Health Affairs

Editor’s note: Kathryn Gilbert, a J.D. candidate at the University of Michigan Law School, is a coauthor of this post, in addition to Jill Horwitz and Helen Levy (photos and linked bios above).

The case that will decide the fate of the most important piece of health care legislation in the past fifty years has, perhaps unsurprisingly, broken a number of records.  The Supreme Court allowed six hours of oral argument in the case, the longest since 1967.  Friends of the court also filed a record 152 briefs.  Of these, the two that garnered the most interest from the Justices were drafted by economists, not lawyers.  These briefs, particularly the one favoring the respondents (sponsored by the American Action Forum, the “AAF”), figured prominently in the oral arguments and are likely to show up in the opinion.  But we hope that the Justices won’t repeat the economic and policy misunderstandings, discussed below, that pervade the economists’ brief for the respondents and were reflected in the arguments.

Here we focus on two key misunderstandings from the AAF brief, each repeatedly raised by the conservative Justices.  The first has to do with the uniqueness of health care markets, and the second has to do with the idea that it is unfair to require young adults to buy health insurance that is not a “good deal” for them. Read the rest of this entry »

As Integrated Delivery Networks (IDNs) assess the financial implications of accountable care, six key variables deserve special attention. These variables are unique because they will shape both the accuracy of future financial projections and begin to set the broader strategy for the ACO.

Variable 1: The Halo Effect. As IDNs shift utilization patterns of their covered lives, experience has shown that these efforts tend to spill over and affect non-ACO enrollees as well. This “halo effect” is especially likely among patients within the same payor class (e.g. a Medicare ACO will likely affect utilization of all Medicare beneficiaries). The issue is that reduced utilization or less intense services benefits the ACO in the form of shared savings. However, reduced utilization among non-participants just lowers revenues. Read the rest of this entry »

At the heart of the Affordable Care Act (ACA) health care reforms are the premium tax credits, which will extend health insurance coverage to 18 million lower and middle-income Americans.  The idea of using tax credits to purchase private health insurance for the uninsured is one of a number of the historically conservative policy positions adopted by the ACA.  Both the Paul Ryan Roadmap and a recent proposal by James Capretta and Robert Moffit on How to Replace Obamacare also support premium tax credits to make health insurance accessible to Americans.

To create tax credits that are sufficiently substantial to in fact make health insurance affordable to lower-income Americans, without creating a program so costly that it is unaffordable to the country, tax credits must be means-tested and must be structured so as not to crowd out employment-based insurance.  This turns out, not surprisingly, to be very complicated.

On May 18, 2012, the Department of the Treasury published final rules implementing the premium tax credit provisions of the ACA.  These rules finalize rules proposed by Treasury on August 12, 2011, which I blogged about at that time.  The final regulations leave most of the proposed regulation intact, but do make a few important changes.  They also leave many questions unanswered. Read the rest of this entry »

On May 9th, William Nickerson, Senior Judge in the Southern Maryland Federal District Court, issued a 15 page ruling against the six Augusta, GA primary care physician plaintiffs who challenged HHS’ and CMS’ longstanding relationship with the American Medical Association’s Relative Value Scale Update Committee (RUC). The opinion did not weigh the substance of the case, but instead focused on a procedural provision in which Congress bars the judicial system from considering how the relative value units (RVUs) of medical services are determined. Judge Nickerson wrote:

Accepting as true that RUC plays a major role in the formation of the PFS [Physician Fee Schedule] and also accepting as true that this role unfairly skews the PFS toward certain medical professions and procedures, the Court, nonetheless, finds that Congress has precluded courts from reviewing, not only the final relative values and RVUs, but also the method by which those values and units are generated. Read the rest of this entry »

On May 16, 2012, the Department of Health and Human Services moved three steps closer to the implementation of the Affordable Care Act’s health insurance exchanges, which will happen on January 1, 2014.  First, HHS announced the award of 5 new level 1 exchange establishment grants (Illinois, Nevada, Oregon, South Dakota, and Tennessee) and one new level 2 exchange establishment grant (Washington state), totaling $188 million and bringing to 34 the total number of states (plus the District of Columbia) that have received exchange establishment grants.

Second, HHS released a guidance describing in greater detail how the federally facilitated exchange (FFE) will function.  The issuance of this guidance highlights the fact that there will be an operating exchange in every state in 2014, whether it is operated by the federal or by the state government.

Third, HHS issued a Draft Blueprint for Approval of Affordable State-Based and State Partnership Insurance Exchanges, setting out what states will need to do that seek to operate their own exchange or to operate an exchange in partnership with the federal government.  States have until November 16, 2012 to notify HHS whether they want a state exchange, a partnership exchange, or a federally facilitated exchange. Read the rest of this entry »

On April 29, 2012, four days after his 74^th birthday, Larry Lewin (pictured below) died from complications of an underlying cancer. The funeral was May 1 and his wife, Marion asked me to speak briefly about his professional life. What follows is adapted from those remarks. It will be obvious that anyone who knew Larry will be able to expand these remarks and add to the list of accomplishments that I have chosen to illustrate my points.
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Photo of Larry Lewin by Dennis Kan (click photo to enlarge)

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Editor’s note: For more on the adoption of electronic health systems, see these recent Health Affairs articles by Decker and coauthors, DesRoches and coauthors, and Hsiao and coauthors, which were discussed at an April 25 event.

