May

Family health insurance costs near $20 grand

Posted by Joe Paduda on Thursday, May 12th, 2011 | Comments

Actuarial consulting firm Milliman reported recently that the average American family’s health insurance costs are now over nineteen thousand dollars. Costs have more than doubled in the last ten years.
CORRECTION – Families are paying over $8000 towards the cost of insurance – “$4,728 in employee contributions and $3,280 in employee out-of-pocket cost…”
Think about that.
If medical inflation rates stay the same, we’re looking at the cost of family health insurance hitting $30k a year in six and a half years.
And over $40,000 four years after that.
Of course, trend could accelerate…
If there’s any good news, it is that under health reform, both insurance premiums and out of pocket costs won’t be as much of a killer for those at lower income levels. Out of pocket costs including deductibles will be indexed to income, as will premiums which will be subsidized for those with incomes below 4 times the poverty level (about $88,000 in today’s dollars).
thanks to Jane Saransohn-Kohn for the heads up.

Apr

Controlling Medicare costs – Obama v Ryan

Posted by Joe Paduda on Monday, April 18th, 2011 | Comments

Last week we saw two starkly different views of how to control future costs of Medicare. President Obama is seeking to use the negotiating and regulatory power of government, while Rep Ryan wants to abandon any pretense that government can control costs and cede responsibility to individuals and private industry.
The contrast strikes at the heart of the current political divide; what is the role of government in our society.
Rep Ryan’s approach is to get government out of the health insurance business entirely, passing responsibility along to private insurers. In 2022, Medicare recipients would get a check/voucher for $8,000, (based on CBO estimates of Medicare’s average per-beneficiary funding). They’d then have to buy insurance with the eight grand, probably from private or not-for-profit health plans. There’s no way that would cover the entire cost; the CBO estimates that under the GOP privatization plan, the average health insurance policy would be more than $20,000 per year, so the average senior would have to pony up the additional twelve grand.
There are a few other complicating factors not discussed in Rep Ryan’s proposal. Here are the most ‘complicating’ ones.
– What about seniors with pre-existing conditions? What insurance company would want to cover them? Sure, there’s a mild risk-share arrangement in Ryan’s plan, but I ~~seriously doubt~~ don’t know that any insurer would willingly enroll a senior with hypertension, history of melanoma, signs of memory loss, and osteoarthritis.
– Who’s going to help seniors understand their options and ensure they are treated fairly by their insurers? If there isn’t a government regulatory and watchdog function, are we to rely on private insurers to police themselves? Really?
– When costs go up faster than the overall rate of inflation, what’s to be done? Ryan’s plan caps annual increases at the overall inflation rate; medical inflation is usually two to several points higher. We’ve already seen private insurers can’t control costs (or at least haven’t been able to so far), so if anything costs may go up even faster.
To Ryan et al, these are beside the point. His plan is designed to get government out of the health insurance business, and let the chips fall where they may. His plan doesn’t address these issues, and I seriously doubt he or his fellow Republicans have any intention to address them.
President Obama’s strategy is markedly different. His vision is of a more energized and focused Federal approach using the government’s leverage and regulatory power to control cost and improve outcomes.
As a start, last week the President appeared to call for the Feds to negotiate drug prices with big pharma; strengthen, greatly increase the power, and enlarge the role of the Independent Payment Advisory Board; and speed up adoption of new models to deliver care.
Notably, the President’s IPAB would make significant cuts whenever Medicare spending rose more than the increase in gross domestic product plus one percent. And, if Congress failed to act to control costs, the Secretary of HHS could act independently to initiate changes in Medicare. Finally, the IPAB could sequester Medicare funds if neither Congress or the Secretary acted.
What does this mean?

Well, at the most simplistic level, both plans would control costs by limiting future cost increases by capping future spending.
But there are two markedly different ways to do that. Ryan gets government out of the insurance function, while Obama calls for a more activist, engaged, and assertive role for the Feds.
This will be interesting.

