insurance

Can Price Transparency in Health Care Really Lower Costs?

By M2|2019-08-21T14:53:39+00:00August 20th, 2019|Health care spending, Health Care Trends, Hospitals, Insurance, Out-of-pocket spending, Physician-patient communication, Providers, Reimbursement, Uncategorized|

Can Price Transparency in Health Care Really Lower Costs?

Telling patients what they will pay for their health care services is a key stepping stone to more efficient use of health care dollars. Consumers, employers, payers, and the system as a whole would likely benefit if the true cost to the patient were made available before a patient receives a health care service or product.

Several states already have laws on the books requiring health care providers to make at least some price information available on at least some procedures. Some states also run centralized databases where different payers report what they get paid for different services. Additionally, the federal government requires hospitals to post a list of standard charges on the internet.

The Trump Administration wants providers to further expand the price and quality information to consumers, and issued an Executive Order (EO) on Improving Price and Quality Transparency in American Healthcare to Put Patients First in late June. The order aims to help consumers make “well-informed decisions” and expand transparency efforts that provide information “which patients can research and compare before making informed choices based on price and quality.”

More specifically, the EO directs the U.S. Department of Health and Human Services (HHS) to require hospitals to publish negotiated rates in a searchable, consumer-friendly format for 300 “shoppable” services.

You Can Shop if You Want To

Consumers are being asked to make more of these decisions on their own, as we’ve described in previous posts. My home state of Colorado has a shopping tool like the one the EO has in mind. It took me less than a minute to get the result below from the Colorado Center for Improving Value in Health Care (CIVHC) for an MRI scan of a leg joint within 15 miles of my ZIP code:

Shop for Health Care Services – MRI Scan, Leg joint (CPT 73721)

Seems pretty obvious that while the closest option, seven miles away, is Centura Health St Anthony Hospital, they would charge me $510 for the scan. If I drive another five miles, I would only have to pay $150 at Denver Health Medical Center.

“Shoppable,” but Perhaps Not “Buyable”

According to the Health Care Cost Institute (HCCI), “For a health care service to be ‘shoppable’, it must be a common health care service that can be researched (“shopped”) in advance; multiple providers of that service must be available in a market (i.e., competition); and sufficient data about the prices and quality of services must be available.” HCCI estimates that approximately half of out-of-pocket spending is spent on “shoppable ambulatory doctor services.”

The problem is, you might be able to research and compare certain services with upgraded information, thus improving your shopping experience, but you might really struggle to buy the service that is lower in cost.

Using the example of lower-limb MRIs, a 2018 study titled Are Health Care Services Shoppable? Evidence from the Consumption of Lower-Limb MRI Scans found that people typically drive by multiple lower-priced providers to get to their final treatment location. Why? Because that is where the patient’s referring provider sends them. The study shows “the influence of referring physicians is dramatically greater than the influence of patient cost-sharing or patients’ home ZIP code fixed effects.”

In particular, “physicians who are vertically integrated with hospitals are more likely to refer patients to hospitals for lower-limb MRI scans.” We’ve written previously about how costs vary dramatically by site of care. That also means patient cost-sharing varies. We are asked to pay more out-of-pocket for a service we could get elsewhere. But that would mean 1) shopping and 2) acting against the advice of a provider. Not impossible tasks, but difficult for sure.

Increased transparency means you can shop for services, but that is only half of the problem. Yes, it is important to have price and quality information. If the problem were a technical one, more information would lead to different decision making. But in fact, changing the way a consumer selects a health care service – even a “shoppable” service – is an adaptive problem. That is, it requires a change in the way people think, prioritize, and behave.

Additional information on quality and price is definitely necessary, but if I drive by two Centura Health facilities with lower cost MRIs to get to the HealthOne facility my referring provider recommended, I would also need some encouragement, at least, to go against my physician’s recommendation.

It looks like we health policy types have more work to do.

What gets prescribed and why: Opioids v. obesity meds

By M2|2018-12-06T18:37:08+00:00December 6th, 2018|Chronic pain, Evidence-Based Medicine, Health Care Trends, Insurance, Uncategorized, What do we pay for and why|

What gets prescribed and why: Opioids v. obesity meds

The U.S. health care system doesn’t always make sense. Sometimes, even when there is some logic to it, the reasons underpinning what gets prescribed by practitioners and covered by insurers are disappointing. Two pieces I read recently provide examples.

