Comments on: The Massachusetts Model: Massive Spending On Nonbenefit Costs http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/ The Policy Journal of the Health Sphere Tue, 07 Feb 2012 22:23:43 +0000 hourly 1 By: Merton Bernstein http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/comment-page-1/#comment-25930 Merton Bernstein Mon, 08 Jun 2009 16:25:33 +0000 http://healthaffairs.org/blog/?p=1211#comment-25930 The blog authors comments on others’ comments: "As the dimensions imply, our observation that non-benefit health insurance costs run to hundreds of billions of dollars a year refers to the national health care expenditure total. That description derives, in part, from the 2008 McKinsey Quarterly article reporting that such costs run to about $300 billion, consisting mostly of inefficient bill processing. That huge amount results largely from the need of thousands of health care providers to prepare their bills based on their own innumerable price schedules that vary according with the plan involved and the subsequent need of insurers to match up the detailed bill entries with their numerous policies. The main thrust of our blog is that the additional need under the Massachusetts-type plan to ascertain individual eligibility for subsidies based on a sliding scale of income and the subsidies increases non-benefit costs enormously. That's the take-away message. Inasmuch as Medicare's total non-benefit costs run to about 3% of benefits, private plan non-benefit costs must run substantially above the 15% plus average cost of processing bills set out in the McKinsey article. “This is not time to be cowed by past failures. We cannot continue to waste hundreds of billions of dollars on a broken system." ________________________________________ The blog authors comments on others’ comments: “As the dimensions imply, our observation
that non-benefit health insurance costs run to hundreds of billions of
dollars a year refers to the national health care expenditure total.
That description derives, in part, from the 2008 McKinsey Quarterly
article reporting that such costs run to about $300 billion, consisting
mostly of inefficient bill processing. That huge amount results largely
from the need of thousands of health care providers to prepare their
bills based on their own innumerable price schedules that vary according
with the plan involved and the subsequent need of insurers to match up
the detailed bill entries with their numerous policies. The main thrust
of our blog is that the additional need under the Massachusetts-type
plan to ascertain individual eligibility for subsidies based on a
sliding scale of income and the subsidies increases non-benefit costs
enormously. That’s the take-away message. Inasmuch as Medicare’s total
non-benefit costs run to about 3% of benefits, private plan non-benefit
costs must run substantially above the 15% plus average cost of
processing bills set out in the McKinsey article.
“This is not time to be cowed by past failures. We cannot continue to
waste hundreds of billions of dollars on a broken system.”

________________________________________

]]> By: Claudia Chaufan http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/comment-page-1/#comment-25903 Claudia Chaufan Sat, 06 Jun 2009 05:11:32 +0000 http://healthaffairs.org/blog/?p=1211#comment-25903 Roger Collier (and others) writes that "aside from ignoring the total political infeasibility of Medicare-for-all, the authors seem unaware of Medicare’s lack of controls over utilization, its encouragement of ever-increasing provider expenditures on resources, its dependence on cost-shifts to private payers for financial viability, and the growing number of physicians withdrawing from the program". Mr. Collier correctly characterizes some of the problems of Medicare, but confuses the symptom with the disease. Lack of controls over utilization is not a problem of financing, but of delivery, that both private and publicly financed insurance can have and that can, and should, be addressed through several ways, e.g., aligning payment with quality and getting rid of perverse incentives that our system generally has (much more in the for profit private sector). As to Medicare depending on shifting costs to private insurers for financial viability it is actually quite the opposite. Thanks to Medicare, which picks up the bill of the most costly patients, private insurers have been able to survive and thrive way beyond their shelf life, dumping on all of us, taxpayers, the burden of spiriling healthcare costs, including, yet not limited to, administrate waste and ridiculously high prices (I recommend "it;'s the prices, stupid!", by Anderson and Reinhardt). . As to doctors withdrawing, to my knowledge they are withdrawing from medicine generally because many can no longer stand dealing with multiple insurers, being forced to be business savvy, etc. not what most of us signed up for when we chose medical school in the first place. As to political feasibility, to my knowledge what makes any policy politically feasible has never been what politicians are willing to do, but rather the cost on them of not following the popular will. Of course this is true in a democracy, which I believe we have, however imperfect. But even Otto Von Bismark, First Chancellor of the German Empire, and witness of the socialist revolutions that spanned Europe in the mid19th century, realized that you cannot push ordinary folks too hard. He wrote "the social insecurity of the worker is what makes them a peril to the state". So he created the first collective, non profit insurance system, the precursor of the current German health care system. We fail to learn from others at our peril. Thanks professors Bernstein and Altman for your timely analysis. Roger Collier (and others) writes that “aside from ignoring the total political infeasibility of Medicare-for-all, the authors seem unaware of Medicare’s lack of controls over utilization, its encouragement of ever-increasing provider expenditures on resources, its dependence on cost-shifts to private payers for financial viability, and the growing number of physicians withdrawing from the program”.

