Medicare Fraud and For-Profit Hospitals- A Story That Never Ends

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Sunday, CBS’ Sixty Minutes took a close look at Health Management Associates (HMA) a for-profit hospital chain that, according to its employees, has “relentlessly pressured its doctors to admit more and more patients—regardless of medical need—in order to raise revenues”

“We talked to more than 100 current and former employees and we heard a similar story over and over,” CBS correspondent  Steve Kroft reported.  Emergency room physicians were told “that if they didn’t start admitting more patients to the hospital, they would lose their jobs.” The orders came from the top:

With 71 hospitals in 15 states, HMA is the fourth-largest for profit chain in the country. Last year it raked in revenues of nearly $5.8 billion;  half of that came from Medicare and Medicaid. In other words, taxpayers were footing the bill for a large share of those unnecessary hospitalizations.

Patients also paid. As one doctor observed: “If you are put into the hospital for reasons other than a good, justifiable medical reason, it puts you at significant risk for hospital-acquired infections and what we would refer to as ‘medical misadventure’” (i.e. “preventable medical errors)

     :                           “Putting Heads on Beds” –An Old Story

 The piece was shocking. But it is not a new story. It is an old story. To be more precise, it is a never-ending story. In Money-Driven Medicine: The Real Reason HealthCare Costs So Much, I profiled several for-profit hospital companies that did just what Health Management Associates has done: “put heads on beds”– even though the patients didn’t need to be hospitalized.

At Tenet, in Redding, California, patients weren’t just hospitalized, they underwent heart surgery. An investigation would reveal that in many cases, they “had no serious cardiac problems whatsoever.”

 A FBI affidavit estimated that in one-quarter of all cases, Tenet’s two “rainmaker” heart surgeons were slicing  open patients who should never have been on an operating table. Other doctors tried to alert the hospital’s administration. They were ignored.

Some of those patients did not survive. Others were crippled. All suffered psychological trauma. 

                    HCA:  Florida Governor Rick Scott’s Back-Story                       

In 1997, Health Corporation of America (HCA) made headlines when FBI agents swarmed HCA offices in five states, and found evidence that at HCA, executive salaries hinged on meeting financial targets such as “growth in admissions and surgery cases.”
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Haggling for Health Care

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Below, a guest post by Naomi Freundlich. Long-time readers will remember Naomi as the person who helped me write HealthBeat before we both left The Century Foundation in 2011. She now has her own excellent blog,  Reforming Health

In this piece, she describes what it is like to live with a high-deductible health plan and find yourself bargaining with doctors when trying to get care.

Let me add that beginning in January of 2014, comprehensive, affordable insurance will be available in the Exchanges– along with subsidies. This should mean that no one will have to sign up for a plan with a $4,000 deductible ($8,000 out of network) plus co-pays.

(Though I realize that some upper-middle-class families who earn just a little to much to qualify for a subsidy may have a hard time finding affordable insurance in the Exchanges. But so far, the pricing in states like California and Colorado is encouraging. I’ll write more about this as we find out more about how much insurance will cost in other state Exchanges) 

Nevertheless, next year some health care providers may try to charge patients more than the insurer will pay. This is called “balance billing.” In that case, patients will need to shop for physicians who accept the insurers’ reimbursement as payment in full.

My guess is that most heatlh care providers will discover that there just are not enough very wealthy patients out there (even in New York City), able and willing to pay more than either Medicare or an insurer will pay.  

by Naomi Freundlich

I’m not a big fan of bargaining and my half-hearted attempts to get a better price for a used car, garage sale find or contractor’s service have been mostly unsuccessful. There’s always that nagging feeling that the seller is laughing with delight once I’m gone, thinking, “I really pulled one over on that rube!”

And so it has come as somewhat of a shock to me that medical care has become the new garage sale, as far as haggling goes.

First we found out that hospitals have “chargemasters” that hold the list prices for everything from knee replacements to aspirin tablets, and that these prices differ wildly between hospitals; even those in the same city. We also know that insurers, both private and Medicaid and Medicare, never pay these list prices but instead bargain with hospitals to pay substantially discounted prices. The only ones not getting in on the discounts are the uninsured or under-insured people who get hit with the full list price of hospital care.

