Those lawmakers wouldn’t describe their plan that way, of course, but that would be the effect of their proposal to require drug companies to pay Medicaid-style rebates to Medicare.

Pharmaceutical companies already are required to pay rebates to states for the right to sell their products to Medicaid patients. A proposal by Rep. Henry Waxman, D-Calif., and Sen. Jay Rockefeller, D-W.V., would require drug companies to pay a rebate to the federal government for prescription drugs sold through Medicare Part D for those low-income seniors who also qualify for Medicaid or who are eligible for subsidies. This proposal, which is now in play as part of the negotiations to increase the government’s debt ceiling, would collect up to $112 billion over the next 10 years.

Supporters of the rebate proposal say the money would come from the pharmaceutical companies, but the logic is flawed. Experience with the Medicaid rebate programs already has been shown to increase costs for prescription drugs sold in the private sector. And ultimately, the rebate costs are shifted to consumers.

If the new Medicare rebate tax were imposed, more than 17 million seniors who don’t qualify for low-income subsidies would face drug benefit premiums that would be 20 to 40 percent higher than they are paying now, and they would face an average of $200 a year in higher out-of-pocket costs.

These are the findings of a study conducted by Douglas Holtz-Eakin, former director of the Congressional Budget Office who is now president of the American Action Forum, and his associate, Michael Ramlet, the forum’s director of healthcare policy.

Holtz-Eakin and Ramlet studied government data to determine the impact that the rebate plan would have on prescription drug costs. While lower income seniors are protected by government subsidies from paying higher premium costs, they find that millions of other seniors would be forced to pay higher premiums for their drug coverage as a result of the rebate tax.

“This proposal would be a bad deal for Medicare and a raw deal for millions of seniors,” Holtz-Eakin said. “This is a price-fixing scheme that will take money out of the pockets of senior citizens and greatly reduce customer choice.”

The proposed rebate tax also would undermine the most successful health program the government operates — the Medicare prescription drug program.

The prescription drug program, which began in 2006, requires private companies to compete on benefit design and price in offering drug coverage to seniors.

The program is popular because it gives seniors a wide range of choices of prescription drug plans, with different cost points and drug offerings. And it is has the remarkable distinction of costing taxpayers much less than expected. The Medicare Part D program is coming in at 46 percent below projected costs, according to the CBO.

And Part D’s competitive model is saving seniors money as well. The average monthly beneficiary premium for Part D coverage will be $30 in 2011, far below the $53 forecast originally.

But the proposed rebate tax, which also has been endorsed by President Barack Obama, would undermine the gains that competition and consumer choice have brought to the Part D drug benefit program by forcing higher costs on seniors.

“The Medicare prescription drug benefit is one of the only bright spots on the entitlement landscape, costing less than projected and delivering real value for seniors. The last thing the president and Congress should do is turn it into a Medicaid-style program,” Ramlet said.

The rebate plan is not a way to cut government spending but is simply a ploy to shift higher costs to seniors. Congress should look elsewhere for real savings rather than resorting to gimmicks that will trick seniors into paying the bill.

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization that focuses on market-based health policy solutions. She is a co-author of Why ObamaCare Is Wrong for America (Broadside/HarperColllins, 2011).

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States are facing severe budget pressures. The 2009 stimulus package provided short-term cash to the states to shore up Medicaid — the jointly funded federal-state health program for lower-income people. But in exchange, states had to agree to maintain their 2010 Medicaid eligibility levels or risk losing all federal matching funds.

In January, 33 governors and governors-elect to President Barack Obama and congressional leaders requesting “flexibility and relief” from the “excessive constraints placed on us by healthcare-related federal mandates.” States say they need to trim their Medicaid rolls now because they already are swimming in red ink and this circumstance will only get worse — partly because stimulus funding that initially helped many of them pay for the added enrollment ends in June. And, while Health and Human Services Secretary Kathleen Sebelius has responded by sending her agency’s Medicaid experts to the states to help them explore options to trim Medicaid spending, she is still urging states to do everything they can to keep Medicaid enrollment at current levels before the health law’s changes take effect in 2014.

These pleas for flexibility are bipartisan. For example, Democratic Gov. Jerry Brown of California is asking for permission to cut $1.7 billion from his state’s Medicaid program by limiting most recipients to no more than 10 physician visits a year. Arizona’s Republican Gov. Jan Brewer tightening eligibility so the state could cut 280,000 people from its Medicaid rolls. Sebelius her that Arizona didn’t need to ask permission but could reduce its rolls by allowing an existing waiver to expire in September. But few other states have similar options.

Specifically, the new health overhaul law will require states to expand coverage by 2014 to all citizens under 133 percent  of poverty — about $30,000 a year for a family of four. Recent estimates show that this will mean adding an additional 20 million people to the rolls by 2019. Under the new law, the program will grow to 84 million enrollees and will cost nearly $900 billion by 2019. This increasing enrollment will be accompanied by growing cost burdens on the states.

Still, some see these expansions as steps that could transform the program into a means for working people and families to have access to health coverage.

