Driving a New Bargain in Health Care

By TYLER COWEN, professor of economics at George Mason University

Interesting piece on possible compromises that both political parties could agree to in improving the health care law.

The Affordable Care Act has gotten off to a rocky start. Federal and state online health insurance exchanges, which opened for business at the beginning of the month, have been bedeviled by technical snags. And opposition to the law from some House Republicans blocked funding for the entire federal government, leading to its partial shutdown.

In fact, with all the conflict and vituperation over Obamacare, it sometimes seems that one of the few things Democrats and Republicans agree on is that the law is imperfect at best. And they also agree that it could be improved. Even if a bipartisan deal to create a better health care system seems far off today, it’s not too soon to start imagining what a future bargain might look like.

Just to get started, I will assume that, at some point, Democrats will be willing to acknowledge that not everything has worked out as planned with the legislation, and that they would consider a rewrite that would expand coverage. I’ll also assume that Republicans will acknowledge that a feasible rewrite of the bill cannot give the Democrats nothing. And Republicans will need to recognize that repeal of Obamacare should not be their obsession, because they would then be leaving the nation with a dysfunctional yet still highly government-oriented health care system, not some lost conservative paradise. Both sides have a lot to gain, and, at some point, they should realize it.

Let’s look at some of the current problems in the health care system and see whether they might be patched up.

Even under Obamacare, many people will not have health insurance coverage, including two-thirds of poor blacks and single mothers and more than half the low-wage workers who lacked coverage before the law was enacted. That is largely because of the unwillingness of 26 governors to expand Medicaid coverage as the original bill had intended. The Supreme Court struck down that portion of the Affordable Care Act, however, giving states a choice.

Will many red-state governors eventually accept the act’s Medicaid extension, which is sometimes portrayed as a financial free lunch, since federal aid covers most of the coverage expansion? It’s not clear that they will. If the Republicans win the White House in 2016 and perhaps the House and Senate as well, they may cut off federal funds for that Medicaid expansion. In the meantime, many states don’t want to extend their Medicaid rolls, because such benefits are hard to withdraw once granted.

There is a deeper problem with relying heavily on Medicaid as the backbone of health care for the poor. The fact that so many governors have found political gain in opposing a nearly fully-funded Medicaid expansion suggests that long-term support for Medicaid is weaker than it appeared just a few years ago. Furthermore, in cyclical downturns, the increase in Medicaid coverage after a climb in unemployment puts much strain on state budgets.

A separate issue concerns employers who are shedding insurance coverage, whether by dropping retirees, moving more workers to part-time status, withholding coverage and paying fines mandated by law, or simply not hiring more workers in the first place. The magnitude of these effects is not yet clear, but over time we can expect that new businesses and new hiring will be structured to minimize costly insurance obligations. It’s no accident that the Obama administration handed out more than 1,000 exemptions from the employer coverage mandate, and postponed the employer mandate until 2015: both actions reflected underlying problems in the legislation. Ideally, the health care law should minimize what is essentially an implicit tax on hiring.

One way forward would look like this: Federalize Medicaid, remove its obligations from state budgets altogether and gradually shift people from Medicaid into the health care exchanges and the network of federal insurance subsidies. One benefit would be that private insurance coverage brings better care access than Medicaid, which many doctors are reluctant to accept.

To help pay for such a major shift, the federal government would cut back on revenue sharing with the states and repeal the deductibility of state income taxes. The states should be able to afford these changes because a big financial obligation would be removed from their budgets.

By moving people from Medicaid to Obamacare, the Democrats could claim a major coverage expansion, an improvement in the quality of care and access for the poor, and a stabilization of President Obama’s legacy — even if the result isn’t exactly the Affordable Care Act as it was enacted. The Republicans could claim that they did away with Medicaid, expanded the private insurance market, and moved the nation closer to a flat-tax system by eliminating some deductions, namely those for state income taxes paid.

At the same time, I’d recommend narrowing the scope of required insurance to focus on catastrophic expenses. If insurance picks up too many small expenses, it encourages abuse and overuse of scarce resources.