In one study, we learn that while primary care physicians are prescribing opioids less often, other specialists and nurse practitioners are prescribing them more often. Ultimately, opioid prescribing remains at a high level, despite known issues with misuse and abuse, and the availability of alternative pain treatments.

At the same time, while 40% of U.S. adults are obese, fewer than 2% of obese patients are offered medications for obesity, and ultimately “only about 1% of eligible patients fill a prescription for a weight loss medication.” Even when weight loss medications are prescribed, it is usually for a specific (fairly short) period of time, explained Dr. Caroline M. Apovian, a Professor of Medicine and Pediatrics, Department of Medicine, Section of Endocrinology at Boston University School of Medicine and the Director of Nutrition and Weight Management, Department of Endocrinology, Diabetes, and Nutrition, at Boston Medical Center, in an opinion piece in Medscape.

This is an example of what we like to call at M2: “what do we pay for and why?” If 40% of the public has a disease, why aren’t treatments prescribed and covered? Several chronic obesity management medications have been approved by the U.S. Food and Drug Administration (FDA) in the past few years, and have proven of efficacy of 5%-10% weight loss, but Dr. Apovian argues that “public perception of obesity as a matter of will power rather than a disease” is a key barrier to lower treatment rates for obesity.

The U.S. health care system doesn’t necessarily pay for what works, or the treatments people need. As with all policy decisions, there is a judgment about who deserves what, and who should pay for it. In the case of treating obesity with a prescription, Dr. Apovian succinctly explains the current policy stance: “If obesity is considered a moral failing, why treat it with a pill or surgery?”

What’s the hold up? Why do physicians not turn more frequently to the known effective treatments for obesity? Well, sometimes it is lack of proper training (discussed in our in April). Physicians have a lot to stay up to date on, and obesity treatments are often not prioritized despite the prevalence of comorbidities. As we discussed in a back in February, improved insurance coverage for proven effective weight loss treatments could help avoid expensive complications from obesity down the road and may improve quality of life. We suggest this is a better way to choose what is covered the current approach.

Pain affects a large number of people in the U.S. as well – more than 100 million adults. Nearly 40 million adults experience the highest levels of pain (category 3 or category 4), and there are more than 25 million adults who report chronic (daily) pain. Further, the Centers for Disease Control and Prevention (CDC) Guideline for Prescribing Opioids for Chronic Pain is clear: “Opioids are not first-line or routine therapy for chronic pain.” Despite this clear recommendation, as the recent study confirms, opioids continue to be frequently prescribed for pain, even though there are less addictive alternatives available. These medications aren’t that expensive so are frequently covered by insurance.

The M2 blog, Coverage Drives Treatment: The Case of Pain explains how insurance companies seem to prefer to cover what is inexpensive, and perhaps less effective, at least when it comes to opioids for pain.

Confounding situations like this are when we understand why an overhaul of the health care system is appealing to some. It would be an incredible opportunity to step back and create a new system that approaches all situations – obesity, pain, everything – from the perspective of longer term effectiveness. Ultimately this would reduce health care system costs overall, as less time (and money) would be spent covering up symptoms of something that is likely to cause greater expense down the road.

But in order to do this, we’d have to face who we think deserves what kind of care. These decisions are baked in to the system we have and rarely discussed. 2019 is around the corner. Should we start this conversation in the new year?

It’s Open Enrollment for Health Insurance. Am I a Small Business?

By M2|2018-11-02T16:14:41+00:00November 1st, 2018|Health Plans, Health Reform, Insurance, Uncategorized|

It’s Open Enrollment for Health Insurance. Am I a Small Business?

Open enrollment started today for the approximately 15 million people – less than 5% of the U.S. population – who do not purchase their health insurance through an employer, or receive it via a government-run program, such as Medicaid, Medicare, or military health care. Likewise, for people enrolled in Medicare, or many employer plans, it is the season to be making a choice about what health insurance you’d like to have for you and your family next year.

