Episode 17 of “The THCB Gang” was live-streamed on Thursday, July 9th! Watch it below!
Joining me were some of our regulars: patient advocate Grace Cordovano (@GraceCordovano), health economist Jane Sarasohn-Kahn (@healthythinker), WTF Health Host Jessica DaMassa (@jessdamassa), and guests: Tina Park, partner at Diagram (@diagramoffice) & Shannon Brownlee, Senior VP at the Lown Institute (@ShannonBrownlee). The conversation focused on asynchronous care, the gap between patients & technology, and the Supreme Court ruling on employers’ ability to limit women’s access to birth control coverage. It was a great and engaging conversation with some of the top health care experts in the field.
If you’d rather listen, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels — Zoya Khan
Today, I’m closing out the year of Health in 2 Point 00 from the ski slopes. In Episode 103, Jess asks me about the ACA ruling that the individual mandate is unconstitutional, whether Sutter Health got what they deserved after the $575 million settlement, health insurer Bright Health raising a huge $635 million round, and a rumor about a $250M Softbank investment coming next week. Wishing you all a very happy 2020! —Matthew Holt
In a previous post, I described how some features of the Affordable
Care Act, despite the best intentions, have made it harder or even impossible
for many plans to compete against dominant players in the individual and small
employer markets. This has undermined aspects of the ACA designed to improve
competition, like the insurance exchanges, and exacerbated a long
term trend toward consolidation and reduced choice, and there is evidence it
is resulting in higher costs. I focused on the ACA’s risk adjustment program
and its impact on the small group market where the damage has been greatest.
The goal of risk adjustment is commendable: to create
stability and fairness by removing the ability of plans to profit by “cherry
picking” healthier enrollees, so that plans instead compete on innovative
services, disease management, administrative efficiency, and customer support.
But in the attempt to find stability, the playing field was tilted in favor of
plans with long-tenured enrollment and sophisticated operations to identify all
scorable health risks. The next generation of risk adjustment should truly even
out the playing field by retaining the current program’s elimination of an
incentive to avoid the sick, while also eliminating its bias towards incumbency
and other unintended effects.
One important distinction concerns when to use risk
adjustment to balance out differences that arise from consumer preferences. For
example, high deductible plans tend to attract healthier enrollees, and without
risk adjustment these plans would become even cheaper than they already are,
while more comprehensive plans that attract sicker members would get
disproportionately more expensive, setting off a race to the bottom that pushes
more and more people into the plans that have the least benefits, while the
sickest stay behind in more generous plans whose premium cost spirals upward. Using
risk adjustment to counteract this effect has been widely beneficial in the
individual market, along with other features like community rating and
However, in other cases where risk levels between plans differ
due to consumer preferences it may not be helpful. For example, it has been
documented that older and sicker members have a greater aversion to change (changing
plans to something less familiar) and to constraints intended to lower cost
even if they do not undermine benefit levels or quality of care, like narrow networks.
These aversions tend to make newer plans and small network plans score as
healthier. Risk adjustment would then force those plans to pay a penalty that in
turn forces enrollees in the plans to pay for the preferences of others.
It is not wise for Democrats to spend all their energy
debating Single Payer health care solutions.
None of their single player
plans has much chance to pass in 2020, especially under the limited
reconciliation process. In the words of Ezra Klein, “If Democrats don’t have a
plan for the filibuster, they don’t really have a plan for ambitious health
Yet while we debate Single Payer – or, even if it somehow
passed, wait for it to be installed — millions of persons are still hurting
under our current system.
We can help these people now!
Here are six practical programs to create a better ACA.
Taken all together they should not cost more than $50
billion a year. This is a tiny fraction of the new taxes that would be needed
for full single payer. This is at least negotiable, especially if Democrats can
take the White House and the Senate.
With each passing year, the Affordable Care Act becomes
further entrenched in the American health care system. There are dreams on both
the far left and far right to repeal and replace it with something they see as
better, but the reality is that the ACA is a remarkable achievement which will
likely outlast the political lifetimes of those opposing it. Future
improvements are more likely to tweak the ACA than to start over from scratch.
