Insurers expanding

As I mentioned a couple of weeks ago, health insurance co-ops are expanding.  Co-ops from Massachusetts, Montana and Kentucky are crossing borders to operate in New Hampshire, Idaho and West Virginia.  Idaho has a competive exchange market in 2014. New Hampshire and West Virginia have non-competitive Exchange marketplaces as they each had only a single Blue offering plans. 

The Christian Science Monitor reports that it is not just non-profit public good orientated co-ops that are looking to expand their Exchange footprints.

“At this point not very many insurers [are] pulling out,” says Jenna Stento, a senior manager at Avalere Health in Washington, a provider of information and advisory services in the health-care industry. The trend “doesn’t seem to be going in the direction of less competition.”

She says the Blue Cross family of insurers, for example, looks likely to expand its presence from 47 states in the first year of the Affordable Care Act (ACA) exchanges to 49 states when enrollment starts for 2015.

Another straw in the wind: The directors of three state exchanges under the ACA told reporters on a recent conference call that they expect new insurance companies on the playing field for 2015. Those states were California, Kentucky, and Washington.

And in New Hampshire, with only one insurer selling on its exchange for 2014, two more firms are expected to offer coverage in 2015, according to news reports….

Insurers don’t have to disclose their preliminary plans for several more weeks.  At the end of April, preliminary networks, plan designs and premiums are due for plans that want to sell on the Federal exchange.  State based exchanges have different deadlines.  This is a soft deadline.  For instance, Mayhew Insurance last year threw seven major configurations at our regulators for approval.  We withdrew one configuration because our market research folks figured it would not be worth the set-up costs as it could not sell.  We withdrew another because half a dozen groups that had an MOU with us withdrew the understanding, thus blowing up the relevant network and pricing model. We only sold half of what we filed.

A broader example is Aetna.  Last year, Aetna filed preliminary plans in most states where it operated.  However in September when final filings were required, it withdrew from Exchanges in several large states.  It did not think it could make money on Exchanges, so it pulled out. 

One of the big questions that the early 2014 experience has raised is whether or not the insurers think they can make long-term money on the Exchanges.  There will be a few insurers leaving the market, but there looks like a significant number of new insurers entering the market.  This will be especially important in low-competition states and regions.  I don’t think insurance competition is a panacea for cost control purposes, as we’re basically pass through entities in a quasi-public regulated entity model now, so there is some area of savings.  Some regions will see significant cost savings because new entrants won’t have pre-exisiting relationships with high cost providers whom they have to keep happy.  The new entrants can tailor networks based solely on Exchange criteria instead of a multi-objective function of keeping a high cost provider happy for commercial and Medicare Advantage providers. 

As long as insurers think they can make money on Exchange, the Exchanges are healthy enough.

Latest CBO update — more covered at lower costs

 I expected the post Open Enrollment CBO estimates for coverage costs to show a significant increase over their February estimates:

the CBO headline will not be that Obamacare costs $9 billion more than projected, but $13 or $15 or $20 billion dollars more than projected.  The CBO will probably not alter their out-year projections for total uptake as they’ll model the person that they assumed would have skipped out on 2014 enrollment but entered the Exchange in 2015 will have just entered a year “early”. 

The increase in cost will be due to two factors.  The first is increased subsidy costs.  80% of the people on the Exchange qualified for subsidy.  If that ratio holds, that means an additional 800,000 to 1,200,000 people will be getting monthly subsidies.  The second factor is that fewer people will be paying the mandate penalty.  The absolute lowest revenue loss would be $100 million dollars, probable revenue loss is $300 to $500 million dollars. 

I was really, really wrong!

The new CBO report just was released and here are the highlights:

Relative to their previous projections made in February 2014, CBO and JCT now estimate that the ACA’s coverage provisions will result in lower net costs to the federal government: The agencies currently project a net cost of $36 billion for 2014, $5 billion less than the previous projection for the year; and $1,383 billion for the 2015–2024 period, $104 billion less than the previous projections (see the figure below).

. As time has passed, the period spanned by the estimates has changed. But a year-by-year comparison shows that CBO and JCT’s estimates of the net budgetary impact of the ACA’s insurance coverage provisions have decreased, on balance, over the past four years (see the figure below). That net downward revision is attributable to many factors, including changes in law, revisions to CBO’s economic projections, judicial decisions, administrative actions, new data, numerous improvements in CBO and JCT’s modeling, and lower projected health care costs for both the federal government and the private sector.

CBO Cost projections of PPACA 2014-04-14

CBO Cost projections of PPACA 2014-04-14


It’s almost like this thing is going to work at both increasing coverage and flattening the growth curve of healthcare spending.