Since the American Recovery and Reinvestment Act passed in 2009, healthcare professionals, researchers, analysts and policy makers have been paying close attention to the up to $30 billion in incentives (EHR Incentive Program) for the adoption and meaningful use of certified electronic health records (EHR) technology. Much consideration — by thought leaders in the public and private sectors — was put into developing the objectives, measures and proposed stages that comprise the Meaningful Use requirements that eligible providers must meet in order to qualify for the incentives.

Following the passage of the stimulus bill and news of the EHR Incentive Program, however, there were plenty of skeptics (and many reasons to be skeptical) of whether up to $44,000 – $63,750 per provider would be enough to overcome the many different types of barriers that contributed to low adoption of EHRs through the late 2000s. In addition to questions of whether the market would respond, the EHR Incentive Program itself faced many immediate challenges to get the program up and running. These included: establishing, vetting, and publishing Stage 1 meaningful use objectives and measures  (and the corresponding certification and implementation criteria) by July, 2010; identifying and working with certification bodies to ensure that EHR vendors had access to and time available for going through the certification process; and developing a reporting infrastructure.  There were many more challenges, all on an extraordinarily tight timeline. Read the rest of this entry »

Background:  The Centers for Medicare and Medicaid Services’ designation of 32 accountable care organizations (ACOs) across the U.S. to enroll Medicare fee-for-service patients beginning in 2012 makes ACOs an important feature of the national healthcare landscape–at least for publicly insured patients.However in 2007, Blue Shield of California, along with provider and employer partner organizations, began exploring development of one of the first ACO-like programs in the country to serve commercial patients. Two years in the planning, the program was successfully launched in 2010 and has been delivering savings to consumers.

Located in the competitive Sacramento market of northern California, the program has been receiving national attention as an example of an innovative shared savings model involving a large insurer—Blue Shield of California; a purchaser—the California Public Employees Retirement System (CalPERS); a physician group—Hill Physicians Medical Group; and a hospital system—Dignity Health (formerly Catholic Healthcare West). The population served by the virtually integrated health organization includes approximately 42,000 CalPERS employees and their families covered by Blue Shield.

In this Health Affairs Blog interview, senior management and architects from the partner organizations of this ground-breaking commercial ACO-like project discuss the affordability crisis that precipitated a new price-based premium setting strategy and an unprecedented commitment to CalPERS for a zero percent 2010 premium increase for pilot participants. To achieve a $15 million savings target, the project’s three-way global budget honored existing hospital and medical group payment mechanisms and contracts while incentivizing the partners to aggressively drive out costs. The health plan and providers assumed any down-side risk; they also had the upside potential to share excess savings commensurate with the premium share and cost levers each controlled. Read the rest of this entry »

In a recent Health Affairs paper, we documented that the United States has a significant survival advantage over much of Europe when it comes to cancer: 1.8 years for those diagnosed during our study window.  Furthermore, we showed over a 17-year period that this gap had widened, not narrowed, and that this widening was more valuable than traditional health valuation approaches suggest.  As a result, we argued that the additional spending in the United States was ‘worth it.’

These results have generated a lot of controversy, and even some criticism.  We understand the controversy given the impression that US health care spending is too high. However, we find the criticism both irrelevant and misguided, both qualitatively and quantitatively.

First, some critics have argued that we should have looked at mortality rather than survival.  That is, we should have measured how many people have died from cancer, rather than how long people who are diagnosed with the disease live with it.  There is an important distinction, as we note later.  Some have argued that survival estimates suffer from a “lead-time” bias because the United States was differentially diagnosing cancer earlier. Read the rest of this entry »

The two most significant—and controversial–Affordable Care Act (ACA) insurance reforms of 2012 are the minimum medical loss ratio (MLR) rebate and the summary of benefits and coverage (SBC) requirement.  On Friday, May 11, 2012, further regulatory guidance was released on both of these initiatives.

Tidying Up The MLR Rules

The minimum medical loss ratio requirement provides that, beginning with 2011, health insurers must spend a minimum percentage (80 percent in the individual and small group market and 85 percent in the large group market) of their adjusted premium revenues on health care claims and quality improvement expenses.  Insurers that fail to achieve this target must pay a rebate to their enrollees (individuals for nongroup plans and employers for group plans) based on the extent to which the insurer’s actual MLR falls short of the statutory minimum MLR.  These rebates will first be paid in the summer of 2012.

The MLR requirement (also referred to as the 80/20 rule) has, despite its wonkish nature, emerged as a potentially important reform politically.  Indeed, in a May 11 post on Time Magazine’s “The Page” blog,  Mark Halpern described it as a potential “game changer” in the attitude of American’s toward the ACA.  By August 1 of 2012, an estimated 16 million Americans or their employers will receive about $1.3 billion in rebates (most of which will be applied toward premium reductions rather than actually being paid out in checks).  More importantly, as HHS Secretary Sebelius noted in a blog post, also dated May 11, insurers are reducing premiums prospectively to avoid paying rebates, resulting in savings for health insurance consumers. Read the rest of this entry »