A Kaiser Family Foundation issue paper, for instance, perspectives on “strengthening Medicaid’s reach” as a result of the health overhaul law. But these ideas could also backfire if, as Kaiser points out, “Medicaid enrollees cannot find doctors, dentists, specialists, or other providers to see them.”

This scenario is already happening in some areas.

And, because Medicaid is an important safety net for many people who have no other options for health coverage, adding millions more recipients to the program without increasing the system’s capacity will make it even more difficult for those currently on Medicaid to get the care they need.

Medicaid is arguably the worst health care program in the country. Recipients are promised a long list of benefits, but doctors who participate in the program are paid so little, and the paperwork is so onerous, that many can afford to see only a few Medicaid patients.

As a result, patients flood to hospital emergency rooms where — if they wait long enough — they eventually will be seen. Many have only routine health complaints that easily could have been handled in a doctor’s office. A study by the National Center for Health Statistics found that Medicaid recipients were more likely to have multiple emergency room visits in a year than those with private insurance and the uninsured. Other studies have shown that Medicaid recipients are less likely to receive adequate care, and they are more likely to have worse outcomes than those with private insurance. They have also been shown to experience higher rates of hospital mortality than even the uninsured.

The program also is rife with fraud. New York State, where almost one in four residents is on Medicaid or its daughter program, the Children’s Health Insurance Program, has tried to tackle wasteful spending. A 2005 investigation found that as much as 10 percent of the state’s spending on Medicaid was lost to fraud and abuse.

You would have thought that reforming this program would have been Job One with the Congress and President Obama when they drew up their health reform plans. But Medicaid is as bureaucratic and rule-driven as ever. And this is the program that the president relies on to expand coverage to more than half of the newly insured.

Washington clearly is intent on expanding the program to enroll millions more people in this government-run health program while the states plead for more flexibility and relief from Washington.

The governors hold the power cards for health reform over the next two years, and they will continue to demand more flexibility to run the programs themselves. In this tug of war, I’m betting on the governors.

Grace-Marie Turner is president of the Galen Institute and served in 2005-06 on the federal Medicaid Commission to develop recommendations for reform. She’s a co-author of the forthcoming book “Why ObamaCare is Wrong for America” (HarperCollins).

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Massachusetts and the federal government built their reform efforts using similar architectural plans – strict regulation of health insurance, mandates on individuals and businesses, expensive new taxpayer-funded subsidies and a major expansion of Medicaid – and both share a central structural flaw in failing to address rising health costs.

Former Massachusetts Governor Mitt Romney sold his plan in 2006 with the that, “Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced.”

It hasn’t turned out that way.  On average, health insurance now costs for a family of four in the state, compared to $13,027 nationally — nearly 12 percent more. 

In fact, John Cogan of Stanford University and colleagues that since the state’s reform initiative passed, premiums for private employer-sponsored health insurance in Massachusetts increased by an additional six percent in aggregate compared to the nation as a whole.  It’s even worse for smaller firms:  Their health insurance costs grew 14 percent more than in the country as a whole from 2006 to 2008.

Health insurers in Massachusetts are the messengers reflecting higher costs from providers, including the state’s powerful hospitals, and increased utilization of health care services.  The insurance companies are battling with the government to allow them to increase their rates by seven to 34 percent because they say they are losing tens of millions of dollars. 

Gov. Deval Patrick ordered his insurance commissioner to reject the rate increases.   The governor lost the first round when an insurance appeals board overturned his cap on insurance premiums, but the very public battle continues between politicians and health insurance companies over costs.

Other factors are pushing up the cost of insurance:  Reformers promised that covering everyone would eliminate the problem of uninsured people going to the emergency room for routine care and “free-riding” on paying customers.  But the number of people visiting emergency rooms has increased, not decreased, ²õ³ó´Ç·É.Ìý

One reason: More people may have health insurance but they can’t find a doctor to see them. Last year only 44 percent of internal medicine practices were accepting new patients, down from 66 percent in 2005, to the Massachusetts Division of Health Care Finance and Policy.

But the distortions don’t end there:  Some residents are gaming the system in ways that for others.   The Massachusetts Division of Insurance reported in June that the number of people who are buying coverage for short periods more than quadrupled in the three years since passage of the state’s reform law. 

The incentives in Massachusetts invite this behavior:  Insurance companies are required to sell policies to anyone who applies (“guaranteed issue”) at the same prices as other applicants who have maintained coverage (“community rating”).  This gives short-termers a free ride but drives up the cost of insurance for people who maintain continual coverage.

Blue Cross and Blue Shield of Massachusetts that more people are jumping in and out of coverage as they need medical services. The typical monthly premium for short-term members was $400, but their average claims exceeded $2,200 per month. Other insurers have witnessed a similar pattern. “These consumers come in and get their service, and then they leave because current regulations allow them to do it,” said Todd Bailey, vice president of underwriting at Fallon Community Health Plan, the state’s fourth-largest insurer.

