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eridani's Journal
eridani's Journal
May 26, 2013

Loophole in health care law could stick doctors with tab


A loophole in California's upcoming health care overhaul could be exploited by families gaming the system or responding to hardship in a way that doctors say could leave a pile of unpaid bills.

A chain of events would create a two-month period during which a family has medical coverage but no insurer must pay its claims.

Nonpayment of premiums for subsidized policies would trigger the oddity: Federal law provides a three-month grace period before cancellation - but insurers are responsible only for the first month.

The U.S. Department of Health and Human Services, in written comments, conceded that nonpayment of premiums would "increase uncertainty for providers and increase the burden of uncompensated care." But it rejected a handful of proposals for cracking down on families whose policies lapse.

During the three-month grace period, insurers are required to pay claims for the first month, after which policyholders would be asked to pay their doctor's bill or their insurance premium. If they pay neither, doctors get stuck with the tab.

Comment by Don McCanne of PNHP: This looks like another provision of the Affordable Care Act (ACA) designed specifically to protect insurers, at least partially, from untoward losses.

To protect patients who have financial hardships that prevent them from paying their premiums on time, ACA requires that their insurance remain in force for three months before it can be cancelled for non-payment. Physicians contracted with the insurers providing plans through the exchanges will have to continue to provide services for three months after non-payment begins. The insurers, on the other hand, are required to pay the bills for only the first month. After that, the physicians bear the losses.

This is one more example of the role played by the private insurers in both creating ACA and then in implementing it, taking care of their own interests first.

This particular defect is directly related to the fact that Congress, with the support of the Obama administration, selected a highly flawed model of reform - expanding our fragmented, dysfunctional system of private and public plans.

A much greater problem than this transitional coverage issue for non-payment is what then follows. After three months, the patient may remain uninsured, especially if not eligible for Medicaid. The financial hardship that caused the lapse of insurance in many instances will prevent the person from obtaining any other coverage.

Although we can be angry with the insurers for dumping on the physicians, we should hold greater contempt for the politicians and policy makers who brought us this highly flawed financing system. They know that we could have prevented these problems by enacting an improved Medicare that automatically includes everyone, forever, but they didn't do it.

We still can, you know.
May 22, 2013

Employers Eye Bare-Bones Health Plans Under New Law

Employers Eye Bare-Bones Health Plans Under New Law


Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

Benefits advisers and insurance brokers--bucking a commonly held expectation that the law would broadly enrich benefits--are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn't cover surgery, X-rays or prenatal care at all.

Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing.

The idea that such plans would be allowable under the law has emerged only recently. Some benefits advisers still feel they could face regulatory uncertainty. The law requires employers with 50 or more workers to offer coverage to their workers or pay a penalty. Many employers and benefits experts have understood the rules to require robust insurance, covering a list of "essential" benefits such as mental-health services and a high percentage of workers' overall costs.

But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm.


Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach.

Comment by Don McCanne of PNHP: Imagine health insurance not covering hospitalizations nor surgery. Yet this is still possible because the Affordable Care Act applies the essential health benefit requirement only to plans for small businesses and individuals and not to larger employers.

This has opened up the opportunity for a conspiracy between larger employers who could care less whether or not their employees have health insurance and private insurers who are quite willing to sell these almost worthless bare-bones products as long as there is a profitable market for them.

The solution is obvious. Cover all care that people need, and then provide that coverage to everyone, automatically. Maybe these uncaring employers might not like that, but when the taxes to pay for an equitable system are obligatory, they would get used to the idea of their employees being able to obtain health care when they need it. Not such a bad idea after all, especially when their competitors are treated the same.
May 16, 2013

Wendell Potter: GOP Candidates' Top Campaign Issue Will Be Obamacare 'Train Wreck'


Will the implementation of some of the most important provisions of ObamaCare this fall and next year result in the "train wreck" Senate Finance Chairman Max Baucus (D-Mont.) predicted a few days ago?

No. But you can be certain that there will be no shortage of political candidates and high-powered political spin doctors who will be working relentlessly between now and the 2014 midterms to convince us that it will be.

If the Democrats and consumer advocates who support ObamaCare are not at work developing their own strategies to counter the coming barrage of misleading spin, the GOP will have an excellent chance of controlling Capitol Hill after the next elections.

