Tag: After Reform

The Road to Wellville: Pilots and Demos?

As might be expected of reform legislation, the Patient Protection and Affordable Care Act places a lot of emphasis on innovation. Reasonably enough, most of the potential changes—at least in Medicare—are to be preceded by pilot or demonstration projects designed to test their feasibility. In fact, according to one health care blogger with time on his hands, PPACA includes no less than 312 mentions of demonstrations and 80 mentions of pilots.

Just how important are all these pilots and demos? Harvard’s David Cutler, who served as a key advisor to the Obama administration in developing the reform strategy, clearly believes they are vital. Writing in the June Health Affairs, he stresses the need for rapid implementation of the pilots and demonstrations in order to help achieve eventual savings of “enormous amounts of money while simultaneously improving the quality of care.”

How realistic are Professor Cutler’s expectations?

CMS’ Medicare chronic care demonstrations provide some clues. With data showing that the costliest 25 percent of beneficiaries account for 85 percent of total Medicare spending and that 75 percent of the high-cost beneficiaries have one or more major chronic conditions, the demonstrations were expected to show big benefits from care coordination—the major theme of PPACA’s proposed demos.

The outcomes were decidedly discouraging, as noted by MedPac’s 2009 report to Congress:

“Results suggest that some of these programs may have modest effects on the quality of care and mixed impacts on Medicare costs, with most programs costing Medicare more than would have been spent had they not been implemented….In almost all cases, the cost to Medicare of the intervention exceeded the savings generated by reduced use of inpatient hospitalizations and other medical services.”

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The War Between the States

Christmas is the time when kids tell Santa what they want and adults pay for it.  Deficits are when adults tell government what they want and their kids pay for it.  ~Richard Lamm

The day after a mid-term tidal wave of anti-incumbency sentiment swept through Congress resulting in the GOP reclaiming a controlling majority in the House and closer parity in the Senate, a seemingly contrite President Obama took personal responsibility for his party’s dismal showing at the polls. In a carefully worded conciliatory message, the President shared that, “the American people have made it very clear that they want Congress to work together and focus their entire energies on fixing the economy.”

Newly minted House Majority leader, John Boehner, subsequently reconfirmed that the GOP would not rest until Congress had reined in government spending.  This would be partly achieved by deconstructing the highly unpopular and “flawed” Patient Protection and Affordable Care Act – a “misguided” piece of legislation that would actually increase costs for employers thereby reducing the nation’s ability to jump-start an economy that relies on job creation and consumer spending. In Boehner’s mind, government is not unlike the average American, overweight – it’s budget deficits bloated by the cost of financial bailouts, Keynesian stimulus spending and failure to discuss the growing burden of fee for service Medicare.

The President’s failure to acknowledge healthcare reform in his speech was interpreted by many as deliberate and only served to cement the perception that in Washington, it will impossible to have constructive dialogue around the imperfections and potential unintended consequences of PPACA. The White House’s resolve to defend its hard-fought healthcare legislation is likely to extend the polarizing partisanship that has come to characterize Congress. The impasse may very well spark a two-year period of bruising, bellicose finger-pointing over how to fix rising healthcare costs.

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Mau-Mauing the Medical Loss Ratio

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Senator Max Baucus recently admitted that he never read the new health care law. But that hasn’t stopped him from trying to re-write it after the fact, in a way that would drive more health plans from the market and give consumers less choice.

The new law reduces choice of health plans by giving government the power to control the Medical Loss Ratio (MLR) — the amount of dollars an insurer spends on medical care divided by the total premiums. Policies that cover large businesses will have to achieve an MLR of 85 percent, while those for small businesses and individuals will have to achieve an MLR of 80 percent. This sounds simple but leaves many issues unresolved.

Calculating he MLR can be quite complicated — especially when the government gets involved. Suppose, for example, an insurer invests in information technology that it gives to patients or providers in its network in order to improve co-ordination of care. Is that a medical cost?

Furthermore, the MLR regulation is deadly for increasingly popular consumer-directed plans. Suppose a traditional policy costs $4,000 and spends $3,400 on patient care, for an MLR of 85.00. With the consumer-directed policy, the patient controls $800 more of the medical spending than with the traditional policy, through a higher deductible, and his premium goes down by $800. In this case the MLR goes down to 81.25 ($2,600/$3,200). There is no real difference, but the new regulation could require insurers to rebate $120 — the amount by which the ratio falls short of the required MLR. (In real life, the consumer-directed plan would have lower total costs than in this simple arithmetical example, because cutting out the middleman and giving more health dollars to patients to control themselves motivates them to get better value for money.)

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Not all Ratings Are Equal: Part II

By Read Part I here.