Mr. Collier correctly characterizes some of the problems of Medicare, but confuses the symptom with the disease. Lack of controls over utilization is not a problem of financing, but of delivery, that both private and publicly financed insurance can have and that can, and should, be addressed through several ways, e.g., aligning payment with quality and getting rid of perverse incentives that our system generally has (much more in the for profit private sector).

As to Medicare depending on shifting costs to private insurers for financial viability it is actually quite the opposite. Thanks to Medicare, which picks up the bill of the most costly patients, private insurers have been able to survive and thrive way beyond their shelf life, dumping on all of us, taxpayers, the burden of spiriling healthcare costs, including, yet not limited to, administrate waste and ridiculously high prices (I recommend “it;’s the prices, stupid!”, by Anderson and Reinhardt). .

As to doctors withdrawing, to my knowledge they are withdrawing from medicine generally because many can no longer stand dealing with multiple insurers, being forced to be business savvy, etc. not what most of us signed up for when we chose medical school in the first place.

As to political feasibility, to my knowledge what makes any policy politically feasible has never been what politicians are willing to do, but rather the cost on them of not following the popular will.

Of course this is true in a democracy, which I believe we have, however imperfect. But even Otto Von Bismark, First Chancellor of the German Empire, and witness of the socialist revolutions that spanned Europe in the mid19th century, realized that you cannot push ordinary folks too hard. He wrote “the social insecurity of the worker is what makes them a peril to the state”. So he created the first collective, non profit insurance system, the precursor of the current German health care system.

We fail to learn from others at our peril.

Thanks professors Bernstein and Altman for your timely analysis.

