Category Archives: Health Care

Health care system discussions

What Does The CBO Say?

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Last week the Congressional Budget Office released “The Budget and Economic Outlook: 2014-2024.” Conservatives and the right-wing media got an instant woody over Appendix C – Labor Market Effects of the Affordable Care Act: Updated Estimates. The ACA would kill 2.5 million jobs, take away the incentive to work and put millions more on the dole.

The White House, predictably, embraced the report as a victory of sorts for the beleaguered American wage slaves who have been worried they will die chained to their desks.  Meanwhile, Politico accuses both sides of “cherry-picking” the data in the report.

(C) Can Stock Photo

(C) Can Stock Photo

So what to make of all this?  Here’s my take.

First, CBO’s projections are educated guesses about the future based on current data and realities that are likely to change, requiring further analysis and adjustments.  Indeed, the CBO admitted:

“…estimate(s) of the ACA’s impact on labor markets (are) subject to substantial uncertainty, which arises in part because many of the ACA’s provisions have never been implemented on such a broad scale and in part because available estimates of many key responses vary considerably. CBO seeks to provide estimates that lie in the middle of the distribution of potential outcomes, but the actual effects could differ notably from those estimates…”

The claim that there will be 2.5 million fewer jobs by 2024 can be blamed on conservative animosity towards the ACA, aided by the CBO’s authors’ poor choice of words.  The report forecast workers voluntarily reducing their labor by 2.5 million full-time equivalent hours. That will likely happen mostly among low wage workers, amounting to 1.5 percent to 2.0 percent of total hours worked.

“…The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week)…”

Those workers are NOT quitting altogether to go on the dole. Some may go to part-time jobs; others may retire early. There are 10,000 Baby Boomers retiring every day through 2031; their exit from the workplace could potentially create job openings for younger, qualified currently unemployed workers.

However, any potential job changes come with trade-offs.

Full-time employees whose income is more than 400% of the Federal Poverty Level (FPL) or whose employers offer health insurance are not eligible for subsidies for health insurance purchased through the exchanges. So they will either continue to work full-time, switch to a different full-time job, or go to part-time jobs and purchase their own insurance, especially if the net result is working fewer hours while maintaining their desired standard of living.

Employees whose income is less than 400% FLP or whose employer does not offer insurance can obtain insurance through the exchange, and they are eligible for tax credits and subsidies, which decrease as income increases. They might work less to avoid crossing the FLP threshold which means losing their subsidies and credits while effectively hiking their taxes. But then again, they might decide the extra income is worth the tax bite

People living in states that agreed to expand Medicaid are now eligible for Medicaid benefits if their income is less than 138% FLP. If they earn more, they’ll be eligible for insurance subsidies, ensuring they won’t lose coverage. People living in states that did not expand Medicaid, however, can only get insurance subsidies, not Medicaid.

I think the real issue is: conservatives and their corporate overlords hate losing the leverage that health insurance once gave them over workers.  How many people have endured “job lock,” staying in a thankless job, working more hours for less pay, working for condescending employers who’ve made it abundantly clear employees are unimportant, easily replaced, but a necessary evil?  Have you ever been told, “Bend over and like it because there are ten other people out there waiting for your job?”

Employers might be a little more considerate now that health insurance isn’t always tied to the job. I’m not holding my breath.

The Difference Between Auto and Health Insurance

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If anyone still wonders why health insurance is far more expensive than auto or homeowner’s insurance, here’s a simple explanation:

IF CAR INSURANCE WAS LIKE CONTEMPORARY HEALTH INSURANCE

  • Employers would provide auto insurance as a benefit in lieu of higher wages
  • Employers would either be self-insured or pay whatever rates they could negotiation with third party auto insurance companies, guaranteeing outrageous prices because “that is what the market will bear.”
  • A run through the diagnostics and an oil change would be covered, but, like an annual exam and Pap smear, would be priced at $250.  You could only have one oil change a year; if you needed more, you’d pay $250 out of pocket, unless you had the Federal Employees Auto Insurance Benefits, in which case you could have an oil change every week, subsidized by the taxpayers.
  • Like dental coverage, your car would be eligible for professional detailing twice a year, at participating detailers.
  • Like optical coverage, your car could get a new set of headlights and taillights every year, whether or not it needed them. Or, better yet, a new set of tires every year.
  • Like pharmaceuticals, you’d have a $10 co-pay for a tank of regular gas, $20 for midrange gas and $35 for premium, but that tank would have to last a month.  Your Auto Fuel Benefit Manager, however, would be arguing with the oil companies who would be charging $200, $500, or $5000*per tank to cover their “R&D” costs, which would be half of their marketing and advertising budget.
  • If you were self-employed, unemployed, or lost your coverage because of “downsizing” or illness, you’d have to pay $250 for that oil change, a minimum $200/month for a tank of gas, or walk to work.
  • If you were poor, you might qualify for Car-aid, but few gas stations or repair shops would accept your coverage and those that did would look down on you as a low-life draining the system, even though all you want to do is get to work and buy food without walking 16 miles in a blizzard, up hill, both ways.
  • When you reached 62 or 65, you’d qualify for Car-care, which would cover repair and maintenance at the same rate, whether you owned an Escalade or a Prius.  Your repair shop would be prohibited from providing any extra or discretionary work on your car, even if you could afford it, and be subject to fines and/or imprisonment.
  • However, since you no longer had Auto Fuel coverage, you’d be back to paying $200 for a tank of gas, unless you had Car-care Gap Coverage, hawked by Mr. Bluewrench, dressed in knit coveralls, standing by the waiting room in a homey garage “for only $9.99 a month and you CAN’T be rejected.”

A Short History of Health Insurance-Part 2

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I discussed the origins of our health insurance benefits in my last post.  This is how it all fell apart.

OOP Spending 1960-2014

Out Of Pocket Health Care Spending 1960-2014

By 1960 employer-sponsored health insurance plans covered 142 million people just waiting to be exploited. Congress and the states mandated coverage for health conditions, procedures and products, often because of lobbying efforts, not medical necessity. Out-of-pocket spending dropped from 48% of all health care costs in 1960s to 11.5% by 2009.  Annual health care expenditures rose every year, outpacing general inflation. We spent $27 billion in 1960, $888 billion in 1993 and $2.8 trillion in 2012. Everyone was happy playing with someone else’s money.

But there is only so much money to go around.

Medicare financing concerns surfaced early. In 1967, the House Ways and Means Committee predicted Medicare would cost $12 billion by 1990, an estimate 10 times too low.  Medicare expenditures were $98-110 billion by then (depending on who you ask), rising to $536 billion by 2012.

In 1992, the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) switched to the Resource Based Relative Value Scale (RBRVS) payment schedule, reimbursing hospitals a set amount based on Diagnosis-Related Groups (DRGs) rather than on length of stay or charges. Commercial insurers followed.  No one wanted to lose money so physicians discharged patients “quicker and sicker” than before. But the rate of growth in health care costs dipped only slightly before rising once again; insurance premiums quickly followed.

(c) 2009 Bob Conroy

(c) 2009 Bob Conroy

Health Maintenance Organizations (HMOs) attracted employers with large groups of mostly healthy workers, promising to control health care costs with “managed care.”  The reality, “managed cost,” created obstacles to potentially costly care with pre-authorizations, denials, and penalties for using “out-of-network” providers. The primary care physician became the beleaguered and much resented “gatekeeper,” pressured to forestall referrals or deny care outright. Patients and physicians rebelled, often resorting to litigation or ugly media campaigns forcing HMO administrators to approve payments for just about anything, including in-vitro fertilization.*

Private insurers eventually relented as well, but covered their losses by raising premiums every year. Employers who could afford to reluctantly went along; those who balked lost employees to other companies. Employers with a strong union presence—Pittston Coal, NYNEX, General Electric—faced expensive strikes over health care benefits.  Employees didn’t care as long as premium hikes or the full cost of benefits weren’t coming out of their pockets.  Large companies began to self-insure, taking their employees out of existing risk pools. Smaller firms dropped their policies, or in many cases, insurers dropped them.