Massachusetts says it has reduced the percentage of its citizens without health insurance to about three percent, but of the newly-insured receive coverage that is heavily or completely subsidized by taxpayers.  An infusion of federal Medicaid funds has allowed the state to increase eligibility for subsidized coverage to 300 percent of poverty, or more than $66,000 a year for a family of four.  Without that money, the state would have had to rely on significant new taxes to finance its coverage expansion.

Employer coverage has increased largely because employers do not want to break the law requiring them to provide coverage or pay a fine.  The percentage of firms with three or more employees offering health benefits has increased from 73 to 79 percent. 

But now, some small Massachusetts employers are dropping employer-sponsored insurance and are instead sending their workers into the taxpayer-funded health insurance pool. They say they have no choice because of the relentlessly rising costs of coverage. 

The Boston Globe that “Since April 1, the date many insurance contracts are renewed for small businesses, the owners of about 90 small companies terminated their insurance plans with Braintree-based broker Jeff Rich and indicated in a follow-up survey that they were relying on publicly-funded insurance for their employees.

This spells trouble for taxpayers.  With more than two-thirds of the newly-insured receiving taxpayer-supported coverage, it will put additional pressure on the already burgeoning state budget if more employers opt to pay the $295 fine and instead send their workers to taxpayer-subsidized coverage.

Massachusetts residents are no different than people in the rest of the country:  They respond to incentives.

Health reform in the Bay State has increased demand without increasing the supply of health care providers, it continues to keep people in the dark about the true cost of health care and health insurance, and has not changed incentives for people to seek more affordable options or for a truly competitive marketplace. Washington’s health overhaul law has the same structural flaws.

When President Obama told in an interview last week that his new health reform law “not only makes sure everybody has access to coverage but is reducing costs,” the quote was evocative of Romney’s promise.  Washington’s reform effort doesn’t even pretend to achieve universal coverage, and Massachusetts’ experience shows the near impossibility of containing costs in a system where incentives go in exactly the opposite direction.

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focused on patient-centered health reform.  She can be reached at

galen@galen.org
.

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Mercer’s latest National of Employer-Sponsored Health Plans found that major employers held total health benefit cost increases per employee to 5.5 percent in 2009 – the lowest increase in a decade (see chart below). Participation in consumer-directed health plans, as well as health management programs, has been growing over the last few years as companies sought ways to successfully engage employees as partners in managing costs and care.

Source: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1990-2009; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1990-2009.

Enrollment in consumer-directed plans grew to an estimated 23 million people in 2009, up from 18 million people in 2008-a 27% increase, according to an April by the American Association of Preferred Provider Organizations.

Among the most notable is the growing adoption of Health Savings Accounts. Ten million Americans now are covered by HSA-qualified health plans, up from eight million last year, according to the latest by America’s Health Insurance Plans. To open tax-free health savings accounts, people first must be enrolled in high-deductible health insurance plan.

Unfortunately, ObamaCare threatens to render these plans a thing of the past.  Until now, employers have had the flexibility to tailor benefit and cost structures to fit their budgets and corporate cultures, but the new health overhaul law will limit their options in the future.

Under the new law, the Department of Health and Human Services will make the ultimate ruling on HSAs when it decides how to calculate the actuarial value of the high-deductible health insurance policies that must accompany health savings accounts.  

The health law requires also that all insurance policies will be required to provide a minimum actuarial value of at least 60 percent for the benefits covered.  If HHS allows contributions by individuals and employers to health savings accounts to “count” as part of the actuarial value, then HSAs and other account-based plans would likely meet the test.  But if contributions are not included, the plans likely would not qualify, removing an important tool to hold health costs down.

HSAs couple a tax-favored savings account used to pay medical expenses with a high-deductible health plan that meets certain requirements for deductibles and out-of-pocket expense limits. Most cover preventive care services, such as routine medical exams, immunizations and well-baby visits, without requiring enrollees to first meet the deductible. The funds in the HSA are deposited tax free, interest earned is tax free, and the account is owned by the individual and may be rolled over from year to year.

The new AHIP study underscores the value of consumer-directed plans in achieving key goals of the health reform effort.  Here are some highlights of the AHIP survey of people enrolled in HSA-qualified health insurance:

• Lower premiums: Monthly premiums for individuals aged 30 to 54 averaged $2,465 a year ($205 a month) and $5,335 for a family ($445 a month) – less than half the average costs of traditional plans.
• Larger companies: The fastest growing market for HSA/HDHP products was large-group coverage, which rose by one-third, followed by small-group coverage, which grew by 22 percent. 
• PPOs preferred:  Overall, preferred provider organizations (PPOs) were the most popular insurance type, with 88 percent of enrollees. They generally have access to negotiated discount arrangements with health care professionals when paying bills from their HSA accounts.
• More consumer information: More than 90 percent of responding companies reported offering access to HSA account information, health education information, physician-specific information, and personal health records as consumer decision support tools for their members.
• Not just for the young: Fifty-two percent of all individual market enrollees — including dependents covered under family plans — were aged 40 or older so they clearly are not just for the young, as critics claim.