As a small business owner, I am also faced with a decision about whether and how to offer insurance to my employees, and what to offer. Here is where the fun begins and where my work life as a state health policy consultant collides with my experience as an employer trying to do the right thing.

In Virginia, as of 2018, I can now choose between buying coverage in the individual market or the small group market. This is because the Virginia legislature passed SB672 this summer, revising the definition of “small employer.” Here is the super boring, but very important change as described by the Virginia Bureau of Insurance in a bulletin to health insurance carriers:

The new law broadens the definition of “small employer” in §§ 38.2-3406.1 and 38.2-3431 of the Code of Virginia (“Code”) to include a “self-employed individual, and to allow a sole shareholder of a corporation or a sole member of a limited liability company (“LLC”), or an immediate family member of such sole shareholder or sole member, to count as an employee of the corporation or LLC, provided that the individual has performed a service for remuneration under a contract of hire.

Why does this matter? Because the rates offered to me in the small group market are much lower than those offered to me in the individual market for the same coverage, in the same market, with the same selection of providers. The difference is stark as the table below shows.

Table 1. M2 Health Care Consulting Healthcare.Gov Individual v. Small Group Rate Comparison

Notably, the Virginia Bureau of Insurance admits in the summer bulletin, “the inclusion of sole proprietors in the definition of “small employer” does conflict with the definitions of “small employer” as administered by the Department of Health and Human Services, the Department of Labor, and the Internal Revenue Service, § 1321(d) of the Patient Protection and Affordable Care Act (“ACA”)…” [emphasis added]

But in its defense of possibly being in violation of federal law, Virginia argues first, that this provision “does not ‘prevent the application’ of the ACA,” and second, that other states have enacted similar laws.

Health care is confusing, expensive, and has become increasingly frustrating. Virginia decided to make a health care policy change this year that makes at least one small business less frustrated, while at the same time making health insurance options for me and my employees less expensive and we appreciate it. Let’s keep working on the system and see what else we can do!

The Rising Cost of Health Care – a 360 Degree Perspective

By M2|2018-09-21T20:19:20+00:00September 21st, 2018|Health care spending, Health Reform, Insurance, Out-of-pocket spending, Uncategorized|

The Rising Cost of Health Care – a 360 Degree Perspective

The Colorado Women’s Alliance surveyed 2,000 swing women voters in Colorado earlier this year and asked them to identify their top issues of concern, as well as what they hoped the new Governor (who will be elected in November) and Colorado legislature will focus on in the coming session.

The rising cost of health care was the number one issue.

In response, Joni Inman, the Executive Director of the Alliance, in partnership with the Summit Chamber, organized a series of events, including a panel discussion in Frisco, Colorado last week titled “The Rising Cost of Healthcare – a 360 Degree Perspective.” I was honored to serve as a panelist alongside Colorado House Representatives Millie Hamner (D) and Bob Rankin (R), and professionals from the local hospital, a statewide health insurer and the Summit County Care Clinic.

While I am often asked to share policy ideas, for this panel, we were asked to share thoughts on what the consumer can already do that they might not realize is a good strategy available to them to lower their health care costs.

This is of particular relevance in Summit County as it is one of the healthiest places in the U.S., but also has some of the highest health insurance premiums in the country. Not surprisingly, Summit County health care consumers, as the audience quickly proved once the panel discussion started, are highly informed and interested in being proactive about their health care and the health care of their families.

My primary message was simple. When it comes to health care, we need to be much more demanding.

Be a demanding constituent

Sharing the stage with elected officials, I acknowledged the state legislature and Governor’s administration has some ability to make changes to how health care, and health insurance is financed and delivered. With that in mind, yes, it is important to advocate for policy changes. Vote. Call your representative. Send letters. Participate in hearings. Get involved in local politics. Make your opinion and preferences known.

This seems simple, but Reps. Hamner and Rankin were clear that they wanted to hear more from constituents, and individuals in particular, not just from lobbyists. Still, this can be hard to do. We all have busy lives and sometimes it is hard even to know what is happening regarding legislation or proposed policy ideas.

Be a demanding consumer

In addition to being a demanding constituent, it is important to be a demanding consumer. What can consumers already do that are good strategies to lower costs? Know more and ask questions.

