Backup plans if mandate struck down

By: Brett Norman
March 11, 2012 10:07 PM EDT

If the U.S. Supreme Court strikes down health reform’s individual mandate and leaves the rest of the law in place — what happens next?

The backup plan could be automatic enrollment in your employer’s health insurance, a lot like the way you get signed up for the 401(k) plan.

If Congress decides to act to repair that hole in the Affordable Care Act — and that’s a big if — an auto-enrollment requirement is the option that’s getting the most attention from health policy experts. It’s a more low-key way to reach at least some of the uninsured people who would be covered by the individual mandate.

It’s an idea that could even appeal to Rep. Paul Ryan (R-Wis.) — because it’s straight out of the health reform alternative he sponsored in 2009.

“Compared to the relatively weak tax penalties with the mandate, aggressive auto-enrollment like what was talked about in 2009 could work pretty well,” said Don Taylor, a health policy professor at Duke University who has written extensively about Ryan’s 2009 bill, the Patients’ Choice Act, at The Incidental Economist blog. “In policy terms, there are things that can be done. Of course, politically, it’s a very different story.”

The Patients’ Choice Act proposed setting up auto-enrollment procedures at emergency rooms and state departments of motor vehicles and through state tax returns and workplaces. People would have been enrolled in private plans being sold on state exchanges.

Although the bill allowed individuals to opt out, research has shown that auto-enrollment, particularly in the case of individual retirement accounts, has successfully boosted participation from people who wouldn’t take the initiative on their own. And Congress will need high participation from healthy people if they want to keep one of the most popular parts of the health reform law: the guaranteed coverage for people with pre-existing conditions.

The individual mandate would require nearly all Americans to purchase health insurance or pay a tax penalty, starting in 2014. It’s one way to get more healthy young people and others on insurance rolls to help pay for expanded coverage of the sicker population.

It’s also the most politically unpopular element of the law.

A Supreme Court decision to strike the mandate could bring back other ideas like auto-enrollment, which enjoyed some conservative support — as did the individual mandate — before the Affordable Care Act passed, some health policy experts say. And Congress would come under considerable pressure to act.

Health care economists disagree on how effective the mandate would be, but they are united on at least one point: If the mandate goes and insurance companies still have to cover everyone with pre-existing conditions, a tidal wave of uncertainty — that great fear of actuaries — will crash down on the insurance industry and people’s premiums could shoot up to frightening levels.

That’s only a hypothetical, since the court could rule that the pre-existing condition coverage — along with a provision that bans insurers from basing premiums on people’s health status — has to go away if the mandate is unconstitutional. But if it gets rid of only the mandate, calls for action will echo through the halls of Congress.

“If it’s as bad as I think it’s going to be — and I think the uncertainty it adds would be very, very bad — then we’ll need to try something else,” said Jon Gruber, an architect of the Massachusetts health reform law that is a model for the Affordable Care Act. “It would become a self-fulfilling prophecy. The actuaries would imagine the worst case and start projecting high premiums across the board.”

Gruber believes the individual mandate is the tried-and-true way to move people onto insurance rolls, but he would choose auto-enrollment as the second best option. He warns, however, that a loss of the mandate would be a major shock to a load-bearing piece of the health reform law.

Gail Wilensky, who ran Medicare and Medicaid under President George H.W. Bush, said she thinks a combination of carrot-and-stick policies could do a better job of moving free riders into the insurance market than the mandate — “a terrible piece of policy,” she said.

Auto-enrollment could do a better job, Wilensky said, as could another option: strict late-enrollment penalties, in which people pay higher premiums if they don’t enroll in coverage as soon as they’re eligible. That’s an approach similar to those that have shown results in Medicare Part B and Part D.

Another alternative comes from Princeton sociologist Paul Starr, who was a senior health care adviser to President Bill Clinton. Under his proposal, people would have three options, not including the poor, who would be covered under health reform’s Medicaid expansion.

They could buy insurance, with subsidies if they qualify. They could pay an annual tax penalty for going uninsured. Or they could opt out with no penalty — but they couldn’t opt back in for five years. And those who opt out wouldn’t have the protections under the health reform law, meaning any insurance — if they could get it at all — could be prohibitively expensive.