The tell the story of success:

Indiana Gov. Mitch Daniels, a Republican, says providing the HSA option to state employees will save the state at least $20 million this year, and employees will save $8 million compared to their coworkers in traditional health plans.  More than 70% of Indiana’s 30,000 state employees have selected the HSA option. 

Gov. Daniels says that employees become more active participants in their health care, making smarter and more cost-effective decisions – visiting hospital emergency rooms 67% less often and using generic drugs more than those in conventional plans, for example.  An independent survey by Mercer found no evidence that HSA members are deferring needed treatment or preventive care.

Many companies, such as Whole Foods, offer another form of CDHC plan called Health Reimbursement Arrangements. HRAs give employers more flexibility in shaping their health benefit packages, including the ability to offer account-based plans and provide incentives for prevention and wellness activities. But, unlike HSAs, HRA account balances generally are not portable after employees leave the company.

Both products are helping to make health insurance more affordable and are helping companies to lower health costs.

Competition works when consumers are engaged in getting better value for their health care dollars. Policymakers would be well-advised to make sure that these consumer-friendly plans remain as an option for both individuals and employers so they can continue to have these tools to engage employees as partners in managing health costs.

Grace-Marie Turner is president of the Galen Institute, , a non-profit research organization focusing on patient-centered health reform initiatives. She can be reached at gracemarie@galen.org.

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Fifteen federal government officials were appointed in March to launch the new federal initiative designed to provide doctors and patients with better information about treatments so they can compare options. The officials, who serve on the Federal Coordinating Council for Comparative Effectiveness Research (CER), have held three “listening sessions” to gather testimony from a broad range of citizens and experts on priorities for future investments in research.

The council will provide guidance on how to use $1.1 billion provided by the economic stimulus act. The effort is controversial in some quarters. While getting better information is needed to achieve better value, many people are concerned about granting the government new power over the medical treatments available to Americans.

Patients, especially those with rare diseases and multiple chronic illnesses, are worried that their unique needs may be disregarded in mega-studies. Doctors fear their clinical expertise will be replaced by formulas. Medical device and pharmaceutical companies are concerned that they may face another layer of government approval that would stifle innovation.

There are also concerns that comparative effectiveness research findings will be used to make spending as well as clinical decisions. House Appropriations Chairman David Obey touched off an uproar when he said that drugs and treatments “found to be less effective and in some cases, more expensive, will no longer be prescribed.”

The final legislative language said that the information won’t be used to direct “payment, coverage or treatment” decisions. But many believe that the chairman tipped his hand, and described the long-range goals of the effort.

Many people also are concerned that individuals’ unique medical needs might not be considered, hurting patients who do not respond well to standard care. Experts in Europe and Canada, where comparative effectiveness systems are established, warn that those who fall outside the mainstream have more difficulty receiving treatment.

Physicians are concerned that experience and knowledge could be replaced by centralized decision making, based on formulas. In the name of protecting their bottom lines, public and private health care plans might refuse to cover treatments and procedures that don’t have the approval of this centralized agency.

Physicians and hospitals, fearing the loss of reimbursement and even lawsuits, would also be much less likely to try unapproved treatments – even if early evidence suggests a treatment might work for a particular ailment or set of patients. Our health care system would become more rigid and less innovative as doctors fear repercussions if they go against the official recommendations.

Medical companies would be less likely to pursue research on new and potentially life-saving drugs, biologics, and medical devices when faced with another major bureaucratic hurdle to introducing their products to market. Ultimately, funds for new research would shrivel.

A new study from the Institut économique Molinari in France says that the hurdles to clear comparative effectiveness review boards in Europe are increasingly “tough, heavy-handed and costly Despite the best intentions, the inevitable consequence of these regulations is to push up the cost of innovation substantially, to undervalue its benefits and to reduce the number of new products by making certain projects unprofitable.”

Many hope CER research could be used to lower health spending. But Professor Michael Schlander, a well-respected German physician, medical researcher and economist, found that decisions by the National Institute for Health and Clinical Excellence in the U.K. have actually led to higher spending by the National Health Service. He says that once a treatment is approved for payment, there is a greater incentive for doctors to prescribe it, which carries an increased potential for overuse.

President Obama has assured Americans that “no government bureaucrat will second-guess decisions about your care.” Officials designing the CER process would do well to heed his commitment and focus on creating quality information about medical treatments and allow doctors and patients to make decisions.

The CER council has an opportunity to contribute to development of a knowledge-based health care system. Rather than serving as an arbiter that makes final decisions on the value of one treatment over another, the federal government can play a crucial role in aggregating information about the effectiveness of various medicines and treatments and disseminating that information to researchers, clinicians, and patients.

This would allow the process of learning and innovation to continue so a patient-centered health care system could continue to evolve.

Grace-Marie Turner is president of the , a nonprofit research organization focusing on health reform.

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Those lawmakers wouldn’t describe their plan that way, of course, but that would be the effect of their proposal to require drug companies to pay Medicaid-style rebates to Medicare.