First, know as much as you can about what your health insurance costs. What is the premium amount? What is the deductible? What types of services are covered at what levels? What are your rights to appeal a denial? Lots of resources exist. A great place to start is this compilation of websites from the Institute for Healthcare Improvement.

Second, as a consumer and as a patient, it is important to ask questions. Especially about how much a health care service will cost you. Of course, if you have been transported by ambulance to the emergency department, you aren’t going to be able to demand pricing information, but in the many instances you can ask, you should.

For example, as of May of 2018, 26 states, including Colorado (see map) have passed laws banning a practice that forbid pharmacies from informing consumers if and when the drug they were seeking to buy would be cheaper if they paid out-of-pocket instead of using their insurance. Yes, you read that right! Before these laws, many pharmacists were contractually forbidden by so-called “gag clauses,” from answering a direct question from a consumer at the pharmacy counter about the purchase price of a drug.

Ask this question: What is the price of this medicine, or this procedure, or this lab test, if I don’t use my insurance?

This strategy works outside of the pharmacy too. A consumer in the audience at the Summit County event gave an example of going to a local hospital with her husband over the fourth of July after he broke his elbow. When they asked the hospital about the price for the scan a provider recommended, they were told they could receive a 50% discount if they paid cash or used their credit card instead of using their insurance.

When I went to my dermatologist recently, I signed a document saying I wouldn’t submit a claim to my insurer if I agreed to use a specific pathology lab that would only charge $65 for lab tests. While my dermatology office wouldn’t tell me exactly how much I was saving (I was saving it since I was out-of-network and have a $7,600 deductible even in-network), they implied the insured rate for these pathology labs was hundreds of dollars more.

Demand more

Yes, call your legislator. Participate. Organize. Vote. But, we should all demand more of our employers, our health plans, and our health care providers, too. Ask for price lists. Ask for discounts. Ask what care options you have. Ask whether cheaper alternatives exist and how you can access them. Tell your employer you want choices.

We are all health care consumers, even if we aren’t all patients. Make your voice heard and your preferences known. Consumers can change the way the system works, but we have to demand that change.

Health Care Expenditures and You. Know Your Numbers.

By M2|2018-02-16T16:58:12+00:00February 15th, 2018|Health care spending, Health Care Trends, Medicaid, Uncategorized|

Health Care Expenditures and You.

Know Your Numbers.

As a Valentine’s Day gift to health policy types, the economists in the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) published the National Health Expenditure Projections for 2017–26 and Health Affairs published an insightful analysis, as well. The storyline has been pretty consistent for the past few years and looking forward to 2026, several trends are intact:

The U.S. population is aging, which is pushing health cost trends higher.
Medicare spending is growing faster than private spending as Baby Boomers age out of private insurance plans through their employers and into Medicare.
A “higher share of aged and disabled enrollees” continues to contribute to faster growth in Medicaid spending.

The topline is that health spending growth, provided there are no significant policy changes, is expected to increase around 5 to 6 percent per year from 2017-2026. If this is estimate is correct, by 2026 health care will account for nearly 20 percent of the U.S. economy, compared to 17.9 percent in 2016. Digging deeper into the estimates reveals some items that may not have crossed your radar yet:

The rate of 5.5 percent per year from 2017-2016 is much less than the 7.3 percent average increase per year the U.S. experienced from 1990-2007.
Prices for medical goods and services saw historically low growth rates of just 1.1 percent per year between 2014 and 2016, and will average 2.5 percent per year in 2017–26.
The projected price increases for medical goods and services at 2.5 percent is much lower than the 3.3 percent average annual growth rate in 1990–2007.

These low price increases might seem surprising if you rely on general news reports, but it is really just a matter of thinking about which numbers are being reported, by whom, and about which group of people. For example, earlier this month, Express Scripts, a pharmaceutical benefits manager with more than 34 million members, published their annual Drug Trend Cost Report announcing a Record-Low Increase in Rx Spending in 2017. “Commercial plans saw the lowest increase in drug spending in 24 years – just 1.5%, compared with 3.8% in 2016,” explained the report. In Medicare, “total per-person spending increased 2.3%, with diabetes leading all classes.” In Medicaid, “total per-person spending increased 3.7%, with HIV leading all classes.” For the health insurance exchanges, “total per-person spending decreased 3.3%.” These numbers are just about drug spending.