]]> By: AnnEMalone http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/comment-page-1/#comment-25884 AnnEMalone Fri, 05 Jun 2009 15:59:36 +0000 http://healthaffairs.org/blog/?p=1211#comment-25884 As many in Massachusetts know, I am a long time health reform advocate and a nurse who is a very vocal critic of the Massachusetts Model. I view our "landmark law" largely as a sham of grand proportion. This is because it does not reform our health care system. What the law does is as described by the authors of this HA blog entry (but I do question if their figures of "hundreds of billions in nonbenefit dollars" is meant to read "millions"?) and these things do not constitute health system reform. It is true that some of the so-called "Commonwealth Choice" plans (saavy marketing isn't it, what they named some of the insurance products that residents are forced under the law to purchase?) do indeed have very high deductibles and co-pays of $2K for individual, $4K for couple or family. In the interest of relevant disclosure, Brian Rosman who is a stalwart defender of the law, works for an organization that receives significant funding from the private insurance industry in Massachusetts. The misleading spin put on the MA insurance law by its architects (largely the insurance industry and the politicians who choose not to challenge the abuses of that industry) has been appalling, to say the least. Contrary to being meaningful reform of the system, the MA insurance law simply mandates purchase of private health insurance for all state residents except those who are granted permission from the state to remain uninsured. Yes, it does create MInimum Creditible Coverage (MCC) benefits--but not for "youth" who get serious illnesses, too. MCC makes sense, but in the absence of enacting serious cost controls it is not reform. The law relies on massive amounts of new public dollars to subsidize purchase of private insurance policies for many. This has led to many other worthy public programs being starved for funds--public health, education, and on and on. These are the reasons why countless others in the state and across the nation who know the law's details and who are not on the dole of the insurance industry also have concluded that the MA Plan is a give-a-way to the private health insurance industry in the state. Mr Rosman's comment here references "An independent review found the charge of uncontrolled costs to be a “myth.”" but what he does not state is that the "independnet review" was crafted by a group, the Mass. Taxpayer's Foundation, that has Blue Cross and Blue Shield on it's board of trustees; this begs the question: What are the funding sources for the group conducting this so-called "independent review" ? Due to being a health professional and health reform advocate in Massachusetts, I have had the benefit (or the curse, many might say) of following the law's creation closely over years of careful groundwork that was laid out by MA Blue Cross and Blue Shield Corporation and their joined-at the-hip partner, the BCBS of MA Foundation. Brian Rosman's organization and just about every other "advocacy" group in the state has come to rely on a stream of regular funding from Blue Cross and Blue Shield, this being one part of the careful groundwork that paved the way for a law establishing mandatory purchase of private health insurance with no cost controls. Thankfully, people are smartening up and paying attention to the details as our national reform process moves forward; there's a groundswell opinion among both the general public and health policy experts that an improved Medicare Part E (for Everyone) for all who want it is what will provide America the health system reform we so urgently need. As many in Massachusetts know, I am a long time health reform advocate and a nurse who is a very vocal critic of the Massachusetts Model. I view our “landmark law” largely as a sham of grand proportion. This is because it does not reform our health care system. What the law does is as described by the authors of this HA blog entry (but I do question if their figures of “hundreds of billions in nonbenefit dollars” is meant to read “millions”?) and these things do not constitute health system reform. It is true that some of the so-called “Commonwealth Choice” plans (saavy marketing isn’t it, what they named some of the insurance products that residents are forced under the law to purchase?) do indeed have very high deductibles and co-pays of $2K for individual, $4K for couple or family. In the interest of relevant disclosure, Brian Rosman who is a stalwart defender of the law, works for an organization that receives significant funding from the private insurance industry in Massachusetts.

The misleading spin put on the MA insurance law by its architects (largely the insurance industry and the politicians who choose not to challenge the abuses of that industry) has been appalling, to say the least. Contrary to being meaningful reform of the system, the MA insurance law simply mandates purchase of private health insurance for all state residents except those who are granted permission from the state to remain uninsured. Yes, it does create MInimum Creditible Coverage (MCC) benefits–but not for “youth” who get serious illnesses, too. MCC makes sense, but in the absence of enacting serious cost controls it is not reform.

The law relies on massive amounts of new public dollars to subsidize purchase of private insurance policies for many. This has led to many other worthy public programs being starved for funds–public health, education, and on and on. These are the reasons why countless others in the state and across the nation who know the law’s details and who are not on the dole of the insurance industry also have concluded that the MA Plan is a give-a-way to the private health insurance industry in the state. Mr Rosman’s comment here references “An independent review found the charge of uncontrolled costs to be a “myth.”” but what he does not state is that the “independnet review” was crafted by a group, the Mass. Taxpayer’s Foundation, that has Blue Cross and Blue Shield on it’s board of trustees; this begs the question: What are the funding sources for the group conducting this so-called “independent review” ?

Due to being a health professional and health reform advocate in Massachusetts, I have had the benefit (or the curse, many might say) of following the law’s creation closely over years of careful groundwork that was laid out by MA Blue Cross and Blue Shield Corporation and their joined-at the-hip partner, the BCBS of MA Foundation. Brian Rosman’s organization and just about every other “advocacy” group in the state has come to rely on a stream of regular funding from Blue Cross and Blue Shield, this being one part of the careful groundwork that paved the way for a law establishing mandatory purchase of private health insurance with no cost controls.