Apr

The future of health reform – lessons from workers comp

Posted by Joe Paduda on Thursday, April 14th, 2011 | Comments

The current political and cultural divide over health reform is not new – in fact, a century ago a very similar debate took place, and the result may be instructive.
At the turn of the century courts were stuffed full of tort cases brought against employers by workers injured in industrial accidents. Workers had no other recourse besides the court system, and for the years leading up to 1911, the courts offered little hope. That began to change in 1911, when New York passed legislation requiring employers to pay for industrial accidents. The day after the bill passed, a Earl Ives, a railroad worker, sprained his ankle while signaling to an engineer. His employer took the case to court, saying it was Ives’ responsibility to be more careful.
Ultimately, the court found in favor of the railroad. This from Peter Rousmaniere’s recent piece in Risk and Insurance:
“…what drove Werner’s (judge in the Ives case) reasoning were cultural values. He magnified the responsibility of the self-reliant worker within his or her immediate sphere of influence. He chose, in effect, a narrative that made sense a generation before Ives’ accident.
New York voters overrode Ives with a constitutional amendment in 1913. Other states responded by crafting legislative proposals meant to be challenge-proof.
The rapid and broad acceptance of the new system was mainly due to a new angle of vision on the individual at work. The cause of work accidents now was neither the worker nor the employer but industrial employment itself. The new mantra of a work accident “arising out of and in the course of employment” skirted the question of causality.”
Workers comp took hold across the country, and within a decade most states had passed some form of comprehensive workers comp legislation.
There are a couple reasons why employers’ efforts to battle workers comp legislation stopped. First, on a national scale, the cultural issues noted by Peter overtook the laissez faire theology of early industrial America.
Second, employers were starting to lose more and more court cases, an occurrence that struck fear into management and owners. Work comp was seen as a ‘less worse’ alternative to the increasing number of increasing verdicts.
Third, the growing influence of organized labor was being felt in corporate boardrooms around the country, and management wanted to eliminate industrial accidents as an issue.
So what does this have to do with health reform?
Health care is reaching a crisis point. Within six years, family premiums will exceed $30,000, plus out of pocket costs In an increasingly global economy, American employers are going to abandon ideology when confronted by the stark reality that they cannot and will not ever be able to compete if they aren’t relieved of the burden of health care costs.
Similarly, taxpayers (as we’re seeing every day) cannot and will not pay for ever-increasing health care benefit costs for Medicare, Medicaid, and public employees. But those programs, especially Medicare, control a LOT of votes. Thus politicians will be forced to come up with cost-reducing solutions that are dramatically different from the feeble attempts from Washington to date (and I include both parties in that).
Ryan’s solution is no solution at all – in actuality it is nothing more than a ‘throwing up of the hands and abandoning any pretense of cost control.’. And, it’s from one of the guys who voted for the single largest increase in entitlement programs since Medicare – Part D.
The Accountable Care Act isn’t a solution either, but it contains the seeds of real change, specifically with the IPAC.
What does this mean for you?
When things no longer can continue, they won’t. We saw that with workers comp exactly a century ago, and we will see that with health care within five years.

Apr

The Ryan deficit plan, part two – shifting cost to Medicare recipients

Posted by Joe Paduda on Friday, April 8th, 2011 | Comments

Rep Paul Ryan’s (R WI) Plan to address the deficit relies heavily on private health insurers to solve the seemingly-intractable health care cost inflation problem. Today we’ll finish the discussion of his solution for Medicare.
Ryan’s Medicare plan does include means-testing and increases in the age of eligibility, both of which will affect costs on a macro scale. Means testing increases revenues for CMS, while increasing the eligibility age reduces the number of recipients – both valuable and needed, but neither does anything meaningful to restrain the increase in health care costs for Medicare recipients.
In fact, Ryan’s plan will increase Medicare’s cost trend by ‘fixing’ the physician reimbursement schedule, a fix that will add about $350 billion to the deficit today, and do nothing to reduce physician costs going forward. Beyond that, there’s precious little in his plan that does anything material to address the real problem – health care cost inflation.
For that, Ryan is relying on private insurers, who would take over responsibility for Medicare. They would be paid a fixed price, and would be expected to provide all necessary benefits for that price – an approach that’s very similar to how the private insurance market works today. How’s that going to work?
Pretty well, according to Ryan, who asserted that the Congressional Budget Office had reviewed his numbers. (at least that’s what I think he says; read it yourself here.)
Well, the CBO did review his plan, and the results are pretty discouraging.
Here’s Forbes’ Rick Ungar:
“Accordingly to the CBO estimates, the program would result in seniors paying twice as much for their care – a sum that would total more than $12,510 a year…
The GOP proposal, which would begin in 2022, involves providing a ‘voucher’ – or as Ryan likes to call it, ‘premium support’ – to seniors to help pay for their health insurance. The average American would receive a check for $8,000, representing roughly what the CBO estimates Medicare would have to fork out for the average beneficiary in 2022. In addition to the government’s costs, the CBO estimates that seniors, in 2022, would lay out about $6,150.00 in out-of-pocket costs in the Medicare system. That totals an average cost of health care for participating seniors, in 2022, to be $14,770.
Under the GOP privatization plan, the cost to purchase the health insurance policy would cost about $20,520 per year – leaving the seniors out of pocket in the amount of $12,510 or more than twice what they would pay in 2022 should the Medicare system we currently have continue.”
Ryan says his plan is adjusted to account for medical inflation; in actuality Medicare premium increases in the Ryan plan are based on the overall inflation rate, which is significantly lower than the medical CPI.
Fact is, private insurers have been managing Medicare for millions of beneficiaries for well over a decade, and they’ve shown no ability whatsoever to control costs. In fact, when the subsidy paid to private insurers was cut, they screamed bloody murder.
What does this mean for you?
While there are parts of Ryan’s Medicare plan that deserve serious consideration (increasing eligibility age for one), his reliance on private insurance is naive at best, and the complete lack of real controls over cost is quite disappointing. After all the fanfare over his plan and willingness to take on the tough issues, Ryan’s shown himself to be just another number-massaging political operator.