The same thing happens with doctor bills. If you’ve ever compared what your doctor bills your insurer with what your insurer actually agrees to pay, it’s clear that there is a lot of bargaining going on. If the list price of an office visit is $125, the insurer pays $60; for a $200 lab test, the insurer reimburses $70, and so on.

A recent New York Times article,  “The 2.7 Trillion Medical Bill,”  focuses on the cost of colonoscopy to help explain how health care spending can be so much higher in the U.S. than other developed countries. In the article, patient bills for their colonoscopies ranged from a hefty $6, 385 to a whopping $19,438. Meanwhile, their insurers all negotiated the price down to about $3,500. As Elizabeth Rosenthal of the Times notes, ” this is still far more than the “few hundred dollars” that a routine colonoscopy costs in Austria or Italy.

Why do we have such price inflation here in the U.S.? Our for-profit health care industry has a lot to do with it, as does the maddeningly unregulated nature of the business.  Rosenthal writes: “A major factor behind the high costs is that the United States, unique among industrialized nations, does not generally regulate or intervene in medical pricing, aside from setting payment rates for Medicare and Medicaid, the government programs for older people and the poor.”

David Blumenthal, president of the Commonwealth Fund tells the Times; “In the U.S., we like to consider health care a free market.” He adds, “But it is a very weird market, riddled with market failures.”

Now back to haggling. In the last year, my family—like many others in the nation—has been covered by a high-deductible insurance plan. Before our plan kicks in to pay for doctor bills, prescription drugs or diagnostic tests, we must meet a $4,000 in-network deductible. After that, we still have co-payments and also face an out-of-network deductible of $8,000. Now responsible for so much out-of-pocket health spending, I’m face to face with Blumenthal’s “weird market.” It’s a market where no one tells you the price of office visits beforehand, doctors have no idea how much an MRI they’ve just ordered is going to cost, and you end up paying dearly for not being an aggressive shopper.
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Workplace Wellness Programs– Making Insurance Too Expensive For Those Who Need It Most

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Note to readers: before reading this post, you may want to read the post below which questions just how effective workplace wellness programs really are.

Often, Workplace Wellness Programs use financial carrots to reward employees who participate.. In some cases, workers  will not have to contribute as much to their health care insurance premium if  they “get with the program” and meet specific standards related to their health. Typically, these “outcome-based wellness programs” offer discounts to employees who quit smoking, or who meet specific metrics for blood pressure cholesterol or body-mass index.

Meanwhile some companies charge workers higher premiums if they continue to smoke, or do not participate in a wellness program. 

Even if a company doesn’t use financial “sticks,” the carrots can mean that some employees contribute far less to the cost of their insurance.. The employer must make up the difference, and as a result, he is likely to make the “standard” employee contribution that much higher. Thus, employees who don’t receive the discount help subsidize the carrots for their co-workers.

                                                  Is This Fair? 

Last week, the Obama administration issued new rules which say that under reform, wellness program rewards can equal 30 percent of the cost of coverage, defined as the total amount that employer and employee contribute to premiums (Under current law, discounts are limited to 20 percent.) The regulations also allows a reward of up to 50 percent for employees involved in programs designed to prevent or reduce smoking.

The new rules, issued by the Labor, Treasury and Health and Human Services departments, gives this example of a permissible wellness program: “The annual premium for coverage in an employer’s group health plan is $6,000, of which the employer pays $4,500 and the employee $1,500. The employer offers a $600 discount to employees who participate in a wellness program focused on exercise, blood sugar, weight, cholesterol and blood pressure. 

 At the same time employers will be able to hike premiums for smokers by 50 percent .

Penalties Could Mean That Workers Will Be Forced to Opt Out of Insurance

“This could make insurance unaffordable for some workers, and  keep the sickest workers from affording the care they need,” Alan Balch, vice president of the Preventive Health Partnership, an alliance of the American Cancer Society, the American Diabetes Association, and the American Heart Association, recently told Business Week. In that case “Wellness Program” penalties could undermine a major aim of the Patient Protection and Affordable Care Act—ensuring  that all  Americans  have access to insurance.
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A RAND Report on “Workplace Wellness” Is Quietly Buried for Five Months—Why?