Pharmaceutical companies already are required to pay rebates to states for the right to sell their products to Medicaid patients. A proposal by Rep. Henry Waxman, D-Calif., and Sen. Jay Rockefeller, D-W.V., would require drug companies to pay a rebate to the federal government for prescription drugs sold through Medicare Part D for those low-income seniors who also qualify for Medicaid or who are eligible for subsidies. This proposal, which is now in play as part of the negotiations to increase the government’s debt ceiling, would collect up to $112 billion over the next 10 years.

Supporters of the rebate proposal say the money would come from the pharmaceutical companies, but the logic is flawed. Experience with the Medicaid rebate programs already has been shown to increase costs for prescription drugs sold in the private sector. And ultimately, the rebate costs are shifted to consumers.

If the new Medicare rebate tax were imposed, more than 17 million seniors who don’t qualify for low-income subsidies would face drug benefit premiums that would be 20 to 40 percent higher than they are paying now, and they would face an average of $200 a year in higher out-of-pocket costs.

These are the findings of a study conducted by Douglas Holtz-Eakin, former director of the Congressional Budget Office who is now president of the American Action Forum, and his associate, Michael Ramlet, the forum’s director of healthcare policy.

Holtz-Eakin and Ramlet studied government data to determine the impact that the rebate plan would have on prescription drug costs. While lower income seniors are protected by government subsidies from paying higher premium costs, they find that millions of other seniors would be forced to pay higher premiums for their drug coverage as a result of the rebate tax.

“This proposal would be a bad deal for Medicare and a raw deal for millions of seniors,” Holtz-Eakin said. “This is a price-fixing scheme that will take money out of the pockets of senior citizens and greatly reduce customer choice.”

The proposed rebate tax also would undermine the most successful health program the government operates — the Medicare prescription drug program.

The prescription drug program, which began in 2006, requires private companies to compete on benefit design and price in offering drug coverage to seniors.

The program is popular because it gives seniors a wide range of choices of prescription drug plans, with different cost points and drug offerings. And it is has the remarkable distinction of costing taxpayers much less than expected. The Medicare Part D program is coming in at 46 percent below projected costs, according to the CBO.

And Part D’s competitive model is saving seniors money as well. The average monthly beneficiary premium for Part D coverage will be $30 in 2011, far below the $53 forecast originally.

But the proposed rebate tax, which also has been endorsed by President Barack Obama, would undermine the gains that competition and consumer choice have brought to the Part D drug benefit program by forcing higher costs on seniors.

“The Medicare prescription drug benefit is one of the only bright spots on the entitlement landscape, costing less than projected and delivering real value for seniors. The last thing the president and Congress should do is turn it into a Medicaid-style program,” Ramlet said.

The rebate plan is not a way to cut government spending but is simply a ploy to shift higher costs to seniors. Congress should look elsewhere for real savings rather than resorting to gimmicks that will trick seniors into paying the bill.

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization that focuses on market-based health policy solutions. She is a co-author of Why ObamaCare Is Wrong for America (Broadside/HarperColllins, 2011).

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States are facing severe budget pressures. The 2009 stimulus package provided short-term cash to the states to shore up Medicaid — the jointly funded federal-state health program for lower-income people. But in exchange, states had to agree to maintain their 2010 Medicaid eligibility levels or risk losing all federal matching funds.

In January, 33 governors and governors-elect to President Barack Obama and congressional leaders requesting “flexibility and relief” from the “excessive constraints placed on us by healthcare-related federal mandates.” States say they need to trim their Medicaid rolls now because they already are swimming in red ink and this circumstance will only get worse — partly because stimulus funding that initially helped many of them pay for the added enrollment ends in June. And, while Health and Human Services Secretary Kathleen Sebelius has responded by sending her agency’s Medicaid experts to the states to help them explore options to trim Medicaid spending, she is still urging states to do everything they can to keep Medicaid enrollment at current levels before the health law’s changes take effect in 2014.

These pleas for flexibility are bipartisan. For example, Democratic Gov. Jerry Brown of California is asking for permission to cut $1.7 billion from his state’s Medicaid program by limiting most recipients to no more than 10 physician visits a year. Arizona’s Republican Gov. Jan Brewer tightening eligibility so the state could cut 280,000 people from its Medicaid rolls. Sebelius her that Arizona didn’t need to ask permission but could reduce its rolls by allowing an existing waiver to expire in September. But few other states have similar options.

Specifically, the new health overhaul law will require states to expand coverage by 2014 to all citizens under 133 percent  of poverty — about $30,000 a year for a family of four. Recent estimates show that this will mean adding an additional 20 million people to the rolls by 2019. Under the new law, the program will grow to 84 million enrollees and will cost nearly $900 billion by 2019. This increasing enrollment will be accompanied by growing cost burdens on the states.

Still, some see these expansions as steps that could transform the program into a means for working people and families to have access to health coverage.