Why are all ratings not equal? Because they are designed for different purposes!
Herein lay the underlying truth to the many objections posed by organizations being rated. Rightfully so, the Three R’s (ratings, rankings and reviews) of providers must be kept in the context of overall purpose. This is one of the challenges to getting The Three R’s accepted and to making report cards right.

Health care is a big industry to rate and it is going to take more than one blog entry to develop a clearer picture of how best to move forward and embrace ratings systems, but let’s put down some context and history, as it is important to our current day objections and it is instructive to our future direction.

In the Beginning… in a fee-for-service market, before we had enough data to understand the enormous variability of clinical care, and before HCFA first contemplated releasing mortality data, performance measurement was all about financial performance measures. The ratings and rankings were quite simply all about financial and operating ratios, and hospitals were the institutional providers who were the rated with the CFO taking the bullet. Thanks to the public debt markets of the municipal bond industry, the hospital industry’s bricks, mortar and technology were mostly financed by long-term tax-exempt municipal bonds. Like most all other financial instruments these bonds are purchased and sold in the secondary markets long after the initial raising of capital, in some case decades. Being a predominantly not-for-profit industry, there exists no statutory reporting of a hospital’s financial results, and thus the Bloomberg terminals used by traders were void of hospital performance data, and the secondary bond market and the portfolio surveillance by large bond funds and bond insurers was a real challenge! No current data, no timely ratios, no real-time analysis…plenty of risk for those trading bonds. Sound familiar?

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If Reform Fails

If conservatives manage to kill health care reform legislation, what will happen next?

I really don’t want to go there.

First, I’m convinced that conservatives won’t be able to repeal the Affordable Care Act (ACA). Democrats will hold onto the Senate, and President Obama still has a veto. If necessary, he will use it to protect the bill. Meanwhile, the majority of the public either favors the legislation or want to “wait and see” how well it works. Most voters would be utterly disgusted if Congress returns to the health care debate this fall. It was ugly the first time around; virtually no one wants to watch re-runs on C-Span. In the months ahead, Americans hope that their elected representatives will do just three things: create jobs, create jobs, and create jobs.

Secondly, if conservatives somehow succeed in crippling the reform bill, we will find ourselves back in a world of laissez-faire health care where medical spending continues to spiral by 4.5% to 9% a year (just as it has for the past ten years), thanks to a combination of climbing prices and rising utilization.

Here, I’m not talking about how much insurance premiums rose: reimbursements that private insurers, Medicare and Medicaid paid out to hospitals, doctors and patients over the past ten years have been climbing by 4.5% to over 9% annually.

In some years, Medicare reimbursements were growing faster; in other years, payouts by private insurers levitated. Over the same span, Kaiser reports that premiums for a family plan rose by an average of 13.1% a year.

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The New Rules for Insurance Appeals Under PPACA

On July 22, the Obama Administration released interim final rules that allow patient appeals of health insurance coverage decisions as required under the Patient Protection and Affordable Care Act (”PPACA”) and Health Care and Education Reconciliation Act (”Reconciliation Act”).  Published by the departments of Health and Human Services, Treasury, and Labor, these rules create standards for the internal and external processes by which patients can appeal adverse benefits decisions.

Prior to these rules, coverage appeals were governed by contract and State law.  Forty-four States have created some form of external appeal process for insurance coverage decisions; however, their coverage is limited and the processes vary greatly.  Effective January 1, 2003, changes to the Employee Retirement Income Security Act of 1976 (”ERISA”) regulations provided standards for internal appeals processes.  However, these standards only apply to employer-sponsored group health insurance.

As stated in the Obama Administration fact sheet entitled, “Appealing Health Plan Decisions,”

Today, if your health plan tells you it won’t cover a treatment your doctor recommends, or it refuses to pay the bill for your child’s last trip to the emergency room, you may not know where to turn. Most health plans have a process that lets you appeal the decision within the plan through an “internal appeal” — but depending on your State’s laws and your type of coverage, there’s no guarantee that the process will be swift and objective. Moreover, if you lose your internal appeal, you may not be able to ask for an “external appeal” to an independent reviewer.

Internal Appeals Process

Under the rules, new health plans beginning on or after Sept. 23, 2010, must have an internal appeals process for beneficiaries to challenge “adverse benefits decisions” — a “denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit.”  Such adverse benefits decisions may be based on individual eligibility, benefit coverage, limitations on otherwise covered benefits (such as preexisting condition exclusions, source-of-injury exclusions, and network exclusions), and a determination that a benefit is experimental or not medically necessary.

In addition, health plans must do the following:

  • Notify a claimant of a benefit determination as soon as possible;
  • Provide claimants, free of charge, with the evidence relied upon and the rationale for the decision;
  • Avoid conflicts of interest by making decisions regarding hiring, compensation, termination, and promotion independent of a claims adjustor or medical experts record of denial of benefits; and
  • Meet additional requirements for notice, including information on internal appeals and external review processes.