The biggest blow to employer-sponsored health care benefits came in 1990 when the Financial Accounting Standards Board (FASB) ruled that, beginning in 1992, retiree health care liabilities had to be on corporate balance sheets, effectively reducing company assets and driving down share prices. The percentage of mid-sized and large firms offering retirees health care benefits went from 85.6% in 1980 to 37.1% in 2000.

KFF average premiums 1999-2013

Average Health Insurance Premiums 1999-2013
Source: Kaiser Family Foundation-kff.org

The dot-com bust in the late 1990s didn’t help.  Employers reduced benefit packages, increased the employees’ share of their premium contribution, or dropped coverage altogether as the economy suffered.  The percentage of employers offering health care benefits dropped from 80% in 1989 to 61% in 2013. Every year forty to fifty million people lacked health insurance. Health care premiums for a family policy almost tripled between 1999 and 2013, rising from $5,791 to $16,351. People expected health insurance to cover everything because it was so expensive.  Health insurance was expensive because people expected it to cover everything.

So how do we fix it?

*In 1998 the Supreme Court’s ruling on Bragdon v. Abbott that being HIV positive constituted a disability and inferred that infertility was also a disability since, at the time, HIV positive women were advised against becoming pregnant.  A similar ruling cost the City of Chicago $1.5 million to settle a class-action lawsuit brought by city workers demanding reimbursement for fertility treatments.

A Short History of Health Insurance

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Universal coverage in the United States goes back at least to Teddy Roosevelt but the opposition has always been fierce. The American Medical Association called the idea “socialized medicine.” Ronald ReagReagan-LPcoveran said it was the first step towards Socialist America, warning “We are going to spend our sunset years telling our children and our children’s children, what it once was like in America when men were free.” We’d all be getting the same, substandard care from government-employed doctors in dreary Soviet-era clinics taking numbers and waiting months, if not years, for lifesaving care.

Prior to the 1930s workers bought “sickness insurance” to cover economic losses if the breadwinner fell ill.  If you were sick, you stayed home or you went to the hospital to die. The Great Depression changed the doctors’ and hospitals’ attitudes; they struggled to survive because few could afford health care.   The cost of medical care and training new physicians began to rise, as a result of advances in medicine and the Flexner report on medical education.  By the 1930s, medical costs were 20% higher than lost wages, making health insurance, as oppose

In 1929 Baylor University Hospital provided Dallas schoolteachers up to 21 days of hospital care for fifty cents per person per month—the precursor to Blue Cross.  Prepaid hospital plans grew throughout the Great Depression, allowing patients to cover expenses while insuring a steady income stream for hospitals.  Hospitals agreed to provide benefits regardless of reimbursement levels.

Commercial insurers’ big break came during World War II. On October 3, 1942, Roosevelt issued the Stabilization WWII ProductionAct, freezing wages and prices, but not insurance and pension benefits. In 1943 the National War Labor Board and the Internal Revenue Service (IRS) exempted benefits from the freeze, allowing employers to entice desperately needed workers with health insurance. The post-war National Labor Relations Board (NLRB ruled pensions and health benefits could be included in collective bargaining in 1948, a ruling the Supreme Court upheld in 1949.  In 1954, the IRS determined employer contributions to health employee health insurance plans were deductible as a business expense and not taxable income to employees. And so began our employer-based health insurance system which we assumed would last forever.

Blue Cross/Blue Shield’s federally-sanctioned non-profit status gave it an unfair advantage over commercial insurers by allowing the Blues to avoid insurance regulations. The government required the Blues to use “community rating” when calculating premiums; that is, everyone paid the same premium regardless of health status.  Commercial insurers used “experience rating”, basing individuals’ premiums on their health history; sicker people paid more.  Commercial insurers targeted employers of large groups of healthy people, undercutting Blue Cross in many markets.blue-cross-730171

The Blues reimbursed physicians’ “usual, customary and reasonable” (UCR) charges which effectively meant physicians could charge whatever they wanted.  Hospitals received “cost-plus reimbursement”—whatever they charged and a little extra. Commercial insurers followed, lest it be left in the dust.