If you look at yet another set of data, you get yet another picture. The Health Care Cost Institute (HCCI) 2016 Health Care Cost and Utilization Report explained, “Total spending per person is now growing at faster rates than prior years, with 4.6% growth in 2016.” The HCCI report is based on claims in employer-sponsored insurance sponsored by Aetna, Humana, Kaiser Permanente, and United Healthcare for 39 million members. The report produces a “per-person health care spending estimate” that only includes the amount the insurance companies paid and the cost-sharing amount the patients paid for those services. It does not include the premiums that consumers or employers paid, however.

The HCCI report agrees with the Express Scripts report, however, by noting, “In 2016, increased spending on outpatient services was the biggest contributor to the annual growth in total spending. This is a change from prior years. In 2014 and 2015, prescription drug spending was the biggest contributor to total spending growth.”

You can see that different reports, written for different audiences and looking at different cuts of the data, reflect different truths – and all are based in fact.

One Thing is For Sure, Patients Aren’t the Problem

The State Of Health Care Today: How Physicians, Consumers, and Employers View Health Care Costs, Outcomes, and Reform Efforts, a survey of more than 600 physicians, 500 employers, and 5,000 consumers published in January 2018 by Leavitt Partners, explains these dueling data sets fairly well, though my guess is that was not their intention. The report explains, “In general, physicians, employers, and consumers agree that the health care system requires change; however, they disagree on what changes are needed, who is responsible for making changes, and which reform efforts hold the most promise.” This makes sense because most people’s experience and understanding of health care is personal. It’s about my health care provider, my insurance coverage, my health care costs.

As this chart from the Leavitt report shows, when asked who or what is responsible for the problems with the U.S. health care system, patients mostly blame the government, physicians primarily blame insurance companies, and employers blame both government and insurance companies nearly equally. Patients seem to have escaped blame, however, at least for the more than 7,000 people in the Leavitt survey. Keep that in mind the next time you see a news report about health care expenditures and a recommended policy change. Know your numbers. It might change your policy life!

ICYMI: The CVS-Aetna Proposed Merger Could be Public Health Rocket Fuel

By M2|2017-12-07T01:22:04+00:00December 6th, 2017|Health Care Trends, Health Disparities, Insurance, Public Health, Retail Health, Social Determinants of Health, Uncategorized|

ICYMI: The CVS-Aetna Proposed Merger Could be Public Health Rocket Fuel

Sunday, December 3, CVS Health announced it will acquire health insurer Aetna for $69 billion. Lowering the cost of care by enabling a broader range of treatment in retail clinic settings, of which CVS Health has more than 1,100 in 33 states, is one of the obvious rationales of the combination. But what struck me in the comments of the merging companies’ CEOs was how much they sound like public health professors. Social determinants of health? Health as a path to fulfillment? What have they done with the business people? In case you missed it…

Mark Bertolini Really Cares About the Whole Person

Aetna Chairman and CEO Mark T. Bertolini has been talking publicly for quite some time about the importance of thinking about people not as patients, but more holistically. In September, in an interview with Dennis Berman, the Wall Street Journal financial editor, he said, “We believe the only way to truly disrupt the cost of health care … is to go into the homes and meet the social determinants that are now driving as much as 60 percent of life expectancy of Americans.”

What Bertolini has had to say now that the merger is official is straight-up public health speak. On CNBC Monday morning, when explaining the vision of the merger, Bertolini sounded like a philosopher: “Most people,” he explained, “find their health is a barrier to the life they want to live.” Indeed.

Larry Merlo is Fixated on Unmet Need

Larry J. Merlo, President and CEO of CVS Health, reminded anyone who was paying attention something that we in public health have known for a long time, but surprised the CNBC reporters, “You look at chronic disease in this country today, about half of all Americans have at least one of those chronic diseases. It’s accounting for 80% of the health care costs.”

Merlo further explains, “there’s billions of dollars every year on unnecessary and avoidable spending because people are not following…care plans.” Merlo’s solution, to be executed in part with the announced merger, is to address the unmet need the traditional health care system is creating, but CVS Health knows first-hand because patients come through its doors with health care needs that aren’t being met.

