Zika Cost update

Thanks to Liz Szabo for willing to chase down a number that we needed in yesterday’s Zika post:


From the CDC on 3/10/2016:

we know the cost of caring for one infant with a birth defect can be up to $10 million or more.  Funding is crucially important and urgently needed.  The rains are coming and with the rains will come mosquito season and with mosquito season will be the risk of explosive spread of Zika as well as dengue and other Chikungunya.



That works out to be $120,000 in incremental costs assuming an 85 year lifespan. If we assume a 50 year life span, we’re looking at $200,000 per year in incremental costs.

Depending on the life span assumptions, a Zika birth defect case ranges from the equivilent of an additional Hep-C treatment year to a Cystic Fibrosis treatment year. If there are widespread but low level infections and a low probability of significant birth defects from Zika, then state budgets can handle a few more catastrophic on-going claims. If there are concentrated areas of infection with significant birth defects then state budgets will blow up.

Exchange Strategery thoughts

Exchange strategy is dynamic and I think the new round of pricing plus additional insurance company learning by doing will see some significant changes this during this Fall’s open enrollment period.

This is in reference to New York state pricing. The cost of the second lowest Silver in some regions is projected to go down dramatically from 2016 and 2017 even as the median insurer in the state is asking for an increase. This means there looks to be two clusters on the Silver Exchange market. The first cluster is Medicaid like pricing near the subsidy attachment point of the second least expensive Silver. The other cluster are plans that pay near standard commercial rates to providers and they are much more expensive. The first cluster will get most of the membership and even more of the healthy membership.

Insurance administration needs scale. As I have said before, my job when I was a plumber, was effectively membership scale invariant. A product with 300 people took me as much time to plumb as a product with 30,000 people but my costs were spread out over a much larger population. High cost insurers will be facing administrative scaling problems in markets where there is a Medicaid like provider that gets most of the healthy membership.

Risk adjustment based strategies are a plausible path forward. High cost insurers could offer disease specific plans and make their money by offering good chronic disease control while getting risk adjustment inflows from the low cost plans. The problem with this strategy is the risk adjustment inflow is calculated based on average premiums in the region. The low cost plans bring down regional average premium which means the risk adjustment transfer payment does not fully compensate the high cost plan’s provider reimbursement.

Over the long run (2018/2019), high cost insurers are likely to get off Exchange in regions where there are low cost Medicaid like insurers that get most of the membership.

The other major modification to my thought process on Exchange strategy is on the issue of spamming the exchanges with isomorphs in order to capture the #1 and #2 Silver. This is not a bad strategy but it is a suboptimal strategy.

Let’s use the Chicago zip code 60290 on Health Sherpa as an example for a 40 year old non-smoker.  Ambetter Chicago The chart to the right is the 2016 Silver prices.  As you can see, Ambetter effectively   spammed the Exchanges.  They had the low cost Silver and then another six plans before the first plan offered by another (high provider reimbursement) insurer.  This plan offering configuration means the subsidized individual who chooses the lowest cost Silver pays $3 less per month in out of pocket premiums then they would have if they chose the 2nd Silver.

Right now there is a $54 gap between the first Ambetter product and the first product offered by a competitor.  However there is only a $3 gap between the first Silver and the second Silver.

This is a business opportunity.

Ambetter can make themselves significantly better off (with the side effect of making most subsidized buyers better off) by rejiggering their product offering profile.  Offering fewer silver plans would lead to higher enrollment of healthy people who are heavily subsidized.

They continue to offer the low cost Silver plan at $195 per month and then either discontinue their other low cost Silver plans so that the second Silver  is the Blue Cross Silver plan or offer a medium cost Silver as the new second Silver priced below the Blue Cross offering.  This would increase the Silver subsidy gap bonus.  This would improve their retention of heavily subsidized, healthy members.

Right now, an individual who makes $18,000 a year pays $63 per month for the Second Silver, and they would pay $60 per month for the low cost Silver.  Under this gap maximization plan the Blue Cross Silver would be $63 per month for this individual but the low cost Silver plan would be $9 per month.  Healthy individuals with low incomes are the most likely people to drop coverage because they can’t afford it.  A premium of under $10 per month is far easier for a poor 23 year old Young Invincible to handle than a $60 per month premium.

This is an extreme example as it excludes the relative price dynamics of making the Blue Cross plan much cheaper, so the Blue Cross risk pool will get comparatively healthier as some of the sicker people who are currently in the Ambetter pool buy Blue Cross broader network coverage plans so Ambetter would have even larger risk adjustment outflows.