Fraud, Waste and Abuse

The Washington Post is reporting on a successful recovery effort of funds from fraud, waste and abuse in Social Security:

The Treasury Department has intercepted $1.9 billion in tax refunds already this year — $75 million of that on debts delinquent for more than 10 years, said Jeffrey Schramek, assistant commissioner of the department’s debt management service. The aggressive effort to collect old debts started three years ago — the result of a single sentence tucked into the farm bill lifting the 10-year statute of limitations on old debts to Uncle Sam….

the Social Security Administration, which has found 400,000 taxpayers who collectively owe $714 million on debts more than 10 years old. The agency expects to have begun proceedings against all of those people by this summer.

Wait, its not reporting on successful recovery of funds that were illegally gained by moochers. 

The report is sympathetic to people the government claims collected too many benefits:

In Glenarm, Ill., Brenda and Mike Samonds have spent the past year trying to figure out how to get back the $189.10 tax refund the government seized, claiming that Mike’s mother, who died 33 years ago, had been overpaid on survivor’s benefits after Mike’s father died in 1969.

“It was never Mike’s money, it was his mother’s,” Brenda Samonds said. “The government took the money first and then they sent us the letter. We could never get one sentence from them explaining why the money was taken.” The government mailed its notice about the debt to the house Mike’s mother lived in 40 years ago.

This is what most “waste/fraud/abuse” looks like — minor book-keeping issues.  Most of the time there is either a prompt reconciliation, or a decision to let things slide as reconciling would be more costly than eating the costs.  So anyone who claims that there are tens of billions of dollars of easy to cut or recover WFA in the federal budget is either a fool, a liar, an innumurate or any and all of the previous.

On reading CMS Data

The New York Times has a great little tool that accesses the massive CMS data dump on provider reimbursement for Medicare Part B.  You can look up any Medicare Part B doc that has treated more than 11 patients in 2012 and see that they charged and what they got reimbursed.  There are a few caveats to this data set.

  • Primary address location is fairly arbitary.  I looked up my PCP.  He spends 60% of his time at an office a few blocks from my house.  He was not there.  His “primary” location according to the CMS data set is a location he spends one day a week at.  When he first came to the area, he worked at this location 100% of the time, but moved to my neighborhood five or six years ago.  His Medicare data profile has not been updated.  Unfortunately provider data that is not 100% neccessary for claims payment is splotchy.
  • Claims rolling up to a provider’s NPI or Medicare ID.  Non-MD/non-D.O. clinicians such as Certified Nurse Practicioners, Physician Assistants, Master and Doctorate level Physical Therapists etc. often will roll their billing up to a doctor’s Medicare billing number.  This means we can’t do a simple time management bullshit detection study based solely on “This provider is claiming he is doing 17 Medicare Part B procedures a day.  Each of these procedures takes 30 minutes… IMPOSSIBLE”.  That type of first level analysis might identify odd situations, but most will be explained by seeing three or four CRNPs/PAs doing most of the work that the doctor than bills for.
  • Medicare Advantage is not in this data set.  Some regions have lots of Medicare Advantage enrollment. Others don’t Some docs have a lot of Medicare Advantage patients.  Others don’t.  We can’t generalize too well to the entire Medicare population from the CMS data set.
  • No way to determine medical neccessity/particular skill.  This is pure counting data, it is not quality data.  Counting data is valuable as it can be used to look at odd counts, but there are plenty of good reasons for outliers.  For instance, a provider might be particulary good/renowned for putting shoulders back together, so that could be why his shoulder surgery count is so high compared to less aggressive treatment reimbursement codes as he was getting patients referred to him that needed surgery.  We can’t tell from this data if the patients were different or the doctor was different in treatment preferences.

This is very valuable data for geeks, but it is caveated and limited.  Nicholas Bagley at the Incidental Economist notes that information disclosure is not a particulary effective policy tool in and of itself.

Information disclosure is a common regulatory tool. It’s been studied a lot. And in most settings, it just doesn’t work…. Nor is it clear that employers and insurers will leverage the data in shaping their provider networks or honing their cost-control strategies. An extensive 2000 review of the evidence about publicly available information on provider quality concluded that “[n]either individual consumers nor group purchasers appear to search out, understand, or use the currently available information to any significant extent.”

…. Sure, the data will reveal some outlier physicians with outrageous billing habits. Patients should avoid those doctors. But what about a cardiologist who bills Medicare for stenting an unusually large number of patients? Is that a “bad” doctor with a penchant for inserting medically unnecessary stents? Or a “good” doctor with a thriving practice and a steady hand who inserts stents only where clinically indicated? How would you know?


Ch, ch, ch Changes….

Momsense has some good news:

Also, I have some news to report on dealing with life changes and exchange policies. I recently reported a major increase in salary (yay me!) which meant a change in the subsidy amount. The coverage will be seamless, I will just pay a lot more per month. It is manageable and still about $1,000 less than I was paying per month before I had to drop my coverage in the aftermath of the fustercluck brought to us by Wall Street and the Republicans.