Marcus Welby/Steve Jobs approach to Medicaid

Dave Chase, Contributor

Powering & studying the disruptive innovators reinventing healthcare

Pharma & Healthcare
3/11/2012 @ 9:49AM |1,643 views

The Marcus Welby/Steve Jobs Solution to the Medicaid-driven State & County Budget Crisis

Image via Wikipedia

Not a week goes by without seeing some headline about deficits pushing municipalities to desperation or Bill Gates describing state budgets using accounting techniques that would make Enron blush.  The common culprit: healthcare costs with Medicaid being the biggest driver.

Fortunately, there is a solution that has bipartisan support and has shown to reduce healthcare costs by 40-80% (e.g., Seattle-based Qliance). It can be described as two parts Marcus Welby and one part Steve Jobs. The federal health reform bill included a little-noticed clause allowing for Direct Primary Care (DPC) models to be a part of the state health insurance exchanges. That little-noticed clause (Section 1301 (a)(3) of the Affordable Care Act and proposed HR3315 to expand DPC to Medicare recipients) should have the effect of massively spreading the DPC model throughout the country.

The future is already here — it’s just not very evenly distributed. – William Gibson

A common myth is DPC is the same or similar to their more expensive cousin — concierge medicine. Not so. Typically one-third of DPC practices are uninsured people. AtlasMD in Wichita, KS is run by Dr. Josh Umbehr who recently mentioned to me one of his patients. Due to tough economic times, she’s living in a storage unit. Her monthly fee ($50/mth which is inclusive of all fees) is less than she was paying in co-pays at the local public health facility. Another is MedLion. One of their recent clinics is in Salinas, CA (a farming community) and caters to farm workers . The waiting rooms are nicer than a public health facility because can put their resources towards a more pleasant experience than billing systems and personnel. AtlasMD has 2 MDs and one NP. No admin staff. Zero. Everything is low cost software, etc.  DPC organizations such as WhiteGlove Health and arriveMD have even lower overhead as their practice are run as a clinic on wheels. [Disclosure: Two of the organizations mentioned, arriveMD and MedLion are customers of my software company, Avado.]

Let’s break down how it’s possible to provide such a high level of service at such an affordable price (i.e., less than a typical cable bill). It’s simple: low overhead. It’s not unusual for a primary care practice to have 3-5 administrative staff for every doctor. This is necessary to deal with the myriad insurance billing schemes that can best be described as a Gordian Knot designed by Rube Goldberg. Smart utilization of affordable technology (often in the low hundreds of dollars per month vs. many thousands and ongoing headaches) is at the heart of it. This allows the doctor to practice medicine the way they were trained, rather than pulling their hair out dealing with insurance for the medical equivalent of a trip to Jiffy Lube. In other words, the practices run similar to the fabled Marcus Welby, MD days. Yet, they are improved upon with a dose of Steve Jobs enabling enhancements that weren’t possible in the past such as virtual house calls. In anticipation of the rapid expansion of these models, entrepreneurs such as BJ Lawson, MD of Physician Care Direct have developed software to run the business side of these practices. [See more on how practices are overcoming obstacles to switching to Direct Primary Care.]

Thus far, DPC has had success in the private market. I put the question of why not use DPC for the Medicaid population (reportedly that is in the works in West Virginia) to DPC practitioners. The response below is a summary of their perspective. It is estimated that if DPC was scaled nationally it could save 20-30% off of overall healthcare costs. That would be the difference between states defaulting and sustained balanced budgets.

The issue of using DPC for the poor is from my point of view a no brainer. Why use the most expensive inflationary system available (by which I mean the insurance system, whether public or private) to take care of those with the least money and most in need of basic services? The structure that makes sense to me is to create a thriving marketplace in direct primary care, competing on price, access and quality – and working exclusively for our patients. Then add a fixed monthly stipend for primary care for every Medicaid patient in the United States – a stipend that covers the lowest priced/highest functioning primary care available. This could be a voucher or credit card account for each Medicaid patient. The allowance could only be spent on primary care and the patients could buy up to higher priced practices if they saw value worth purchasing. That would convert the Medicaid patient from being a low paying, high utilizing patient to a valued customer who can pay cash for care at a reasonable price. This makes all kinds of sense economically:

  1. No government management system to control or manage care – it manages itself with the patient at the helm.
  2. Converting dependent impoverished citizens into patients with economic clout and respectful treatment
  3. Eliminating the cost overhead of insurance billing on both the MD and the government side
  4. No more barriers to basic care for Medicaid patients – they can use all they need
  5. Eliminating the fee-for-service incentive disaster that produces massive overutilization and huge downstream expenses
  6. Financially stabilizing the primary care world with consistent monthly fee payments to cover our fixed costs while allowing those docs with better ideas or higher prices to go for the upscale patients or those wanting better art work and longer visits.
  7. Free up primary care docs to further improve their quality, access and patient centered services – not their billing savvy
  8. If the government wanted to regulate, they could demand an annual report on each patient they support, giving the actual utilization, health care outcomes and proof of appropriate management of common illnesses, immunizations and cancer screening. The government could actually pay for results, not process. Primary care practices would have to be certified as producing an acceptable level of results and patients would have access to our success profiles both in terms of cost and quality when selecting their doc for next year. [Note: A standard is being defined by the Healthcare Delivery Innovation Alliance which is seeking outside input.]
  9. The government could track the overall costs created by each practice and make those numbers public as well. The high cost practices would eventually lose certification, particularly if the money ended up in the hands of their employer (hospitals, big multispecialty clinics).
  10. If the government wants to tackle the HotSpotters patients, they just need to up the monthly ante for the sickest patients – they will get their money back with huge interest from the reduced downstream costs and reduced transaction costs that these folks generate. With the big fees they will also be able to require more complete reporting of how their chronic illnesses are being managed.

Medicare should do the same – stop paying fee-for-service for Primary Care and start paying a fixed monthly fee (allowing patients to buy up if the government gets the price wrong, as it almost certainly would). The patient should have total control over which primary care doc gets the money – remember, we want to work for the patient, no matter who pays the bill.

So that’s the solution – a simple system where the patient is in charge, the government buys good basic care and the patients can buy up. The system itself is created within a free market structure which the government is simply choosing to ride (like food stamps and grocery stores) with patients running the show, so service and quality could go up every year while prices remain stable or decline – like any real functioning market system in the world. Direct Primary Care is the only available model that could accomplish these goals. Everyone else is still trying to figure out how to “work” the insurance system. However, if the government has wisdom, they would also make the monthly fee deal available to prior fee-for-service docs – to boost competition and to accelerate the conversion to Direct Primary Care models. The right incentives produce the right results.

Reform: A trek not a sprint

Obama’s health care law: A trek, not a sprint

By RICARDO ALONSO-ZALDIVAR, Associated Press – 2 hours ago 

WASHINGTON (AP) — It took only a year to set up Medicare. But if President Barack Obama’s health care law survives Supreme Court scrutiny, it will be nearly a decade before all its major pieces are in place.

And that means even if Obama is re-elected, he won’t be in office to oversee completion of his signature domestic policy accomplishment, assuming Republicans don’t succeed in repealing it.

The law’s carefully orchestrated phase-in is evidence of what’s at stake in the Supreme Court deliberations that start March 26.

The Affordable Care Act gradually reorganizes one-sixth of the U.S. economy to cover most of the nation’s 50 million uninsured, while simultaneously trying to restrain costs and prevent disruptions to the majority already with coverage.

Despite the political rhetoric about what “Obamacare” is doing to the nation, only a fraction of the law is in effect.

“We really haven’t seen the main game,” said Drew Altman, president of the California-based Kaiser Family Foundation, a nonprofit information clearinghouse on the health care system. “The major provisions that will affect the most people and cost the most money don’t go into effect until 2014 or later.”

What has taken effect in the two years since the law was enacted has produced both successes and clunkers, and some surprises.

Few expected a relatively minor provision tacked on late in the legislative process to be its biggest success so far. But allowing young adults to stay on their parents’ insurance until age 26 has added nearly 2.5 million people to the coverage rolls, at no cost to taxpayers.

Despite Republican pledges to repeal the overhaul, it’s arguably the Obama administration that has done more to scale it back.

Health and Human Services Secretary Kathleen Sebelius decided to pull the plug on a long-term care insurance program seen as a budget drain. She also decided that Washington would not dictate a basic health benefits package for the country, allowing each state to set its own, within limits.

