Tag: Insurers

A Look Inside: The Massachusetts Health Reform Law

Feb 17, 2010• 12

By DAVID HARLOW

The Massachusetts health reform law Part II, enacted in 2008 – laid the groundwork for cost control and quality improvement, as a follow-on to the initial legislation’s emphasis on achieving near-universal coverage. The legislation authorized several studies — including a report published a few months back on global payment strategies — and set the stage for hearings on health care cost containment to be held before the state Division of Health Care Finance and Policy (DHCFP), which are scheduled to begin March 16, 2010.

In anticipation of these hearings, and as required by the law, the Attorney General’s office released a report on health care cost trends and cost drivers on January 29.

While the names of providers and payors are not included in this report, it provides a fascinating level of detail regarding what we already knew, or at least suspected: some providers are paid as much as twice as much as others for the same services, with no correlation to improved quality or outcomes.

The AG’s summary conclusions in full:

[O]ur preliminary review has revealed serious system-wide failings in the commercial health care marketplace which, if unaddressed, imperil access to affordable, quality health care. In brief, our investigation has shown:

A. Prices paid by health insurance companies to hospitals and physician groups vary significantly within the same geographic area and amongst providers offering similar levels of service.

B. Price variations are not correlated to (1) quality of care, (2) the sickness or complexity of the population being served, (3) the extent to which a provider is responsible for caring for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or research facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities.

C. Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers.

D. Variation in total medical expenses on a per member per month basis is not correlated to the methodology used to pay for health care, with total medical expenses sometimes higher for globally paid providers than for providers paid on a fee-for-service basis.

E. Price increases, not increases in utilization, caused most of the increases in health care costs during the past few years in Massachusetts.

F. The commercial health care marketplace has been distorted by contracting practices that reinforce and perpetuate disparities in pricing.

This report is well worth reading, and it is well-illustrated with clear charts. While the detail is welcome, many have criticized the AG’s office for leaving out identifying information, and for coming to the party a year after the Boston Globe reported on some of the same issues.

At the end of last week, DHCFP released a series of three reports on health care cost trends as well. The DHCFP reports are summarized here; they really serve to describe the baseline facts on the ground and explore trends form 2006 through 2008. Here’s the summary of key findings:

The Commonwealth’s health care system is a key employer and driver of economic growth for the region. However, personal health spending per capita is higher in Massachusetts relative to the nation and continues to rise.
Some characteristics of the Massachusetts health care marketplace that may be contributing to the high levels of cost growth, include:
- Most of a health insurance premium goes toward spending on health care services as opposed to administrative and other non-medical services. On average, in Massachusetts more than 88% of premiums are spent on health care expenses (compared to less than 84% nationally).
- Average monthly health insurance premiums increased 12% from 2006 to 2008. If employers and individuals had purchased comparable benefits each year, the growth in premiums would have been larger.
- Premium trends, benefit levels, and trends in health care spending vary across different-sized employer groups. Small group premiums were higher and grew faster on average than mid-size and large group premiums, when adjusted for differences in benefits, demographics and location.
Health care spending in the Commonwealth increased 7.5% per year from 2006 through 2008, a growth rate that is higher than the nation. The increased spending can be attributed to several factors:
- Price was an important factor contributing to rising health care spending across all service types.
- One area of particular concern (and opportunity) is the variation in prices, which was typically greater for facility charges than professional charges.
- In addition to price increases, care is being provided in more expensive settings over time—more inpatient care is being provided in academic medical centers and there is a decline in the provision of care at stand-alone outpatient facilities. Much of the growth in outpatient hospital care occurred at academic medical centers located in the metro Boston area.
- High concentration of physicians (especially specialists);
- Greater availability and use of academic medical centers for both inpatient and outpatient hospital based-services, and use of outpatient hospital-based facilities for some services that could be provided in less costly settings;
- Richer health insurance benefits compared to the nation; and
- Use of payment methods that are not designed to incentivize efficiency and coordination of medical care.

Again: no surprise here — Massachusetts health care costs are higher than national averages, and are growing at an unsustainable rate.The challenge before Massachusetts policymakers is clear: They need to put together these puzzle pieces of data, learn from the past, model potential solutions, and plan for the future. Even the national mainstream media acknowledges that, in the face of health reform meltdown, doing nothing is not an option. (Where were they six months ago?)