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Did you know that in the U.S. “Workplace Wellness” has become a $6 billion industry?  That’s how much employers pay vendors who sell workplace wellness programs designed to encourage employees to lose weight, lower their cholesterol, or stop smoking..  

Today, firms lay out an average of $521 per employee per year on ‘wellness incentives’ such as gift cards for employees who shed pounds. That is more than double the $260 they spent in 2009 according to a recent survey by Fidelity Investments and the National Business Group on Health. 

 At first blush, this sounds like progress: Enlightened employers are doing their best to encourage employees to take care of themselves.  There is just one catch: we have no hard evidence that these programs either improve health or lower health care bills.

Even Bruce Elliott, manager of compensation and benefits at the Society for Human Resource Management, the largest professional organization that represents benefits managers, is concerned. As employers chase Wellness, “the one things that does worry me is the utter lack of metrics and really, the utter lack of thought” Elliott recently told Bloomberg News, pointing to the “herd mentality” that seems to have overtaken the idea of “workplace wellness.”  

      A Rand Report Appears Briefly Online—and Disappears                   

Two weeks ago, Reuters broke a story about a RAND report on Wellness programs that was supposed to come out last winter. The report was mandated by the Affordable Care Act, and RAND delivered the analysis to the U.S. Department of Labor and the Department of Health and Human Services last fall. 

 According to Reuters’ reporter Sharon Begley, “Two sources close to the report expected it to be released publicly this past winter.”  She added that “Reuters read the report when it was briefly posted online by RAND before being taken down because the federal agencies were not ready to release it, said a third source with knowledge of the analysis.”

RAND had collected information about wellness programs from about 600 businesses with at least 50 employees and analyzed medical claims collected by the Care Continuum Alliance, a trade association for the health and wellness industry.

Reuters revealed that the results were disappointing:  “The programs that try to get employees to become healthier and reduce medical costs have only a modest effect. Those findings run contrary to claims by the mostly small firms that sell workplace wellness to companies ranging from corporate titans to mom-and-pop operations.”
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Who Will Sell Insurance In the Exchanges? Non-profit Insurers.For Consumers, This is Great News– Part 1

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You may have heard that big for-profit health insurers are taking a “wait-and-see” attitude toward the Exchanges –the one-stop marketplaces where small businesses and individuals who don’t receive benefits at work will be able to buy insurance.

Both UnitedHealthGroup, the nation’s largest carrier,  and Aetna the third-largest, have told analysts that their involvement in the health insurance marketplaces across the country will depend on whether they find them “financially viable” for the companies  WellPoint, Humana and Cigna also have indicated that they will participate in a “limited” number of markets. /

Aetna is being particularly coy.  On a conference call with investors and analysts just three weeks ago Aetna officials said that if they don’t like the way the market is shaping up they “might pull their products from the online marketplaces at the last minute.”

Is this meant as a threat? One can only imagine the chaos that would ensue if Aetna began pulling out of state Exchanges at the 11th hour. The remark demonstrates how little concern Aetna has for its customers.

 Doomsters say Too Few Plans Will Mean Higher Premiums

Many have been predicting that the Exchanges will fail because the big names won’t be participating. They point out that in Illinois “only six insurance carriers have told the state of they want to sell health policies on the state’s online s marketplace. “   The  critics warn that if not enough companies offer coverage in the Exchanges, consumers won’t have enough choices, and  their won’t be enough competition to keep a lid on prices.

Former insurance executive turned industry consultant Robert Laszewski  is quick to pounce on “the Illinois numbers” as “an early indicator that insurance companies are backing away from full participation in the online marketplaces. . . I’m hearing that from other carriers in other parts of the country as well” he told Chicago’s Crain’s Business. “They are terribly fearful that if there’s a poor launch (of the marketplaces) they’re going to get blamed for a mess.”   

Laszewski has been predicting “sticker shock” in the Exchanges for some time. What he ignores is that what matters most is not the number of plans available in the Exchanges, but how good they are.  Quality, not quantity is what counts. 

 In the end, “robust competition” does not depend on the free-market chaos of 20 or 25 plans vying for market share. It turns on a few good companies offering transparent information. Then, and only then, can consumers compare them and make rational decisions.