Medicare recipients gained more protection from high prescription costs and better preventive coverage, but older people remain the age group most opposed to the law, concerned that cuts to the program to finance benefits for the uninsured eventually will compromise their own care.

If the Supreme Court overturns the law entirely, that would present an immediate dilemma about popular early benefits such as coverage for young adults and prescription savings for seniors.

“These provisions give immediate relief to a small percentage of people, but it’s a lot of relief,” said economist Len Nichols of George Mason University in Virginia.

Other early benefits have been a mixed bag.

Millions of people are getting preventive care that now must be provided at no additional cost to patients. Birth control for women soon will be on that list. Insurance premium increases are getting more scrutiny.

But a program of tax credits for small businesses has seen little acceptance. The administration is in the awkward position of asking congressional Republicans to help fix it.

A highly promoted program that provides a lifeline to people denied coverage because they already had medical problems has probably saved lives. But enrollment in the Pre-Existing Condition Insurance Plan has been disappointing, with only about 50,000 people nationwide.

Glenn Nishimura, a consultant from Little Rock, Ark., checked it out and found his premiums would come to about $6,300 a year.

“It’s out of my price range,” said Nishimura. It makes more financial sense to take care of his high blood pressure and high blood sugars by paying out-of-pocket and gambling that his health will hold up, he reasons. In three years he’ll be eligible for better coverage under Medicare.

If the health care law is upheld, it will bring some relief against such risks for millions of people such as Nishimura.

Starting in 2014, insurers will have to accept all applicants regardless of prior health problems. Also that year, many middle-class people will qualify for federal subsidies to lower the cost of their premiums. Consumers will have access to competitively priced private insurance through new state-based markets called exchanges.

At the same time, Medicaid would be expanded greatly to cover millions more low-income people, childless adults who do not now qualify.

Between the two approaches, more than 30 million uninsured people are expected to obtain coverage. Millions more will gain the security of knowing they can’t be turned down for health insurance if they switch jobs.

That’s critical for Natalie Hough, a college sophomore from Hillsborough, N.C. An aspiring artist, Hough has a heart condition that probably would make her uninsurable if she had to apply on her own later in life. Starting in 2014, insurers will not be able to turn away people like her.

“It’s definitely peace of mind, knowing that I can go to a hospital if I need to,” she said. “I’m an art major, and I’m not going to make billions of dollars.”

But such changes hinge on whether the law’s requirement that most people have health insurance is upheld by the Supreme Court.

This individual mandate, the main target for the law’s critics, also takes effect in 2014. Without it, many experts fear that the new exchanges, the state-based markets for private insurance, won’t work. Healthy people would be tempted to postpone signing up until they get sick, raising costs for everybody.

Administration lawyers have advised the court that if it strikes down the mandate, it also should invalidate the requirement that private health insurers accept customers with health problems.

If the court leaves the rest of the law in place, the Medicaid expansion could continue.

But even if Obama’s plan to expand coverage survives its test of constitutionality, expect the law’s cost-control measures to remain under attack.

One is an independent board that would have the power to curb excessive increases in Medicare spending by ordering cuts if Congress fails to act first. Republicans call it a “rationing board,” although the law specifically bars the yet-to-be-named panel from restricting access. The health care industry opposes the board; efforts to do away with it or diminish its role seem to be gaining ground.

“It would work like a random tax on medical innovation,” said economist Douglas Holtz-Eakin, a Republican adviser. “If you were an innovator, why would you want to bring something new to market when the biggest payer in the country is periodically lopping off spending?”

The other main cost-control measure is a tax on generous health insurance plans. Labor unions oppose it.

It won’t take effect until 2018, a year after a second Obama term would have ended.

Medicaid Reduces Access – column

Avik Roy, Contributor

The Apothecary is a blog about health-care and entitlement reform.

Pharma & Healthcare
3/10/2012 @ 6:57PM |917 views

New Study: Expanding Medicaid Reduces Access to Health Care

Ted Kennedy helped to create the S-CHIP program. Image via Wikipedia

Chapin White of the Center for Studying Health System Change has published an important new paper in Health Services Research, a journal of health economics, which suggests that a critical part of the Affordable Care Act—its expansion of Medicaid coverage to 16 million more Americans—may actually reduce those individuals’ access to health care

White’s report comes to my attention from John Goodman via Jason Shafrin. It comes on the heels of numerous studies that show that patients on Medicaid, our national government-run health-care program for the poor, do far worse on health outcomes than do those on private insurance, and in some cases, worse than those with no insurance at all. (For an extremely deep dive into these studies, see my threepart series on the topic.)