In the midst of this challenge, Governor Deval Patrick seems to be distracted by health reform’s implications for his political future. Instead of waiting for a reasoned outcome of the deliberative process set in motion two years ago (well, as reasoned as possible, given the heavy-duty political and economic interests at stake here), he has leapt into the fray with what looks like an ill-conceived bit of political grandstanding: a bill that would give the state insurance commissioner the authority to cap health care price increases.

The Boston Globe reports:

Rates hospitals and other health providers charge insurers would be “presumptively disapproved as excessive’’ if they increased faster than the level of medical inflation, and they could be rejected after a public hearing.

Similarly, for health insurance plans sold to employers with 50 or fewer workers, premium increases that exceed one and a half times the level of medical inflation would be considered excessive and could be turned down.

The legislation would also impose a two-year moratorium on lawmakers’ mandating any new health benefits that must be covered by insurance plans, a practice that employers have said drives up their health insurance premiums. Small businesses have been hit with double-digit rate increases in recent years.

This proposal brings us back to the future here in Massachusetts:

Twenty years ago, Patrick’s presumptive GOP challenger in the fall, Charlie Baker (who, thanks to some of his views being out of step with GOP orthodoxy, will likely draw many of the significant number of independent voters in Massachusetts, as well as some Democrats), was largely responsible for the dismantling of the Massachusetts health care rate setting system during his tenure in budget and health policy roles in the Weld administration. (In fact, some of us who have been around long enough still refer to DHCFP as “the agency formerly known as Rate Setting.”) (As a second aside: For those of you tuning in from afar, Baker’s most recent position was CEO of Harvard Pilgrim Health Care, one of the three dominant payors in the Commonwealth.) Is Patrick trying to stake out a position in opposition to Baker’s legacy? What constituency is going to buy into this vision of the future? Other local observers have also questioned the wisdom of this approach, including fellow health policy bloggers Evan Falchuck and Paul Levy. (Taking a cue from Paul’s musings on blogger disclosure in connection with this issue, I’ll just say that as a life-long registered Democrat, I have voted for a Republican maybe just once.)

Deregulation was successful twenty years ago because we were collectively convinced that payors could do a better job of holding providers’ feet to the fire. We later framed this in terms of holding providers accountable, and have employed a variety of tools over time to try and make this private-sector arrangement work: capitation, discounted fee-for-service payments, quality incentives, global payments, etc., etc. Patrick’s proposal is one version of the general acknowledgment that the market approach has essentially failed.

Instead of going back to the future, Governor Patrick ought to let the health reform process play out. The legislature should hold the Governor’s bill pending the DHCFP hearings and the subsequent deliberations that will — we hope — yield a more data-driven and sustainable approach to the problem of health care costs and quality.

And who knows? The national debate may continue to be informed by what comes out of Massachusetts.

David Harlow blogs at the HealthBlawg.

The Health Assurance – Disease Insurance Plan

Feb 4, 2010• 24

By NORTIN M HADLER, MD

The American health care delivery system is reprehensible for the degree to which it tolerates the under-treatment of those in need and supports the over-treatment of those who are entitled. It invests vast wealth in its own entropy. I don’t want to belabor all this shamefulness. The best we can do is to superimpose rationality on the current system—iron clad, science supported, and patient driven rationality with the goal of assuring health and providing recourse when that assurance falls short. We are advantaged by a cadre of physicians who are culled from the ranks of the best and the brightest and who would like nothing better than to do what is right by their patients. The moral charge to our society is to design a system that exists for no reason other than to provide for the wellbeing of both the sick people and the sick peoples amongst us¹. To begin to do so demands confronting 3 of the current system’s most intransigent and least recognized moral lapses: licensing overtreatment, institutionalizing conflictive relationships, and promoting perverse incentives.Continue reading…

An Unhealthy Debate Around Wellness

Feb 1, 2010• 36

By JAAN SIDOROV

Sidorov There’s an adage that, except for their tax revenue, American business is something the left loves to hate. And who can blame them, what with executive compensation, minimum wage and overseas job outsourcing powering the left wing’s ascent faster than corporate gunships in a greedy search of Avatar movie unobtainium? Being the principal source of health insurance for their employees hasn’t helped the liberals’ view of American business either, not only because it gets in the way of their cherished public option, but because their constituents’ benefits have been squeezed by the specter of an unholy alliance with managed care over caps, deductibles, co-insurance and co-pays.

