We have a bill! The GOP's plan to cut taxes on the rich and health care for the rest of us

Every day it gets more difficult to write about the new “American Health Care Act” (AHCA) that has been introduced in the House of Representatives by Speaker Paul Ryan because every day there is so much more news about it, and so much more criticism of it that appears in the press. Even before its introduction, the bill was attacked for being likely to significantly increase the number of uninsured Americans while providing windfall tax cuts for the wealthiest.

It did not disappoint. Consistent with predictions, the nonpartisan Congressional Budget Office (CBO) estimates that initially 14 million people will lose coverage, with the number rising to 24 million in 10 years. These estimates are discussed in detail, and clarified, in “Deciphering CBO estimates” at the Kaiser Health News site. The largest number of people who will lose coverage will do so because of the changes – but let’s call them what they are, “cuts” – to federal funding of Medicaid (discussed by the Health Affairs blog), which would shift costs to the states, most of which will be unable or unwilling to absorb these costs. The 31 states that have expanded Medicaid to all those under 138% of the federal poverty level  under the Affordable Care Act (ACA) will be faced with having to fund a lot more from their own coffers; poor people in the states that have not expanded Medicaid eligibility will continue uncovered. The other group that will lose coverage will be those who have bought subsidized insurance on the ACA-created marketplaces and who will no longer be able to afford the premiums. Yes, the new GOP plan calls for tax credits to help pay premiums, but they will be far less than under the ACA and far from enough to cover the actual cost.

This change will have the biggest impact on the older, sicker poor who are not yet eligible for Medicare (and, while I we will not address it here, the GOP leadership certainly has plans for cutting Medicare!), whose premiums will go up because of two important changes the AHCA will make. It will end the “individual mandate” of ACA, so that those who feel that they do not need health insurance can pass on buying it, which means the pool of insured will lose those healthier people and have a pool more skewed to those who are sicker and will actually usehealth care. This will tend to drive premiums up for them, and the AHCA also allows insurers to charge 5 times as much to older people as younger. As reported by Thomas Kaplan and Robert Pear in the NY Times on March 13, 2017

Under current law, in 2026, a single 21-year-old earning $26,500 with an insurance policy that costs $5,100 a year would get a tax credit of $3,400 and would have to pay $1,700 of the premium. Under the Republican bill, that person’s share of the cost would drop to $1,450.

By contrast, a 64-year-old earning the same amount would fare much worse. That person’s $15,300 health plan would be offset by a $13,600 tax credit under current law, leaving the consumer responsible for $1,700. Under the Republican plan, health insurers would be free to charge older people more, raising that person’s premium to $19,500. But the tax credit would be only $4,900, and that person’s share of the premium would then be $14,600.

That’s a bite! And, ironically, as pointed out by Noam Levey in the Los Angeles Times (March 12, 2017), it will hurt Trump/GOP voters more than Democratic voters, because those Trump voters – and the counties and states which went for Trump in which they live -- are more likely to be in this older, sicker, group. This group of Republican voters did not like Obamacare because the premiums, co-pays, and deductibles were going too high and the coverage was not always great, especially for the plans they could afford. Trump, and the GOP, promised them high-quality, affordable coverage. These folks believed them. They voted for them. And they are not going to get it, certainly not from the AHCA. Levey notes that “…In nearly 1,500 counties nationwide, such a person stands to lose more than $6,000 a year in federal insurance subsidies. Ninety percent of those counties backed Trump…[a]nd 68 of the 70 counties where these consumers would suffer the largest losses supported Trump in November.” What can you do. Politicians lie. This one was a whopper.

What is the reason for this? Many of Congress’ and Washington’s leading “conservatives” say that they believe that the role of government should be as close to zero as possible, and certainly think that the government has no business being involved in the insurance marketplace to ensure that people without resources have health coverage; to them, the AHCA is too much like the ACA in that it actually makes some effort to help some people, if weakly. There are a few of these “conservatives”, in and out of Congress, who really believe this and act on such beliefs. Uniformly, they are not poor, are not close to poor, and are not likely to be negatively affected. There is a much larger contingent that only believe government should not help most people. They support legislation that benefits rich people, like the AHCA, which uses the money it will save (and the CBO says that it will reduce the deficit over 10 years by $337 billion) to give tax cuts, not evenly distributed, but very much skewed to the highest incomes. This is where the [mean] rich people come in; they fund the Congresspersons, and this is what they want. Rep. Michael Burgess (R, TX), Chairman of the Energy and Commerce subcommittee on health, is quoted in the Times on March 11 (“The GOP’s high-risk strategy for health law repeal”) as saying “If you ask someone to give up something, there will be resentment,” and he is correct. That it is regular people who are being asked to give up something by Mr. Burgess and his colleagues, so that his rich patrons can save even more on their taxes, is something he doesn’t focus on.