However, these requirements do not pertain to so-called “grandfathered health plans” — those health plans that were in existence before March 23, 2010 when PPACA was enacted.  In the individual market, health insurance providers must meet the foregoing requirements as well as the following three:

  • Applicants for individual insurance must be allowed to appeal initial eligibility determinations;
  • Internal review must be limited to a single level, allowing claimants to appeal to external or judicial review immediately; and
  • Insurers must maintain all claims and notices for a minimum of six years, which is already required of employer-sponsored health plans under ERISA.

External Appeals Process

If the internal appeal is denied, patients may choose to have the claim reviewed by an independent reviewer.   According to Appealing Health Plan Decisions, States are encouraged to adopt the National Association of Insurance Commissioners (NAIC) standards in “their external appeals laws to adopt these standards before July 1, 2011.”

The NAIC standards call for:

  • External review of plan decisions to deny coverage for care based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.
  • Clear information for consumers about their right to both internal and external appeals — both in the standard plan materials, and at the time the company denies a claim.
  • Expedited access to external review in some cases — including emergency situations, or cases where their health plan did not follow the rules in the internal appeal.
  • Health plans must pay the cost of the external appeal under State law, and States may not require consumers to pay more than a nominal fee.
  • Review by an independent body assigned by the State. The State must also ensure that the reviewers meet certain standards, keep written records, and are not affected by conflicts of interest.
  • Emergency processes for urgent claims, and a process for experimental or investigational treatment.
  • Final decisions must be binding so, if the consumer wins, the health plan is expected to pay for the benefit that was previously denied.

If State laws don’t meet these standards, consumers in those States will be protected by comparable Federal external appeals standards.

As Kaiser Health News reported, “This is a regulation that benefits everyone — consumers get protections, business and providers get more certainty in the rules and the need for litigation to settle these issues should be dramatically minimized,” Phyllis Borzi, assistant secretary of the Department of Labor, said at a briefing for reporters Thursday.

Consumer Assistance Grants

However, procedural rights for consumers are not sufficient to ensure proper appeals.  “Not enough consumers know this is an option that they have,” said Angel Robinson, the consumer advocate in the Iowa Insurance Division, according to Kaiser Health News.

In addition to the new requirements for internal and external appeals processes under the interim final rules, the federal government is offering nearly $30 million in resources to States and Territories to strengthen and establish consumer assistance programs.  Specifically, these programs are charged with:

  • Helping consumers enroll in health coverage;
  • Helping consumers file complaints and appeals against health plans;
  • Educating consumers about their rights and empowering them to take action; and
  • Tracking consumer complaints to help identify problems and strengthen enforcement.

Katherine Matos is a 3rd year student at Seton Hall Law and a regular blogger at Health Reform [] She is the principle inventor on a patent application in the field of medical imaging, resulting from her research as a student at Stevens Institute of Technology. After graduating with degrees in biomedical engineering and history in 2008, she volunteered with the Irish government in the Health Services Executive. At Seton Hall Law, Katherine has researched federal oversight of nanotechnology with Professor Jordan Paradise and non-profit governance with Professor Melanie DiPietro. She worked as a summer associate at Fitzpatrick, Cella, Harper & Scinto in 2009 and at Robinson & Cole in 2010.

Facepalming Our Way into the Future

The reform isn’t perfect, but maybe it’ll help us avoid disaster.

The rapidly ramifying crisis in health care may (we can pray) end all delusions. It may at least begin to weaken them by exposing them to the light, to the sobering effects of reality.

The reform act has not brought us to the Promised Land. By bringing us access without capacity, fierce restrictions coupled with vague language and loopholes, mandates coupled with fines low enough to become the cheap way out, strong new ideas that are only pilots, and tough commissions and task forces that have no teeth, the reform act delivers us into a period of maximum melee, in which the needs and desires of hospitals, doctors, citizens, politicians, insurers, drug companies, device manufacturers and hundreds to thousands of niche industries within the sector, get pitted nakedly against one another.

Everyone in this melee will increasingly be driven by the ratcheting drumbeat of cost, cost, cost—which is another word for over-use of resources.

It can seem at times like a kind of existential madness. But in fact we are engaged in a struggle over the very meaning and substance of who we are, what we do and why we do it. We can hope that at last and increasingly, we will be shedding our delusions and engaging in that struggle on the basis of some kind of reality.

Stupidity Everywhere

You know the facepalm moment. It’s that moment when you smack your hand on your forehead, accompanying the concussive thwap with the expletive of your choice, when confronted by a bit of numbskullery so dense as to tear the space-time continuum.