In sum, poorer Americans would get a guarantee of coverage and, with private but federally subsidized insurance, gain better access to quality care for significant expenses than they have now with Medicaid. Private insurance pays more and is accepted by many more doctors. But on the downside, the insured care would be less comprehensive than under current definitions of Obamacare’s mandate.

With a cheaper and more modest insurance package mandated under a retooled law, employers would be less intent on dropping coverage. That would help in job creation. It also would lower the federal cost of the subsidies through the exchanges, both because employers would cover more workers and because the insurance policies would be cheaper.

This wouldn’t be an ideal health care system, but it may be the best we can do, considering where we stand today.

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Health Care Reform Rules Give Patients A New Bill Of Rights

Health Care Reform initiatives have yielded a new “Patient Bill of Rights” since November. There will be a great number of changes enacted in 2013 leading up to 2014 when coverage mandates, state insurance exchanges and tax changes take effect for health care. Sound confusing?, It certainly will be. In the meantime, “Know your rights” and check back with us periodically to learn how to navigate health care cost and confusion.

Jeffrey Young – Huff Post Business – 11/20/2012

Health insurance consumers won’t be discriminated against because of pre-existing conditions, can’t be charged more because of gender and will be guaranteed a basic set of benefits under historic new federal regulations published Tuesday.

Think of them as the Patients’ Bill of Rights that eluded former President Bill Clinton more than a decade ago. The regulations carry out the promises of President Barack Obama’s health care reform law, which will extend health insurance coverage to 30 million people over a decade and outlaw some of the industry’s most notorious practices.

Health insurance companies, state regulators and consumer advocates have eagerly awaited these rules since Obama enacted the health care overhaul in March 2010.

The details contained within the 331 pages of regulations are crucial for health insurance companies and states preparing for the new options that will be available to uninsured people and small businesses starting in 2014. The health insurance exchanges, online marketplaces where consumers can shop for plans and determine whether they qualify for tax credits to pay for private insurance coverage or Medicaid benefits, are slated to be open for business on Oct. 1, 2013.

“Americans in all 50 states will have access to an exchange and the benefits of the new law,” Health and Human Services Secretary Kathleen Sebelius said on a conference call with reporters Tuesday. “Beginning in October next year, families and small-business owners everywhere will be able to shop for affordable, quality health coverage.”

The Department of Health and Human Services published three separate regulations Tuesday. Broadly, the rules restate the health insurance market reforms in Obama’s health care law. But health insurance companies and state officials that aren’t actively resisting the implementation of Obamacare need the details to ensure that health insurance exchanges are ready, and health plans available for sale on time.

One lays out the rules requiring health insurance companies to sell coverage to anyone who applies, prohibits charging women more than men, limits how much people must pay additionally based on age, where they live, family size and whether they use tobacco, and guarantees renewal of health coverage every year.

A second set of regulations spells out which benefits all health insurance plans sold on the exchanges must cover — 10 categories of medical care, including emergency services, hospital stays, maternity care, prescription drugs and preventive medicine. In addition, the rule explains how states must designate an insurance product already on the market as a “benchmark plan” to serve as a model for what the new insurance products will cover starting in 2014. This regulation also sets up how health insurance companies must prove their plans will cover at least 60 percent of a consumer’s average annual medical expenses.

The cost of health insurance on the exchanges will be subsidized using tax credits for people with incomes up to 400 percent of the federal poverty level, which is $44,680 this year. People who make up to 133 percent of poverty, $14,856 in 2012, will qualify for Medicaid in states that opt into an expansion of the health program for the poor.

The Obama administration published a third rule on “wellness” programs that employers include in workers’ health benefits, such as discounts to employees who quit smoking, lose weight or lower their cholesterol. The new regulations are designed, in part, to prevent companies from using the programs to set prices to discriminate against workers who don’t meet the wellness programs’ standards.

Publishing these regulations is just one small step toward 2014, however, and major obstacles remain. As of Monday, just 17 states and the District of Columbia had committed to creating a health insurance exchange themselves as the law sets out, according to a tally by the Henry J. Kaiser Family Foundation. The federal government will have to step in, and partially or completely establish these exchanges in the rest of the states, including those run by Republican governors like Rick Perry of Texas who have vowed continued opposition to the law.