One of the most iconic differences between ACA and AHCA focuses on equity: the subsidies (and tax credits for those who paid taxes) under ACA were tiered to income. The tax credits that replace subsidies under AHCA are tiered to age. Of course, as I have noted, older people are more likely to be sick, but they are not all of the same need; some older people have lots of money, and some have none. The same is true for younger people, including those with medical need. In any case, the tax credits in AHCA will not, as demonstrated above, be sufficient for those without significant other resources to buy health coverage, even if they are in the more-highly-subsidized older group. The Times’ Alan Rappeport reports on March 16, “One certainty in health bill: tax cuts for the wealthy”, with 40% of the cuts going to the top 1%, and the bill providing the necessary basis for further tax cuts for the rich. Rappeport quotes Mike Mulvaney, the White House budget director: “We promised at the outset that we were going to repeal all of the taxes. Who cares if someone else benefits?” Well, maybe the people who will suffer for their benefit? The same issue of the Times contains a brief and informative piece by Mr. Pear, “Putting Republicans’ plan on the Obamacare scale”, examining the criticisms of ACA and how the AHCA solves them (or not).

President Trump apparently feels conflicted; he promised the repeal of ACA, and the Congress wants to do that. He also knows that any plan that comes out that does this will be called “Trumpcare”, just as the ACA was called “Obamacare”. Enough Republican senators are concerned that the House’s AHCA will make it too hard for too many people to afford insurance that they might vote against it, so “Mr. Trump was left to strike a balance between siding with House Republicans while also distancing himself from the details, with top aides conceding that the legislation needed modifications before it could pass the full Congress,” (”G.O.P. Senators Suggest Changes for Health Care Bill Offered by House” NY Times, March 14).

For the rest of us, it is an impending disaster.

Medicare Advantage plans, CMS, and providing high-quality care to -- and care for -- all people

Medicare Advantage plans, also known as Medicare HMOs, or officially as Medicare Part C, are an alternative to traditional Medicare. By enrolling in such a plan, at additional out-of-pocket cost, the Medicare recipient gets additional benefits that are characteristic of HMOs. This may include smaller (or no) copayments or deductibles, coverage for things not covered by traditional Medicare like dental care, eyeglasses, and hearing aids, and other “advantages”. There are disadvantages, also, of course, just as in other HMOs. Beyond cost, the main one is that there is a limited panel of providers – doctors and hospitals – that the person can use. This is particularly an issue for retired people who travel a lot, or may spend the winter in a warmer climate, since these HMOs’ panels are usually in a limited geographic area.

Older “closed panel” HMOs usually had only doctors and other providers employed by the HMO itself. There are fewer of these than there once were; some of them, like Kaiser, are well-known. Other HMOs are “open panel”, where any doctor can be “approved” to be part of their provider group, but many doctors may choose not to be for reasons such as lower reimbursement or onerous regulation. Thus, it is at least theoretically possible that a Medicare Advantage enrollee could receive lower quality care from the doctors and hospitals that were part of the HMO’s network than from another doctor or hospital that might not be, but would be available to traditional Medicare patients. In addition, some Medicare Advantage plans are open to “dual-eligibles”, people with both Medicare and Medicaid, with Medicaid paying the additional premium. That such programs might provide worse care than others isnot an unreasonable concern based upon other services targeted Medicaid patients (e.g., nursing homes) and other programs targeted specifically to low income people.

Thus, Medicare has developed a rating system for Medicare Advantage plans, which assigns from 1 to 5 stars based, presumably, on carefully considered and assessed quality measures. If you want a good plan, it would behoove you to choose one with a “5 star” rating. Provided, of course, one is available in your area, and provided you can afford the out-of-pocket costs, or, if you have Medicaid, it is one that Medicaid will pay for. Unsurprisingly, many plans that have enrolled Medicaid or other lower-income patients have had lower ratings, based on the outcomes of those patients. The plans argue that this is because these low-income patients are higher-risk, have more co-existing medical, mental health, and social conditions outside of the plan’s control. Others, including the Center for Medicare and Medicaid Services (CMS), which administers Medicare, have argued that considering these characteristics might “give a pass” to plans that provide lower-quality care to poor people. A similar rating system exists for hospitals, and similar arguments have been made. As I discussed in a blog from November 10, 2013, “Does quality of care vary by insurance status? Even Medicare? Is that OK?”, there are legitimate arguments to be made on both sides.

