This blog will be off until after New Year’s Day. Thanks to all the faithful readers.
This blog will be off until after New Year’s Day. Thanks to all the faithful readers.
From Deutsche Bank’s annual employer survey:
One of the more noteworthy takeaways from our survey is that compared to last year, fewer employers are considering migrating their employees into the new Exchanges starting in 2014. Specifically, 11% of employers in our survey are actively considering migrating employees into exchanges in 2014, down materially from 35% that said they are considering shifting employees into the Exchanges in 2014. Note that our industry market model currently assumes that around 10% of the employer market will shift into the Exchanges in 2014, so current employer sentiment appears to be exactly in line with our industry forecast.
We think the drop-off in interest in the Exchanges likely reflects the generally disorganized state of affairs around Exchange planning at both the state and federal levels, which has created significant uncertainty around the path to implementation of the Exchanges in 2014.
Deutsche Bank has released its annual employer health benefits survey, which projects 2012 commercial healthcare premiums to rise 7.2%, down from an increase of 8.2% in 2011. That’s a lower rate of increase (for both years) than found in other surveys; however, the direction is the same: a slowdown. After benefit design changes, premiums will rise 6.8% in 2012, Deutsche Bank projects, indicating buydowns of 320 basis points.
All of which could put pressure on health plan profits in 2012. Deutsche Bank projects that the spread between pricing and costs will tighten to 50 basis points in 2012, compared to 190 basis points in 2011. In other words, health insurance will be a riskier business next year will less room for error.
Based on the findings, Deutsche Bank has downgraded Coventry and Health Net shares to sell from buy, “given their higher exposure to the Commercial risk market.” Deutsche Bank continues to rate as buys Aetna, Amerigroup, Cigna, Magellan, UnitedHealth and WellPoint.
Deutsche Bank surveyed 432 self-insured and fully funded employers offering 628 unique plans.
Notes HHS: “The Pioneer ACO initiative will encourage primary care doctors, specialists, hospitals and other caregivers to provide better, more coordinated care for people with Medicare and could save up to $1.1 billion over five years.” Other ACO options — like the Medicare Shared Savings Program — remain available to providers.
Aetna continues to see a future dominated by accountable care and information technology. That’s not news, but Aetna CEO Mark Bertolini did a nice job of laying out the case at the company’s annual investor meeting. Below are a few slides from his presentation (the full deck is here). Note: Aetna’s investment in decision-support tools and technology now includes iTriage (along with Medicity and Active Health). As reported in our sister publication ACO Market News, Aetna plans to enter into hundreds of ACO arrangements over the next three years.
The proposal would allow states to choose one of the following “typical employer plans” as a benchmark:
In addition, the plan would have to offer coverage in 10 key categories:
All of which means I still don’t know what my health plan will cover when I’m really sick, but at least there’s a good chance I will have coverage.
I asked Maggie Mahar (formerly of HealthBeat and whose posts I sorely miss) what she thought of the Ryan-Wyden plan to reform Medicare. She wrote me a lengthy response. Here’s an excerpt:
When it comes to health care reform, I have never trusted Wyden. The private insurers have had him in their pocket.The premium plan simply represents a way to shift the cost of Medicare (and Medicare inflation) to seniors — who can ill afford it. (The average senior has a median income of $20,000 — half earn less.) Wyden says that the premium that seniors receive will “rise and fall” with the cost of insurance. What that means is that insurers will be the price-makers, seniors the price-takers. The subsidy that seniors receive will be enough to buy the poorest private plans, but not enough to buy the better more comprehensive private plans.Only traditional Medicare has the clout to bring down the cost of Medicare without undermining the quality of care by using financial carrots and sticks to:a) force hospitals to be more efficient (fewer preventable medical errors that hurt patients and cost a fortune; fewer preventable readmissions; less over-spending on hotel-like amenities; over-priced equipment that is no better than existing equipment; fewer unnecessary tests (often an ER will simply order a battery of tests before a doctor has even taken the patient’s history or done a hands-on exam);b) encourage doctors to focus on chronic disease management before the disease turns into a crisis that lands the patient in a hospital; encourage doctors to be more cost-conscious when prescribing drugs (ignoring bribes from the drug industry);c) “bundle” payments to doctors and hospitals so that they have an incentive to coordinate care (no one gets the bonus unless everyone does)These are just a few ways that traditional Medicare can bring down costs. And it’s already working! As I wrote in one of my last columns, growth in Medicare spending has fallen to about 4% during the past two years –down from double-digit inflation in the preceding years. This is because hospitals, in particular, are working to become more efficient as they prepare for 2014. Former CBO director Peter Orszag confirmed what I said in a column that he wrote for Bloomberg, quoting HealthBeat.There is no need to “compromise” with the Republicans over Medicare. Medicare is one of the most popular programs that we have. And the carrots and sticks in the health reform legislation already are working to rein in the costs — even before 2014.