“Now that the law is here to stay, I’m hopeful that states and other partners will continue to work with us to implement the law,” said Sebelius, who offered to meet with governors who have outstanding questions about states’ role in carrying out the health care reform law. Florida Gov. Rick Scott (R), an ardent opponent of Obamacare, last week wrote Sebelius requesting a sit-down.

(more…)

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NJ lawmakers seeking to control insurance costs

Looking for greater transparency on how insurers calculate and charge for premiums? The state of NJ is intending to provide just that. A recent measure adopted by the state legislature would require all insurers to gain approval by the state’s regulatory agency before they can raise premiums.

THE ASSOCIATED PRESS

TRENTON  — Health insurance carriers who serve individuals and small businesses in New Jersey may soon have to gain state approval before implementing rate increases.

These firms currently can set and increase rates just by filing the information with the state. But a measure planned by three state lawmakers would require that the firms gain approval for such actions from the state Department of Banking and Insurance.

It also would expand the jurisdiction of the state’s Division of Rate Counsel, which now has no say over health insurance rates, to create a watchdog for residents and small businesses.

“Residents deserve a watchdog, someone with the knowledge to advocate on their behalf when it comes to the complicated issue of rising health care premiums,” said Assemblyman Dan Benson, D-Hamilton Township (Mercer County), who said he will sponsor the measure with fellow Democrat Valerie Vainieri Huttle of Englewood.

Democratic Senate Majority Leader Barbara Buono plans to sponsor identical legislation, with both measures likely to be introduced by year’s end.

“This legislation will provide far greater transparency,” Benson said.

Ed Rogan, spokesman for the banking and insurance department, declined to comment on the proposal. As a matter of policy, the department does not discuss proposed or pending legislation.

Besides requiring the banking and insurance department commissioner to approve any rate increase, the proposed bill also would give the commissioner authority to reject proposed rate changes deemed discriminatory or excessive.

The commissioner and rate counsel would also have to jointly hold public hearings on any proposed premium increases for insurance contracts or policies in the Individual Health Coverage Program or New Jersey Small Employers Health Benefits Program market.

Information about premium increases, including an explanation of how carriers report and calculate health insurance premiums, also would have to be posted on the department’s website.

Currently, insurers in these plans are required to spend no more than 20 percent of the premiums paid on administrative expenses.

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Cut Costs by Reducing Redundant or Inefficient Activity

What’s the parallel between the world’s largest car manufacturer -Toyota – and the American Healthcare System?  Read on to learn how total quality management and improved operational efficiencies can reduce waste and decrease spending in our healthcare system.

By Mark Graban and Rob Harding August 09, 2011

Enlist your employees to help find and eliminate waste in your organization’s processes.

Many hospital CEOs, including John Toussaint, M.D., the former CEO of ThedaCare, and thought leaders, including Donald Berwick, M.D., M.P.P., administrator for the Centers for Medicare & Medicaid Services, estimate that 30 to 50 percent of all health care spending can be described as waste — activity that provides no benefit to patients. This adds up to more than $1 trillion a year in the United States. Instead of merely slashing reimbursements or providing less care, there is a clear opportunity to do more — and provide the right care — with less waste and less spending.

The word “waste,” or muda in Japanese, is one of the most commonly used terms in Lean management, which is based on the Toyota Production System. According to Toyota, there are eight types of waste, each of which can be translated directly into health care:

Lean’s Eight Types of Waste

Examples of Waste Found in Hospitals

Defects

Lost or mislabeled laboratory specimens

 

Overproduction

Medications sent to inpatient units in 24-hour batches, leading to wasted medications if orders

Change

Transportation

Moving patients a long distance from the operating room to recovery

Waiting

Patients waiting weeks for an appointment, or waiting hours to be seen in the emergency department, resulting in exacerbated conditions

Inventory

Expired supplies due to overstocking and poor rotation of inventory

Motion

Staff walking in excess because high-use surgical instruments and packs are not grouped together in perioperative services

Processing

Staff writing or entering the same patient information into multiple forms or software screens

Human potential

Nurses dragging bags of dirty linen down the hallway; staff members unengaged in improvement activities

In health care, Lean teaches us to engage all staff members in a never-ending search for waste, making quality and process improvements that benefit patients, leading to lower costs. Reducing waste is very different, in mindset and practice, from traditional cost cutting, as Lean waste reduction looks at how the actual work is performed rather than focusing on spreadsheets, budgets and financial benchmarks. Reducing errors, improving throughput, reducing staff frustration — all of these tactics reduce costs.