Comment by Don McCanne of PNHP: Of those who are serious about health care reform, some want to abandon the Affordable Care Act (ACA) and immediately enact single payer, and others want to abandon the single payer cause and move full steam ahead with implementation of the ACA. But should we really abandon either approach?

It is clear that ACA alone will be grossly deficient. Thirty million people will remain uninsured, inadequate low actuarial value plans will become the new standard, and wasteful spending will continue because of the highly flawed, administratively complex model of ACA. So single payer should not be abandoned since it is an imperative if we want to have affordable health care for everyone.

Why shouldn't we abandon ACA? Because, quite simply, it is all that we have right now, and it will provide some limited relief for millions of people. If we were to abandon ACA now, mobilizing a social movement and then enacting and implementing single payer would still take many years - too long for those who would receive some benefit from ACA now.

So we should do both. Let the ACA enthusiasts continue with the implementation, while single payer forces step up the social movement for health care justice though advocacy for an improved Medicare for everyone.

So where is the train wreck? There isn't any. But Wendell Potter is right. The opponents of reform will latch onto every ACA implementation glitch, real or imagined, and onto the criticisms which will inevitably follow.

They will attempt to frame the implementation as a debacle, and run with that in their effort to use election politics to advance their anti-government agenda.

This complicates the message for the single payer camp. We need to educate people as to why ACA will fall intolerably short of reform goals, but we do not want that to become part of the Repeal ACA message. The opponents initially supported Repeal and Replace, but they have largely abandoned Replace, concentrating on Repeal. So how do we counter the Repeal message?

We need to emphasize the positive message of single payer - truly affordable health care for everyone. We can add that we don't need to repeal ACA since it can help some during the transition to single payer. But our action message should be Replace - letting the public know that we really do have a much better program that will work for everyone, whereas the opponents do not.

So perhaps a unifying message for the supporters of health care justic eshould be: Forget Repeal, REPLACE!

May 15, 2013

The Unhappy Marriage of Economics and Health Care


America’s health care system is collapsing, and we can blame the Economics profession. Most economists approach health care in the wrong way, viewing it as a commodity like shoes or the laptop on which I write. Instead, health care is an idiosyncratic commodity, subject to uncertainty and “asymmetric information” leading to destructive behavior. Trying to force health care into a box, treating it like other commodities, economists have promoted cost sharing, market competition, and insurance oversight of health care providers that have inflated the administrative burden while denying ever more Americans access.

Health care spending has been rising throughout the world as aging and more affluent populations spend on their health. Nowhere, however, has the cost of health care risen as fast as in the United States where costs soared because of rising administrative expense. Compared with other affluent countries in the Organization for Economic Cooperation and Development (the OECD), the United States spends over twice as much per person as is spent elsewhere. Before 1971 when Canada enacted its Medicare program, a single-payer government funded health care system, Canada spent a higher share of its national income on health care than did the United States; since then, however, while Canada has controlled costs, spending has soared in the United States so that we now spend over $3000 more per person. That is $12,000 for a family of four that is not available for travel, education, housing, or food.

Elsewhere, increases in health care spending have been associated with improvements in the provision of health care and, therefore, go with increasing life expectancy. In the United States, however, spending has increased because of rising administrative costs and increases in the price of prescription drugs and, therefore, has yielded relatively few benefits in improvements in care. Comparing changes in health-care spending and life expectancy between 1971 and 2008, other affluent OECD members gained a year of life expectancy for every $453 in spending; in the United States, however, life expectancy has increased less and spending has risen sharply more so that each year of increased life expectancy has cost over twice as much as in these other countries. Health care spending in the United States has increased by $1283 for every additional year of life expectancy; had our spending per year of added life increased at only the rate of other countries we would be spending over $4500 less per person, $18,000 saved for the average family of four. Most of the difference in relative expenditures, most of the growing waste in spending in the United States, is due to increasing administrative costs in the provision of private health insurance and in the billing and insurance operations within doctors’ offices and in hospitals. The average physician in the United States now spends four-times as much interacting with insurance companies as does the average physician in Ontario, Canada, over $80,000 per physician compared with a little over $20,000 in Ontario. Prescription drug prices and administrative expenses have been the fastest rising costs in the United States health care system; from 1980 to 2005, administrative costs rose by 1300% while drug prices rose by nearly 2000%. There are now 2.5 million administrative support personnel in the American health care system; more than the number of nurses, and five times the number of physicians. We now have more health-care managers than physicians and surgeons.
May 13, 2013

American Health Care as a Source of Humor


Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

From time to time I stand accused of injecting humor into my public presentations on health policy in the United States. As a German-born economist, I find it hurtful.