A critical part of making the ACA work is for it to support
healthy, competitive and fair health insurance markets, since it relies on them
to provide health care benefits and improve access to care. This is
particularly true for insurance purchased by individuals and small employers,
where the ACA’s mandates on benefits, premiums and market structure have the
most impact. One policy affecting this dynamic that deserves closer attention
is risk adjustment, which made real improvements in the fairness of these
markets, but has come in for accusations that it has undermined competition.
Risk adjustment in the ACA works by compensating plans with
sicker than average members using payments from plans with healthier members.
The goal is to remove an insurer’s ability to gain an unfair advantage by
simply enrolling healthier people (who cost less). Risk adjustment leads insurers
to focus on managing their members’ health and appropriate services, rather
than on avoiding the unhealthy. The program has succeeded enormously in bringing
insurers to embrace enrolling and retaining those with serious health
This is something to celebrate, and we should not go back to
the old days in which individuals or small groups would be turned down for
health insurance or charged much higher prices because they had a history of
health issues. However, the program has also had an undesired effect in many states:
it further tilted the playing field in favor of market dominant incumbents.
The notion that hospital readmission rates are a “quality” measure reached the status of conventional wisdom by the late 2000s. In their 2007 and 2008 reports to Congress, the Medicare Payment Advisory Commission (MedPAC) recommended that Congress authorize a program that would punish hospitals for “excess readmissions” of Medicare fee-for-service (FFS) enrollees. In 2010, Congress accepted MedPAC’s recommendation and, in Section 3025 of the Affordable Care Act (ACA) (p. 328), ordered the Centers for Medicare and Medicaid Services (CMS) to start the Hospital Readmissions Reduction Program (HRRP). Section 3025 instructed CMS to target heart failure (HF) and other diseases MedPAC listed in their 2007 report.  State Medicaid programs and the insurance industry followed suit.
Today, twelve years after MedPAC recommended the HRRP and seven years after CMS implemented it, it is still not clear how hospitals are supposed to reduce the readmissions targeted by the HRRP, which are all unplanned readmissions that follow discharges within 30 days of patients diagnosed with HF and five other conditions. It is not even clear that hospitals have reduced return visits to hospitals within 30 days of discharge. The ten highly respected organizations that participated in CMS’s first “accountable care organization” (ACO) demonstration, the Physician Group Practice (PGP) Demonstration (which ran from 2005 to 2010), were unable to reduce readmissions (see Table 9.3 p. 147 of the final evaluation) The research consistently shows, however, that at some point in the 2000s many hospitals began to cut 30-day readmissions of Medicare FFS patients. But research also suggests that this decline in readmissions was achieved in part by diverting patients to emergency rooms and observation units, and that the rising rate of ER visits and observation stays may be putting sicker patients at risk  Responses like this to incentives imposed by regulators, employers, etc. are often called “unintended consequences” and “gaming.”
To determine whether hospitals
are gaming the HRRP, it would help to know, first of all, whether it’s possible
for hospitals to reduce readmissions, as the HRRP defines them, without gaming.
If there are few or no proven methods of reducing readmissions by improving
quality of care (as opposed to gaming), it is reasonable to assume the HRRP has
induced gaming. If, on the other hand, (a) proven interventions exist that reduce
readmissions as the HRRP defines them, and (b) those interventions cost less
than, or no more than, the savings hospitals would reap from the intervention
(in the form of avoided penalties or shared savings), then we should expect much
less gaming. (As long as risk-adjustment of readmission rates remains crude, we
cannot expect gaming to disappear completely even if both conditions are met.)
Leading lights of
the health insurance industry are crying that Medicare For All or any kind of
universal health reform would “crash the system” and “destroy
healthcare as we know it.”
They say that like
it’s a bad thing.
They say we should
trust them and their cost-cutting efforts to bring all Americans more
affordable health care.
We should not trust
them, because the system as it is currently structured economically is
incapable of reducing costs.
Why? Let’s do a
quick structural analysis. This is how health care actually works.