A Kaiser Family Foundation issue paper, for instance, perspectives on “strengthening Medicaid’s reach” as a result of the health overhaul law. But these ideas could also backfire if, as Kaiser points out, “Medicaid enrollees cannot find doctors, dentists, specialists, or other providers to see them.”

This scenario is already happening in some areas.

And, because Medicaid is an important safety net for many people who have no other options for health coverage, adding millions more recipients to the program without increasing the system’s capacity will make it even more difficult for those currently on Medicaid to get the care they need.

Medicaid is arguably the worst health care program in the country. Recipients are promised a long list of benefits, but doctors who participate in the program are paid so little, and the paperwork is so onerous, that many can afford to see only a few Medicaid patients.

As a result, patients flood to hospital emergency rooms where — if they wait long enough — they eventually will be seen. Many have only routine health complaints that easily could have been handled in a doctor’s office. A study by the National Center for Health Statistics found that Medicaid recipients were more likely to have multiple emergency room visits in a year than those with private insurance and the uninsured. Other studies have shown that Medicaid recipients are less likely to receive adequate care, and they are more likely to have worse outcomes than those with private insurance. They have also been shown to experience higher rates of hospital mortality than even the uninsured.

The program also is rife with fraud. New York State, where almost one in four residents is on Medicaid or its daughter program, the Children’s Health Insurance Program, has tried to tackle wasteful spending. A 2005 investigation found that as much as 10 percent of the state’s spending on Medicaid was lost to fraud and abuse.

You would have thought that reforming this program would have been Job One with the Congress and President Obama when they drew up their health reform plans. But Medicaid is as bureaucratic and rule-driven as ever. And this is the program that the president relies on to expand coverage to more than half of the newly insured.

Washington clearly is intent on expanding the program to enroll millions more people in this government-run health program while the states plead for more flexibility and relief from Washington.

The governors hold the power cards for health reform over the next two years, and they will continue to demand more flexibility to run the programs themselves. In this tug of war, I’m betting on the governors.

Grace-Marie Turner is president of the Galen Institute and served in 2005-06 on the federal Medicaid Commission to develop recommendations for reform. She’s a co-author of the forthcoming book “Why ObamaCare is Wrong for America” (HarperCollins).

This <a target="_blank" href="/medicaid/022811turner/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

Massachusetts and the federal government built their reform efforts using similar architectural plans – strict regulation of health insurance, mandates on individuals and businesses, expensive new taxpayer-funded subsidies and a major expansion of Medicaid – and both share a central structural flaw in failing to address rising health costs.

Former Massachusetts Governor Mitt Romney sold his plan in 2006 with the that, “Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced.”

It hasn’t turned out that way.  On average, health insurance now costs for a family of four in the state, compared to $13,027 nationally — nearly 12 percent more. 

In fact, John Cogan of Stanford University and colleagues that since the state’s reform initiative passed, premiums for private employer-sponsored health insurance in Massachusetts increased by an additional six percent in aggregate compared to the nation as a whole.  It’s even worse for smaller firms:  Their health insurance costs grew 14 percent more than in the country as a whole from 2006 to 2008.

Health insurers in Massachusetts are the messengers reflecting higher costs from providers, including the state’s powerful hospitals, and increased utilization of health care services.  The insurance companies are battling with the government to allow them to increase their rates by seven to 34 percent because they say they are losing tens of millions of dollars. 

Gov. Deval Patrick ordered his insurance commissioner to reject the rate increases.   The governor lost the first round when an insurance appeals board overturned his cap on insurance premiums, but the very public battle continues between politicians and health insurance companies over costs.

Other factors are pushing up the cost of insurance:  Reformers promised that covering everyone would eliminate the problem of uninsured people going to the emergency room for routine care and “free-riding” on paying customers.  But the number of people visiting emergency rooms has increased, not decreased, ²õ³ó´Ç·É.Ìý

One reason: More people may have health insurance but they can’t find a doctor to see them. Last year only 44 percent of internal medicine practices were accepting new patients, down from 66 percent in 2005, to the Massachusetts Division of Health Care Finance and Policy.

But the distortions don’t end there:  Some residents are gaming the system in ways that for others.   The Massachusetts Division of Insurance reported in June that the number of people who are buying coverage for short periods more than quadrupled in the three years since passage of the state’s reform law. 

The incentives in Massachusetts invite this behavior:  Insurance companies are required to sell policies to anyone who applies (“guaranteed issue”) at the same prices as other applicants who have maintained coverage (“community rating”).  This gives short-termers a free ride but drives up the cost of insurance for people who maintain continual coverage.

Blue Cross and Blue Shield of Massachusetts that more people are jumping in and out of coverage as they need medical services. The typical monthly premium for short-term members was $400, but their average claims exceeded $2,200 per month. Other insurers have witnessed a similar pattern. “These consumers come in and get their service, and then they leave because current regulations allow them to do it,” said Todd Bailey, vice president of underwriting at Fallon Community Health Plan, the state’s fourth-largest insurer.

