Good lord that is a lot of money

Wellmark in Iowa has a great example of the benefit changes of the ACA and their costs:

Wellmark Blue Cross & Blue Shield is sending letters this week telling about 30,000 customers it plans to raise their premiums by 38 percent to 43 percent next year….
She said about 10 percentage points of the increase stem from the costs of a single, extremely complicated patient who is receiving $1 million per month worth of care for a severe genetic disorder.

Pre-PPACA or with current grandfathered/grandmothered plans that are not ACA compliant, Wellspan would have had a pair of outs. The first one would be that they could have underwritten individuals with severe genetic risks out. They might not be able to say that they are writing out based on genetics but they could write them out on the basis of past service history. The second out would be the lifetime limit. Most individual policies would have stopped paying after $1 million or $5 million in claims.

So what would that have meant in a pre-PPACA world for the patient?  Most likely the patient would quickly run through their private insurance.  At that point, s/he would most likely either qualify for Medicaid, put on charity care or left to die.

From a policy perspective, it is completely unreasonable to expect a 30,000 person risk pool to absorb one of the top ten claims in the nation.  I am slightly surprised that Wellmark does not have reinsurance or stop loss policies on their plans unless they figure that they can self-insure because they are big enough as a corporation to eat the loss of one unlucky division.  Risk adjustment does not help as risk adjustment does a decent job of calculating average costs of conditions.  A $12 million dollar a year claim episode is an extreme outlier so a risk adjustment transfer might only move a small fraction of the total claim cost to Wellmark.

National re-insurance could be a viable solution.  We had talked about a life panel approach where Medicare would act as a claims repricer for a certain set of conditions before.

we identified a set of big chronic conditions that are impossible to game or upcode, this could be an interesting proposal that reduces private medical premiums, and total net medical spend.

Let us  take cystic fibrosis and  hemophilia as examples.  These are conditions that can’t be faked on a chart and can be easily verified.  They are also very expensive conditions.  Insurers with small risk pools in a particular region/product can be destroyed by having an unnatural cluster of CF or hemophilia members that they cover.    Each condition can cost $300,000 or more per personper year to treat.  Fifty or more very low utilizers in an exchange or commercial plan are needed to generate sufficient surplus to cover one CF person.

Moving these very high cost individuals to Medicare immediately lowers the medical expenses of the privately insured groups as some of their highest cost members have been removed.  This means lower premiums (and for those who think insurers are inherently evil, lower potential profits as the MLR requirements kick in).  Medicare tends to pay a lower rate for services than commercial and Exchange plans.  The rate for Exchange plans is usually Medicare plus a bit, while large employer groups tend to pay at Medicare plus a lot.

A plan like this could be financed by a covered life set-aside.  Every month, every person covered by a fully insured product would see $5 of their premiums go to the national super catastrophic risk re-pricer pool to cover the people who have $8 million/year claims.  This would create a defacto national super high cost risk pool that is adequately funded while removing some of the expensive cases from insurers’ books by paying those claims at Medicare rates instead of higher Exchange or commercial rates.

And yes, this type of plumbing work-arounds would not be needed in single payer system but we’re not in that world today nor likely to be in it next year.

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Guest Post Hospice

Guest post by commenter PRESCOTT CACTUS. He’ll be around in comments to answer questions about his experience as a hospice volunteer.

I just got my 10 year pin for volunteering with a hospice organization. I’d like to share some of my experiences and if you have any questions please free to ask.

I started being a volunteer dedicated to a specific patient. The usual is four hours a week. Let the spouse have some time away for respite, do chores around their home or sometimes sit, listen and talk a little. We were taught to become a blank chalkboard and let the patient fill it.

My current duty is being a member of the “11th Hour team”. When a patient is deemed within 48 hours of dying the hospice provides an around the clock companion to the patient. You are there to provide comfort to the patient, his family and often the staff of the facility, if the patient has been in a long term care or nursing home for any length of time. Often the patient is alone, most friends are gone or unable to visit. Family is far away or wants to remember gramps the way they were. Sad shit actually. Our programs unofficial motto is “no one dies alone”.
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In between, I have shopped and delivered groceries, done one time visits to patients whose regular volunteer is ill or unable and have filled in doing office work. If your desire is to volunteer at a hospice, there is always something that most everyone can feel comfortable doing, including working in a thrift shop they run.

The most important thing I can share are that there are 2 kinds of hospice. Profit and not for profit. I donate my time to the not for profit. They do get reimbursed thru Medicare, but they are not a profit driven company. Being not for profit allowed my organization to explore and fill many great ideas that a for profit wouldn’t pursue, including the 11th Hour program. They have pet visits, a harp player who serenades patients in palliative care units. (PCU’s) . The difference doesn’t stop and start there. It’s a choice you may have to make and you should consider it an important one.

When is time to get hospice involved? A patient is eligible for hospice care if the natural progression of their disease likely ends their life within 6 months. Once certified as eligible for hospice, Medicare feels that extra care and cost should be available (no death panels – Thanks Oboma!) and that things like oxogen and a hospital bed are provided free of charge. At home visits by doctors, nurses and visitors begins along with having a dedicated social worker to help with loose ends

Sounds great, huh? The problem is that families and patients often don’t want to hear the truth and doctors often have a hard time telling it. Not many people are ready to admit I’m down to 6 months. Unfortunately, patients in their end stage of life provide doctors and hospitals with a shit-ton of money and profit. On average a patient is “on service for just 29 days when they could have been receiving special caring for 6 months.