Germans pride themselves on their lack of humor. Economists, for their part, pride themselves on being practitioners of the dismal science. We are the professional buzzkills who put caveats on any good news.

Now imagine both traits packaged into one human being: you have yours truly. It is not that I inject humor into our otherwise august debate on health policy. Rather, the health system in the United States is in many ways so risible that it comes across as droll even when a dour German-born economist describes it.

One of those risible moments occurred this week when the Centers for Medicare and Medicaid Services of the Department of Health and Human Services delivered agiant spreadsheet on hospital charges and payments.

The spreadsheet has data in 65,536 rows and 12 columns. It covers, for each of more than 3,000 hospitals, charges and payments for the 100 most frequently billed inpatient cases, along with the average covered charges hypothetically billed by those hospitals for those cases.


Why was this news? That charges vary enormously among hospitals surely must have been known for many years. As early as 2004, for example, Lucette Lagnado of The Wall Street Journal reported that on the paper’s front page.

I recall producing from her data, for a 2006 paper, “The Pricing of U.S. Hospital Services: Chaos Behind a Veil of Secrecy,” the following slide. (see link) More such wondrous charges can be found in Ms. Lagnado’s article.

Perhaps the news in this case was that at long last the government had bestirred itself to publish data on which it had been sitting for decades. Indeed, why it had not done so eons ago is an intriguing question.
May 8, 2013

What if we still calculated cost of living adjustments (COLAs) for Social Security the way we did in

--the 70s?

From the book Worse Than You Think (the real economy hidden beneath Washington’s rigged statistics, and where to go from here) by Keith Quincy, Professor of Economics at Eastern Washington University. ISBN 978-0-9838797-1-8-51800, pp 158-168.

This is an executive summary of the chapter on Social Security and retirement income. I strongly recommend the entire book.

If we calculated COLAs according to methods in use before 1980, Social Security and other benefits would be twice what they are today. How did Reagan and subsequent administrations manage to ignore the real increases in the cost of living?

First, they substituted rental price inflation for inflation of housing prices. As every realtor knows, whenever house prices go up, rental prices go down. When interest rates fall, more people can afford the monthly payments on a new home. So they go shopping for a new house. The higher demand causes house prices to go up. With people moving out of rentals into new homes there are many vacancies. To fill them back up, landlords lower rents. You see the connection. House prices go lip, rents go down. Rents are therefore a terrible gauge of house prices.

On the other hand, using rental costs as a measure of house prices is a great way to make house inflation disappear. It also takes an enormous bite out of the overall inflation numbers. Housing costs take up almost 30 percent of the CPI. The switch from house prices to rental costs in 1983 cut the CPI from 6.2 percent down to 4.3 percent

In 2008, the average Social Security income was $10,189 when it should have been $21,405.

Was the lower number of $10,189 enough to keep a person out of poverty? Not according to the government’s own poverty guidelines. That year, the poverty threshold for someone sixty-five or older was $10,326. Apologists for cutting Social Security income insist that seniors have many other sources of income. But do they?

What about private pensions? Formerly defined benefit pensions were the norm, but today only 13 percent of those close to retirement have this kind of pension. Those who have pensions at all have 401(k)s, or defined contribution pensions.

Today, both types of private pensions are in bad shape. Defined benefit pensions don't pay much because they are underfunded. And defined contribution plans have lost money. Many were invested in stocks and bonds backed by bad mortgages. When the stock market crashed and the housing market went bust, these plans lost tons of money. As a result, private pensions don't pay very much to retirees. Let's look at 2008. For people sixty-five and older, most (65 percent) got no pension money at all. And for those who had pensions, most didn’t get very much. The average was $4,768 a year.

What about inheritance money? Could this make a difference? Not likely! One study found that only 15 percent of people close to retirement expect to get any inheritance. And it isn't very much. Of the few who get something, only 2 percent wound up with more than $100,000. So most people won't get much, if anything at all, from dead relatives.