Medicaid underpays doctors for their expenses

Why does this occur? The main reason is that Medicaid underpays doctors and hospitals to care for Medicaid beneficiaries. Medicaid’s reimbursement rates are around half of those paid by private insurers. In many cases, Medicaid pays doctors less than it costs to care for Medicaid patients, meaning that doctors face the choice of caring for the poor, and going broke, or shutting their doors to Medicaid patients. One survey found that internists were 8.5 times as likely to accept no Medicaid patients at all, relative to those with private insurance. Another found that two-thirds of kids on Medicaid were denied a doctor’s appointment for a serious condition, relatively to only 11 percent for the privately-insured.


Believe it or not, physicians even do better caring for the uninsured than they do caring for Medicaid patients. Two MIT economists, Jonathan Gruber and David Rodriguez, have found that three-quarters of physicians receive lower fees for serving Medicaid patients than they do for the uninsured, because many people without health insurance are still able to pay out-of-pocket for routine health expenses. (Ironically, Gruber was the intellectual father of Obamacare, and remains an outspoken advocate of the law.)

Overall, Medicaid expansions do not lead to more doctor visits

Chapin White looked into this problem by examining the State Children’s Health Insurance Program, or S-CHIP, which was created by Congress in 1997 as a way of expanding Medicaid to lower-income children who were above the income thresholds of traditional Medicaid. He found that CHIP was “not associated with any change in the aggregate quantity of physician services [consumed],” and concluded that “coverage expansions…do not necessarily increase physician utilization.”

The main reason for this non-effect, he surmised, was due to the fact that CHIP paid physicians less for their time and expenses. “Increasing Medicaid fees,” he wrote, “is…clearly related to a reduction in non-[cost-sharing]-related access problems among both low- and high-income children.”

White compared children in states which had undergone large CHIP expansions, and compared them to children in states with smaller expansions. He also examined increases versus decreases in Medicaid physician fees. He found, surprisingly, that physician utilization was lower in the states with the largest CHIP expansions, and that expansions of CHIP led many children to lose private insurance as the government program crowded out the private sector. “Supply-side effects of CHIP—either the use of managed care tools or the relatively low reimbursement rates, or both—may have limited the utilization effect of the coverage expansion,” White concluded.

PPACA’s Medicaid expansion could worsen physician access

As the below table shows, 11 percent of children in the lowest income quartile, who were uninsured, gained insurance; however, 13 percent of children in that quartile who had private insurance lost it, while Medicaid/CHIP expanded by 23 percent of children. In other words, for every two children who gained Medicaid coverage, one lost private coverage.


In the third-lowest and second-lowest quartiles, the proportion of those gaining Medicaid coverage and those losing private coverage were almost identical, suggesting that Medicaid was replacing private coverage in the majority of cases. Those individuals who are subject to the replacement will have poorer access to health care, because Medicaid pays less than private insurance. It is this cohort, represented especially by White’s third-lowest quartile, that is subject to Obamacare’s expansion of Medicaid.

White concludes: “In general, these findings argue strongly against the idea that the effect of expanding utilization can be deduced simply from the reduction in patient cost sharing…Coverage expansions by themselves do not necessarily spur increases or decreases in overall utilization.”

Put more simply, health insurance is not the same thing as health care.

(This article originally appeared in The Atlantic, where I am guest blogging for Megan McArdle for two weeks.)

Follow Avik on Twitter at @aviksaroy.

UPDATE: Kevin Outterson writes that I “focus on [Medicaid’s negative impact on access] but never [mention] the very important boosts to primary care reimbursement in the ACA.” However, Kevin must know that these reimbursement boosts are only available in 2013 and 2014, after which Medicaid reimbursement rates revert to prior levels. “The impact of the reimbursement increase likely will be limited because of its temporary nature and exclusion of other [medical and surgical] services,” writes Peter Cunningham in an excellent study on the subject.