So when it came out that the Senate’s proposed health reform legislation would increase employers’ and insurers’ ability to incentivize employees’ participation in worksite-based health promotion activities, progressives zeroed on it like Air Force One on a Massachusetts political rescue mission. Believing that any use of any financial rewards is just plain wrong, opponents have cast incentives as penalties on those who don’t participate in workplace wellness programs – a sneaky, indirect and backdoor way of making the sicker pay more for their health insurance.

State vs. National Exchanges – Why it Matters

Jan 12, 2010• 19

By BILL KRAMER

Does it matter whether health insurance exchanges are state-level or national? I used to think that it wasn’t a major issue, but my opinion has changed.

During the health reform debate early in 2009, I thought that other exchange design issues were more important than whether they are organized at the state or national level. In my view, who is eligible to join (all small business employees or just those who receive subsidies?), whether the exchange is the exclusive market for individuals and small groups, and how the exchange will be protected from an adverse selection “death spiral” are critical design features and will determine whether the exchanges are successful.

It seemed to me that the arguments put forward by advocates of a national exchange were not compelling. The most common argument was that a national exchange was needed in order to gain sufficient size, which would supposedly give the exchange more bargaining power with health insurers. But I always thought that size was more important at the local level. Health insurers negotiate provider contracts locally, not nationally, and they gain leverage based on their size locally regardless of how big they are nationwide. In addition, the “bargaining power” argument is relevant only if the exchange is negotiating rates with insurers. In an “all comers” model, the exchange isn’t negotiating rates; it relies on healthy competition among insurers to drive down premiums.

The Coming Clash over “Cadillac” Plans

Dec 27, 2009• 46

By MERRILL GOOZNER

Goozner Now that the Senate has passed its version of health care reform along partisan lines, let’s look ahead to the single biggest issue that will draw the most heat in conference: The tax on so-called “Cadillac plans,” the largest revenue raiser in the Senate legislation.

As regular readers of this blog know, I consider it ill-considered and unfair, a tax on people stuck in expensive plans because they belong to groups with older and sicker beneficiaries who use more health services; small groups generally; or who live in areas with expensive delivery systems. The idea that taxing those plans will somehow encourage people to reduce their utilization is wishful thinking that ignores who actually makes health care decisions — doctors, hospitals, drug companies, and other providers.

It also ignores why most people use health care — it’s because they are sick. The latest research shows less than 4% of the higher cost of some plans is due to extra benefits. Most of the rest is due to the higher claims of people in those more expensive plans, or the fact that the plans cover people in areas with expensive medicine.

Why buy insurers stocks, When the Obama health bill would bankrupt them?

Dec 23, 2009• 30

By DONALD JOHNSON

Don Johnson

On Monday, liberals sneered when insurers’ stocks rose, indicating that speculators thought ObamaCare (HR 3590) would be good for the big regional companies. But today several of the stocks are sinking, probably in response to University of Chicago Professor Richard A. Epstein’s op-ed piece in The Wall Street Journal, “Harry Reid turns insurance into a public utility; the health bill creates a massive cash crunch and then bankruptcies for many insurers.”

Here are charts for AET, CI, CVH, HS, HUM, UNH and WLP. Click on a chart for more information. The stocks that are sinking serve the individual and small group markets. Those that are rising are less invested in those markets, I think.

Now, the big companies might benefit from having smaller insurers that serve individuals and small employers bankrupted. But they would be crushed by new regulations and price controls that would not allow them to make profits. Nothing in the bill says insurers should be allowed to earn market returns. That means they’re as likely to go bankrupt as the smaller insurers.

Epstein’s impact graph:

The perils of the Reid bill are made evident in a recent Congressional Budget Office (CBO) report that focused on the bill’s rebate program, which holds that once an insurance company spends more than 10% of its revenues on administrative expenses, its customers are entitled to an indefinite statutory rebate determined by state regulatory authorities subject to oversight by the Secretary of Health and Human Services. Defining these administrative costs is a royal headache, but everyone agrees that they are heaviest in the small group and individual markets, where they typically range between 25% and 30%, without the new regulatory hassles.

