As States Create Health Insurance Exchanges, Insurers Are Benefiting from the ACA

January 25th, 2012

The same insurance companies that spent millions of dollars working to defeat the Patient Protection and Affordable Care Act (ACA) claiming it would raise costs and disrupt coverage, are seeing their profit margins soar to levels not seen since before the recession and are benefiting financially from the law, a Bloomberg Government study shows.

Insurers recorded their highest combined quarterly net income of the past 10 years after the law was signed in 2010, said Peter Gosselin, the study author and senior healthcare analyst for Bloomberg Government. The Standard & Poor’s 500 Managed Health-Care Index rose 36 percent in the period, four times higher than the S&P 500.  “The industry that was the loudest, most persistent critic of this law, the industry whose analysts and executives predicted it would suffer immensely because of the law, has thrived,” Gosselin said. “There is a shift to government work under way that is going to represent a fundamental change in their business model.”

Health insurers gave $86.2 million to the U.S. Chamber of Commerce to oppose the law after Obama administration officials disparaged their desire to chase profits by raising customer premiums.  America’s Health Insurance Plans (AHIP), still claims the law will increase costs and cause consumers to lose coverage.  Even so, the insurers saw their average operating profit margins expand to 8.24 percent in the six quarters since the ACA became law, compared with 6.88 percent during the previous 18 months.

One significant finding of an annual California Employer Health Benefits Survey released by the California HealthCare Foundation, a research and grant-making non-profit organization, is that in California fewer companies provided healthcare coverage for their employees last year; those that did raised premiums for coverage. According to the survey, premiums have risen 153 percent since 2002, a rate more than five times the increase in California’s inflation rate.  During the last two years alone, the proportion of state employers offering coverage to workers fell to 63 percent from 73 percent, according to the survey.

“This is a departure from previous years and could be an early sign of future changes,” the foundation report noted in commenting on data collected between July and October 2011 in interviews with 770 private firm benefit managers.

Increasing costs and shrinking coverage are speeding up, said Anthony Wright, executive director of Health Access California, a group that advocates for expanded health insurance coverage.  “They are frankly multi-decade trends,” he said. “What is notable is that this is more significant than usual.”  What’s been a “gradual erosion of employer-based coverage in good years” has evolved into “a steep one in bad years,” Wright said. “To be down to 63 percent (of California companies offering coverage) is huge.  It used to be up over 80 percent.”

There is good news, however, in the fact that 13 states have functioning health insurance exchanges, two have pending legislation to establish them, while another five are planning their exchanges. Health insurance exchanges are state-regulated standardized healthcare plans where individuals can purchase health insurance and be eligible for federal subsidies.  The remaining 30 states are moving more slowly.  For example, Pennsylvania is gradually moving toward a health insurance exchange.  “Pennsylvania has taken steps towards the establishment of an exchange, which I think is positive — there are other states that have moved more aggressively, including states whose governors are part of the lawsuit,” said Sharon Ward, director of the Pennsylvania Budget and Policy Center, a non-government organization that supports the federal health care law.  Two states — Louisiana and Arkansas — have opted out of the insurance exchange program.

Insurers are of two minds regarding the issue of insurance exchanges. Some favor the programs because they would help them to reach more consumers.  Consumer advocacy groups and insurance analysts claim that exchanges would increase competition to the industry, with the ultimate result of cutting prices nationwide.

Writing in the Green Bay Press Gazette, Jeff Mason, CEO of the BayCare Clinic, believes that, generally speaking, healthcare payments need fixing. According to Mason, “Healthcare finance is complicated even in the best of times.  Unfortunately, it isn’t the best of times.  We’re in a climactic period in healthcare when the finance mechanisms don’t work anymore.  Employers can’t continue to pay the spiraling healthcare costs.  Providers can’t continue to shift their low-reimbursement government work to employers. The government can’t expect any more free care out of providers.  Right now, our clinic collects less than half of what we charge to all of our customers in aggregate.  We collect 11 cents of every dollar we charge to Medicaid, and 13 cents of every dollar we charge to Medicare.  This is considered our “low-pay” business, and is extremely difficult to manage financially.

“This physician/hospital payment problem is a government experiment that started in the 1980s and has gone terribly wrong.  It followed the concept that a large purchaser of a service should get a better price and began discounting government payments to providers.  Medicare started by shaving a few percent, but then it got larger and larger.  All along, health care providers were shifting the shortfalls to the private employers.  At the same time, health care expense continued to grow as we obtained more expensive new medications and new technologies to improve patient treatments.”

John Driscoll

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Medicare, Medicaid Costs Rising More Slowly

January 24th, 2012

Healthcare spending nationally grew slowly for the second successive year in 2010, bringing it in line with growth in the U.S. economy as a whole, according to the Department of Health and Human Services (HHS).  Spending rose by 3.9 percent in 2010, to $2.6 trillion, while the GDP rose 4.2 percent, according to HHS, which published its findings in the journal Health Affairs.  In 2009, spending increased nearly the same by 3.8 percent, but in contrast it’s growth rate was twice that by 7.6 percent in 2007.  Spending increases frequently hit double digits in the 1980s and 1990s.  While spending growth in general remained slow, premiums for people in private insurance plans grew faster for the first time in seven years than what was spent on their care, according to the Centers for Medicare and Medicaid Services (CMS).  Premiums in 2010 rose 2.4 percent, slightly less than the 2.6 percent increase in 2009, although private health insurers’ spending on actual benefits rose only 1.6 percent in 2010, down from 3.7 percent in 2009.

Healthcare represents 17.9 percent of the U.S. economy, the same proportion as in 2009, according to a government report. “Persistently high unemployment, continued loss of private health insurance coverage and increased cost sharing led some people to forgo care or seek less costly alternatives than they would have otherwise used,” the report said.

The report showed that the federal government paid 29 percent of the nation’s healthcare bill in 2010, up from 23 percent in 2007. Some of that increase reflects a transitory increase in federal aid to states to enroll more uninsured people in Medicaid. The percentage of spending by private businesses and state and local governments fell.

The recession played a large role in impacting spending, CMS officials said.  Because fewer people were insured, and private insurers generally picked up less of the cost, patients went to the doctor and hospital less frequently.  The answer may go beyond the recession.  “The utilization slowdown is at least in part structural, and not just cyclically driven by the economy, and the adoption of higher cost sharing plan designs will result in some level of permanent slowdown in trend,” said Ana Gupte, a senior analyst at Sanford Bernstein, which conducts research for investors.

“Premiums grew faster than benefits for the first time in seven years, and benefits grew at their slowest rate in the history of the accounts, according to Anne Martin, a CMS economist.  Martin said this was because private health insurance companies lost enrollees as people were laid off, moved to cheaper health insurance plans as a result, cost-sharing increased.

Karen Ignagni, president of America’s Health Insurance Plans, said that the portion of premiums “allocated to health plans administrative costs was among the lowest in recent years, despite the fact that health plans have been in compliance with the healthcare reform law.”

Additionally, spending on prescription drugs declined in 2010.  Not only did individuals buy fewer drugs, but there were also more switches from brand to lower-cost generic medications. According to CMS, fewer new drugs came onto the market.

Paul Ginsburg, president of the Center for Studying Health System Change, a Washington research group, said the report didn’t address the biggest question: “When the economy gets strong again, do we just return to the old business as usual?  Probably,” he said. “But there’s a chance that the experience of people economizing may have longer-lasting effects.”

The Obama administration was pleased with the report and called it good news for the healthcare law, although some researchers found the law had a less than 0.1 percent impact on national health spending in 2010.  “These numbers do not take into account all of the cost-saving provisions in the Affordable Care Act that are still being implemented.  But they do show why the Affordable Care Act is so important,” senior White House adviser Nancy-Ann DeParle said. According to DeParle, the insurance regulations in the law will keep insurance companies “in check.”

The phasing in of the patient Protection and Affordable Care Act (ACT) which will expand insurance coverage to as many as 32 million people, will incur larger cost increases later in this decade. National health spending is expected to increase by 8.3 percent in 2014, when the most ambitious coverage expansions take effect, according to CMS projections.  “The law will control the growth of healthcare spending through fraud prevention, better coordination of care, disease prevention and overhauling insurance markets,” DeParle said.

According to DeParle, “Starting in 2011, insurance companies were required to publicly disclose and justify any premium increases larger than 10 percent. Many states have the authority to reject unreasonable premium increases and the Affordable Care Act gives states $250 million to strengthen their rate review programs. Additionally, insurers are required to spend at least 80 percent of your premium dollars on healthcare expenses instead of overhead and profits.”

Donna Jarmusz

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Mental Faculties Can Decline as Young as Age 45

January 23rd, 2012

An intensive new study has found that memory, reasoning and comprehension can start to decline as early as age 45. This finding runs counter to conventional wisdom that mental decline typically begins after the age of 60, according to the researchers “Cognitive function in normal, healthy adults begins to decline earlier than previously thought,” said study author Archana Singh-Manoux.  “It is widely believed that cognitive ability does not decline before the age of 60.  We were able to show robust cognitive decline even in individuals aged 45 to 49 years,” added Singh-Manoux, research director at INSERM’s Center for Research in Epidemiology & Population Health at the Paul-Brousse Hospital in Paris.

“These findings should be considered in the context of the link between cognitive function and dementia,” Singh-Manoux said.  “Earlier research shows small differences in cognitive performance at a young age to predict larger differences in risk of dementia in later life.  A thorough understanding of cognitive aging might make it easier to identify those at risk for dementia earlier in life,” she said.

Men aged 45 to 49 saw their reasoning skills decrease by nearly four percent; those aged between 65 and 70 saw their skills drop by about nearly 10 percent.  For women, the decline in reasoning neared five percent for those aged 45 to 49 and about seven percent for those 65 to 70, according to the research.

The study’s results are being published in the journal BMJ (formerly called the British Medical Journal). They demonstrate that the average, performance on cognition tasks deteriorated as the subjects aged. The declines were the most obvious among the oldest participants, who were aged 65-70 at the beginning of the 10-year study that began in 1997-99.

In conducting the study, researchers tracked the mental function of more than 7,000 British civil servants for 10 years.  They found that even the youngest participants, who were between the ages of 45 and 49 when the study began, showed slight yet measurable declines in short-term memory, mental reasoning, and verbal facility over the course of the study.  The declines were too small to be noticed in daily life and were detected only through tests the researchers gave the participants every three to four years.  But the findings may have implications for the prevention of dementia, and underscore the importance of taking care of our bodies and minds early in life, the researchers say.

“We, and others, have shown healthy lifestyles and good cardiovascular health to be important for cognitive outcomes,” Singh-Manoux said. “The fact that cognition declines early implies that midlife levels of these factors — health behaviors and cardiovascular risk factors and disease — might be important for cognitive outcomes later in life.”

Researchers haven’t decisively proven that cognitive decline in middle age is a  predictor of Alzheimer’s or other dementias; however, the evidence suggests that small changes in midlife mental function can become magnified later in life, says Francine Grodstein, Sc.D., an epidemiologist and associate professor of medicine at Brigham and Women’s Hospital, in Boston.  “There is a lot of evidence that (people) with cognitive decline are at highest risk of later developing dementia, so it is likely that preventing or delaying cognitive decline today will help reduce risk of dementia tomorrow,” said Grodstein, who wrote an editorial that accompanied the study.

“On an individual level this doesn’t mean very much — it certainly doesn’t mean that we’re seeing a lot of people with dementia in their 40s.  We know that’s not true,” Grodstein said.

Jeff Newkirk

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Some of America’s Doctors Are Going Broke

January 18th, 2012

Many of America’s physicians have an embarrassing secret — they are going broke. This quandary is claiming a wide range of casualties, including family physicians, cardiologists and oncologists.

Industry insiders are concerned about the trend.  Approximately 50 percent of all doctors operate a private practice. If a cash crunch forces the closure of an independent practice, it robs a community of a vital healthcare resource.  “A lot of independent practices are starting to see serious financial issues,” said Marc Lion, CEO of Lion & Company CPAs, LLC, which advises independent physician practices about their finances.  Doctors say that smaller insurance reimbursements, changing regulations, soaring business and drug costs take away from their practices’ profitability. Some experts counter that doctors’ lack of business sense shares the blame.

Recent steep 35 percent to 40 percent cuts in Medicare reimbursements for key cardiovascular services, such as stress tests and echocardiograms, have taken a substantial toll on revenue for cardiologists, as an example.  Federal law requires that Medicare reimbursement rates be adjusted every year based on a formula tied to the economy’s health. That law says rates need to be cut every year to keep Medicare financially sound.

Although Congress has blocked those cuts 13 times over the 10 years, most recently on December with a two-month temporary “patch,” this dilemma haunts doctors every year.

Beau Donegan, senior executive with a hospital cancer center in Newport Beach, CA, is well aware of physicians’ financial woes.  “Many are too proud to admit that they are on the verge of bankruptcy,” she said. “These physicians see no way out of the downward spiral of reimbursement, escalating costs of treating patients and insurance companies deciding when and how much they will pay them.

“This is a very timely and truthful story for doctors and hospitals in America. This is also a 911 call for U.S. healthcare security.  More importantly, when a doctor is ‘$3.2 million in debt’ or has to force 6,000 cancer patients to look for a new doctor”, as reported by CNN Money, “our healthcare system infrastructure earthquake is coming,” says Dr. Jin Zhou, president of ERISAclaim.com, a national expert on PPACA and ERISA appeals and compliance.  This 2012 CNN Money report is consistent with an AMA report on March 4, 2011 that 51 percent of doctors in Texas are going broke: “51 percent of Texas doctors dug into personal funds to keep practices afloat in 2010,” Dr. Zhou said.

Writing in Forbes, Rick Ungar counters that “While there is considerable truth to be found in the CNN Money piece, a deeper analysis is in order given the knee-jerk reaction by the many who are too quick to place the problem and the blame at the feet of the federal government.  First off, it is important to recognize that not all physicians in the healthcare system are facing financial crisis. About 50 percent of the nation’s doctors are employed, typically by hospitals, and receive a salary in exchange for their service. So far, these practitioners do not appear to be in any significant financial danger.”

The financial problems are typically experienced by a portion of the remaining 50 percent who wish to operate their own private practices and, as a result, find themselves suffering from the financial stresses faced by so many small businesses in these difficult times.  Yet, even among this 50 percent, not all private practices areas are in trouble. For example, surgeons and dermatologists seem to be doing just fine while cardiologists and oncologists, whose business models necessarily make them more susceptible to trouble, are feeling the pain.

Why oncology and cardiology?

Part of the blame does rest with changes in Medicare and Medicaid payment policies. Certainly, cardiologists and oncologists, whose practices naturally bring them into contact with more senior citizens, are the most likely to feel the pain when it comes to reduced government payments. Last year, the Centers for Medicare & Medicaid Services (CMS) took a hatchet to what is paid to cardiologists for performing important tests such as echocardiograms, stress tests and other “machine” based testing. But what you may not know is that these reductions were based on a survey conducted by the American Medical Association, at the request of the CMS, that seemed to go out of its way to omit cardiologists in private practice from the survey participants. Why? Because private practice cardiologists have, by and large, dropped out of the AMA and the AMA’s interest was in getting more money set aside for those medical practitioners in other areas of medicine who remain members.

John Driscoll

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Craig Wortmann on Being an Entrepreneur

January 17th, 2012

Virtually anyone can be an entrepreneur, although starting one’s own business is a giant leap.  Many people look at becoming an entrepreneur as a cause and effect – the academic term being “causal logic”.  That may not be the optimal way to view entrepreneurship, however.  Rather, the world’s most successful entrepreneurs use effectual logic.  According to Craig Wortmann, Clinical Associate Professor of Entrepreneurship at the University of Chicago Booth School of Business, “It goes like this:  I’m an entrepreneur, I’ve got this idea, I’ve got this limited set of resources and I’m just going to begin, and I’m not exactly sure what the effect will be.”  Wortmann has more than 20 years of experience in entrepreneurial sales and marketing strategy experience.

According to Wortmann, this is a powerful way to think about entrepreneurship because the concept has such an underlying vibe of optimism.  This notion of entrepreneurship is just start the business, anyone can do it.  They are all personality types; they don’t have to be deep in domain knowledge.  Anyone can start a business.  The research suggests that as long as people are not rigid about reaching a certain outcome, they will be successful.

Wortmann asks budding entrepreneurs to think about the idea they have and ask what is the relative value to the idea.  He believes that many people get stuck as entrepreneurs because they say “I can’t be an entrepreneur because I don’t have the next Google.  I’m not waking up in the middle of the night with the next idea for Facebook.”  Any idea that will change the focus of people or get them to do something better or a bit different – you have a potential business.

Would-be entrepreneurs need to begin taking action.  They need to talk to potential customers and partners, and start to formulate a product or service to offer to people.  Chances are the fledgling entrepreneur will be rejected; there is no question about that.  But if they keep embracing that chaos and making contact with the market, things will begin to take shape.  They need to get out there and realize that they are the structure and the process.

The challenge for entrepreneurs can be maintaining momentum.  It it’s the product, stay close to the product.  If it’s the people, get out into the market, meet people and maintain energy.  According to Wortmann, “One of the things I like to talk to students about:  is shutting down a business failure?  It is in a way, but we’re all on a journey and that’s just a chapter.  In a microcosm, it is a failure.  But is it really a failure if you take those lessons and start something new or go back to a big company and leverage all those things you learned?  That looks like success to me.”

To listen to Craig Wortmann’s full interview on entrepreneurship, click here.

Tom Silva

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Medicare Times Are a Changing

January 16th, 2012

Baby boomers may not like it — and whoever wins the White House this year — but the Medicare that our parents knew and love is destined to change. And it’ll be like it or lump it.

With more than 1.5 million baby boomers enrolling in Medicare every year, the program’s future is one of the most crucial economic issues for anyone who currently is 50 or older. Healthcare costs are the most erratic part of retirement expenses, and Medicare remains a great deal for retirees, who often get benefits worth significantly more than the payroll taxes they paid while working.  “People would like to have what they used to have.  What they don’t seem to understand is that it’s already changed,” said Gail Wilensky, a former Medicare administrator. “Medicare as we have known it is not part of our future.”

Consider these numbers.  Medicare’s giant trust fund for inpatient care is expected to run out of money in 2024.  When that happens, the program will collect only enough payroll taxes to pay 90 percent of benefits.  Additionally, researchers estimate that as much as one-fifth and even two-thirds of the more than $500 billion that Medicare now spends every year is spent on treatments and procedures of little or no benefit to patients.

Representative Paul Ryan (R-WI), chairman of the House Finance Committee, is leading the charge on changing Medicare.  Ryan’s current proposals will not impact people now 55 or older would not have to make any changes.  But how would it work?  Would it save taxpayers’ dollars?  Would it shift costs to retirees, who are least able to afford it?   Will Congress ultimately end traditional Medicare?  These questions are still waiting for answers.  “I’m not sure anybody has come up with a formula on this that makes people comfortable,” said health economist Marilyn Moon, who formerly served as a trustee overseeing Medicare finances.

The White House’s preference is to keep the existing structure of Medicare while “twisting the dials” to control spending, said Medicare trustee, economist Robert Reischauer of the Urban Institute think tank.

Ryan’s original approach would have put 100 percent of future retirees into private insurance.  His most recent plan, written with Senator Ron Wyden (D-OR), would keep traditional Medicare as an option, competing with private plans.

Writing for AARP, Ricardo Alonzo Zaldiver says that, “This could mean more Medicare recipients joining private insurance plans (currently, only about 25 percent of Medicare recipients are in private ‘Medicare Advantage” plans, while the other three-quarters participate in the traditional, government-run Medicare program).  A new voucher-for-private-Medicare plan would be available to anyone currently under 55.

“It could also mean keeping the existing Medicare structure but making certain tweaks to control spending.  Under President Obama’s healthcare overhaul, the Independent Payment Advisory Board could force Medicare cuts to service providers if costs rise above certain levels and Congress fails to act.  Obama has said he’ll veto any plan to cut Medicare benefits without raising taxes on the wealthy.  During failed budget negotiations last summer, he indicated a willingness to gradually raise the Medicare eligibility age to 67, revamp co-payments and deductibles in ways that would raise costs for retirees, and cut payments to drug makers.  ‘For the 76 million baby boomers signing up over the next couple of decades, it will pay to be watching.’”  President Obama has promised that he will veto any plan to cut Medicare benefits without raising taxes on the wealthy.

The Chicago Sun-Times offers this sage advice: “Fix Medicare, ignore scare talk.”  According to writer Steve Huntley, “I’ve contributed to Medicare every year of its existence. Yet, it’s a myth that seniors have paid the costs of their Medicare services, as demonstrated by the research of economists Eugene Steuerle and Stephanie Rennane of the Urban Institute think tank.  Their study showed that a two-income couple earning $89,000 a year would pay $114,000 in Medicare taxes during their careers but could expect to receive $355,000 in medical care in retirement. They could get prescriptions, doctor visits and hospital services valued at three times their contribution to Medicare.

“Medicare combined with Medicaid and Social Security add up to an entitlement time bomb –  they’ll consume all tax revenues by 2052, according to a Heritage Foundation analysis –  for the people who’ll be stuck with the bill: working Americans.  In 1950, there were 16 taxpaying workers for each retiree; by the time the baby boomers all retire, there will be two workers for each retiree. Entitlement reform has to happen.”

John Driscoll

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States Rewarded for Adding Kids to Public Insurance Rolls

January 9th, 2012

Twenty-three states will share $296.5 million in federal funds for encouraging low-income families to enroll children in state-run public healthcare programs.  The bonuses reward states that streamlined eligibility for Medicaid, the federal-state health program and the Children’s Health Insurance Program (CHIP).  The goal is to assure coverage for children younger than 19 from households with annual incomes of less than $45,000 for a family of four, though some states are more generous.  Despite 2011’s shaky economy, the number of uninsured children fell to 5.9 million in 2010 from 6.9 million the previous year, according to a study by the Georgetown University Health Policy Institute.  Children still leave the program rolls because parents neglect to renew eligibility, increasing the likelihood of missed vaccinations and dental checkups, said Tricia Brooks, a senior fellow at the Georgetown institute.

“Families may avoid routine preventive care with the hope they’ll have more money next month or delay seeking care until they know they really have to bring the children in,” Brooks said.  “At that point, the emergency room is a likely choice.”

Besides the 1.2 million newly insured children, three million who previously had private insurance transferred to CHIP or Medicaid during that time frame, said Sherry Glied, assistant secretary for planning and evaluation at the Department of Health and Human Services (HHS).  Because of that, children have been protected from 10 years of erosion of health insurance among Americans that resulted as employers dropped coverage, workers with insurance were laid off because of the recession, and people whose only alternative was to buy insurance on their own could not afford to do so.  Since CHIP was first established in 1997, the share of adults ages 26 to 64 with a health plan dipped from 83 percent to 80 percent. By contrast, in the same period, the share of children with insurance grew from 86 percent to 93 percent.  “It’s very encouraging, because it shows that even in an economic downturn, CHIP really made a difference,” Glied said.

The 23 states that are eligible to receive performance bonuses are: Alabama, Alaska, Colorado, Connecticut, Georgia, Idaho, Illinois, Iowa, Kansas, Louisiana, Maryland, Michigan, Montana, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, South Carolina, Virginia, Washington, and Wisconsin.

To earn their bonuses, states used electronic databases rather than paperwork submissions from families to verify incomes or preemptively enrolling kids who appear to be eligible.  Additionally, states may guarantee one year of eligibility rather than requiring periodic renewals.  Georgia and South Carolina use information from their nutrition assistance programs to hasten eligibility determinations, said Marilyn Tavenner, acting administrator of the U.S. Centers for Medicare and Medicaid Services.  In 2010, 15 states claimed bonuses totaling approximately $206 million.  Alabama, which received $55 million after adding 133,000 children to its public insurance programs, led the pack.

In Connecticut, for example, an estimated 49,000 Connecticut children under 18 have no health insurance, said Mary Alice Lee, senior policy fellow with Connecticut Voices for Children.  The state provides affordable insurance for children under the Husky Health program. According to Lee, considering that the state’s economic downturn and the 2010 nine percent unemployment rate, the fact that the percentage of uninsured children held steady means that the Husky program is working.  “The number of uninsured children in Connecticut is really relatively low compared to other states,” Lee said.  On a national basis, 9.8 percent of children under 18 were uninsured in 2010.  “The Husky program is doing exactly what it’s supposed to do, that is, provide affordable coverage for children during times of economic stress.”

No parent in America should have to think twice about taking their child to a doctor’s appointment or filling a prescription for their child because the cost is too high,” Tavenner said. “And no child should have to miss school or activities because they’re not getting the care they need to stay healthy.”  States have wide latitude regarding how they spend the funds, but the intent is that they will be used to help defray the shared Medicaid costs that the states incur by enrolling more children.

Donna Jarmusz

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ACA Is Fixing U.S. Healthcare Delivery: Donald Berwick

January 4th, 2012

Dr. Donald Berwick, who oversaw Medicare and Medicaid until recently said the programs are trapped in a health system that promotes wasteful spending and inefficient care. “Healthcare is broken,” Berwick, who headed the Centers for Medicare and Medicaid Services (CMS), said.  “We have set up a delivery system that is fragmented, unsafe, not patient-centered, full of waste and unreliable.  Despite the best efforts of the workforce, we built it wrong. It isn’t built for modern times.”  Berwick said the Patient Protection and Affordable Care Act (ACA) is changing how physicians and hospitals are paid and deliver care through such innovative arrangements as accountable care organizations (ACOs), which improve coordination and lower costs.”

According to Berwick, it is not clear whether these efforts will produce results quickly enough to silence the critics who want to make more radical changes that would shift the majority of the burden onto beneficiaries.  “That is the central question, the nub…whether that will happen fast enough, I just don’t know.”

To read the full transcript of Berwick’s remarks, click this link:

Berwick defended his tenure as CMS administrator. Even though he failed to win Senate confirmation, that did not impact his ability to get things done, though he would have preferred a longer term.  “An agency of this size will do better with longer-term leadership commitment,” he said.  With the knowledge that his tenure was likely to be short, Berwick felt a greater sense of urgency to achieve things.  Berwick’s most challenging decisions involved state requests to cut Medicaid benefits and writing regulations to encourage doctors and hospitals to form ACOs, while not making the requirements overly burdensome.

Berwick took exception to state’s efforts to limit hospital coverage for Medicaid recipients, which is presently under review by federal regulators.  Hawaii has proposed a 10-day limit on some enrollees; Arizona has proposed a 25 day limit.  “It’s a nonsensical idea.  If a patient needs 20 days, the patient should get 20 days,” he said.

According to the Bangor Daily News, Berwick’s departure from CMS is “an unnecessary loss.” Berwick’s parting words should help Americans understand how their health system is in the process of being improved.  The article notes that “Waste is a broad term, including needless medical procedures, failure of adequate preventive measures, duplication and inefficiency, as well as outright fraud.  Hospital-acquired infections have caused the deaths of almost 100,000 Americans each year and the illness of millions more, according to the U.S. Centers for Disease Control and Prevention.  Dr. Berwick has reported that these complications have added as much as $45 billion a year to hospital costs borne by taxpayers, insurers and customers.  He said that some hospitals have virtually eliminated some infections that other hospitals still consider inevitable.  Under the Affordable Care Act, sometimes called Obamacare, financial incentives will go to hospitals that excel in fighting these infections starting in 2015.

Unnecessary hospital readmissions add another $12 billion a year, estimates the Medicare Payment Advisory Commission.  It says half or more of these readmissions could be prevented through better coordination and patient education, permitting them to recover at home rather than re-entering the hospital with complications.  ‘Integrated care’ will also reduce costs, said Dr. Berwick, by protecting patients from having to tell their stories over and over to different providers and letting a doctor know what medication they had already been given.  No figure is available for the savings from automated record keeping, but it is becoming substantial.  Preventive medicine is already reducing waste, for example by detecting diseases at early stages for prompt treatment.  The Affordable Care Act makes preventive benefits like cholesterol tests, mammograms and screening for colon and rectal cancer free for everyone with Medicare.”

Donna Jarmusz

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Brain Scans a Tool In Early Alzheimer’s Detection

January 3rd, 2012

Researchers believe they can see revealing brain shrinkage years before a person develops memory loss or other symptoms of Alzheimer’s disease. The new finding may ultimately let physicians detect the disease and treat patients earlier with the goal of keeping them functional longer.

Massachusetts General Hospital and the University of Pennsylvania researchers used magnetic resonance imaging (MRI) scans to measure how thick the brain’s outer layer is in 159 people who did not suffer from memory loss.  Earlier studies have linked Alzheimer’s disease with distinctive shrinkage in nine regions of the brain’s gray matter, or cerebral cortex.  This is what physicians call the “Alzheimer’s signature.”

According to researchers, the brain shrinks as it loses nerve cells – more commonly known as neurons.  They aren’t entirely sure what causes this.  One theory is that the cells die after they become choked by excess amounts of two kinds of protein — beta amyloid and tau.  “The neurons degenerating over time are really what we think causes the shrinkage,” said researcher Brad Dickerson, M.D., an associate professor of neurology at Harvard Medical School and director of the frontotemporal disorders unit at Massachusetts General Hospital.  “And that shrinkage in their size is something you can measure with an MRI scan.”

Alzheimer’s is the sixth leading cause of death in the United States, according to the Alzheimer’s Association.  The number of deaths has increased in recent years, and there is no cure.  In the new study, researchers focused on how thick the edges of the brain are.  “We’re looking at the parts of the cortex that are particularly vulnerable to Alzheimer’s disease, parts that are important for memory, problem-solving skills and higher-language functions,” Dickerson said.

The 15 percent of participants – who averaged 76 years old –who had the thinnest brain areas performed poorly on the tests: About one in five of them were experiencing cognitive decline, as well as increases in signs of abnormal spinal fluid, a possible sign of developing Alzheimer’s disease.  “That suggests they may be developing symptoms,” according to Dickerson.

Susan Resnick, PhD, who works at the National Institute of Aging, wrote:  “The ability to identify people who are not showing memory problems and other symptoms but may be at a higher risk for cognitive decline is a very important step toward developing new ways for doctors to detect Alzheimer’s disease.”

Dr. Simon Ridley, from the charity Alzheimer’s Research UK, said, “The ability to predict who will develop Alzheimer’s disease is a key target for dementia research, as it would allow new treatments to be tried early, when they are more likely to be effective.  These findings add weight to existing evidence that Alzheimer’s begins long before symptoms appear, although it’s important to note that the study did not assess who went on to develop the disease.  This research provides a potential new avenue to follow, but we need to see larger and longer-term studies before we can know whether this type of brain scan could accurately predict Alzheimer’s.”

Writing in Time, Alice Park notes that “Alzheimer’s disease has always been difficult to diagnose — the only way to identify it definitively is by autopsying the brain after death — but scientists may now have an easier way to spot the degenerative brain disease long before that, even before symptoms appear, using brain scans.  By studying people’s brain scans over time, they were able to see that these nine brain regions appear to be thinner in people who eventually go on to develop Alzheimer’s — but that it takes many years for this structural difference to show up as symptoms of memory loss or cognitive problems.  Using this brain-size signature as a yardstick, the researchers decided to confirm the correlation by testing the patients’ cognitive abilities three years after a baseline brain scan.  Indeed, they found that 21 percent of participants, who had the thinnest Alzheimer’s-related brain regions but showed no signs of memory problems or other cognitive deficits at the start of the study did show signs of cognitive decline three years later, compared with none of the subjects who did not have the same brain thinning and seven percent who showed moderately thinner brain areas.”

Jeff Newkirk

Posted by: Jeff Newkirk
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States to Determine Their Own ACA Coverage Levels

December 28th, 2011

The Obama administration averted a potentially vicious lobbying battle over the medical benefits insurers must cover under the Patient Protection and Affordable Care Act (ACA) when it handed the decision to the states.  The ruling gives states the power to set coverage levels for the policies uninsured people will purchase through exchanges, starting in 2014.  Business groups will make a case for a narrow set of benefits to save costs while consumer advocates want expanded coverage.  The decision shifts the issue to the states and away from the White House, and lets President Barack Obama say he’s giving governors and legislatures greater flexibility to confront rising medical costs and control changes the 2010 healthcare law is bringing to insurance markets.

“Obama has taken all the grief he can stand over healthcare,” said Erik Gordon, a business professor at the University of Michigan in Ann Arbor.  “He doesn’t want it to give the Republicans any more political ammunition.  He is passing the hot potato to the states.”

“This is significantly more state-flexible and friendly than many would have expected,” said Alan Weil, head of the National Academy for State Heath Policy. What’s to guarantee that the state’s choice of a benchmark plan will be affordable?” asked National Retail Federation Vice President Neil Trautwein.  If coverage is unaffordable today, this doesn’t change the equation.”

Ron Pollack, executive director of Families USA, said Department of Health and Human Services (HHS) would have to provide “strong oversight and enforcement” of the benefit standards as the states implement them.  “It will be important to ensure that adequate coverage across all 10 required benefit categories is provided — marking an improvement over many plans offered today,” he said.  Giving states greater flexibility to determine necessary benefits was perceived as an attempt to defuse criticism that the health reform law gives the federal government too much control over the healthcare system.  A longtime advocate for federal health reform, Pollack also expressed reservations.  “We understand the inclination to balance flexibility, comprehensiveness of coverage, and cost,” he said. “However, flexibility must yield to reliable, comprehensive coverage of benefits for consumers.  It is essential that HHS provide strong oversight and enforcement.”

Under the revised guidelines, state legislature must either set coverage levels in line with widely subscribed small- business plans in their communities, or tie them to benefits included in their state employees’ health plan, federal plans or the largest commercial managed-care plan in the state.  Generally, health plans for small businesses, state employees and federal workers “cover similar services,” including doctors’ visits, hospitalization and outpatient mental health, according to a study conducted by HHS.  Discrepancies arise in areas such as prescription drugs.  While they’re covered as a basic benefit by all government employee plans, only 84 percent of small business plans cover them.  Others require additional premiums.  Small business plans also rarely cover dental care, acupuncture, bariatric surgery and hearing aids, unless states require it.

According to Forbes magazine’s sba.com column, “At a first glance, this seems like it might be a step in the right direction for individuals and small business owners.  However, that is not necessarily the case.  It seems as though the new idea comes with a wide array of new problems.  First, while the new policy will give states flexibility, it imposes more benefit mandates.  The new policy lists 10 ‘essential health benefits’ that the state MUST provide.  Some of these essential benefits are prescription drugs, preventative care, doctor and hospital services, and maternity care.  The new policy allows the states to designate a state-wide ‘benchmark’ health insurance plan, setting the minimum standard of care.  All insurers would then have the ability to change their insurance plans as long as the coverage provided benefits of the same or greater value.  The new ‘more flexible’ plan still seems very rigid and regimented.  Additionally, the new plan would lead to higher-cost insurance premiums, not lower.

“Another long-standing issue with Obama’s idea is that individuals are not clear on what services and benefits are expected to be provided as a minimum.  Instead of clearing up this confusion and spelling out what exactly would be required, Obama has simply put that responsibility on the states – giving them the ‘flexibility’ to design their plans.

“While it may look like Obama is responding to his opponents’ remarks about his previous plan forcing health insurance standards on states, it seems as though this policy change still accomplishes his goals – just through a different means.  Obama can continue to shape and reshape his ideals; however it will be up to the Supreme Court to decide whether the government can require Americans to buy health insurance at all.”

John Driscoll

Posted by: John Driscoll
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