Massachusetts says it has reduced the percentage of its citizens without health insurance to about three percent, but of the newly-insured receive coverage that is heavily or completely subsidized by taxpayers.  An infusion of federal Medicaid funds has allowed the state to increase eligibility for subsidized coverage to 300 percent of poverty, or more than $66,000 a year for a family of four.  Without that money, the state would have had to rely on significant new taxes to finance its coverage expansion.

Employer coverage has increased largely because employers do not want to break the law requiring them to provide coverage or pay a fine.  The percentage of firms with three or more employees offering health benefits has increased from 73 to 79 percent. 

But now, some small Massachusetts employers are dropping employer-sponsored insurance and are instead sending their workers into the taxpayer-funded health insurance pool. They say they have no choice because of the relentlessly rising costs of coverage. 

The Boston Globe that “Since April 1, the date many insurance contracts are renewed for small businesses, the owners of about 90 small companies terminated their insurance plans with Braintree-based broker Jeff Rich and indicated in a follow-up survey that they were relying on publicly-funded insurance for their employees.

This spells trouble for taxpayers.  With more than two-thirds of the newly-insured receiving taxpayer-supported coverage, it will put additional pressure on the already burgeoning state budget if more employers opt to pay the $295 fine and instead send their workers to taxpayer-subsidized coverage.

Massachusetts residents are no different than people in the rest of the country:  They respond to incentives.

Health reform in the Bay State has increased demand without increasing the supply of health care providers, it continues to keep people in the dark about the true cost of health care and health insurance, and has not changed incentives for people to seek more affordable options or for a truly competitive marketplace. Washington’s health overhaul law has the same structural flaws.

When President Obama told in an interview last week that his new health reform law “not only makes sure everybody has access to coverage but is reducing costs,” the quote was evocative of Romney’s promise.  Washington’s reform effort doesn’t even pretend to achieve universal coverage, and Massachusetts’ experience shows the near impossibility of containing costs in a system where incentives go in exactly the opposite direction.

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focused on patient-centered health reform.  She can be reached at

galen@galen.org
.

This <a target="_blank" href="/news/072210turner/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

Mercer’s latest National of Employer-Sponsored Health Plans found that major employers held total health benefit cost increases per employee to 5.5 percent in 2009 – the lowest increase in a decade (see chart below). Participation in consumer-directed health plans, as well as health management programs, has been growing over the last few years as companies sought ways to successfully engage employees as partners in managing costs and care.

Source: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1990-2009; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1990-2009.

Enrollment in consumer-directed plans grew to an estimated 23 million people in 2009, up from 18 million people in 2008-a 27% increase, according to an April by the American Association of Preferred Provider Organizations.

Among the most notable is the growing adoption of Health Savings Accounts. Ten million Americans now are covered by HSA-qualified health plans, up from eight million last year, according to the latest by America’s Health Insurance Plans. To open tax-free health savings accounts, people first must be enrolled in high-deductible health insurance plan.

Unfortunately, ObamaCare threatens to render these plans a thing of the past.  Until now, employers have had the flexibility to tailor benefit and cost structures to fit their budgets and corporate cultures, but the new health overhaul law will limit their options in the future.

Under the new law, the Department of Health and Human Services will make the ultimate ruling on HSAs when it decides how to calculate the actuarial value of the high-deductible health insurance policies that must accompany health savings accounts.  

The health law requires also that all insurance policies will be required to provide a minimum actuarial value of at least 60 percent for the benefits covered.  If HHS allows contributions by individuals and employers to health savings accounts to “count” as part of the actuarial value, then HSAs and other account-based plans would likely meet the test.  But if contributions are not included, the plans likely would not qualify, removing an important tool to hold health costs down.

HSAs couple a tax-favored savings account used to pay medical expenses with a high-deductible health plan that meets certain requirements for deductibles and out-of-pocket expense limits. Most cover preventive care services, such as routine medical exams, immunizations and well-baby visits, without requiring enrollees to first meet the deductible. The funds in the HSA are deposited tax free, interest earned is tax free, and the account is owned by the individual and may be rolled over from year to year.

The new AHIP study underscores the value of consumer-directed plans in achieving key goals of the health reform effort.  Here are some highlights of the AHIP survey of people enrolled in HSA-qualified health insurance:

• Lower premiums: Monthly premiums for individuals aged 30 to 54 averaged $2,465 a year ($205 a month) and $5,335 for a family ($445 a month) – less than half the average costs of traditional plans.
• Larger companies: The fastest growing market for HSA/HDHP products was large-group coverage, which rose by one-third, followed by small-group coverage, which grew by 22 percent. 
• PPOs preferred:  Overall, preferred provider organizations (PPOs) were the most popular insurance type, with 88 percent of enrollees. They generally have access to negotiated discount arrangements with health care professionals when paying bills from their HSA accounts.
• More consumer information: More than 90 percent of responding companies reported offering access to HSA account information, health education information, physician-specific information, and personal health records as consumer decision support tools for their members.
• Not just for the young: Fifty-two percent of all individual market enrollees — including dependents covered under family plans — were aged 40 or older so they clearly are not just for the young, as critics claim.