There is another possible source of retirement income, the equity a person has built up in a home. In late 2000, the housing market took off The Federal Reserve had lowered the interest rate it charged banks for money. The drop was big, from 6.5 percent down to 3.5 percent. Banks passed the savings People of retirement age (sixty-five and older) already feel the pinch. Most cannot count on any money from the equity in their home. And for those who do have some equity, the income it provides is small. The average is less than $5,000 a year.

What about wages earned after retirement? Does this make a difference? A recent survey found that 72 percent of workers planned to be employed after they retire. But seniors have a hard time finding full-time work. Most who are employed work part time and what they earn amounts to only 2 percent of what they receive from Social Security and a private pension, if they have one. As a result, they cannot count on much help from finding a job.

Even with an honest inflation adjustment that almost doubles Social Security benefits, most seniors would still fall below the poverty threshold. Nor would they break this barrier after padding their Social Security payments with income from a private pension, home equity, and wages. The extra income would boost their total to only $17,665, still short by more than $2,000 of breaking through a poverty threshold of $19,710. This bare bones income is not even what retirees receive today. It is what they would get if the COLA adjustment was accurate instead of rigged.



May 6, 2013

Aetna will drop out of health insurance exchanges if they are not profitable enough

Q1 2013 Earnings Conference Call
Mark Bertolini - Chairman, CEO and President, and Shawn Guertin - Chief Financial Officer

Guertin: On the individual and small group, it is not a function of irrational pricing in any way, shape or form. We've talked before about the importance of having solid operating margins going into 2014, and so we have continued to err on the side of caution in our pricing on that product. And as I mentioned we'll favor sort of margin over membership on this.

Bertolini: We are entering these exchanges very carefully. We are about two-thirds of the way contracted for our exchanges. Those tend to be narrow networks that are generally 25 to 50 percent of the size of our base networks in those marketplaces. Currently the rates we're getting for most of those networks is between Medicare and commercial, based on the narrower networks, the closer we get to Medicare. The rates will really be based on geography and probably, more importantly, will be based on how much we get the network contracted. So our approach in the initial pricing that we've submitted to the exchanges has been focused on where we have rates on a document inked. We've included those into our cost structure. Where we do not, and we need to add providers for network sufficiency, we're pricing those at commercial pricing until we otherwise know that we have a betterrate. And, as you know, the negotiations will take place through the summer and into the fall. Obviously, at the end of all of this, we have an opportunity to pull out in September, and we continue to hold that as an option should the exchanges not develop favorably, or they ask for unreasonable rates by the time we need to close on participation.

Comment by Don McCanne of PNHP: In this quarterly earnings conference call, Aetna's Mark Bertolini and Shawn Guertin demonstrate their executive skills in guiding this large insurance corporation in the direction of providing the greatest returns for the investors. From a corporate governance perspective, that's exactly as it should be. How well does that work from the perspective of our health care system?

Chief Financial Officer Guertin says that they will favor "margin over membership." That is, they will sacrifice the option of bringing more people under the insurance umbrella in exchange for greater profits for the Aetna investors. Is limiting access to the payer of health benefits a policy decision that we want driving our health care system?

Chairman Bertolini says that they intend to reduce the size of their already-limited provider networks by one-half to three-fourths in order to use that leverage to squeeze payment rates for their remaining providers. So they are deliberately removing choices that patients would have in selecting their health care professionals and institutions for the purpose of increasing their margins (profits). Is impairing access by restricting choice a policy decision that we want made for our health care?

Chairman Bertolini also says that they will continue to hold onto the option of pulling out of the exchanges if they do not "develop favorably" or if "they ask for unreasonable rates." Is this a policy to take care of patients, or one to take care of investors?

Imagine a public single payer program, such as an improved Medicare that covered everyone. "Margin over membership" would be unheard of. As a universal system, everyone would be included. It would be inconceivable that the stewards of the system would limit the numbers enrolled as a means of generating more favorable balance sheets.

It's the model that's wrong. We need to change it.

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Gender: Female
Hometown: Washington state
Home country: USA
Current location: Directly above the center of the earth
Member since: Sat Aug 16, 2003, 02:52 AM
Number of posts: 51,907

About eridani

Major policy wonk interests: health care, Social Security/Medicare/Medicaid, election integrity
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