A Lean Perspective on Waste

Traditional organizations might see that 60 percent or 70 percent of their expense is direct labor cost. This realization often leads to the idea that the clearest path to cost reduction is to eliminate people (again, often based on benchmarks). Lean methodology takes a different view: Waste reduction cannot be used to drive layoffs, as that would put an end to staff engagement in the improvement process — a core Lean principle.

Leading health care organizations that actively employ Lean tactics, including ThedaCare, Denver Health and Avera McKennan, all have “no layoffs due to Lean” commitments with employees. Engaging people to reduce waste through process improvement has led to significant savings at these organizations — more than $54 million at Denver Health, for example — along with quality and access improvement, thanks to a culture of collaboration. (more…)

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Insurance mandates again hike costs

Recent government mandates in the state of Connecticut raise the cost of insurance for all. While the act aims to offer more comprehensive services, it may, in actuality prove as a disservice by raising the overall cost of insurance to the states residents.  Read on to learn more.

By Greg Bordonaro

While tax increases, paid sick leave and union concessions took up most of the attention during the recent legislative session, lawmakers passed a flurry of new health insurance mandates that will raise the cost health insurance for employers.

In all, seven new mandates — some of which business lobbyists have fought for years — passed the legislature and have been signed into law by Gov. Dannel P. Malloy.

A health insurance “mandate” is something for which an insurance company or health plan must offer coverage, and whose costs typically get passed onto employers.

Health mandates have been a hot political issue in Connecticut for years. The business community has long voiced opposition, citing costs. But supporters say cost concerns are overblown and that the benefits outweigh the price.

The divide illustrates a central issue in the broader health care debate. The question of how to control health care costs, while also mandating adequate coverage that prevents and treats illnesses effectively, has been difficult to answer.

New mandates passed this year:

• Expand coverage requirements for certain patient clinical trials, breast MRIs, colonoscopies and prostate cancer screenings;

• Increase the maximum annual coverage for ostomy-related supplies from $1,000 to $2,500;

• Require coverage for bone marrow testing;

• And place new restrictions on insurance companies that require the initial use of over-the-counter drugs for pain treatment.

“It is a fundamental truth that as you add benefits you increase costs,” said Keith Stover, a lobbyist for the state’s health insurance industry. “The math isn’t that complicated.”

According to a report by the Council for Affordable Health Insurance (CAHI), which is funded by the insurance industry, Connecticut had 59 mandates at the end of 2010, making it the fifth most demanding state.

While mandates make health insurance more comprehensive, they also make it more expensive, requiring insurers to pay for care patients previously funded out of their own pocket. Those expenses often get passed onto employers through higher premiums.

(more…)

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Employee wellness programs help companies deal with rising healthcare costs

One way corporate America is tackling the rise in healthcare costs is by offering an employee wellness program.  Many are offering incentives to employees in terms of gifts and rewards for employees who become actively engaged. The benefits are worth the investment as employers are encouraging employees to take an active role in maintaining their health.

KePRO Industry News

Many employers’ healthcare costs are soaring as a result of the high prevalence of chronic diseases. This is cutting into profit margins and making it difficult for companies to expand. In order to address the situation, many businesses are looking to employee wellness programs.

For example, a group of business leaders in Oregon and state health officials recently joined forces to form the initiative Wellness@Work, according to Oregon Business. The project provides companies with an online resource that they can use gauge their employees’ levels of wellness and consider new initiatives to improve well-being.

“We’re hoping businesses will bring together a committee of employees from all departments to make changes to their workplaces,” Dawn Robbins, the state’s worksite wellness coordinator, told the news source.

She added that despite fears over the cost of the initiatives, most businesses see a significant return on their investment in employee wellness. In fact, the Wellness Council of America estimates that most will experience a return of $3 for every $1 invested.

This could help businesses handle the dramatic rise in healthcare costs that are expected to occur this year and beyond.

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