I’ll agree on competitive bidding with a public option in the Medicare market (i.e., the Ryan-Wyden plan for Medicare reform), provided conservatives agree on competitive bidding with a public option in the under-65 market (i.e., ObamaCare with a public option). Even better, why not “Medicare for all” with a competitive bidding component?
The dichotomy of what Ryan wants for Medicare and his calls to repeal ObamaCare is noted by Ezra Klein:
Competitive bidding either works or it doesn’t. But it can’t only work for seniors. In fact, many health-care experts think seniors are the population among which its least likely to work, as many of their health costs are already locked in, and people with many health problems and established relationships with doctors don’t want to switch plans midstream.
From the HHS announcement that new rules allowing children up to age 26 to stay on their parents’ health insurance policy has resulted in 2.5 million additional young adults with coverage.
Thanks to the Affordable Care Act, 2.5 million more young adults don’t have to live with the fear and uncertainty of going without health insurance. Moms and dads around the country can breathe a little easier knowing their children are covered.
Critics of the law…have suggested that its expansions of and improvements to health insurance are not worthwhile because of the expense they inevitably impose. And it’s certainly true that requiring insurers to cover more services or more people will, on its own, force them to raise premiums. Recent private sector estimates have suggested that the law’s new requirements have raised premiums by 1 to 2 percent.
But that includes all of the early coverage provisions – i.e., not just the requirements to cover young adults but also new guarantees of access to preventative care and some prohibitions on discrimination against the sick. It should also be a one-time bump, since now those provisions are in effect. And while the Affordable Care Act will impose many more requirements on insurers in 2014, when its full provisions take effect, the law also includes myriad efforts at cost control that will, according to the Congressional Budget Office, more than offset the cost for government without causing private insurance premiums to soar.
The debate at Forbes over what ObamaCare — and more specifically minimum medical cost ratio requirements — will mean for health insurers is a fun one. This being the holiday season, let me take this opportunity to say I disagree with everyone.
Rick Ungar argues that the MCR rules will mean the death of the health plan industry and the arrival of single-payer healthcare in America. Well, Rick, we may one day go to single-payer, but it won’t be because of MCR requirements. My back-of-the-envelope calculations suggest that MCR regulations will cut industry profits up to 7% in 2011 and new reform-related taxes will trim another 10%. So health insurance will become a far less profitable industry, but still a viable one. Even if margins are tiny, aggregate profits remain big.
Avik Roy argues that MCR regulations will lead to private health plan monopolies that drive up premiums. Roy tends to write in a dizzying array of concentric circles, but I think his argument is MCR rules will force small individual plans to exit the market while making it harder for start-ups to enter.
That would leave the big plans as monopolies. Rather than cut administrative costs, he argues, they will raise premiums and spending to hit the 80% individual MCR minimum. His math looks like this. A plan with a $10k premium, $7k in medical costs and $3k in admin costs would have a 70% MCR. But a $15k plan with $12k in medical costs and $3k in admin costs would have an 80% MCR. The arbitrary MCR rules, he argues, just encourage waste.
Of course, there’s another way plans can meet the MCR: reduce premiums. Or as Citi analyst Carl McDonald noted last year:
I think what you’ve started to see and will be seeing more of is plans lowering premium rates to bring that adjusted loss ratio closer to 80%. The thought is that a lower priced product will be better at attracting new members than maintaining the same price and writing a rebate check….Doesn’t always mean that absolute premium dollars go down, but it could mean that a plan that was planning on raising rates 10% because of increasing cost trends doesn’t have to do that anymore.
In other words, there’s a good chance plans will keep a lid on premiums and take the margin hit in exchange for share. Yes, there will be consolidation, so Roy is right on that score. But there’s also the chance that innovators will figure out how to operate with a lower cost structure in an exchange — providing commoditized individual coverage that meets basic benefit and MCR requirements and beating traditional players at their own game.