DougJ passed along word that Health and Human Services Secretary Kathleen Sebelius is spending more time with her family:

Obamacare has won. And that’s why Secretary of Health and Human Services Kathleen Sebelius can resign.

Both of these are major changes that and the state level exchanges can help people deal with changes.  In MomSense’s good news, she had a major change in income.  She had two choices.  The first was what she did, go online, notify the Exchange that her income for the rest of 2014 was going to be much higher than projected.  The Exchange took the new income into consideration and reduced her subsidy.  The other choice was to not report the new projected income, report it on next year’s tax return and see her tax bill go up substantially as the IRS claws back the overly generous subsidy. 

Secretary Sebelius will soon experience a job loss.  She will be losing her employer sponsored healthcare shortly.  She has two options.  The first is to go on Medicare as her exclusive insurance as she is 66 and qualified by age.  The second is to COBRA her policy.  If she was two years younger, she would have had a third option.  She could have gone on the Exchange for an individual policy to bridge her to Medicare eligibility. 

These are just two of the many qualifying events that can see people add or change their Exchange based insurnace outside of the normal open enrollment.  Qualifying events are major life changes such as marriages, divorces, births, adoptions and deaths of family members, significant employment changes and moving primary residences.  People with major qualifying events have thirty days from the event to go on the Exchange, update their information and potentially make a new selection of a new plan that accomodates their new situation better.

Simple solutions that won’t be approved

Paul Waldman proposes a simple, straightforward change to Medicare payment rules that would save significant money by removing at least one fucked up incentive to prescribe overly expensive medication:

Avastin costs $50 a dose, while Lucentis costs $2,000 a dose. And Medicare pays doctors a six percent fee on top of the cost of whatever drug they’re prescribing. So if you’re an ophthalmologist who has a patient with macular degeneration and you prescribe Avastin for them, you get $3. If you prescribe Lucentis, you get $120. Dr. Melgen billed Medicare for $11.8 million in Lucentis alone….

get rid of that six percent fee and just give doctors a flat fee for writing prescriptions. Make it $5, or $10, or any number that makes sense. There’s no reason in the world that the fee should be tied to the price of the drug; all that does is give doctors an incentive to prescribe the most expensive medication they can.

This would be straightforward and remove the incentive for providers to overprescribe because they get a cut. Most private insurers that pay for drugs that are administered during the course of an appointment already pay fee schedule instead of percentage fees. 

It is a simple, straightforward incentive correction that will save money and lead to more appropriate course of action for patients.  And it won’t pass as it takes money out of the pockets of the one of the most trusted professions and organized lobbies in the country. 

However, PPACA’s Indepedent Payment Advisory Board could have a role in reducing this practice.  IPAB, for those who need a refresher, is a board appointed by the President and confirmed by the Senate that has the responsibility for cost control in Medicare if Medicare spending per beneficiary exceeds either the average of CPI-U and CPI-U medical components between 2015 and 2019 or the general rate of growth in the economy after 2019. 

IPAB can’t ration, and it can not change Medicare beneficiary benefit designs.  It can only make changes to provider payment structures.  Low hanging fruit like the percentage based on-site prescription fees would probably be the first round of easy cuts.  IPAB can get away with it because it is politically isolated from Congress.  However, IPAB probably won’t have a chance to go to work as right now Medicare per capita spending growth is at or under target (in and of itself, a good thing, but a problem to eliminating really stupid waste).

Restating the obvious — the sick get insured first

From MedCity News:

an analysis of the first two months of claims data shows the new enrollees are more likely to use expensive specialty drugs to treat conditions like HIV/AIDS and hepatitis C than those with job-based insurance.

The sample of claims data – considered a preliminary look at whether new enrollees are sicker-than-average  – also found that prescriptions for treating pain, seizures and depression are also proportionally higher in exchange plans, according to Express Scripts, one of the nation’s largest pharmacy benefit management companies.

This is not surprising.  Sicker individuals on average signed up for Exchange policies in October, November, December and the first half of January.  They were the motivated enrollees.  The less motivated enrollees waited until deadline pressure where they would have to spend money for either something (health insurance) or nothing (mandate penalty) forced a decision. 

From a loss management perspective, the relevant question is not whether or not the early enrollee population is sicker than the population that receives insurance through work but whether or not the actual early enrollee population is sicker than projected AND whether or not the late enrollee population is healthy enough to meet projections or slightly healthier than anticipated to cross subsidize the sicker early enrollers.

A population that is sicker than people in work sponsored plans was always anticipated and priced into premiums.  Different companies projected and priced the risk differently, but this was a common core assumption.  Right now the early evidence is showing that most companies got it pretty close.