in 2014. Health plans don’t just cross a state line and set up their business like they did decades ago when the insurance license and an ability to play claims was a all a carrier needed to do business. This idea was first suggested by the last of the insurance industry cherry pickers back in the 1990s and it has long outlasted its relevance.Continue reading…

Commentology: Actually, High-Tech Imaging Can Be High-Value Medicine

Mar 17, 2014• 3

By Robert McNutt, MD & Nortin Hadler, MD

Our comments regarding this interesting blog, and the comments to the blog, may seem tangential to the author’s points.

The blog and comments point, we think, to a confusing set of principles being considered, perhaps, out of context?

Those comments range from: ACOs will lead to better figuring out what is best (impossible) – to mismatched information regarding a specific clinical case (reasonable). What is striking is that we have medical students worrying about costs of care.

Instead, shouldn’t we be teaching them to understand the value of information for decision-making? Shouldn’t we be teaching them the concepts of co-dependent testing leading to all tests being less useful than we think?

Shouldn’t we be teaching students the concepts of decision-analysis, and thresholds, and patient’s being involved in the decisions? Shouldn’t we be teaching that it is better to know than to think we know? Shouldn’t we be doing studies rather than scratching at the “tragedy of the commons” (so many physicians feasting on the grassy fields of a sick patient)?

Med School: Can the Lecture!

Mar 14, 2014• 4

By James Salwitz, MD

Medical students frequently see patients with us in our office. Their presence is welcome, if for no other reason than it makes us think young.

A second year student has been coming to our office for over a year and is excited about a future taking care of cancer patients. She just completed the Hematology and Oncology section of lectures at the med school. I asked her how it went. “Frankly, “ she said, in the articulate way of the highly educated, “it sucked.”

I was astonished. How could such an exciting, complex and rapidly evolving field, yield teaching that would cause a motivated student to take such umbrage? Too much information? Too complex a topic? Too much difficulty in the exams? “No,” she said, it lacked “too” of anything.

It was not organized, not at the appropriate level, rambling and incomplete. Without reviewing the critical information in texts and online, she would have learned little and the entire class would have failed the subsequent tests.

In a huff, wanting to assure that we not lose a crop of budding oncologists, I swore to find the cause of this didactic discord. Surely, it must be possible to put together a set of clear, complete, cancer and blood lectures, so that the students were not only taught, but inspired. Somehow, we would fix those lagging lectures. But, then it occurred to me, why?

There are 141 medical schools in the United States, 2372 in the world. They teach 20,055 students in North America and hundreds of thousands around the globe. In every school, every state, and country, they all teach about cancer. In every school, cancer is the exact same disease. On every continent, the possible treatments are the same.

Therefore, why in the world do students listen to different lectures by different teachers on the exact same subject?

Why use the lecture hall format in medical school? Why not find a few super-experts to write one perfect lecture, and then record that lecture one perfect time, given by a brilliant, inspiring, articulate educator (with translations)?

Checking the ACA’s Vital Signs

Mar 14, 2014• 2

By Evan Saltzman

Despite pervasive challenges associated with the rollout of the Affordable Care Act (ACA), including the botched launch of HealthCare.gov and the concurrent wave of plan cancellations, the administration remains optimistic about the ACA’s fate.

However, critics of the ACA have seized upon these recent mishaps, particularly President Obama’s pledge that “if you like your health plan, you can keep your health plan,” as evidence of the inevitable demise of the ACA.

In response to this political firestorm, the Obama administration decided to allow insurers to renew plans not complying with ACA regulations, subject to the approval of state health insurance commissioners.

Under the policy announced last November, plans failing to meet ACA standards could be renewed for one year starting as late as Oct. 1, 2014 (and hence could be continued until Oct. 1, 2015).

The extension announced last week allows individuals to keep such plans until Oct. 1, 2017.

Allowing people to keep plans out of compliance with the ACA could deprive the newly-created marketplaces, where lower- to middle-class families can receive subsidies from the government to purchase private individual coverage, of enrollees, particularly the young and healthy enrollees they need to make premiums affordable.

According to ACA critics, meager enrollment of the young and healthy in the marketplaces would lead to a death spiral, a self-reinforcing cycle of premium increases and enrollment declines that could spell doom for the system. Recent data released by the Department of Health and Human Services suggests that enrollment, particularly among young adults, has been lackluster, falling short of Obama administration targets.

Is a death spiral looming? Our analysis suggests not.

Patientgate: Why Patient Recordings Will Change Everything

Mar 13, 2014• 22

By Glyn Elwyn, MD

It’s 8.30 am, just before clinic opens. It is 2010. Dr Byte* checks an online forum, and something catches his eye.

A female patient is complaining about a doctor. Her posting has led to strident reactions from other doctors. Patients are taking her side. It looks ugly.

It turns out that the patient had asked her family doctor whether she could use her smartphone to record the encounter. Her doctor was apparently taken aback and had paused to gather his thoughts. He asked the patient to put her smartphone away, saying that it was not the policy of the clinic to allow patients to take recordings.

The patient described how the mood of the meeting shifted. Initially jovial, the doctor had become defensive. She complied and turned off her smartphone.

The patient wrote that as soon as the smartphone was turned off the doctor raised his voice and berated her for making the request, saying that the use of a recording device would betray the fundamental trust that is the basis of a good patient-doctor relationship.

The patient wrote that she tried to reason, explaining that the recording would be useful to her and her family. But the doctor shouted at her, asking her to leave immediately and find another doctor.

Some participants on the online forum expressed disbelief. But the patient then went on to state that she could prove that this had actually happened, because she actually had a recording of the encounter. Although she had turned off her smartphone, she had a second recording device in her pocket, turned on, that had captured every word.

Misunderstanding Narrow Networks

Mar 13, 2014• 18

By David Dranove & Craig Garthwaite

In a recent New York Times opinion piece, Obama advisor Ezekiel Emanuel attempts to ease the minds of millions of Americans who may be selecting narrow network plans in the exchanges.

In defending narrow networks, Emanuel cites the well-known example of Kaiser, which has for decades required enrollees to choose among only Kaiser-owned hospitals and Kaiser-employed physicians.

He goes on to propose some “safeguards” for plans in the exchanges such as mandating that insurers disclose the criteria used to establish their network of providers and requiring that insurers pay for second opinions from elite out-of-network providers.

Perhaps surprisingly given our previous commentary, we agree with the general thrust of Emanuel’s argument, which is that freedom of choice is overrated. And while we do not agree with many of his recommended safeguards, our quarrel today is not with his proposals for even more new rules and regulations.

Rather, our primary quarrel is with the vast majority of the individuals who chose to comment on, and often lash out at, Emanuel’s article. These comments are emblematic of the general misunderstanding of the role of narrow network plans in controlling the future growth of health care expenditures.

In a nutshell, this is the archetypal response against Emmanuel’s claim: “Evil insurers have given us narrow networks. The government must intervene in this bloodthirsty lust for profits. Give us freedom of choice! (And preferably with the government taking over the business of insurance altogether).”

Given previous comments on this site, we suspect that many readers of our blog might share similar sentiments. So we would like to take our readers on a stroll down memory lane to explain how insurers ended up creating networks, and why we are all better off for it.