Apr

Paul Ryan’s health care ‘fix’

Posted by Joe Paduda on Wednesday, April 6th, 2011 | Comments

Rep Paul Ryan (R WI) has come up with an economic/philosophical/governance plan that puts our problems squarely on the table – unsustainable government spending, driven in large part by health care costs.
While that’s not exactly new news, it is helpful to be reminded of how big the issue is. And some of his ideas, like increasing the eligibility age and means-testing for Medicare, make a lot of sense. And they will help, on the margins.
If you were looking for real solutions to the health cost problem, you’re going to be sorely disappointed. Limiting eligibility doesn’t address cost drivers, it just limits the number of people in the program. And that’s where Ryan’s ‘plan’ falls apart.
Unfortunately, he’s fallen into the same trap his Democratic colleagues did with their version of health reform – the Ryan plan does little to address costs.
The main pillars of Ryan’s plan are privatizing Medicare, changing Medicaid to a block grant program, and replacing health reform with a refundable tax credit ($2300 for individuals, $5700 for families).
While each of those ideas are attractive on their face, they are not going to do anything to solve the real problem – cost inflation.
If privatizing Medicare was the solution, Medicare Advantage programs would be less expensive than good old government run Medicare, and the private insurers that manage them wouldn’t be screaming about the reduction in their payments from the Feds. MA plans are MORE expensive than plain Medicare. They’ve also been around for about twenty years, more than enough time for the private market to prove it can do a better job delivering benefits while controlling costs.
The sad fact is that hasn’t been the case. While this may be difficult for free market ideologues to grasp, the for-profit system has not delivered better results for the Medicare population, better results defined as lower costs and better outcomes with happier members
Ryan also recommends fixing the Medicare physician fee problem by adding $350 billion to the deficit, an idea that does nothing to control costs, and actually increases the financial burden of the system on taxpayers.
I’ll look at Medicaid and private insurance in later posts – where we’ll examine Ryan’s plan to require insurers to take all comers without forcing people to get coverage before they get sick, and institute tort reform to somehow control costs when credible studies indicate this is a minor cost driver.

Mar

Health reform – the public’s awareness, or lack thereof

Posted by Joe Paduda on Thursday, March 24th, 2011 | Comments

The interesting numbers from the monthly Kaiser tracking poll aren’t the public’s like or dislike for health reform, but the rather impressive level of ignorance about reform that persists even now, a year after passage.
Here are a few ‘highlights’.
– half the country (52 percent) is aware the health reform law is still the law of the land, just over one in five Americans (22 percent) think health reform has been repealed and is no longer the law and another quarter (26 percent) aren’t sure either way.
– 59% think the law creates a new government health plan – which it doesn’t
– 40% think it allows the government to make end of life care decisions for Medicare beneficiaries
– 45% believe the law cuts Medicare benefits previously provided to all beneficiaries – which it doesn’t
And it isn’t just the ‘average American’ who’s confused.
This was brought home to me in a conversation I had with a very well educated business person earlier this week – trained as an economist, this individual is in the health information management sector. He wasn’t aware of some of the rather basic provisions of the reform bill, and misconstrued others.
My sense is most of the debate about health reform ignores what’s really in – and not in – the Patient Protection and Affordable Care Act. Instead, there are heated arguments about topics, provisions, themes, taxes, limits, intrusions that are based on not much more than “I read this on the internet or heard it on talk radio’.
To test your own knowledge about reform, take this quick quiz. Not to worry, scores won’t be posted on the class bulletin board.
Full disclosure – I scored nine out of ten…