We “lack the element of convenience and coordination…that is the unmet need we are talking about,” says Merlo.

We Are All Public Health

As a public health student, educator and professional, I am public health. This merger discussion shows we are all public health. Georges C. Benjamin, M.D. Executive Director, American Public Health Association wrote in 2015, “Today, the biggest threats to the health and longevity of Americans are preventable diseases. These are the diseases that are burying us in preventable suffering, as well as crippling our communities with mountains of avoidable medical bills. The root causes of many of these health threats are inextricably linked to the social determinants of health and the conditions that shape a person’s opportunity to attain good health and adopt healthy behaviors. These social determinants include access to safe housing, good jobs with living wages, quality education, affordable health care, nutritious foods, and safe places to be physically active. They also include racism, discrimination, and bias.”

To see such similar language from Mark Bertolini and Larry Merlo in the CVS-Aetna merger discussion to date shows that the leaders of what could become the largest health care company in the U.S. are thinking differently about the broken U.S. health care system. Near the end of the investor call about the merger, an analyst asked whether the combined entity planned to be a person’s primary care physician. Bertolini answered: “The real important part here is that you have to understand that almost 60% of Americans don’t have a regular doctor.”

When you connect these dots, you can really see the big picture come together. The CVS-AET vision is bigger than managing the pharmacy benefit.

Will it work? Hard to say at this early stage. Should consumers want it to work? Absolutely. A health care company with a public health lens that focuses on health well before a person shows up at the doctor and prioritizes convenience, coordination, and social determinants of health would be a welcome change for individuals, families, and employers. Score one for public health.

13 Ways You Might Not Realize Floods Are Like Health Care

By M2|2017-10-08T11:25:08+00:00September 13th, 2017|Insurance, Uncategorized|

13 Ways You Might Not Realize Floods Are Like Health Care

Hurricane Harvey has officially dissipated, but it has wiped out the Federal Emergency Management Agency (FEMA) disaster relief fund, and despite Congressional efforts to provide additional funds, Hurricane Irma will probably require yet another injection of relief funding before the end of September. Like most people, we at M2 are thinking about our friends and family – and all people – in the affected areas and are donating money to local organizations lending a hand.

Unlike most people, though, we at M2 are also noticing the ways these disasters and the National Flood Insurance Program mirror the issues we grapple with in health care and the ACA repeal and replace debate.

Disaster relief and health care are essentially social issues that force the government to decide who they will help and when. Which is better: paying for those affected by disaster or significant health care needs, or helping people to buy insurance against those possibilities?

If the government “helps people buy insurance,” in other words, provides subsidized insurance, how much of the premium should be subsidized? For whom should the premium be subsidized? This year the U.S. Government Accountability Office (GAO) called the National Flood Insurance Program (NFIP) high risk, in part because of a simple math problem that all insurance products must address. What happens if you can’t charge a rate high enough to cover the cost of insuring the risk?

The GAO wrote, “Since the program offers rates that do not fully reflect the risk of flooding, NFIP’s overall rate-setting structure was not designed to be actuarially sound in the aggregate, nor was it intended to generate sufficient funds to fully cover all losses.” Slightly different language, but same concept as the current fight over cost-sharing reduction (CSR) payments to health insurance companies: the government subsidizes the cost of insurance for certain people because otherwise the premiums would be too high for them to afford coverage.

Below are 13 ways you might not have realized floods are like health care (and why insurance is so important):

Personal costs are likely to far exceed a person’s ability to pay for them
When a catastrophe occurs, many people receive aid, and many who should have had insurance don’t, which may cost the government more than the insurance would have cost
Government must decide how much subsidy is enough to entice participation, but not so much as to discourage personal responsibility
States’ rights must be balanced against the federal government’s interest in sharing the expense of providing aid to people affected by catastrophic events
A small percentage of policy holders account for a large percentage of claims
Insurance is required by government, for at least some people
Insurance is subsidized by government, for at least some people
If premium rates are tied to actuarial rates, rates will skyrocket
To reduce what the government spends on subsidies without raising premiums, insurance policies with higher deductibles may be offered
Eventually Congress may establish a fee on all insurance policies sold to recover part of its costs for operating the federal program
A constant debate rages about the length of waiting periods because too short of a waiting period allows people to buy insurance coverage when they already know they will have a claim
There is some kind of national educational campaign to help people understand the importance of having insurance
Proposals are floated to ban people from receiving assistance if they have had repetitive losses