                              California Disproves the Critics

California already has demonstrated that the doomsters are wrong.  Two days ago, the state unveiled the offerings that will be available in its Exchanges—along with the prices.  Nearly three dozen plans had submitted bids, and 13 were selected.  (California exchange officials rejected bids that were too expensive, or failed to include enough choices of doctors and hospitals.)  

Sure enough, the brand name for-profits are not going to peddle their products in the California Exchange.  

But as it turns out, they weren’t needed to create a competitive affordable market that offers Exchange customers a wide range of choices. As I discuss below, Kaiser, which ranks #1 in the state for both quality and consumer satisfaction will be part of that marketplace.

In  every region in the state, individuals who don’t have health benefits at work will be able to purchase comprehensive insurance that offers free preventive care, covers the 10 essential benefits, and caps out-of-pocket spending for less than $4,000 a year. (In North Los Angeles County, for example, Kaiser will offer a Silver Plan for just $294 a month.)  This is significantly lower than expected: the Congressional Budget Office (CBO) had estimated that such comprehensive coverage would cost $5200.

Four thousand dollars might sound pricey for a middle-class family, but keep in mind that individuals reporting modified adjusted gross income (the number at the bottom of the first page of your tax return) of less than $45,960, as well as families earning as much as $94, 200 will be eligible for federal subsidies that will help them cover their premiums.

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Are the Health Plans that Non-Profit Insurers Sell Less Expensive Than Those Offered by For-Profit Companies?

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Below, a guest-post by Kev Coleman, Head of Research and Data at HealthPocket.  His latest study comparing the costs of for-profit and non-profit plans can be found here .

Sometimes I groan after I complete a piece of research, knowing that the results may be seized and simplified by either end of the political spectrum .

Nevertheless, I went ahead and decided to compare premiums and out-of-pocket limits of nonprofit vs. for-profit health plans. This task is easier said than done. First, health plans vary with respect to their benefits and premium comparisons aren’t especially meaningful if there are significant disparities in covered medical services among plans. Consequently, I had to define a minimum set of benefits in order to get a decent representation of both nonprofit and for-profit plans that were similar to one another. Plans that didn’t meet the criteria weren’t included in the study.

 Another problematic issue for premium comparisons is that there is a relationship between deductible amounts and monthly premiums: higher premiums often mean lower deductibles.. Comparing premiums between plans with wildly different deductible amounts isn’t fair. This issue led me to establish deductible ranges; comparisons between the plan types were performed only within those ranges.

 Finally, there was the issue of location. Health insurance premiums are strongly influenced by region. This influence exerts itself on several fronts: state-specific insurance regulations that have to be satisfied;  local level of competition in the market; and the medical claim trend for people living in the region. Accordingly, the premium comparisons were performed inside selected metropolitan regions and never between differing regions. Six cities were chosen as regions for premium comparisons, two from the east coast, two from the west, and two from the center of the country.

                                              Results of the Study

 The results? I found that in 47% of the comparisons a city’s nonprofit plans had the lowest average premium within a particular deductible range. For-profit health plans had the lowest premium in 39% of comparisons with the remaining 14% classified as ties since the differences between the nonprofit and for-profit averages were less than 3%.

An examination of out-of-pocket limits for these nonprofit and for-profit plans yielded similar results: Nonprofits had the lowest average limits on out-of-pocket costs in 56% of the comparisons. For-profit plans had the lowest average limits in just 28% of the comparisons.

What should we conclude based on these results? If you have strong political convictions, I can see several ways the data could be spun,  particularly given the thorny issue of tax advantages that some nonprofit plans enjoy. For myself, I satisfy myself with a modest set of conclusions and let the politicos fight about the rest:

 1) Nonprofit health plans are more likely to offer a lower premium than for-profit health plans

2) Removing a profit incentive from health plans as a means to make premiums more affordable cannot be supported by my study’s results since in over half the comparisons nonprofit health plans did not have the lowest premium

3) Nonprofit plans are more likely to have superior out-of-pocket cost protections than for-profit plans

 It will be interesting to revisit the nonprofit/for-profit premium comparisons once the new Affordable Care Act plans are released. The Essential Health Benefits will effectively commoditize plans and health status will no longer be a factor in availability or price of coverage. As a result, so premium differences and provider networks could assume greater importance to consumers shopping for health insurance.