The tell the story of success:

Indiana Gov. Mitch Daniels, a Republican, says providing the HSA option to state employees will save the state at least $20 million this year, and employees will save $8 million compared to their coworkers in traditional health plans.  More than 70% of Indiana’s 30,000 state employees have selected the HSA option. 

Gov. Daniels says that employees become more active participants in their health care, making smarter and more cost-effective decisions – visiting hospital emergency rooms 67% less often and using generic drugs more than those in conventional plans, for example.  An independent survey by Mercer found no evidence that HSA members are deferring needed treatment or preventive care.

Many companies, such as Whole Foods, offer another form of CDHC plan called Health Reimbursement Arrangements. HRAs give employers more flexibility in shaping their health benefit packages, including the ability to offer account-based plans and provide incentives for prevention and wellness activities. But, unlike HSAs, HRA account balances generally are not portable after employees leave the company.

Both products are helping to make health insurance more affordable and are helping companies to lower health costs.

Competition works when consumers are engaged in getting better value for their health care dollars. Policymakers would be well-advised to make sure that these consumer-friendly plans remain as an option for both individuals and employers so they can continue to have these tools to engage employees as partners in managing health costs.

Grace-Marie Turner is president of the Galen Institute, , a non-profit research organization focusing on patient-centered health reform initiatives. She can be reached at gracemarie@galen.org.

This <a target="_blank" href="/insurance/061710turner/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

Fifteen federal government officials were appointed in March to launch the new federal initiative designed to provide doctors and patients with better information about treatments so they can compare options. The officials, who serve on the Federal Coordinating Council for Comparative Effectiveness Research (CER), have held three “listening sessions” to gather testimony from a broad range of citizens and experts on priorities for future investments in research.

The council will provide guidance on how to use $1.1 billion provided by the economic stimulus act. The effort is controversial in some quarters. While getting better information is needed to achieve better value, many people are concerned about granting the government new power over the medical treatments available to Americans.

Patients, especially those with rare diseases and multiple chronic illnesses, are worried that their unique needs may be disregarded in mega-studies. Doctors fear their clinical expertise will be replaced by formulas. Medical device and pharmaceutical companies are concerned that they may face another layer of government approval that would stifle innovation.

There are also concerns that comparative effectiveness research findings will be used to make spending as well as clinical decisions. House Appropriations Chairman David Obey touched off an uproar when he said that drugs and treatments “found to be less effective and in some cases, more expensive, will no longer be prescribed.”

The final legislative language said that the information won’t be used to direct “payment, coverage or treatment” decisions. But many believe that the chairman tipped his hand, and described the long-range goals of the effort.

Many people also are concerned that individuals’ unique medical needs might not be considered, hurting patients who do not respond well to standard care. Experts in Europe and Canada, where comparative effectiveness systems are established, warn that those who fall outside the mainstream have more difficulty receiving treatment.

Physicians are concerned that experience and knowledge could be replaced by centralized decision making, based on formulas. In the name of protecting their bottom lines, public and private health care plans might refuse to cover treatments and procedures that don’t have the approval of this centralized agency.

Physicians and hospitals, fearing the loss of reimbursement and even lawsuits, would also be much less likely to try unapproved treatments – even if early evidence suggests a treatment might work for a particular ailment or set of patients. Our health care system would become more rigid and less innovative as doctors fear repercussions if they go against the official recommendations.

Medical companies would be less likely to pursue research on new and potentially life-saving drugs, biologics, and medical devices when faced with another major bureaucratic hurdle to introducing their products to market. Ultimately, funds for new research would shrivel.

A new study from the Institut économique Molinari in France says that the hurdles to clear comparative effectiveness review boards in Europe are increasingly “tough, heavy-handed and costly Despite the best intentions, the inevitable consequence of these regulations is to push up the cost of innovation substantially, to undervalue its benefits and to reduce the number of new products by making certain projects unprofitable.”

Many hope CER research could be used to lower health spending. But Professor Michael Schlander, a well-respected German physician, medical researcher and economist, found that decisions by the National Institute for Health and Clinical Excellence in the U.K. have actually led to higher spending by the National Health Service. He says that once a treatment is approved for payment, there is a greater incentive for doctors to prescribe it, which carries an increased potential for overuse.

President Obama has assured Americans that “no government bureaucrat will second-guess decisions about your care.” Officials designing the CER process would do well to heed his commitment and focus on creating quality information about medical treatments and allow doctors and patients to make decisions.

The CER council has an opportunity to contribute to development of a knowledge-based health care system. Rather than serving as an arbiter that makes final decisions on the value of one treatment over another, the federal government can play a crucial role in aggregating information about the effectiveness of various medicines and treatments and disseminating that information to researchers, clinicians, and patients.

This would allow the process of learning and innovation to continue so a patient-centered health care system could continue to evolve.

Grace-Marie Turner is president of the , a nonprofit research organization focusing on health reform.

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