If you get lucky and live a bit longer than 6 months, don’t worry, as they will reevaluate and can keep you in the program. You can get kicked out. FSM bless him, my Dad has done 180 degree turn-arounds twice and he was taken out of the program 4 years ago and again 2 years ago. He’s still with us and doing pretty good BTW !

Any questions about hospice ?

P.S. I’ve spent a lot of time just talking about hospice and haven’t really mentioned death and what you should know and be prepared for. Another time very soon perhaps ?

House v. Burwell King v Burwell on CSR appropriations

There were a couple of questions about the court case from yesterday that said the Cost Sharing Reduction subsidies are not funded in PPACA. I am not a lawyer nor do I play one on this blog, so here are some smart lawyers.
Nicholas Bagley has a long run down but the highlight is here:

For what it’s worth, I share the district court’s skepticism of the administration’s arguments. As I explain in some detail here, it’s hard to read §1324 as supplying an appropriation for cost-sharing reductions. What I don’t share, though, is the district court’s confidence that she could properly hear this case. Until now, no one has thought that one house of Congress could file a federal lawsuit to hash out an appropriations dispute with the executive branch. This shouldn’t be the first time, even if the administration broke the law.

What happens now? Even if the D.C. Circuit expedites the government’s appeal, the court is unlikely to resolve the case before the election. When it does, I suspect it will have very little patience for the district court’s conclusion that the House of Representatives has standing to sue. My hunch, too, is that the Supreme Court will either not intervene or uphold the D.C. Circuit’s eventual dismissal of the case. This opinion will attract a lot of attention—and it should—but it’s not an existential threat to the ACA.

Lyle Denniston at SCOTUSBlog looks at the standing issue:

At an earlier point in the House of Representatives case against the ACA, the administration had tried to have the case dismissed on the theory that the House had no right to sue on the premise that it would not suffer any injury for how the government made spending decisions under ACA.  Collyer last September upheld the right of the House to sue, although she did narrow significantly the number of specific challenges the House had made.

Because the judge refused to allow the government to appeal her ruling allowing the case to proceed (and, on Thursday, turned down a government request to reconsider that point), that question of the House’s “standing” will remain an issue for the government to contest when it does file an appeal.  It is highly unusual for courts to allow one house of Congress, or individual lawmakers, to sue in federal court, so the “standing” issue could become decisive when an appeal is decided.

The Administration can appeal to either the DC Court of Appeals or to the Supreme Court directly. Since there is a 4-4 Supreme Court split and a tie goes to affirming the original decision, I think the Administration will appeal to the DC Court of Appeals primarily on standing grounds. Their argument is that this is a political question and the appropriate resolution is for Congress to use its constitutional power of the purse to get its way and that the courts have no place in the middle of a political food fight. If that argument is not successful in the first appeal, it will go for an en banc hearing. The Administration does not want to go to a split Supreme Court until it has a favorable ruling.


Update 1: Title corrected


update 2: Appealed to DC Court of appeals


Doomed … ooops

The fact that United Healthcare was pulling out of most states on the individual market was a sign that the Exchanges and thus Obamacare (let’s forget about the very successful Medicaid expansion for a moment) were doomed.

There would be no competition and no one could make money on the exchanges.

Doom I tell you, Doom!

And then OOPS


Other insurers are submitting bids and prepping applications to expand into markets that United Healthcare is leaving.

Applying for approval in Kansas is a fairly low cost operation as a committment is not needed until mid-September but this means the build teams at Aetna and Medica had been working on these projects since last November and the decision to explore expanding was made last summer with numerous points where pulling the plug on the exploration could be done fairly easily and cheaply.

It could be competition is working the way it is supposed to work. Overpriced and undervalued firms leave markets that they don’t understand while new firms that think they have an interesting angle enter markets.

Was there a Scottish radical who wrote something about that a while ago… what was his name……

Business strategy in a single insurer state

This is a follow-up from yesterday’s post on how to create an accidental high value, low premium single payer individual market in states where there is only a single insurer.  One of the big questions is what happens if there are no insurers in a state.  I don’t think this would be a likely scenario as the incentives to make a boat load of almost risk free money are too strong.

We need to divide the decision process into two universes.  The first is on-Exchange and subsidized buyers who make less than 400% of Federal Poverty Line.  The other segment of the market is everyone else who is not getting a subsidy on or off-Exchange.  This second segment could see no affordable plans offered.

Let’s assume that there is a single insurer offering plans on an Exchange in a state or a region.  They’re objective is to make as much money as possible.  If it is a quick pump and dump, the plan would be to raise prices as high as possible in year one and accept that competition will come back into the region/state in Year 2.  If it is a longer strategy, the goal would be to raise prices to a point where a mint is being made but below the point where the hassle of an out of region competitor coming in can undercut pricing once start-up and network building costs are accounted for.

So what is the optimal business strategy in this scenario?

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