 One of the issues not addressed in this study is the question of health plan quality (e.g. clinical outcomes, customer satisfaction, adherence to best practices, etc.). Health plans are more than premiums and the lowest cost plan might not be the wisest consumer choice if quality scores are unacceptably low. I plan on analyzing the same plans used in this study from the perspective of their quality scores to shed some light on the relationship of quality to the premium differences discovered.

Note from MM: — I am glad that Coleman  ends by emphasizing that consumers need to consider quality as well as price. If insurance doesn’t protect you, it’s not worth the money, no matter how low the premiums.

As it happens, I began comparing the quality of non-profit vs. for-profit insurance plans a  couple of weeks ago, and will be publishing a post on the topic in a few days.  I’ll invite Coleman to come back and report on his results as well.

 

 

Why Do Republicans Continue to Try to Repeal Reform? (A Method to Their Madness)

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(A longer version of this post originally appeared on Healthinsurance.org  There, you will also find a link to an HIO post showing how each Representative voted—and who didn’t vote.)

Last week the House voted—for the 37th time—to repeal the Affordable Care Act. Everyone knows that repeal will never pass the Senate.  Some suggest that legislators might better spend their time (and our tax dollars) figuring out how to create jobs.

Even the Congressional Budget Office (CBO) couldn’t take this 37th vote seriously. When preparing for this latest showdown, Republican Paul Ryan requested an update to CBO’s July 2012 estimate that repealing the ACA would cost more than it would save, increasing the deficit by some $109 billion over the coming decade (2013-2022.)

CBO replied to his request: “Preparing a new estimate of the budgetary impact of repealing the Affordable Care Act would take considerable time – probably several weeks – for CBO and the staff of the Joint Committee on Taxation, because there are hundreds of provisions in the ACA and those provisions are already in various stages of implementation. . .   We have just finished the time-consuming task of updating our baseline budget projections and need to finish our analysis of the President’s budgetary proposals.”

I like economist Jared Bernstein’s paraphrase of CBO’s response: “You guys go ahead and keep gettin’ your crazy on … over here we’re kinda busy doin’ actual work, so can’t help you right now.”

CBO added that when it does have time to do an update, it expects similar results. Repealing health care reform would add to the deficit.

                              Are Republicans Crazy . . .  Or Cunning?

You might think that by continuing to obsess over a bill that will never succeed, Republicans are once again exhibiting their self-destructive tendencies. But I would argue that House Republican leaders are not crazy, at least not in a way that is easy to understand. They’re cunning.

Ask yourself this: How many people skimmed or half-heard the news stories telling them that the House had passed a bill to repeal Obamacare?

This helps to explain why 12 percent of all Americans believe that the ACA already has been scrubbed. Every time a commentator mentions “health care reform” and “repeal” in the same sentence, the words will sink into that morass of half-truths and fictions that we call “the conventional wisdom.”

Even if people realize that the ACA  is now the law of the land, many take the repeated efforts to kill reform as a sign that there is something very wrong with the legislation.

After all, they think: “why would Republicans spend so much time trying to overturn a law if there wasn’t something terribly wrong with it?”

Of course House Republicans also voted against re-authorizing the Violence Against Women Act.  (Until it became crystal clear that they were once again tossing the women’s vote under the bus.)  Then there was the time when they voted unanimously to support an anti-abortion bill that redefines rape as “coercive” (as opposed to voluntary rape?)  GOP solidarity is not necessarily a sign of clear thinking.

A New “Sardonic”Edition of Health Wonk Review

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This edition, hosted by Brad Wright, of Wright on Health takes an original approach to the bi-weekly round-up of the best healthcare posts of the past two weeks: It’s excellent—I urge you to check it out. Just keep in mind that the descriptions of the posts are largely tongue-in-cheek.

 (I would provide more detail about the newest edition of HWR, but my lap-top rolled over and died two days ago. As a result, I  don’t have the time to give newest edition of HWR the attention it deserves.)