In an article called, “The US Flood Insurance Market is a Mess,” (paywall) a reporter from The Financial Times asked a reinsurer from Bermuda how to fix the U.S. flood insurance market. His response could just as easily apply to the current health care debate:

“This is a big social issue. Should mortgage companies require more people to get flood insurance? Should the government provide reinsurance, or buy more reinsurance? There is no fast and cheap fix on offer.”

N.B. Our “13 ways” list would not have been possible without the information compiled by the American Institutes for Research, The Pacific Institute for Research and Evaluation, and the Deloitte & Touche LLP October 2002 report for the Federal Emergency Management Agency (FEMA) called A Chronology of Major Events Affecting the National Flood Insurance Program.

Light Health Care Users: Most Americans Use Few Health Care Resources and Have Low Out-of-Pocket Spending

By M2|2017-10-09T01:49:05+00:00May 23rd, 2017|Health care spending, Health Care Trends, Insurance, Out-of-pocket spending, Uncategorized, What do we pay for and why|

Light Health Care Users: Most Americans Use Few Health Care Resources and Have Low Out-of-Pocket Spending

Every day we read news coverage focused on rapidly rising health care costs, but a seldom-reported part of the story is how very few people are responsible for those costs.

A study of health care costs from 1977 to 2014 shows that over the length of the study period, the top 1 percent of the health care using population consistently cost the system more than the bottom 75 percent. Just 1 percent of the population, in fact, accounts for nearly a third of medical spending.

The study, published in the April 2017 issue of Health Affairs, finds that “most Americans use few health care resources and have low out-of-pocket spending.”

In addition, more than 93 percent of these light spenders (those in the bottom half of the population) believe they have received “all needed care in a timely manner,” and the light spending by the majority of the population “has remained almost unchanged during the thirty-seven-year period.”

This light spending has also remained “unchanged since the inception of the Affordable Care Act (ACA),” as a Medscape article on the study notes.

These findings matter because most health care policy discussions focus on spending at the population level – in other words, on the 1 to 5% of the U.S. population that incurs significant medical costs. That isn’t how individuals think of health spending, however. Most of us think of what we as individuals, or perhaps our family, spends on health care.

Insurance, by design, must include many non-users, so to speak, in order to work. Most of us buy home insurance or car insurance and never use it. That is, we make payments to an insurer in the form of premiums, but we typically don’t have car accidents and don’t have house break-ins or fires. Similarly, most people don’t have much in the way of medical spending.

But if too many light spenders don’t buy insurance, the price of insurance increases for everyone. And in fact, that is what happens.

This chart from the April 2017 Health Affairs article shows that the highest spenders are the most likely to be on public insurance – think Medicaid for the severely disabled – and light spenders are the most likely to be uninsured – they don’t think they need it, and they probably don’t for years and years – until something catastrophic happens.

In terms of out-of-pocket spending, for light spenders in 2014 this figure was just $75 on average, which is less than the $94 (in adjusted 2014 dollars) spent in 1977, the authors find. On the other hand, high spenders averaged $1,096 in out-of-pocket costs. And 50% of light spenders had no spending at all (not including health insurance premiums, if they were insured), whereas only 6.1% of high spenders had none.

As we continue to think about how to improve or change health care insurance, delivery, and payment in the U.S., it is important to remember how few people actually interact with the health care system every year. Even for people buying health insurance, a large proportion of people spend little on actual health care services, and that has remained stable for decades.

This makes some complaints about the Affordable Care Act a little easier to understand. As the study explains, light spenders “as a group are unlikely to receive substantial short term benefits from the Affordable Care Act.”

The question is, what is insurance for? We probably shouldn’t design the entire U.S. health care system for people who don’t need care. But the subtle lines of who pays more, the sick or the well, the old or the young, are something we still need to work out.