Finally, there’s John Graham, who argues that both Ungar and Roy are correct. Monopolies will arise initially, he says, but they will abuse the public trust. Result: the last of the health insurance industry’s political supporters will “switch sides and collapse” in support of “Medicaid-for-all” (I assume he means Medicare for all, but you get the point).
Frankly, I just can’t see someone like House Majority Leader Eric Cantor (R-VA) or John Goodman of the National Center for Policy Analysis switching sides in favor of single-payer. More likely is a continued evolution toward a public-private system in which health plans are heavily regulated — sort of like utilities.
One interesting sidebar: Even as we debate the merits and faults of ObamaCare, the private market is rapidly adopting consumer-directed health plans — the approach favored by free-market advocates. Or as Drew Altman of the Kaiser Family Foundation notes:
Conservatives rail about Obamacare, but they may be winning more than they are losing; it is their vision of insurance with more “skin in the game” that is gradually taking over the marketplace because employers have no other way to control costs.
In other words, we’ve unwittingly created a real-world health system laboratory — providing a unique opportunity to simultanously test and compare the liberal vs. conservative approaches. May the best plan win.
Interesting piece in The Economist notes that healthcare tort reform in Texas, which caps damages in most cases at $250,000, hasn’t led to an increase in the number of physicians in the state or reduced healthcare cost trends.
The caps did achieve their direct aim: medical-malpractice claims fell sharply in number, and awards dropped just as sharply in value….But these have failed to bring down overall Medicare costs, a key indicator of medical costs generally.
Of course, Massachusetts-style healthcare reform — the model for ObamaCare — hasn’t bent the cost curve either, The Economist notes:
In reality, incentives must change in American health care across the board, and tort reform is only part of that.
But you knew that already.
Good recap in today’s Wall Street Journal on the blurring of lines in healthcare between insurer, provider and employer:
Hospitals are bulking up into huge systems, merging with one another and building extensive new doctor work forces. They are exploring insurance-like setups, including direct approaches to employers that cut out the health-plan middleman.
On the other side, insurers are buying health-care providers, or seeking to work with them on new cooperative deals and payment models that share the risks of health coverage. And employers are starting to take a far more active role in their workers’ care.
Managed Healthcare Executive interviewed me for an article on health plan profit prospects:
Mercurio estimates the move to exchanges, coupled with higher taxes and medical-loss ratios that cap profitability, could shave an additional 25% to 30% from insurers’ bottom lines….Many, including Wellpoint, Cigna and Aetna have already begun to diversify, he notes, with UnitedHealth Group leading the pack.
1. 2.7 million Medicare recipients saved more than $1.5 billion on prescriptions because of discounts mandated by ObamaCare in the donut hole.
2. Through November, 24 million people Medicare recipients have received free preventive care, which is mandated by ObamaCare.
At the company’s annual investor conference, UnitedHealth Group released data on expenditures in the U.S. healthcare market for 2011 as follows:
Members 171 million
Expenditures: $850 billion
Medicaid and Related Programs
Members: 60 million
Expenditures: $440 billion
Members: 48 Million
Expenditures: $575 billion
In an interview in the New York Times on his last day as head of Medicare, Don Berwick, M.D., outlined five reasons for the “extremely high level of waste” in the U.S. healthcare system.
A Centers for Disease Control and Prevention survey shows that adoption of electronic medical records and electronic health records is rising among office-based physicians. Keep in mind that the word “adoption” means different things to different people (see the definitions used by CDC), and we still lag other nations by a lot.
I missed this study from October: According to the Assn. of American Medical Colleges (Washington), first-time applicants to medical schools reached an all-time high in 2011 at 32,600 — up nearly 3% from last year. Total applications also rose 3% to nearly 44,000.
Says AAMC chief executive Darrell Kirch, M.D.:
U.S. medical schools have been responding to the nation’s health challenges by finding ways not only to select the right individuals for medicine, but also to educate and train more doctors for the future. However, to increase the nation’s supply of physicians, the number of residency training positions at teaching hospitals must also increase to accommodate the growth in the number of students in U.S. medical schools. We are very concerned that proposals to decrease federal support of graduate medical education will exacerbate the physician shortage, which is expected to reach 90,000 by 2020.