Mar

The Republicans on health care reform

Posted by Joe Paduda on Friday, March 4th, 2011 | Comments

The health reform battle may well be decided in the state houses. Two events lead me to that conclusion.
First, as Bob Laszewski observed this morning, President Obama threw his support behind “the Wyden-Brown bill that would give the states the opportunity, in 2014, to take their share of the almost $1 trillion the new health law collects and use it to craft an alternative health care plan to their liking.”
The implications of passage of Wyden Bennett are clear – governors and legislators with grave concerns about some/most/all aspects of the Accountable Care Act and implementation thereof are (almost completely free) to come up with their own solutions.
And the GOP is in a very strong position to do just that.
I sat in on a session at the National Association of Mutual Insurance Companies’ annual meeting yesterday that focused – in large part – on the dramatic, game-changing outcome of the last election. The speaker, Neil Alldredge of NAMIC, noted that the GOP added 700 seats in state legislatures, the first time since 1966 that a move this momentous had occurred. This effectively puts the GOP in charge of all branches of government in a third of the states – sixteen to be exact.
If the governors and legislators in those sixteen, or, for that matter, any of the fifty states think they’ve got better answers, passage of the Wyden Brown bill will give them the freedom to put their ideas to work.
It’s easy to be in opposition – especially when the issue is health care. There are big and knotty issues with the Accountable Care Act; lets all hope the various states come up with better answers to our crisis of cost and coverage.
It will be very, very interesting to watch the solutions developed by Republicans and Democrats and Independents in the states. So far, two states – Vermont and Oregon – have begun major efforts to develop their own alternatives. If Republicans have a better answer, one that solves the problem of access and cost, they’ve got a great opportunity to get it out there for public review.
And if their solution is better, they are going to win very, very big in 2012.
We’ll see.

Feb

Health care factoid of the week

Posted by Joe Paduda on Friday, February 25th, 2011 | Comments

A fifth of Americans polled think the health reform bill has been repealed.
And another quarter aren’t sure.
There, in rather stark terms, is a synopsis of the American electorate’s engagement in – and awareness of – the health care debate.
The news, from the latest Kaiser Health Tracking Poll is the clearest indication to date of the lack of effective reporting by the media on the health reform battle. That, and a blunt assessment of at least half the respondent’s knowledge of civics.
It is easy to blame the media – and some blame is well deserved. But much more should be assigned to those ill-informed, and uneducated, respondents. These people, some of whom may actually vote from time to time, are almost certainly basing their political opinions and candidate preferences on opinions that have little basis in reality.
The onus is on us. We have to inform ourselves, understand the process, intent, and implications of public policy. We have to engage with others on the basis of fact and insight, not emotion-based opinion. We need to check our sources, and question our assumptions.
If not, we’ll end up electing more Rick Scotts and Rob Blagojoviches.
And that is a very scary proposition.