Health care, in the
neatly packaged phrase of Nick Soman, CEO of Decent.com, is a “system designed
to create reimbursable events.” For all that we talk of being
“patient-centered” and “accountable,” the fee-for-service, incident-oriented
system is simply not designed to march toward those lofty goals.
A friend of mine told me the other day, “We’ve seen our insured patient population go from 15% to 70% in the few years since Obamacare.” As a primary care physician in the Midwest, he’s worked for years in an inner-city clinic that serves a poor community, many of whom also suffer from mental illness. Before the Affordable Care Act (ACA), the clinic constantly struggled to stay afloat financially. Too often patients would be sent to an emergency room because the clinic couldn’t afford to provide some of the simplest medical tests, like an x-ray. Now, with most of his patients insured through the Medicaid expansion program, the clinic has beefed up its staffing and ancillary services, allowing them to provide better preventive care, and in turn, reduce costly ER visits.
From the time Medicaid was established in 1965 as the country’s first federally-funded health insurance plan for low-income individuals, state governments have only been required to cover the poorest of their citizens. Before the ACA, some 47 million Americans were uninsured because their incomes exceeded state-determined benchmarks for Medicaid eligibility and they earned far too little to buy insurance through the private marketplace.
The ACA reduced the number of uninsured Americans by mandating that states increase their income requirement for Medicaid to 138% of the federal poverty line (about $1,330 per month for a single individual), and promising that the federal government would cover the cost to do so. However, in a 2012 decision, the Supreme Court left it to the states to decide if they wanted to increase their Medicaid eligibility. If they agreed to adopt Medicaid expansion, the federal government offered to cover 100% of the increased cost in 2014 and 90% by 2021.
In the industrialized world and especially in United States, health care expenditures per capita has has significantly outgrown per capita income in the last few decades. The projected national expenditures growth at 6.2%/year from 2015 onwards with an estimated in 20% of entire national spending in 2022 on healthcare, has resulted in passionate deliberation on the enormous consequences in US political and policy circles. In US, the ongoing public healthcare reform discussions have gained traction especially with the recent efforts by the Senate to repeal national government intervention with Affordable Care Act (ACA).
In this never ending debate the role of government interventions has been vehemently opposed by conservative stakeholders who strongly favor the neoclassical economic tradition of allowing “invisible hands” of the free market without minimal (or any) government regulations to achieve the desired economic efficiency (Pareto optimality).
A central tenet of this argument is that perfect competition will weed out inefficiency by permitting only competent producers to survive in the market as well as benefit consumer to gain more “value for their money” through lower prices and wider choices.
Restrained by limited societal resources, in US to make our health market ‘efficient’ we need to aim for enhancing production of health services provision at optimal per unit cost that can match consumers maximum utility (satisfaction) given income/budget restraints.
Keeping asides the discussion on whether a competitive market solution for healthcare is even desirable as adversely impact the policy objective of ‘equity”, however from a pure ‘efficiency’ perspective it is worthwhile to focus on the core issue whether conditions in healthcare market align with the prototypical, traditional competitive model for efficient allocation of resources.
Back at their desks after the holidays, health care payers, providers and policymakers across the country are staring down their list of 2019 priorities, wondering which they can actually accomplish. Innovation to improve care quality and reduce costs will top many lists, and progress on this front depends, in no small part, on conditions for such innovation in the health care marketplace. Here are three phenomena unfolding there that I’ll be following closely this year to understand what innovators are up against, and how they’re responding.
The legal battle over the Affordable Care Act (ACA). Over 20 million previously uninsured Americans acquired health insurance between 2010 and 2017, many due to the ACA’s premium subsidies, ban on pre-existing condition restrictions, and Medicaid expansion. At the most fundamental level, this coverage expansion has vastly improved one of the most important conditions for a healthy population—access to health care. But it also supports innovation toward better, more affordable care.Coverage expansion means providers get reimbursed for more of the care they deliver to patients who are unable to pay, which strengthens their financial position. It also enables some patients to maintain more continuous health insurance coverage, hence see a doctor more regularly over time. This, in turn, facilitates providers’ development of more effective approaches to management of long-term, chronic disease, which causes untold suffering and costs the U.S. hundreds of billions in direct medical costs. Continue reading…