The highly probably strategy for companies that are very confident that they will offer the # 1 Silver with a large gap between their low price offerings and the next insurer’s lowest priced Silver is a modified plan spam approach with the aim of maximizing the gap without losing too much profitable membership. In this example, that would mean Ambetter would offer the #1 Silver at $195 per month and then the current #5  as their second, benchmark setting Silver plans at $213 per month.  This would make the gap $18 .  For an individual making $18,000 per year, the low cost Silver now costs them $45 per month while there is still a plan choice owned by Ambetter between the subsidy point and the first offering by a competitor.  This will lead to higher initial uptake of healthy, subsidized members during open enrollment as well as less attrition due to failure to pay.



Zika and Medicaid

I want to focus on the probable consequences of a potential Zika outbreak on Medicaid as a continuation of the discussion that Anne started last night.

Zika could be a significant push to rejigger parts of the Legacy medicaid system away from state based funding to a national reinsurance model because of who has high cost persistent conditions, where Zika infections are more likely to be concentrated and who pays for a significant number of births.

Medicaid is a significant payer for maternity, labor and delivery care in the United States.  In 2010, Medicaid paid for 44% of the births in the country.  These births are paid for via Legacy Medicaid where the states are paying between 30% and 50% of the total cost of the service.  The Southern and Southwestern states are more likely to have higher than national average percentage of births paid for by Medicaid than cooler climate states.  This means that all else being equal, the impact of Zika will be borne by more Southern and Southwestern states than states that fought for the Union or in the Mountain West.

Southern states tend to have far skimpier Medicaid plans and more importantly, they are generally poorer with less public health capacity and less economic ability to absorb significant economic and medical shocks.

The most notable impact of Zika is microcephaly.  Children born with too small heads are extreme medical risks.  These children will have lifelong medical costs for additional surgeries, drugs, treatments and rehabilitation therarpy compared to kids.  Having a child with life long medical needs is a significant constraint on earnings for parents and caregivers.  I would project that Medicaid and CHIP will cover a disproportionate share of children who have Zika related birth defects.

So we would have very expensive cases concentrated on publicly provided insurance rolls in states that stingily fund their safety net.  A state that has several hundred covered lives with Zika related birth defects on their Legacy Medicaid plans will be in significant financial trouble.  They either can’t or won’t raise taxes enough to cover the cost of catastrophic illnesses that are outside the normal variance.

There is a viable policy tweak.  It would require Congressional action.  Zika related birth defects would be carved out as  as a separate eligibility category with a distinct federal funding stream.  We already do this with end state renal disease (dialysis) and three years of immunosuppressent payments for transplants.  People who have those diseases and conditions are enrolled into  Medicare and Medicare pays for them as either the primary public insurer or as a secondary insurer for people with private insurance.  Carving out Zika would be fairly straightforward and it distributes the risk nationally.  Alaska and Montana would pay their share for public health.

The other alternative would be to have Medicaid pay kick payments to the states on a capitation basis for individuals with Zika related birth defects.  The kick payment would act to bring the total cost of treatment onto the Federal books instead of the state’s books.  This would be a narrower intervention  as it would only nationalize Zika treatment costs for individuals on Medicaid.

Information for tough decisions

The New York Times reports that seniors are seeking information for tough decisions that they’ll make.  Doctors are getting paid to offer end of life planning support.

Three non-profits — the California Health Care Foundation, Cambia Health Foundation and John A. Hartford Foundation — fielded a poll of 736 doctors who see patients 65 and older. Only 14 percent said they had already billed Medicare for the new counseling, though the survey was conducted February 18 through March 7, meaning the earliest participants only had about six weeks from the start of the benefit. Altogether, 95 percent of doctors in the poll expressed support for the Medicare benefit and a big majority considered such conversations important….

All told, it was only about 20 minutes before Diamond’s white sneakers shuffled out of the room and the appointment was over. He was to review the paperwork with his two daughters before signing it, but he said he had looked forward to the session simply because it was a new experience. Diamond said he saw it as both necessary and comforting.

Medicare reimbursements for the appointments vary by region and the type of facility, but on average, an initial 30-minute session in a doctor’s office costs $86. As those experiences proliferate, the topic of discussing end-of-life care may return to the relatively uncontentious mantle it once enjoyed.

Death is scary, but lots of things are scary.  Having a plan to address uncertainty helps a lot of people become less scared as well as maintain control over themselves and their environment.  In a medical finance context, having a plan allows people to get the care that they want with some modicum of dignity.  It is not a death panel.  People can choose to have the hospital go all out with a strong possibility of a long stay in an ICU while others may choose to have hospice as their preferred option.  It is a matter of choice instead of a mandated non-choice that all people will get every type of care even when the individual would prefer not to have that care.

It is not a death panel.  It is information and advice from a trusted expert to make good choices.

Space Death, The Final Frontier


Please repeat after me: “Prescott Cactus is not a lawyer and isn’t giving legal advice”. Thanks !
The paperwork I show below is usually available on the website your State maintains. The italicized, quote boxed wording below is from the State of Arizona forms on the internet.