I hope you will.

Health Insurance and Tax Breaks: New Rules for the Self-Employed

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If you, your spouse or an adult child is self-employed, no doubt you already know just how expensive insurance is in the individual market.  Moreover, you know how difficult is to find comprehensive coverage when you’re buying your own insurance.  For example, most policies don’t cover pre-natal care, or child-birth– a huge problem for young women.

But under the Affordable Care Act everything changes. Beginning in January, you will be able to purchase a policy in your state’s Exchange—a one-stop marketplace where you can shop for plans. They will be easy to compare because all policies sold in the Exchanges must cover “10 essential benefits”  including pre-natal care, maternity, dental and vision care for children, rehab and mental health care.  There will be no no co-pays for preventive care and the deductible does not apply.No matter how much care you or your family need, there will be a cap on your out-of-pocket expenses of roughly $6,000 for a single individual or $12,000 for a family. (These rules apply to anyone buying their own insurance in the Individual Exchange, whether they are self-employed, unemployed, or work for an employer who doesn’t offer affordable, comprehensive health benefits.)

                                 Lower Premiums, Subsidies

In the Exchange, you will automatically become part of a large group, and as a result, premiums will be lower than the premiums you would papy today for similar coverage.

 Moreover, depending on your income, you may be eligible for a subsidy. For example, a 30-year-old couple with joint income of $45,000 would receive a subsidy of roughly $2700 and wind up paying $4,000 a year for comprehensive coverage that includes free preventive care. (This is a national average)  

 What You May Not Know about Health Insurance and Tax Deductions

You probably are aware that if you are self-employed and buy your own medical, dental or long-term care insurance, you can deduct premiums for an individual or a family plan on your income tax.

But did you know that if:  

You Have Children under 27, you also can deduct premiums you pay for  them–even if they are no longer your dependents?  

 You or  Your Spouse Receive Medicare, the IRS has now ruled that you can deduct Medicare premiums for Parts A, B, C and D?  This is in addition to the deduction for insurance that you or your spouse buy in an  Exchange.

                              How Much Can You Deduct?

To calculate your allowable health insurance deduction, take your self-employment income, and subtract the 50% deduction for self-employment taxes. Then subtract any retirement contributions made to SEP-IRA, SIMPLE-IRA, or Keogh plan. The remainder is how much you can deduct for health insurance expenses.

Health Wonk Review: Oncologists Tell the Truth about Cancer Drugs; Will There Be Enough Plans to Choose From in the Exchanges? What Does Oregon’s Research on Medicaid Tell Us? And More . . .

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The newest edition of Health Wonk Review  is up on Managed Care Matters.

There, host Joe Paduda calls attention to an eye-opening post by The Health Business Group’s David E. Williams. 

Williams reports on what oncologists say about cancer drugs in “The Price of Drugs for Chronic Myeloid Leukemia (CML); A Reflection of the Unsustainable Prices of Cancer Drug.” The article, which was published in the journal, blood, includes candid comments from more than 100 experts  They tell us  that:.

  • Many costly treatments aren’t worth the money
  • New treatments with tiny orno benefits often cost a multiple of existing therapies
  • Despite their reputation for penny-pinching, health plans are often not aggressive in negotiating price
  • Patients are already suffering mightily from high costs –and it impacts quality of life and survival as well as financial health
  • Society as a whole cannot afford to pay the high prices charged for so many of the new therapies

 (I’m reminded of “A Very Open Letter from an Oncologist published on HealthBeat in 2009.)  It’s encouraging to see more oncologist stepping forward to telll the truth about cancer drugs..)

.As Williams observes these insights “come from people who know what they’re talking about and who have traditionally been sympathetic to drug makers and unperturbed about costs.”  

But now, the companies that make these drugs have taken greed too far.

 Paduda also highlights Health Affairs just-released research indicating that the decline in inflation could result in a reduction of $770 billion (yup, that’s “billion” with a B) in public program health care costs over ten years. “

But is the trend sustainable? John Holahan and Stacy McMorrow of the Urban Institute are “cautiously optimistic.” Paduda agrees: “there’s no question there are fundamental changes occurring that are affecting care delivery, pricing, and reimbursement.”

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