Now, however, according to a report in “Modern Healthcare” on October 21, 2015, CMS interim administrator Andy Slavitt and his deputy administrator who runs the Center for Medicare, Sean Cavanaugh, are considering adjusting its quality ratings for Medicare Advantage plans based upon the pre-existing risk of the patients enrolled. This is important to the plans, since Medicare can drop them if they have several years of lower-than-3-star ratings. And they don’t want to be dropped, because these plans are moneymakers, in no small part because CMS treats them, financially, better than traditional Medicare plans (a result of purposeful federal policy to try experiments to “privatize” Medicare). While new criteria have not been officially announced, and would not take effect until 2017, “The comments from Slavitt and Cavanaugh were somewhat surprising because the CMS has previously downplayed the effects of socio-economic status on the ratings. The agency described the effect as ‘small in most cases and not consistently negative’ in a summary of findings from an analysis the CMS commissioned by the RAND Corp.”

It is not only surprising, but when one considers why the (possible) change of heart is happening, it is difficult to not consider the financial and political clout of the insurance industry that sponsors these programs, and the political support that such “private” Medicare-replacement programs have.  It is worth noting that CMS has not indicated that it will consider revising the ratings for hospitals, despite the fact that hospitals that care a higher proportion of poor and socially disadvantaged people face the same issues. The financial penalty for hospitals is very direct, as Medicare is not paying for readmissions which occur within 30 days. If this seems, on its face, reasonable, consider that sometimes even when the care provided in the hospital is of high quality, people go back to their homes (or long-term care facilities) where it may not be. This is sometimes a result of lack of money, lack of social support, and other stressors, but the result is that they are more likely to be readmitted. Again, CMS has argued that it would not want to encourage hospitals providing lower-quality care for poor people (which certainly would be a bad thing). But if CMS penalizes hospitals for readmissions that are outside their control, it simply encourages hospitals to not care for low-income people, or, if they are sole providers in their community, possibly even close their doors, and that would be a very bad thing. Studies that have been done indeed show that readmissions are higher when hospitals care for lower income and Medicaid patients, and that this is not the result of poorer quality care provided when those people are inpatients. (See “Aiming for Fewer Hospital U-turns: The Medicare Hospital Readmission Reduction Program” from the Kaiser Family Foundation and “Socioeconomic status and readmissions: evidence from an urban teaching hospital” in Health Affairs.)

It is important for CMS to ensure that the care provided to all Medicare recipients (indeed all people) by a hospital is not discriminatory or inequitable and that all patients have access to the care they need at the highest possible quality level. But unadjusted readmission rates are a very crude measure of quality, and it is unreasonable for CMS to expect that hospitals will be able to compensate for the impacts of poverty and lack of access to preventive care and early diagnosis and treatment. It is not unreasonable, however, for us, the American people, to expect that our government develop and help pay for programs that ensure that people’s basic needs for shelter, food, clothing, warmth and other social determinants of health, as well as post-hospital care (access to primary care, home health, and high-quality long-term care).

A single-payer health system is insufficient to address all of these needs. But it is a good start for some of them.

Integrating health systems must be to improve quality, not increase cost

The February 13, 2014 article in the New York Times by Elisabeth Rosenthal, “Apprehensive, many doctors shift to jobs with salaries”, more or less just presents the facts. It notes that the medical placement firm, Merritt Hawkins, says that 64% of jobs this year are salaried as opposed to 11% in 2004, and that it expects it to go up to 75% in the next two years. She cites AMA figures that “…about 60 percent of family doctors and pediatricians, 50 percent of surgeons and 25 percent of surgical subspecialists — such as ophthalmologists and ear, nose and throat surgeons — are employees rather than independent.” In some places it is more dramatic; in Kansas City, there are no longer any cardiologists (a type of internal medicine subspecialist) who are not employed by hospital systems, and oncologists (cancer specialists) are not far behind.

So, is this a good thing? The article suggests yes, but maybe not entirely. It states that “Health economists are nearly unanimous that the United States should move away from fee-for-service payments to doctors, the traditional system where private physicians are paid for each procedure and test,” and I agree, and that “When hospitals gather the right mix of salaried front-line doctors and specialists under one roof, it can yield cost-efficient and coordinated patient care. The Kaiser system in California and Intermountain Healthcare in Utah are considered models for how this can work,” with which I also agree. However, not all health systems are Kaiser or Intermountain Healthcare. The article continues: “But many of the new salaried arrangements have evolved from hospitals looking for new revenues, and could have the opposite effect. For example, when doctors’ practices are bought by a hospital, a colonoscopy or stress test performed in the office can suddenly cost far more because a hospital ‘facility fee’ is tacked on.”