President Lyndon Johnson signed Medicare and Medicaid into law in 1965.  Medicare was a federal health insurance program covering seniors’ health care expenses; Medicaid, a state program for the indigent. The Federal government became the single largest health care purchaser in the country.  Physicians, initially resistant, fell in love with the programs, figuring they’d get paid for care they had previously rendered for free.

Santa Rosa HospitalAnd what’s not to love?  Medicare adopted “cost-plus” reimbursement,” dr-kildarepaying doctors and hospitals what they charged.  Patients didn’t worry because someone else was picking up the tab.  Physicians routinely admitted patients to the hospital “so we can run a few tests.” As one retired hospital administrator explained, “Being an administrator was never easier! If a doctor wanted a new piece of equipment, we said, ‘yes,’ especially if a hospital across town had the same equipment.  The more we did, the more we got paid. It was a great time to be in health care!”

So what happened?  Stay tuned for the rest of the story.

A Little Perspective, Please (Part 2)

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Since it’s Thanksgiving weekend, I’ll be brief.

4.2.7

34 “Then the King will say to those on his right, ‘Come, you who are blessed by my Father; take your inheritance, the kingdom prepared for you since the creation of the world. 35 For I was hungry and you gave me something to eat, I was thirsty and you gave me something to drink, I was a stranger and you invited me in, 36 I needed clothes and you clothed me, I was sick and you looked after me, I was in prison and you came to visit me.’

37 “Then the righteous will answer him, ‘Lord, when did we see you hungry and feed you, or thirsty and give you something to drink? 38 When did we see you a stranger and invite you in, or needing clothes and clothe you? 39 When did we see you sick or in prison and go to visit you?’

40 “The King will reply, ‘Truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me.’

Matthew 25:34-40

Affordable Care Act Timeline: 2012-2014

2012 

  • Established Value-Based Purchasing program (VBP) in Traditional Medicare, offering financial incentives to hospitals to improve the quality of care.
  • Provided incentives for physicians to join together to form “Accountable Care Organizations” to better coordinate patient care and improve the quality, help prevent disease and illness and reduce unnecessary hospital admissions. ACOs will get a financial reward for providing high-quality care at lower cost.
  • Instituted changes to standardize billing and requires health plans to begin adopting and implementing rules for the secure, confidential, electronic exchange of health information. Using electronic health records will reduce paperwork and administrative burdens, cut costs, reduce medical errors and most importantly, improve the quality of care.
  • Required any ongoing or new federal health program to collect and report racial, ethnic and language data to help identify and reduce disparities.

2013 

  • Provided new funding to state Medicaid programs that choose to cover preventive services for patients at little or no cost.
  • Established a national pilot program to encourage hospitals, doctors, and other providers to work together to improve the coordination and quality of patient care.
  • Required states to pay primary care physicians no less than 100% of Medicare payment rates in 2013 and 2014 for primary care services, with the feds picking up the tab.
  • The Health Insurance Marketplace for individuals and small businesses opened October 1, 2013.

January 1, 2014 

  • Prohibits insurance companies from refusing to sell coverage or renew policies because of an individual’s pre-existing conditions
  • Eliminates the ability of insurance companies to charge higher rates due to gender or health status in the individual and small group markets.
  • Phased out annual limits on insurance coverage starting September 23, 2011 and eliminates them entirely January 1, 2014
  • Prohibits insurers from dropping or limiting coverage of individuals participating in clinical trials.
  • Provides tax credits for insurance for people with income between 100% and 400% of the poverty line—about $43,000 or less in 2010—who are not eligible for other affordable coverage.
  • Opens the Health Insurance Marketplace to people whose employers don’t provide benefits.
  • Increases the Small Business Tax Credit up to 50% for “qualified” small businesses and up to 35% for small non-profit organizations.
  • Allows anyone earning less than 133% of the poverty level (about $14,000 for an individual and $29,000 for a family of four) to enroll in Medicaid, with 100% federal funding for three years and then no less than 90% federal funding for subsequent years.
  • The individual mandate becomes effective January 1, 2014.  Everyone who can must purchase insurance or pay a fine.