Equally important, Epstein writes, the bill would turn insurers into heavily regulated utilities without giving them the right to make market rate returns on investments, which is unconstitutional.

That the bill appears unconstitutional may be good news for insurers, but think of the uncertainty that investors in insurers will face for years as the courts take their time deciding the case.

How Will the Senate Bill Impact the Insurance Companies and Their Customers?

Dec 23, 2009• 6

By ROBERT LASZEWSKI

How will the Senate bill impact health insurance companies and their customers?

Even better, how will it impact a not-for-profit health plan–one with a reputation for being a “good guy” that continually wins the country’s top awards for member services and with historic profits of less than 1% of premium? And, one that is operating in Massachusetts–a market that has already been through much of this?

I will suggest that, in combination, these are three intriguing questions.

That is why I thought that the Harvard Pilgrim’s CEO’s recent post on their website was important. It is short, direct, and to the point. And, from everything I know, it is bang-on.

There Be Dragons: The Fiscal Risk Of Premium Subsidies In Health Reform

Dec 14, 2009• 14

By JEFF GOLDSMITH

Last week, the Congressional Budget Office weighed in on the biggest economic imponderable in the health care debate: how private health insurance premiums will behave under health reform. Building on its December 2008 CBO health insurance market analysis, CBO forecast largely benign effects from health reform’s private market reforms and subsidies on the vast majority of the presently insured (e.g. voting public).

According to CBO, only 17% of Americans in the so-called non-group market–largely individuals–would see premium increases in 2016 (the CBO reference year), because they would be required to purchase fatter benefits with less economic risk. CBO believes that the other 83% of the presently insured will see little or no change.

Analysis of how the health insurance market will behave under health reform has become ferociously politicized. After the infamous PriceWaterhouseCoopers study sponsored by health insurers suggested possible large premium increases, the CBO report might provide cover for members of Congress who are contemplating irreversibly tying the federal budget to a volatile “private” insurance market. I think the fiscal risks of a partially federalized private health benefit are significantly greater than CBO has suggested.

Better Care Through Clinical Trials

Dec 13, 2009• 13

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By DOUGLAS BLAYNEY, MD

Amid hundreds of amendments offered in the health care reform debate, there is a non-partisan, non-controversial gem that will both help patients and speed the search for new cures to deadly diseases.

Senators Sherrod Brown [D-OH] and Kay Bailey Hutchison [R-TX] have proposed an amendment that would encourage patients with life-threatening diseases or conditions to participate in clinical trials by requiring private insurers to cover patients’ routine care. It is essential that the Senate pass this amendment as part of health care reform.

As a cancer physician, I can speak to the benefits of clinical trials in my field of oncology. Virtually every advance in cancer prevention, screening, and treatment over the last 40 years can be traced directly to clinical trials – colonoscopies; curative treatment for testicular cancer; improved survival for most pediatric cancers; chemotherapy after surgery to prevent recurrence; new personalized therapies that target specific characteristics of cancer cells; and symptom management. Thanks primarily to the knowledge gained through clinical trials, today two-thirds of cancer patients survive at least five years after diagnosis, compared with only half in the 1970s.Continue reading…

The post-reform insurance market, or will Mega survive?

Nov 30, 2009• 7

By Matthew Holt

I had an interesting call from a member of the legal profession the other day, and it got me thinking about the post-reform prospects for my own particular collection of bete noirs—the insurers who prey on desperate people in the individual market. Yes, you can expect the subject of Mega Life & Health to appear later in this article.

Now some dummies are starting to complain about what, to this point, have been broadly accepted parts of the upcoming reform legislation. Robert Samuelson is a typical advantaged recipient of community-rated insurance yet complains about the same concept being extended outside his community-rated group made up of Washington Post employees. AARP suggests in response that he should be sending (his much younger WaPo colleague) Ezra Klein a check, as Ezra is in effect subsidizing Samuelson’s health insurance.

While the political cognoscenti is struggling with the public option and payment rates to rural hospitals (and other bribes needed for DINO Senators from Nebraska & Louisiana, and the NEDINO one from Connecticut), the real issue of health insurance regulation is getting scant attention. In particular three huge issues remain to be resolved: