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PNHP RESOURCES

Data Update - Spring 2014 newsletter

UNINSURED AND UNDERINSURED

• 48.0 million Americans, 15.4 percent of the population, were uninsured in 2012, down slightly from 15.7 percent in 2011. The number of uninsured people was not statistically different from 2011, according to the Census Bureau.

Similarly, there was no significant change in the number of uninsured young adults aged 19-25, 8.2 million, in 2012. The effects of an Affordable Care Act (ACA) provision allowing young adults to be covered by a parent’s plan, which modestly increased coverage for this group between 2010 and 2011, appear to have plateaued. 6.6 million children (8.9 percent) were uninsured in 2012, including 12.9 percent of children in poverty.

Although Medicare expanded slightly in 2012 with more baby boomers reaching retirement age, Medicaid has covered more people than Medicare (50.9 million vs. 48.9 million) since 2009. 54.9 percent of Americans had employment-based insurance in 2012, down from 64.2 percent in 2000.

Texas had the highest percentage of uninsured, at 24.6 percent, followed by Nevada, New Mexico, and Florida, each of which exceeded 20 percent. 272,000 people in Massachusetts (4.1 percent) were uninsured in 2012. Massachusetts’ 2006 health reform is the model for the ACA.

About 8 in 10 of the uninsured are U.S. citizens and 19.7 percent are non-citizens. Uninsured non-citizens include both lawfully present and undocumented immigrants. Undocumented immigrants and legal immigrants residing in the U.S. for less than five years are barred from  federally funded health coverage (U.S. Census Bureau, “Income, Poverty and Health Insurance Coverage in the Unites States: 2012,” September 2013).

More than half of Americans (57 percent) report delaying or forgoing health care in 2012 due to cost. While 83 percent of the uninsured skipped or delayed care due to cost, so did 54 percent of people with coverage. About 1 in 5 people with insurance reported that their plan did not cover a needed service or that they had a problem with medical bills (Kaiser Family Foundation, September 2013).

• Psychiatrists are significantly less likely to accept insurance (even private insurance) than other physicians. According to a new study, only 55 percent of psychiatrists accepted private insurance in 2010, down from 72 percent in 2005. In contrast, about 89 percent of other physicians accepted private insurance in 2005, down from 93 percent in 2005. The proportion of psychiatrists accepting Medicare (55 percent) and Medicaid (43 percent) in 2010 was also lower compared to other physicians, for whom the acceptance rate was 86 percent for Medicare and 73 percent for Medicaid (Seaman, Reuters, 12/11/13).

As of Jan. 1, 3.9 million people had signed up for Medicaid and 2.1 million people had signed up for private coverage on the ACA’s health exchanges (HealthCare.gov and 14 state-based exchanges). The final impact of the ACA on the number of uninsured in 2014 is uncertain as the enrollment period has been extended until March 31 (and indefinitely for people facing certain circumstances, such as a change in family size or hardship); private insurers must receive monthly premium payments from enrollees; the number of enrollees who had coverage last year but are switching to exchange plans is unknown; and more states may choose to expand their Medicaid programs.

The Congressional Budget Office estimated that the number of uninsured Americans would drop by 14 million in 2014. The CBO projected that Medicaid enrollment would increase by 9 million and that another 7 million people would gain private coverage through the exchanges; these gains would be offset by 2 million people losing or switching from their current individual coverage (Congressional Budget Office, May 2013).

High deductibles reduce emergency care, raise subsequent hospitalizations

Even patients with severe conditions reduce trips to the emergency department in response to high deductibles. Two recent studies assessed emergency department use among people with high-deductible health plans (HDHPs) compared with patients in HMOs. The first study found that males whose employers switched them from a traditional HMO to a HDHP reduced their utilization of emergency department visits for high-severity indications (conditions clearly warranting an ED visit) by 34.4 percent, even more than they reduced visits for low- and medium-severity indications (down 22 percent). They also experienced a reduction in hospitalizations in year one by 24.2 percent, but this was followed by a 30.1 percent increase in hospitalizations in year two, suggesting that men “put off needed care after their deductible went up, leading to more severe illness requiring hospital care later on” (Kozhimannil, “The impact of high-deductible health plans on men and women: An analysis of emergency department care,” Medical Care, August 2013).

A second study found that low socio-economic status enrollees in HDHPs in Massachusetts reacted in a similar way: They reduced high-severity ED visits by 25 percent to 32 percent in the first two years, but their rate of hospitalization eventually rebounded after falling 23 percent in the first year. The findings suggest that initial reductions in high-severity ED visits might have increased the need for subsequent hospitalizations (Wharam, “Low socio-economic status enrollees in high-deductible plans reduced high-severity emergency care,” Health Affairs, August 2013).

In contrast, patients who gained Medicaid coverage in the 2008 lottery in Oregon increased their use of the ED by 0.41 visits per person, or 40 percent relative to an average of 1.02 visits per person in the control group over the 18-month study period. ED visits by the newly insured were for a broad range of conditions, some of which could have been treated in a primary care setting. These findings were not unexpected given that the poor tend to be sick and have unmet health needs, especially in the short term after acquiring coverage (Taubman et al., “Medicaid Increases Emergency-Department Use: Evidence from Oregon’s Health Insurance Experiment,” Science, 1/17/14).

SOCIOECONOMIC INEQUALITY

• In 2012, the share of total income going to the top 10 percent of earners exceeded 50 percent, the highest ever recorded, while the top 1 percent took more than one-fifth of the total income earned by Americans, the same level as before the Great Depression (see chart, below). Overall, the top 1 percent of earners have captured 95 percent of the income gains since the recession ended. The incomes of the other 99 percent plunged 12 percent in the recession and have grown only 0.4 percent since then (Lowrey, “The Rich Get Richer Through the Recovery,” New York Times, 9/10/13).

COSTS

• In 2014, U.S. health spending will be $3.1 trillion, $9,697 per capita, 18.3 percent of GDP. This estimate, by the Centers for Medicare and Medicaid Services (CMS), assumes that over 11 million mostly healthy Americans will gain health insurance coverage in 2014, primarily through Medicaid and the health exchanges. Administrative costs for both government and private sector insurance administration are expected to jump in 2014 due to the administrative complexity of the ACA model of reform, to $41.9 billion (up 13 percent from 2013) and $199.4 billion (up 10.8 percent), respectively. Total health spending is projected to rise 6.2 percent per year until 2022, to $5.0 trillion, $14,664 per capita, 19.9 percent of GDP (“National Health Expenditure Projections, 2012-2022,” Health Affairs, 9/13/13).

• In 2013, the cost of employer-sponsored health insurance coverage rose to $16,351 for family coverage and $5,884 for individual coverage, up 4 percent over 2012. Workers paid an average of 29 percent of the cost of family coverage ($4,742) and 18 percent of the cost of individual coverage ($1,059). Over 38 percent of workers with individual coverage have an annual deductible of $1,000 or more, up from 34 percent in 2012. Nearly one-third (29 percent) of employers with 5,000 or more employees said they were considering giving workers a fixed sum of money to buy coverage in an online marketplace (or “private exchange”), with workers’ responsible for the difference between the value of the voucher and the cost of their coverage (“Employer Health Benefits Annual Survey,” Kaiser Family Foundation, 8/20/13).

Since passage of the Parity Act in 2008, spending on in patient mental health and substance abuse care for people under 65 with employer-sponsored coverage has risen only marginally. Mental health spending as a share of total hospital spending grew from 1.8 percent in 2009 to 2.2 percent in 2011; substance-use spending as a share of hospital spending rose from 0.7 percent in 2009 to 1.0 percent in 2011. As a share of the cost of an admission, copayments for mental health treatment and substance abuse treatment (12 percent and 10 percent, respectively) are nearly three times higher than for medical/surgical treatments (4 percent) despite the legislation’s requirement of similar coverage for mental health/substance abuse as for medical/surgical treatment. About 60 percent of total mental health spending of $150 billion in 2009 came from public sources, up from 57 percent in 1986. The ACA includes mental health as an “essential benefit,” but a government rule on what services must be covered is still pending, and choice of provider is severely limited by plans with “narrow networks” (“Mental Health-Substance Use Services In Hospitals Up After Parity Law,” HCCI, 2/27/13; Levit et al., “Federal Spending on Behavioral Health Accelerated During Recession as Individuals Lost Employer Insurance,” Health Affairs, May 2013).

• The Milliman benefits consulting firm estimates the average total cost of health care for a typical family of four in an employer-sponsored PPO plan annually. In 2013, the Milliman Medical index reached $22,030, including $12,886 in employer-paid premiums, $5,544 in employee premiums, and out-of-pocket spending of $3,600. In comparison, median household income (not identical to the worker’s family, but still instructive) for the most recent year available (2011) was $50,054 (Uwe Reinhardt, Economix, New York Times, 8/30/13).

Large employers shifting workers to high deductible plans, health exchanges

One-third of all large employers ( >500 employees) are already taking steps to avoid the “Cadillac tax” that goes into effect in 2018 on plans in excess of $10,200 for an individual or $27,500 for a family. To avoid the tax, many employers are pushing high-deductible, so-called consumer-directed health plans. Nearly three-quarters of large employers (72 percent) now offer at least one high-deductible Consumer Directed Health Plan (CDHP), and nearly one-quarter (22 percent) of employers plan to only offer high-deductible CDHP’s next year, up from 19 percent this year.

Large employers also plan to cut costs by offloading coverage of part-time employees, pre-65 retirees, and COBRA plan participants to the federally subsidized coverage on the health exchanges. Home Depot, Trader Joe’s, and Target are among the large firms that have announced they will no longer provide health insurance to their part-time workers (National Business Group on Health, 8/28/13, “Employers Hold the Line on Health Benefit Costs,” Mercer, 10/1/2013).

MEDICARE

• The number of physicians who agree to take Medicare patients grew from 705,568 in 2012 to 735,041 in 2013 according to CMS. While the number of doctors who decline to take Medicare more than doubled between 2009 and 2012, from 3,700 to 9,539, they are offset by the much larger flow of physicians into Medicare (Diamond, “More Doctors are Quitting Medicare. Is Obamacare Really to Blame?” California Healthline, 8/7/13).

• Medicare premiums for 2014 will stay the same, $104.90 per month. The average premium for enrollees of Medicare Advantage Prescription Drug plans will be $39 per month in 2014, a 14 percent increase from 2013. Some plans are also raising their out-of-pocket limits (The Associated Press, 10/28/13).

The nation’s largest insurer, United Healthcare, is cutting up to 20 percent of the physicians who participate in their Medicare Advantage plans across the U.S., including the entire faculty at Yale’s hospital and medical school. A U.S. district judge issued a restraining order against the firm, temporarily blocking them from dumping 2,200 doctors in Connecticut. United claims it has a unilateral right to terminate a participating physician by “amending” their United Medicare Advantage Plan (Christian, “United Healthcare enjoined from terminating physicians,” Giordano, Halleran & Ciesla, 12/16/13).

• Medicare beneficiaries in fair or poor health spent over twice as much on out-of-pocket costs for health services in 2009 as beneficiaries in good or excellent health, $3,446 vs. $1,643, respectively, according to MedPAC. Having a supplemental plan raised spending on premiums for Medicare beneficiaries in poor health from $1,128 to $3,191 annually, but they still spent a similar amount, $3,382, out of pocket (excluding premiums) for health care (“Health care spending and the Medicare Program,” MedPAC, June 2013).

• Cost-sharing hits black and Hispanic Medicare beneficiaries the hardest, due to their lower median incomes, savings, and home equity. Median per capita income from all sources was lower for black ($15,250) and Hispanic ($13,800) beneficiaries than for white beneficiaries ($24,800) in 2012, a gap that is expected to widen. Per capita savings among black ($11,650) and Hispanic ($12,050) beneficiaries is one-seventh that of white beneficiaries ($85,950). Similarly, a lower percentage of black and Hispanic beneficiaries have at least some home equity (67 percent and 65 percent, respectively) compared to white beneficiaries (85 percent), and the value of that equity was less for black and Hispanic beneficiaries ($53,650 and $67,700, respectively) than for whites ($100,200) in 2012 (“Wide Disparities in the Income and Assets of People on Medicare By Race and Ethnicity: Now and in the Future,” Kaiser Family Foundation, September 2013).

Between 2004 and 2013, the number of Medicare beneficiaries enrolled in costly private Medicare Advantage (MA) plans almost tripled, from 5.3 million to 14.4 million in 2013 (28 percent of all beneficiaries). The plans raise Medicare’s costs by selectively enrolling healthier beneficiaries, gaming the risk adjustment system, and other means. In 2012 alone, private MA plans cost Medicare $34.1 billion more than if their enrollees has stayed in traditional Medicare, or $2,526 per Medicare Advantage enrollee. In 2014, Medicare payments to MA plans are projected to total $154 billion, 26 percent of total Medicare spending (CBO May 2013 Medicare Baseline; Hellander et al., “Medicare overpayments to private plans,” International Journal of Health Services, May 2013).

CORPORATE MONEY AND CARE

• There are 12 new proton-beam therapy centers in the U.S., with 20 more in the works (including two within a 50-mile radius of Baltimore), at a cost of about $230 million per center. Although the beam of protons emitted by the 90-ton cyclotron is more precise than standard radiation and can be useful for rare tumors in the brain, near the eyes, and in children, the main target for the costly technology is the 240,000 men diagnosed with prostate cancer annually, for whom studies have not shown that it is better than standard treatment, although it is much more expensive (“Prostate-Cancer Therapy Comes Under Attack,” Wall Street Journal, 8/28/13).

• Some CEOs of nonprofit hospitals receive lavish pay. In 2009, their average compensation was $595,781 and their median compensation was $404,938. CEOs in the highest 10 percent had average pay of $1.7 million. Some of the most highly paid CEOs (including salary and bonuses) of nonprofits in 2012 included Kaiser Permanente’s George Halvorson ($12.9 million), Providence Health’s John Koster ($10 million), Dignity Health’s Lloyd Dean ($7.1 million), U. Penn. Medical Center’s Jeffrey Romoff ($9.7 million), Carolinas Health System’s Michael Tarwater ($7.5 million), and Advocate Health Care’s James Skogsbergh ($5.5 million) (Herman, Becker’s Hospital Review, 10/15/13; ABC News, “Chart: Hospital Pay and Incentives,” 6/16/13).

Since 2011, when Medicare started to pay dialysis companies a single bundled payment for each patient visit, the dialysis industry has received $530 million to $880 million a year in federal overpayments, audits show. The new bundled payment, intended to eliminate the incentive to over-prescribe epogen, led to a larger drop in the use of epogen and other dialysis drugs than anticipated. Firms’ profits soared as they pocketed the difference between the bundled payment and the cost of the drugs, and their executives reaped a windfall. DaVita CEO Kent Thiry was paid $26.8 million in 2012, up 53 percent from 2011. Congress mandated that HHS eliminate the overpayments, and a final rule from HHS is expected soon. In the meantime, the dialysis industry is spending millions on a campaign to fight the cuts (Eric Lipton, “In Congress, A Bid to Undo Dialysis Cuts,” New York Times, 8/28/13).

• The Department of Health and Human Services, the Office of the Inspector General, and the Department of Justice allocated $583.6 million to fight fraud and abuse in 2012. They recovered $7.90 for the government for every $1 spent on fraud and abuse control activities between 2010 and 2012, according to the General Accountability Office (Health Care Fraud and Abuse Control Program, GAO, September 2013).

• The number of freestanding for-profit emergency rooms has more than doubled in the past four years to over 400. Some hospital chains are using the facilities to generate admissions to their hospitals. HCA Inc. has seven freestanding ERs in Florida, while Wake Med Health and Hospitals has four facilities in the Raleigh, N.C., area. The metro-Houston area alone has 41 freestanding ERs and 10 more under development, including two that sit adjacent to each other. The chain First Choice Emergency Room owns nine ERs in Houston. Another chain, Emerus Hospital Partners, has started converting its facilities into “micro hospitals” with a few beds for patients needing detox or hospice. The firm is partnering with Baylor Health System to operate eight “micro hospitals” in the Dallas area. Emerus, founded by four emergency medicine physicians in 2006, received $30 million from a venture capital firm in 2011 to expand, with the ultimate goal being to take the firm public. The cost of a visit to a freestanding ER can top $1,000, far higher than costs at a clinic or urgent care center; most of the freestanding ERs don’t accept Medicare or Medicaid (Hawkins, “Austin Ventures invests $30 million in emergency room chain,” Austin Statesman, 1/18/11; Galewitz, “Wildfire growth of freestanding ERs raises concerns about cost,” Kaiser Health News, 7/15/13).

• WellPoint, the nation’s second largest health insurer, was fined $1.7 million for exposing health data over the Internet for 612,402 people between October 2009 and March 2010, according to Health and Human Services Department. Since 2009, when HHS started requiring reporting on data breaches, about 27 million people have been affected by major breaches of unencrypted health data (Condon, CBS News, 10/2/13; Reuters, 7/11/13).

• The Florida Department of Corrections, mandated to privatize health services and cut prison health spending by 7 percent, awarded contracts to two firms without looking into their litigation histories. Corizon, awarded a $1.2 billion contract, has been sued for malpractice 660 times in the past five years, including one case in which a jury awarded a 24-year-old patient $1.2 million after he was treated with Tylenol for a back abscess compressing his spine. Corizon also paid a $382,000 fine in Idaho for “failing to meet some of the most basic healthcare requirements” and $1.85 million in Philadelphia for using a front company to pose as a minority-owned business. A second contractor, Pennsylvania-based Wexford Health Services, was awarded a $240 million contract, even though Florida reprimanded the firm in 2002 for poor medical care following the deaths of two inmates. Wexford has paid out $5.7 million to settle 35 malpractice claims since 2008, with about 500 claims outstanding. Arizona terminated its contract with Wexford after an investigation by The Arizona Republic showed the firm was raising costs by skimming the healthier patients and leaving the sicker ones under the state’s care (Christensen, “Florida prison healthcare providers sued hundreds of times,” Miami Herald, 10/2/13).

• The highest profits in the nursing home industry go not to the homes’ operators, but to the hidden, for-profit, investor-owned real estate firms that own and lease out the facilities. Health care “real estate investment trusts” or REITs are growing rapidly, acquiring new properties and aggressively maximizing returns on existing properties, with profits that are double (6-8 percent) the average profit earned by nursing home operators. The three largest firms, with about $60 billion in combined assets and about $6 billion in annual revenues, are HCP, Ventas, and Healthcare REIT (Chart, “10 largest healthcare real estate investment trusts,” Modern Healthcare, 9/9/13).

• While the insurance industry is expected to spend $1 billion on advertising promoting the ACA’s health exchange plans, Tea Party-inspired groups opposed to Obamacare are also well-financed by corporations. The Freedom Partners Chamber of Commerce, a group linked to Koch Industries, gave over $200 million to nonprofit organizations opposing the ACA in 2012. The largest recipient was the Center to Protect Patient Rights (CPPR), which received $115 million. Run by a political consultant with ties to the Koch brothers, the CPPR lists an Arizona post office box as its address, and distributes funds to groups opposing the ACA. Freedom Partners also gave $5 million to Generation Opportunity, which targets college students. The Koch-financed Americans for Prosperity spent $5.5 million on advertisements against the ACA in just three months in 2013, and expects to spend “tens of millions” of dollars on a multifaceted campaign, including efforts to prevent states from expanding Medicaid (Stolberg and McIntire, “A federal budget crisis months in the planning,” New York Times, 10/5/13).

BIG PHARMA

Drug firms fined billions for illegal marketing

A Johnson & Johnson subsidiary was fined $2.2 billion in civil and criminal penalties by the Department of Justice for aggressively marketing the anti-psychotic medication Risperdal for unapproved uses in the late 1990s and 2000s. In addition to aggressively disseminating false information through its sales representatives, Janssen Pharmaceuticals also paid millions in kickbacks in the form of bogus grants and education payments to the nation’s largest nursing home pharmacy, Omnicare. Risperdal annual sales peaked at more than $4.5 billion annually in 2007. The U.S. attorney who prosecuted the case noted that the firm’s “promotion of Risperdal for unapproved uses threatened the most vulnerable populations of our society – children, the elderly and those with developmental disabilities.” The agreement is the third-largest settlement with a drugmaker in U.S. history.

Last year British drugmaker GlaxoSmithKline pleaded guilty and paid $3 billion in fines to settle criminal and civil fines for illegal marketing, failing to report safety data, and false price reporting practices involving several of its medications. In 2009, Pfizer paid $2.3 billion in criminal and civil fines for illegally marketing three medications for off-label uses (“Johnson & Johnson agrees to $2.2 billion fine over Risperdal, Invega, and Natrecor marketing,” The Associated Press, 11/4/13).

• The Supreme Court ruled in June 2013 that pharmaceutical companies that pay generic drug manufacturers to delay sales of generic versions of their products (“pay for delay”) may be sued for anti-trust violations. According to the Federal Trade Commission, generic versions of as many as 142 brand-name drugs have been delayed by these deals since 2005, costing consumers and taxpayers $3.5 billion each year in higher drug costs. A study of 20 such deals found that they have delayed the introduction of generic drugs an average of five years, and as long as eleven years in the case of Bristol-Myers Squibb’s Sinemet CR; that the brand-name drugs cost an average of 10 times more than their generic equivalents, and as much as 33 times more in the case of GlaxoSmithKline’s Lamictal ($465 vs. $14 per month); and that pharmaceutical manufacturers reaped an estimated $98 billion in total sales while generic versions were delayed (“Top twenty pay-for-delay drugs,” Community Catalyst and Oregon State Public Interest Research Group, July 2013).

• Johnson & Johnson will pay at least $2.5 billion to settle about 7,500 lawsuits related to its defective metal hip implants, but the final settlement may exceed $4 billion. While databases outside the U.S. showed a soaring failure rate for the implants as early as 2008, the firm did not recall the device until 2010. About 93,000 patients received the devices from its DePuy Orthopedics unit starting in 2003, about one-third of them in the United States. Once projected to last 20 years, internal documents showed the hips failed in 37 percent of patients within 4.6 years, a rate eight times higher than many other hip devices. Last year, the failure rate in Australia climbed to 44 percent within seven years (Daniel Acker, Bloomberg News, 11/20/13).

High cancer drug prices probably explain the reduced 10-year survival rates for Chronic Myeloid Leukemia (CML) in the U.S. compared with Sweden, according to international experts in CML. Treatment with Bcr-Abl tyrosine kinase inhibitors (TKIs) reduces annual all-cause mortality in CML to 2 percent versus a historical rate of 10-20 percent, and improves 10-year survival from less than 20 percent to above 80 percent. All five TKIs approved for CML have annual price ranges of $92,000 to $138,000 in the U.S., twice the prices in Europe. In the U.S., five-year survival is only 60 percent, compared with 10-year survival above 80 percent in Sweden (Kantarjian et al., “The price of drugs for CML,” Blood, 4/25/13).

GALLOPING TOWARDS OLIGOPOLY

Mergers among hospitals and health systems accelerate

The health care system is rapidly consolidating in the wake of the passage of federal health reform. There were 105 hospital and health system mergers in 2012, more than twice as many as in 2009 (“A wave of hospital mergers,” New York Times, 8/12/13).

Mergers involving four huge health systems reduced the number of large, publicly traded hospital corporations from seven to five. Community Health Systems (CHS) paid $3.9 billion to acquire Health Management Associates (HMA), while Tenet paid $4.3 billion to purchase Vanguard Health Systems.

The CHS-HMA deal will create the nation’s largest (in terms of number of facilities) hospital chain with 206 mostly non-urban hospitals in 29 states, with a heavy presence in the South, and $18.9 billion in combined revenues.

With the acquisition of Vanguard, Tenet will operate 77 hospitals, 173 ambulatory surgery and outpatient centers, and five health plans with combined revenues of about $15 billion. It will also oversee six accountable care organizations (ACOs). Tenet is paying about $582,000 per bed for Vanguard’s four Chicago hospitals, well above the median national price of $450,000 per bed in 2012.

The other three large investor-owned hospital chains are Hospital Corporation of America (162 hospitals, $33.0 billion in revenues), Universal Health Services (23 acute-care hospitals and 197 behavioral health hospitals, $7.0 billion in revenues) and Lifepoint Hospitals (52 hospitals, $3.4 billion in revenues).

Not-for-profit systems are also consolidating. Catholic Health East and Trinity Health finalized their merger earlier this year, creating the second largest not-for-profit health system in the country with 82 hospitals (in 21 states), 89 continuing-care facilities, $12.8 billion in revenues and 87,000 employees, of which 4,100 are physicians. Only nonprofit Ascension Health, based in St. Louis, is larger, with over 90 hospitals and $16.6 billion in revenues (Crain’s Chicago Business, 8/1/13; Crain’s Detroit Business, 5/1/13; Herman, “Tenet Closes on $4.3 billion Vanguard Acquisition,” MRA Alerts and Updates, 10/2/13; Herman, “56 Statistics on Major For-Profit Hospital Chain Finances,” Becker’s Hospital Review, 4/5/13).

The health care system in Massachusetts, the state that provided the model for the ACA, is highly consolidated. One insurer, Blue Cross Blue Shield, controls 45 percent of the private insurance market, and just three insurers control 80 percent. 45 percent of all private payments in the state go to doctors working for just three physician groups. Private insurance premiums in Massachusetts rose 9.7 percent between 2009 and 2011, while the value of that coverage shrank 5.1 percent, and deductibles rose 40 percent. The cost of overhead at insurance companies rose 20 percent annually during the same period, to $1.17 billion (Mass. Center for Health Information and Analysis; State House News Services, “Study: Mass. health care costs rise, benefits fall,” 8/15/13).

• Seven health systems in New Jersey and Eastern Pennsylvania including 25 hospitals are forming an alliance without merging assets. AllSpire Health Partners, composed of systems with $10.5 billion in combined revenues, will focus on joint purchasing and population health, “starting with the systems’ own employees.” Similarly, 20 hospitals in Georgia formed Stratus Healthcare, a consortium including 2,000 physicians and 18,700 employees, and three systems in the Philadelphia area formed Lehigh Valley Health Network, a limited liability corporation, to “gain population health management expertise, beginning with managing healthcare benefits for their combined 32,000 employees” (Regional News, Northeast, Modern Healthcare, 9/23/13).

In Idaho, the Federal Trade Commission is suing to reverse the purchase of the state’s largest multispecialty physician group, Saltzer Medical Group, by the state’s dominant health system, St. Luke’s. The FTC says St. Luke’s gained an 80 percent market share for adult primary care in Nampa in order to leverage price increases for patients with private coverage. This is the first such deal the FTC has litigated to the courtroom and the outcome is expected to have far-reaching implications (Modern Healthcare, 9/23/13).

• The Cleveland Clinic and the 135-hospital Community Health Systems are expanding their six-month-old alliance. They are in negotiations to acquire the Akron (Ohio) General Health System and the Sharon (Pa.) Regional Health System, and are exploring a “strategic equity partnership” with a 208-bed hospital, Metro Health Corp., near Grand Rapids, Mich. If consummated, the deals will extend CHS’ reach into 30 states (Modern Healthcare, 9/23/13).

ACA UPDATE

• Two-thirds of uninsured poor blacks and more than half of uninsured low-wage workers are ineligible for aid under the Affordable Care Act. 26 states – primarily in the South – continue to block the law’s Medicaid expansion, leaving a total of 5.2 million people with incomes below the federal poverty line ($19,530 for a family of three) uninsured but ineligible for subsidies on the exchanges because the ACA envisioned that they would be covered by Medicaid. An additional 3.2 million people with incomes between 100 percent and 138 percent of poverty won’t receive Medicaid but may buy subsidized coverage on the exchanges. Medicaid has income ceilings as low as $11 a day in some states; the median income ceiling in states blocking expansion is about $5,600 a year for an individual, less than half the federal poverty line (“The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid,” Kaiser Commission on Medicaid and the Uninsured, October 2013; Tavernise and Gabeloff, “Millions of Poor are Left Uncovered by Health Law,” New York Times, 10/2/13).

• Three of the nation’s largest insurers – Cigna, UnitedHealthcare, and Aetna – are limiting their participation on the new exchanges, offering plans in just 5, 12, and 14 states, respectively. The firms are avoiding the exchanges for now because they fear that people with costly health needs are more likely to enroll early, reducing profits, despite the administration’s promise of risk adjustment and reinsurance programs (Kirchgaessner, Financial Times, 9/4/13).

• In New York as many as 400,000 independent professionals, from physicians to musicians to craftspeople, are losing the group coverage they obtained through their medical society or association, which in many cases provided greater choice of physicians and less cost-sharing than the exchange plans. The ACA prohibits associations from selling insurance because of the risk they will siphon healthy members, who are needed to keep the new health exchanges financially viable (Hartocollis, “With Affordable Care Act, Canceled Policies for New York Professionals,” 12/13/13).

• Large businesses are projected to receive an annual $10 billion windfall from the virtual elimination of the COBRA program by Obamacare. COBRA allows employees to keep their employer-sponsored health insurance after leaving a job for up to 18 months, but the worker has to pay the full cost of coverage each month. There were an estimated 2.6 million COBRA beneficiaries in 2011. COBRA enrollees cost their former employer up to twice as much as active workers, because only sicker former-employees tend to enroll but they pay only the average premium. With the availability of subsidies on the exchanges, COBRA is expected to be virtually eliminated as former employees switch to subsidized coverage. However, some COBRA enrollees with chronic health problems are unlikely to want to switch to exchange plans because such plans have narrow networks of providers and high cost-sharing (Jay Hancock, “Swapping COBRA For Obamacare Likely To Be Windfall For Big Business,” Kaiser Health News, 9/23/13).

Insurance regulation won’t fix health care crisis

About half of the bronze plans sold in six major cities on the health exchanges require beneficiaries to pay their full deductible before any insurance coverage kicks in. In Dallas, 64 percent of bronze plans require policyholders to meet the full deductible, an average of $5,400 in those plans, before they will cover a doctor’s visit or other, non-preventive, care

The ACA intended to ban insurers from excluding patients based on pre-existing conditions. Insurers have responded to the ban by restricting patient choice of doctor to a small pool of doctors and by limiting or excluding coverage of expensive medications needed to treat HIV and other illnesses. While the online marketplace is supposed to facilitate choice of plan by allowing consumers to comparison shop, many plans don’t disclose the medications on their formulary or doctors in their networks until patients formally apply for coverage.

Since HHS ruled that churches and other nonprofit religious organizations don’t have to cover birth control in employees’ health plans, over two dozen courts have ruled that private businesses also have the right to refuse to provide contraceptives. The ACA requires plans to cover preventive care, including contraception, without cost-sharing, including FDA-approved birth control such as levonorgestrel (Plan B emergency contraceptive). Several courts have granted businesses (e.g. Hobby Lobby) injunctions against any fines until the Supreme Court rules on the matter (Julie Appleby, Kaiser Health News, 12/23/13; Pittman, MedPage Today, 12/29/12).

Delays, changes, and rulings affecting the ACA

Although the Republicans tried to repeal Obamacare for three years, and blocked the ACA’s Medicaid expansion in 26 states after a June 2012 Supreme Court ruling effectively made the expansion optional, many changes to the law have come from the Obama administration as it grapples with the difficulty of implementing such a complex plan. Ten of the most significant changes made by the White House:

1. Delayed the large-employer mandate by one year to give businesses more time to comply with the bill’s reporting requirements. Employers with more than 50 workers will have another year before they must provide coverage for employees working more than 30 hours per week. In the meantime, Target and other large employers have announced they will no longer cover part-time workers.

2. Allowed individual and small-group policies that don’t meet the ACA’s benefits standard to be retained for another year, pending insurer and state insurance commissioner approval, after technical problems made the HealthCare.gov website inoperable for many weeks after the Oct. 1 launch date.

3. Delayed launching online enrollment through the federal Small Business Health Options Program (SHOP) exchange for one year to avoid technical problems with the roll out like those that plagued HealthCare.gov.

4. Delayed the availability of a streamlined application for both Medicaid and subsidies for private coverage on the exchanges for one year due to the complexity of synching state and federal enrollment data and means testing.

5. Delayed implementation of the limit on out-of-pocket expenses for plans with a separate administrator for drug coverage for one year to give insurers more time to coordinate how they tally out-of-pocket costs. Many of these plans have a separate cap or no limit on out-of-pocket spending for drugs.

6. Eliminated the law’s voluntary long-term care insurance component, the CLASS Act, because it was inadequately financed.

7. Granted “quality bonuses” and a “payment adjustment” to Medicare Advantage (MA) plans in 2011 and 2012, respectively, effectively reversing the ACA’s cuts of overpayments to MA plans. The additional payments appeased the insurance industry, which ran a multimillion-dollar campaign mobilizing seniors to contact Congress to oppose the ACA’s “Medicare cuts.”

8. Delayed introduction of the Spanish-language version of HealthCare.gov because it was not ready to launch. CuidadoDeSalud.gov started enrollment over two months behind schedule, and continues to frustrate users with grammatical mistakes and links to forms in English.

9. Gave states permission to charge some Medicaid beneficiaries higher copayments and premiums, up to $1,500 for a family of three making $30,000, and allowed Arkansas, Indiana, and possibly other states to use their federal Medicaid money to purchase private coverage on the exchanges for the very poor to appease GOP governors and get more states to expand Medicaid coverage.

10. Ruled that churches and other nonprofit religious organizations may be exempted from the ACA’s mandate that businesses cover birth control in employees’ health plans in response to religious opposition to the ACA. The Supreme Court has accepted a case that will decide whether businesses may also choose not to provide these essential benefits.

Many state exchanges frustrate users

Some of the 14 state-based exchanges frustrated users even more than HealthCare.gov. Despite federal grants to Oregon, Maryland, and Vermont totaling nearly half a billion dollars, those states’ exchanges experienced some of the worst problems.

After two years and $160 million worth of work, Oregon’s exchange was unable to determine if people were eligible for federal subsidies or Medicaid, leaving 400 newly-hired state workers to process paper applications. Using the manual workaround, 20,000 people were enrolled in private insurance, and another 150,000 people were signed-up for the state’s Medicaid program by year’s end, at an additional administrative cost of several million dollars. As of mid-January, the site had not enrolled a single person (Gray, “Kitzhaber Hires Cover Oregon Examiner,” Lund Report, 1/10/14).

In Maryland, a “disastrous” $170 million website crashed on the first day and continues to have so many bugs that the state considered switching to the federal site, HealthCare.gov. Only about 20,000 people successfully signed up for private coverage in Maryland by the end of December (12 percent of the state’s goal by March 31), although 110,000 people enrolled in Medicaid (Johnson, “Maryland Senate committee to again question state official about exchange problems,” Washington Post, 1/15/14).

Users initially couldn’t get onto Vermont’s $168 million, federally-funded exchange, and when they did get on, they couldn’t sign up or pay for coverage. After fixes, the website still doesn’t give users on-line payment options, and has suffered two privacy breaches. About 20,000 people were finally able to enroll in private coverage through the exchange by year’s end; another 30,000 people signed up through their small business employer. Employers with 50 or fewer employees in Vermont are mandated to buy coverage through the exchange, but were allowed to bypass the website and sign up directly with an insurer as the December 24 deadline loomed. Although only two insurers participate in Vermont’s program, the annual cost of running the exchange is projected to be $18.4 million. The state is withholding $5.1 million in penalties – the maximum allowable – from the website contractor for missing deadlines (Freese, “2013 Health Care Recap,” Vtdigger.org, 12/29/13, Goodnough and Abelson, “Some State Insurance Exchanges Continue to Battle Technical Problems,” New York Times, 11/12/13).

POLLS

• A significant proportion of Americans have an unfavorable view of the ACA because it doesn’t go far enough to reform the U.S. health care system. 20 percent of Americans said they wanted Congress to expand the law in a CBS News poll in July. A CNN poll in September found that 11 percent opposed the law because it was not liberal enough, while a Kaiser poll earlier that month found that 7 percent of people who had an unfavorable view of the law said the law did not go far enough (Kipicki, “Closer Look at Polls Finds Views of Health Law a Bit Less Negative,” New York Times, 10/1/13).

INTERNATIONAL

• New Zealand celebrated the 75th anniversary of its National Health Service, with universal coverage, free care at the point of service, and a salaried physician workforce, on Sept. 14, 2013.

The Society of Family and Community Medicine in Spain is leading the opposition to a law prohibiting undocumented immigrants from obtaining medical care in public facilities unless they are under 18, pregnant, or it is an emergency. In May, a Senegalese immigrant died of TB after being refused treatment at a public hospital. Hundreds of doctors have signed a declaration opposing the law, and several of Spain’s 17 regions, which control the provision of health care, have refused to implement it (Cuzin, “Rebel Spanish doctors to keep treating illegal immigrants,” AFP, 8/7/12; Ghosh, “Undocumented African Immigrant In Spain Dies After Hospital Refuses Treatment,” International Business Times, 5/24/13).

• The next chief executive of the U.K.’s National Health Service, Simon Stevens, spent a decade as a top executive at the largest U.S. private insurance company, UnitedHealth. Stevens previously served as an advisor to Tony Blair, pushing market-based reform. With the NHS facing a £30 billion budget cut, he has announced he will take a 10 percent cut in pay on his 211,000 euro salary “in light of NHS spending pressures.” The real question is whether he will use the artificial “crisis” created by large budget cuts to push further privatization and fragmentation of the strained NHS (Toynbee, The Guardian, 10/24/13).