Thankfully, people are smartening up and paying attention to the details as our national reform process moves forward; there’s a groundswell opinion among both the general public and health policy experts that an improved Medicare Part E (for Everyone) for all who want it is what will provide America the health system reform we so urgently need.

]]> By: RogerCollier http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/comment-page-1/#comment-25847 RogerCollier Thu, 04 Jun 2009 16:55:57 +0000 http://healthaffairs.org/blog/?p=1211#comment-25847 Aside from ignoring the total political infeasibility of Medicare-for-all, the authors seem unaware of Medicare's lack of controls over utilization, its encouragement of ever-increasing provider expenditures on resources, its dependence on cost-shifts to private payers for financial viability, and the growing number of physicians withdrawing from the program. There's lots wrong with the Massachusetts structure as a model for reform, but Medicare isn't the solution. Aside from ignoring the total political infeasibility of Medicare-for-all, the authors seem unaware of Medicare’s lack of controls over utilization, its encouragement of ever-increasing provider expenditures on resources, its dependence on cost-shifts to private payers for financial viability, and the growing number of physicians withdrawing from the program.
There’s lots wrong with the Massachusetts structure as a model for reform, but Medicare isn’t the solution.

]]> By: Brian Rosman http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/comment-page-1/#comment-25809 Brian Rosman Wed, 03 Jun 2009 16:05:58 +0000 http://healthaffairs.org/blog/?p=1211#comment-25809 Bernstein and Altman make a number of factual errors in their review of health reform in Massachusetts. Commonwealth Care, subsidized coverage for low-income adults, has no deductibles. Affordability exemptions from the individual mandate are available automatically through the tax system, without requiring any convincing of the Connector. The assertion that the reform plan "increases nonbenefit costs by the tens of billions" is just nonsense. Real spending for all health care by all payers grew by about $1.9 billion from 2005 to 2007, as coverage increased by over 400,000 people. Massachusetts has the lowest uninsurance rate - 2.6% - of any state. Massachusetts is the only state where employer-provided coverage is increasing, Massachusetts is the only state to limit deductibles and require preventive care be provided before any deductible. An independent review found the charge of uncontrolled costs to be a "myth." Massachusetts is still a work in progress, and there is still much to be done. State leaders are pursuing comprehensive payment reform, medical home initiatives and many other improvements. But national leaders can learn much from the successes so far. Bernstein and Altman make a number of factual errors in their review of health reform in Massachusetts. Commonwealth Care, subsidized coverage for low-income adults, has no deductibles. Affordability exemptions from the individual mandate are available automatically through the tax system, without requiring any convincing of the Connector.

The assertion that the reform plan “increases nonbenefit costs by the tens of billions” is just nonsense. Real spending for all health care by all payers grew by about $1.9 billion from 2005 to 2007, as coverage increased by over 400,000 people. Massachusetts has the lowest uninsurance rate – 2.6% – of any state. Massachusetts is the only state where employer-provided coverage is increasing, Massachusetts is the only state to limit deductibles and require preventive care be provided before any deductible. An independent review found the charge of uncontrolled costs to be a “myth.”

Massachusetts is still a work in progress, and there is still much to be done. State leaders are pursuing comprehensive payment reform, medical home initiatives and many other improvements. But national leaders can learn much from the successes so far.

]]> By: The Massachusetts Model: Massive Spending On Nonbenefit Costs | HEALTHY LIFE GUIDE http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/comment-page-1/#comment-25797 The Massachusetts Model: Massive Spending On Nonbenefit Costs | HEALTHY LIFE GUIDE Wed, 03 Jun 2009 04:58:52 +0000 http://healthaffairs.org/blog/?p=1211#comment-25797 [...] here:  The Massachusetts Model: Massive Spending On Nonbenefit Costs Share and [...] [...] here:  The Massachusetts Model: Massive Spending On Nonbenefit Costs Share and [...]