Rosenthal has written about facility fees before, as has Alan Bavley of the Kansas City Star in his “Doctors, Inc.” series (“’Facility fees’ add billions to medical bills”, Dec 29, 2013), and I have commented on it in Changing the structure of health care delivery systems: to benefit the patient, the providers, or the insurers?, January 14, 2014. The new arrangements promise more money, or at least stable incomes, to physicians, and continue to pay the currently-most-highly-paid specialists the most money, with primary care doctors getting less. This is not because hospital systems have anything against primary care, but rather that they are following the money, and these acquisitions have occurred precisely while we are still under fee-for-service reimbursement in most locations. If cardiology or orthopedic or radiologic or neurosurgical procedures bring in great amounts of money to the hospital (“technical fees”) the hospitals like this, and are willing to share some of that money with the doctors to ensure that they keep their patients in their hospital or health system. Primary care does not generate such largesse. Relatively intelligent systems recognize that they need a locked-in “primary care base” to create referrals to their subspecialists, but will pay as little as they can, and demand “high productivity” (which could be seen as “patient churning”), and it is not just primary care: “many doctors on salary are offered bonuses tied to how much billing they generate, which could encourage physicians to order more X-rays and tests.”

Bloomberg News has a more direct take on this phenomenon, stating firmly in an article by Shannon Brownlee and Vikas Saini that “Bigger hospitals mean higher prices, not better care”, February 18, 2014. They cite data from sources such as the Dartmouth Atlas of Health Care, a recent article in Health Affairs[1] which demonstrated that “On average, higher-priced hospitals are bigger, but offer no better quality of care,” and a variety of lawsuits by public agencies (such as the Massachusetts Attorney General) to demonstrate that hospital acquisitions are about market share and control of practices and, ultimately, about money, not quality. “If you think of value as some combination of needed services delivered for the right price, large hospitals are no better than small hospitals on both counts.” As I have written about before, doctors control a lot of costs in the health system, by choosing the tests that they order, deciding whether to admit to the hospital or not, and where they refer. By employing the physicians, hospitals can not only control the latter, but can set criteria requiring physicians to abide by hospital policies on the others. The doctors then become, in the words of this article,  “…another cog in the corporate machine, and many physicians have told us they feel they must skew their medical judgment to keep their jobs.”

This is the nonsense that occurs when things are done piecemeal. Intermountain Health Care and Kaiser are not perfect, but they have used their status as integrated health systems to control costs and increase efficiencies. To the extent that they are also the insurer, it is in their interest to do so. Efforts by the federal government to have others emulate these models through the creation of Accountable Care Organizations (ACOs), without changing the manner of reimbursement, are bound to fail. As Paul Baladian is credited with saying “every system is perfectly designed to get the results that it gets.” If we are getting a system in which hospitals are buying up physician practices so that they can charge insurers, from Medicare to Blue Cross, more; if we are getting a system in which medical decisions are being made in the best financial interests of hospitals rather than the best health interests of patients; if we are getting a system in which we continue to favor some patient over others based upon their income, insurance status, or their type of disease (middle-aged well-insured person who needs a single joint replacement = “good”, older person with multiple chronic medical conditions and “just” Medicare or worse yet uninsured because they are under 65 or undocumented = “bad”), it is because we have perfectly designed it to be so.

Brownlee and Saini offer some suggestions for solutions. They suggest that Medicare expand its “Advance Payment Model,” a program that provides capital to small or rural physician groups, and also particularly about forming multispecialty Accountable Care Organizations driven by primary care.

“Until we give primary-care groups control over what happens to patients, large hospital systems and specialist-dominated groups -- those with greatest access to capital -- will be able to keep raising prices, even as they issue press releases about their plans to control costs and improve care.”

Sounds like a good idea to me. Combine that with a single-payer system that covers everyone, “everybody in, nobody out!” and we may be able to reverse the trend toward higher profit at the expense of lower quality.

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[1]White C, Rechovsky JD, Bond AM, “Understanding Differences Between High- And Low-Price Hospitals: Implications For Efforts To Rein In Costs”, Health Affairs, January 2014 10.1377/hlthaff.2013.0747.