Who Deserves Health Care? (a.k.a. Health Care is Hard)

By M2|2017-10-09T01:51:07+00:00May 17th, 2017|Health care spending, Insurance, Uncategorized|

Who Deserves Health Care? (a.k.a. Health Care is Hard)

Congressional efforts to repeal (and replace?) Obamacare seem to be on track to continue over the summer. The American Health Care Act (AHCA) passed the House May 4, 2017, and as written will gut Medicaid, defund Planned Parenthood for one year, and allow health plans to charge older, poorer people way more than they are paying now for health insurance.

You can read all sorts of news and opinions about why the House-passed AHCA bill is problematic if the goal of the bill was either to reduce health care costs for consumers or ensure access to health insurance coverage. But you might not read this: Late in February President Trump said health care is unbelievably complex – he was right and this is why.

Health care comes down to two questions that are easy to ask, but hard to answer. First, who deserves health care? Second, who should pay for it?

Question 1: Who deserves health care?

If you think everyone deserves health care, great. Then you can just jump ahead to the second question. However, to understand the current health care debate, it is important to know that many people, including many elected officials, think only certain people deserve health care. And when they say health care, they mean health care insurance.

For those promoting a “free market” approach, they support a system in which a person who “works hard” is rewarded with health insurance coverage. That is how most people in the U.S. get health insurance now. The problem is the definition of “works hard.” In 2014, 83% of people with a full-time job who made more than about $48,000 per year (400% of the federal poverty level or FPL) were offered insurance by their employer (see chart from Kaiser Family Foundation).

So one definition of “works hard” to the proponents of “let the free market decide” is well-paid full-time workers. Indeed, employer-sponsored insurance is the basic building block of the U.S. health care system. Historians will explain that in 1940 about 9 percent of the population had health insurance. In 1943, the Internal Revenue Service (IRS) ruled an employer offering the fringe benefit of health insurance could do so tax-free. As a result, in 1953, health plan participation jumped to nearly 65% of people. The IRS giving certain kinds of health insurance tax-free status hardly seems to be “letting the free market decide,” but we digress…

Besides full-time employees, who else worked “hard” enough to deserve health insurance? The second biggest group are Medicare enrollees. About 15% of Americans receive Medicare. But again, they “deserve” it, because every worker in the U.S. pays a portion of his or her paycheck to the Medicare fund. A person receives Medicare because they earned it – he or she either worked a certain number of years during their lifetime and paid into the fund, or their spouse did.

Yes, health insurance is different from health care. Emergency rooms are required by federal law to accept emergency patients. And community health clinics provide care on a sliding scale. So technically, everyone can get health care because we have emergency rooms and free health clinics.

Question 2: Who should pay for health care?

Even if your answer to question 2 is, “We should all pay!” it doesn’t necessarily make the mechanics of everyone paying any easier. If everyone pays, how do we do it? A flat tax for every person? A tax based on income? A tax based on how much health care costs where you live?

Should sick people pay more than people who are well? Should older people pay more than younger people? Should we all pay for a basic set of benefits, even those we don’t use? For example, should men have to pay for maternity care? Should young people have to pay for prostate exams or colonoscopies? Should middle-aged people have to pay for childhood vaccines?

As mentioned previously, we all pay for health care in the system we have today because our taxes go to support free health clinics and to cover the costs of hospitals who provide emergency care that is “uncompensated.”

Which brings us to why health care is so unbelievably complex. Each of us has our own experience with the system, and whatever we don’t like, we blame on “the system.” If your premiums have gone up in the past few years, you might blame Obamacare, but it is just as likely that your employer changed your health insurance plan so they could save some money for their shareholders. On the other hand, if you couldn’t get insurance before Obamacare because you had a pre-existing condition, you might credit Obamacare for that access.

One individual’s experience of health care or health insurance is not everyone’s experience, and your experience may or may not be because of Obamacare. But every story counts. Many elected officials are hearing from constituents that Obamacare is failing them, and that may very well be true. Other constituents are saying Obamacare saved their life, and that may also be true. Having an honest conversation about all the ways Obamacare helps and hurts people, and who deserves what, would be a better way to get to policies that would work. But that would be hard.