Feb

Florida’s addiction problem – Rick Scott

Posted by Joe Paduda on Tuesday, February 22nd, 2011 | Comments

Several states have implemented prescription drug monitoring programs designed to identify potentially problematic pharmacies, physicians, or patients – those dispensing/prescribing/getting drugs that could cause significant problems.
Florida’s new Governor, the health care expert Rick Scott, thinks Florida shouldn’t have one, and is trying to repeal the law passed last year that got more sunshine into the Sunshine State.
Evidently Scott’s complaints are the cost, privacy, and effectiveness of the program.
These complaints appear to be based on ignorance – at best.
– 34 states already have such programs up and running
– the annual cost runs about a half-million dollars, but all the start up money has already been raised from private donors.
– privacy is guaranteed as the program – already developed – is HIPPA compliant.
So, for a half million dollars, much of it already committed from private funds, the state would be able to help prevent some of the 2500 deaths associated with prescription drugs that occur each year in Florida.
For those inclined to do the math, that’s two hundred bucks per death.
Instead, Florida continues to be a destination spot for out of state tourists seeking drugs, drugs they can’t get in their own states that have implemented prescription drug monitoring programs. This from an article in the EWall Street Journal: “According to Frank Rapier, director of the Appalachia High Intensity Drug Trafficking Area, highway patrol officers in hot spots like eastern Tennessee routinely stop vanloads of people returning from Florida with fresh stockpiles of prescription drugs.
In West Virginia, state Sen. Evan Jenkins said flights on discount airlines between Huntington, W. Va., and Fort Lauderdale, Fla., have been dubbed the “Oxycontin Express.”
But the problem isn’t just the pills. The devastation wrought by prescription addicts getting pills from Florida is crushing towns far away from Rick Scott’s home state. According to the Sheriff of one small county in Kentucky, “98 percent of the crimes his office works are related to oxycodone and 80 percent of those involve pills from Florida.” The county coroner says two-thirds of his deaths are from pills.
For some of those tourists, the trip is only one way. Drug-seeking people from states as far away as Ohio routinely drive to the Sunshine State to get their fix, occasionally dying on the way home from the meds they’ve scored in Florida.
I stopped doing research on this as the story is so big, the tragedy so wide-spread – and so preventable – that I couldn’t continue.
Scott’s effort to repeal the law is unconscionable.
What does this mean for you?
Elections have consequences.

Feb

Florida’s Medicaid ‘Fix’ – What are they thinking??

Posted by Joe Paduda on Thursday, February 17th, 2011 | Comments

Or perhaps more accurately, what are they smoking?
From HealthNews Florida comes the news that a state Senator, one Joe Negron (R Stuart) has come up with the brilliant idea of shoving most of the state’s Medicaid beneficiaries into a state-run ‘managed care’ program – and if the Feds don’t like it, well, then, Florida will just do it without the billion-plus dollars the Feds contibute to Florida’s Medicaid program each year.
And that’s only this year. When reform kicks in in 2014, the dollars really start to flow, with the Feds contributing $24 billion to the state for the five years after 2014.
This isn’t speculation; Negron was recently quoted saying “as a state we’re prepared to manage our own program with our own resources.”
Florida – which is as broke as it could be – is about as likely to forgo a billion bucks of Federal assistance than I am to start at center for the Miami Heat.
This Negron is no dummy – his bio includes an MPA (master’s in public administration) from Harvard – but his grandstanding makes zero sense. Sure, you can chalk this up to political noise, but some of his other comments make you wonder if he really has any idea what he’s talking about.
For example, Sen Negron wants to require the new Medicaid managed care plans to:
– have a minimum Medical Loss Ratio of 90% – that’s a full five points higher than the requirement under ACA;
– increase physician reimbursement; and
– ensure the”benefits under Medicaid will not be worse than what any private citizen has, but not better, either.”
And this is somehow going to cost Florida taxpayers LESS than traditional Medicaid program?
Perhaps the Senator just isn’t very good at math. Forcing insurance companies – for profit insurance companies – to accept an MLR of 90% – and to pay docs more – and to provide benefits that – in his own words – are equal to those received by private citizens – is going to cost a fortune – waaaay more than a regular old run-of-the-mill Medicaid program.

Let’s see. An insurance company has to make about a three percent profit – ideally more, but less than three percent and no one’s going to provide the investment funds to get the thing started.
Now, we are also dealing with Medicaid patients, many of whom have chronic conditions that don’t lend themselves to doctor-only management and require investment in disease management programs that are heavy on IT and clinical support service requirements. The health plan also has to communicate, provide information and resources and interpreters, credential, contract with, and manage providers, manage pharmacy spend, and market their services to potential members.
Plus they need to have a supply of cash in the bank for claim reserves in case there’s a flu epidemic or other event…
Oh, and they have to be on the watch for fraud – you know, the kind that went on at the current Governor’s former company, the kind that resulted in a $1 billion plus fine.
And do all this for seven points?
I’ve worked for major health plans – both as an employee and consultant, and there’s no health plan in the world that can do that – except Medicare, which doesn’t have to worry about claim reserves, or investors, or distribution, or a lot of other stuff that costs money.
What does this mean for you?
I guess they don’t teach finance at Harvard’s public administration program…or perhaps Negron missed that class.

Category: Health Policy