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The Original Individual Mandate, Circa 1792

Revolutionary-war-soldiers  Regardless of one’s opinion on the Patient Protection and Affordable Care Act’s constitutionality, most commentators-and no less an authority than the Congressional Budget Office)-agree (or concede, as the case may be) that Congress has never required Americans to purchase a good or service from a private entity as a condition of citizenship.  But, importantly, they are wrong. The ongoing debate over the mandate’s constitutionality has uncovered an unlikely precedent to the PPACA’s individual mandate to possess health coverage. I recently wrote about this overlooked original individual mandate in an article, “The First Individual Mandate: What the Uniform Militia Act of 1792 Tells Us about Fifth Amendment Challenges to Healthcare Reform.”

The Militia Acts of 1792, passed by the Second Congress and signed into law by President Washington, required every able-bodied white male citizen to enroll in his state’s militia and mandated that he “provide himself” with various goods for the common weal:

 [E]ach and every free able-bodied white male citizen of the respective States . . . shall severally and respectively be enrolled in the militia . . . .provid[ing] himself with a good musket or firelock, a sufficient bayonet and belt, two spare flints, and a knapsack, a pouch, with a box therein . . . and shall appear so armed, accoutred and provided, when called out to exercise or into service

This was the law of the land until the establishment of the National Guard in 1903.  For many American families, compliance meant purchasing-and eventually re-purchasing-multiple muskets from a private party.

This was no small thing.  Although anywhere from 40 to 79% of American households owned a firearm of some kind, the Militia Act specifically required a military-grade musket.  That particular kind of gun was useful for traditional, line-up-and-shoot 18th century warfare, but clumsy and inaccurate compared to the single-barrel shotguns and rifles Americans were using to hunt game.  A new musket, alone, could cost anywhere from $250 to $500 in today’s money.  Some congressmen estimated it would cost £20 to completely outfit a man for militia service-about $2,000 today.

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PPACA: The Individual Mandate

Roger Collier The individual mandate is the single most controversial feature of the Patient Protection and Affordable Care Act. Everyone who can afford coverage—unless an undocumented immigrant or exempted on religious grounds—is required to have it or pay a penalty of $695 or 2.5 percent of income.

The rationale is straightforward: without a mandate, many people would wait until they needed care before buying insurance, driving up premiums for those with ongoing coverage, and potentially creating an “insurance death spiral” as the higher premiums lead to increasing numbers simply dropping their coverage. (This last part is basically what we have today, but will be magnified by PPACA’s ban on preexisting condition exclusions.)

The individual mandate was preferred for obvious reasons over the alternative of a general tax offset by credits for premiums paid. Democratic lawmakers had no wish to be blamed for imposition of a new tax—no matter how reasonable the arguments in its favor. In fact, as President Obama made clear in an ABC television interview “I absolutely reject that notion [that the penalty is a tax].”

The individual mandate has now become the centerpiece in Republicans’ legal fight against reform. Suits challenging PPACA have been filed by the attorneys general of twenty states (with the first, in Virginia, already being argued), with the constitutionality of the mandate a key issue in every case.

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Marooned in the Horse Latitudes

Horse Latitudes

More than a year after glimpsing “green shoots” of economic recovery, President Obama saw nothing but parched brown in June’s employment numbers. The continuing stream of bad economic news is a far greater threat to his Presidency than that sickening orange plume of oil furiously gushing into the Gulf of Mexico. The 9.5% June unemployment rate is essentially the same as it was a long thirteen months ago.. And support in Congress for more pump priming is essentially at an end.  Despite a 59 vote Senate majority, an increasing number of Democrats as well as the Republicans appear unwilling further to increase the federal deficit, even to extend unemployment benefits.

In 2010 thusfar , the economy has replaced only 600 thousand of the 8 million jobs lost in the recession. Only a little more than 100 thousand new private sector jobs have been created in the past two months, while the labor force shrank by almost a million.  If you add discouraged workers and those working part time involuntarily to the people officially unemployed, there are almost 26 million people out of work. A lot of those young people who fought to make Barack Obama President will have spent at least half of his term living in their parents’ basements.

President Obama is trapped between his increasingly angry core Democratic constituents- public sector unions, minorities, young people- and their muse, former economist/now political polemicist Paul “Jeremiah” Krugman, who believes we’re in a depression and need to throw yet more borrowed money from helicopters, and the rest of the country that is trying mightily to pay down their debts and is profoundly uncomfortable mortgaging our future to the Chinese.  It’s not obvious that either formula for salvation- the traditional Democratic balm of more money for worthy causes or the traditional (pre-George Bush) Republican regime of austerity and balanced budgets- gets the economy out of the ditch. Captain Obama has not enough political support to pursue either course, so the Ship of State and his Presidency are becalmed, sails flapping, sweltering in the Horse Latitudes.

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