So now death. The next step beyond hospice. Yesterday you should have completed all your plans about dying. It is a process and wether you come to it slowly and naturally or as quickly as you adjust the radio station on your boom box near your the shower. Providing a game plan will make things SO much easier for those left behind. They will also help to assure that your wishes are fulfilled and that you begin to realize that we are here for just a short stay on this spinning piece of rock.

Docs, Hospital and designee should have copies and you should have original of all of these.

* * * * *

You may want a “Durable Health Care Power of Attorney”. (AZ Example)

If you want to select a person to make future health care decisions for you so that if you become too ill or cannot make those decisions for yourself the person you choose and trust can make medical decisions for you. Talk to your family, friends, and others you trust about your choices. Also, it is a good idea to talk with professionals such as your doctor, clergyperson and a lawyer before you sign this form.

This lets the one(s) you chose guide you toward the light when you are unable to make the decision yourself. If your written request to Nephew Billy is to turn off the oxogen and defibrillator when things break bad, it doesn’t take effect as long as you are conscious. You still make the call. You are providing guidance to someone you trust who will hopefully follow your wishes if you are unable.

* * * * *

You may want a “Durable Mental Health Care Power of Attorney” (AZ Example)

The Durable Mental Health Care Power of Attorney form if you want to appoint a person to make future mental health care decisions for you if you become incapable of making those decisions for yourself. The decision about whether you are incapable can only be made by an Arizona licensed psychiatrist or psychologist who will evaluate whether you can give informed consent. Be sure you understand the importance of this document. Talk to your family members, friends, and others you trust about your choices. Also, it is a good idea to talk with professionals such as your doctor, clergyperson, and a lawyer before you sign this form.

This lets you decide who calls the shots when the brain train comes off the tracks. Choose wisely dear reader as it’s an important one !

* * * * *

You may want a Living Will (End of Life Care) (AZ Example)

Use this Living Will form to make decisions now about your medical care if you are ever in a terminal condition, a persistent vegetative state or an irreversible coma. You should talk to your doctor about what these terms mean. The Living Will states what choices you would have made for yourself if you were able to communicate. It is your written directions to your health care representative if you have one, your family, your physician, and any other person who might be in a position to make medical care decisions for you. Talk to your family members, friends, and others you trust about your choices. Also, it is a good idea to talk with professionals such as your doctor, clergyperson and a lawyer before you complete and sign this Living Will.

Think Theresa Marie “Terri” Schiavo. Make your wishes known. Make it easier for those who need to make important decisions on your behalf. Your Durable Health Care Power of Attorney would be able to make these decisions for you if they are present and available. If not . . .

* * * *

You may want a Letter To My Representative: (AZ Example)

Arizona law allows me to make certain medical and financial decisions as to what I
want in the future if I become unable or incapable of making certain decisions for myself. I have completed the following document(s), and I want you to be my representative or alternate representative for the following purposes.
(Initial or check one or more of the following):
_____1. Durable Health Care Power of Attorney
_____2. Durable Mental Health Care Power of Attorney

Allows you to name a Representative and an Alternate Representative for the above 2 positions.


You may (or may not) want a Prehospital Medical Care Directive aka DNR or DO NOT RESUSCITATE. (AZ Example)

A Prehospital Medical Care Directive is a document signed by you and your doctor that informs emergency medical technicians (EMTs) or hospital emergency personnel not to resuscitate you. Sometimes this is called a DNR – Do Not Resuscitate. If you have this form, EMTs and other emergency personnel will not use equipment, drugs, or devices to restart your heart or breathing, but they will not withhold medical interventions that are necessary to provide comfort care or to alleviate pain.

IMPORTANT: Under Arizona law a Prehospital Medical Care Directive or DNR must be on letter sized paper or wallet sized paper on an orange background to be valid.

OK, if you are close to grabbing a seat in God’s waiting room you may want a DNR. If your gorgeous 30 year old body was just in a bad car wreck, you don’t want to have this card next to your drivers license.


Two things that you should know before you go. Last Will and Testament or perhaps even a Revocable Living Trust. These are means in which to disperse your worldly belongings when you depart. IMPORTANT ! ! !


Finely, about departure. We all go different ways.

Please know that the process of death is different with every person.

I’ll share some very, very general observations I’ve had.

Increased fatigue and sleeping with a decreased appetite.
Patient eventually stops eating and drinking do to lack of desire.
(Ice chips if allowed and wet sponge thingee’s)
Sleep becomes almost constant, though still responsive while awake.
Full time sleep, still responsive to touch and lastly sounds.
Patient becomes non responsive to any stimuli.
2 to 4 days after last food and water active dying usually begins.
The first sign of active dying is mottling (mark with spots or smears of color.) usually on feet and then hands.
Life ceases within 12 to 24 hours.

Thoughts? Something to share ?