]]> By: John Ballard http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/comment-page-1/#comment-25783 John Ballard Wed, 03 Jun 2009 00:49:41 +0000 http://healthaffairs.org/blog/?p=1211#comment-25783 I like the idea of Medicare for all but don't think it's politically feasible this time around. The next step in the national learning curve will have to be MA writ large. Maybe then, finally, our elected representatives will start to do the arithmetic and see how much of the revenue stream is being used for insurance company share-holders, highly-paid sales people, advertising and executive bonuses. It has taken the catastrophe of the auto industry to castrate the unions which led them to the brink of total evaporation. Something of the sort will have to come to pass in health care to divest the system of private insurance. There is a proper place for insurance in the mix, but at the edge, not the core of the mission. Someone said that General Motors was a health care provider that also sold cars. Likewise, today we are looking at financial institutions in the form of insurance companies that offer stockholders a return on their investment, and also treat a few medical problems on the side. I like the idea of Medicare for all but don’t think it’s politically feasible this time around. The next step in the national learning curve will have to be MA writ large. Maybe then, finally, our elected representatives will start to do the arithmetic and see how much of the revenue stream is being used for insurance company share-holders, highly-paid sales people, advertising and executive bonuses.

It has taken the catastrophe of the auto industry to castrate the unions which led them to the brink of total evaporation. Something of the sort will have to come to pass in health care to divest the system of private insurance. There is a proper place for insurance in the mix, but at the edge, not the core of the mission.

Someone said that General Motors was a health care provider that also sold cars. Likewise, today we are looking at financial institutions in the form of insurance companies that offer stockholders a return on their investment, and also treat a few medical problems on the side.

]]> By: Jack Shoemaker http://healthaffairs.org/blog/2009/06/02/the-massachusetts-model-massive-spending-on-nonbenefit-costs/comment-page-1/#comment-25776 Jack Shoemaker Tue, 02 Jun 2009 19:25:24 +0000 http://healthaffairs.org/blog/?p=1211#comment-25776 Thanks for the thoughtful and fact-based analysis of how much we waste just administrating health-care payments under our current systems. (One fact caught my eye. Your write, "These procedures consume hundreds of billions of nonbenefit dollars a year." in your fourth paragraph. I don't have the data, but a figure of "hundreds of billions" for a Massachusetts strikes me as hyperbolic.) Notwithstanding, after you enumerate all the ills associated with government-directed health-care payment, you draw the conclusion that making the program even bigger - Medicare for All - is the answer. I'm not convinced. Sure, by making "everyone" categorically eligible, you should see a reduction in the costs associated with establishing eligibility. But, the problem won't go copmpletely away. What about non-citizens and other fringes of society? More to the point, what makes you think that CMS can handle an even bigger workload than today? It would be a supreme irony if M4A wins the day only to have CMS expand the reach of existing MA programs run by the same insurers you blame for too-high commissions and Wall-Street level executive compensation. Thanks for the thoughtful and fact-based analysis of how much we waste just administrating health-care payments under our current systems. (One fact caught my eye. Your write, “These procedures consume hundreds of billions of nonbenefit dollars a year.” in your fourth paragraph. I don’t have the data, but a figure of “hundreds of billions” for a Massachusetts strikes me as hyperbolic.) Notwithstanding, after you enumerate all the ills associated with government-directed health-care payment, you draw the conclusion that making the program even bigger – Medicare for All – is the answer. I’m not convinced. Sure, by making “everyone” categorically eligible, you should see a reduction in the costs associated with establishing eligibility. But, the problem won’t go copmpletely away. What about non-citizens and other fringes of society? More to the point, what makes you think that CMS can handle an even bigger workload than today? It would be a supreme irony if M4A wins the day only to have CMS expand the reach of existing MA programs run by the same insurers you blame for too-high commissions and Wall-Street level executive compensation.

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