Incentives for Consolidation v Anti-Trust

This is an important Kaiser Health News brief on an Idaho hospital/physician merger that is being scrutinized for potential anti-trust violations. In part it says:

While consolidation in the industry has been underway for decades, the pace has accelerated dramatically since the 2010 passage of the federal health care law. Hospitals and doctors’ groups have joined hands in part out of fear of funding cuts and in part, to position themselves for government bonuses. The bonuses are available to providers who agree to form “accountable care organizations,” which are rewarded for keeping Medicare patients healthy, rather than for the number of tests or procedures they do.

“The Affordable Care Act is pushing consolidation and working together, but the Federal Trade Commission and the Justice Department seem to be saying, ‘Wait a second, there are antitrust laws here,” said Robert Field, a law and health policy professor at Drexel University in Philadelphia. “The federal government has a schizophrenic attitude toward provider consolidation.”

FTC officials, however, deny there is any broad conflict between the Affordable Care Act and antitrust laws.

“The issues are in those small number of cases where collaboration occurs in a way that gives participants excessive marketplace power,” said Deborah Feinstein, director of the bureau of competition for the FTC.

The incentives to aggregate market power have been around for awhile, and North Carolina has seen lots of this in the form of hospitals/health systems purchasing physician practices. The incentives for such behavior are increased not only by the ACA, but by the nascent regionalized Medicaid ACO plan put forth by the N.C. General Assembly. As I said in this post on the emerging North Carolina plan:

This is going to set off another wave of aggregation/consolidation or accelerate it, whichever way you want to view it. The incentives around this sort of plan are to get as big as possible, I think. At some point, there is likely to arise some anti-trust questions around all of this.

April 21st blogging the last 4 years

Austin Frakt was asking what he should blog about on twitter last night, and most of the suggestions were interesting (and important) questions that don’t really have an evidence based answer. I thought, I wonder what I was blogging about on April 21st (or nearest date in April) the past 4 years (my blog started summer 2009). Here goes.

  • 2013. Text of the North Carolina Medicaid reform bill was released. The so called Partnership for a Healthy North Carolina is a phrase still used, but the plan has shifted away from straight privatization of Medicaid.
  • 2012. The next bubble college tuition? was the post nearest April 21. The nearest health policy post was one Looking at the future of payroll taxes v general fund financing of Medicare, given that Part B has a statutory proportion of Part B expenses that must come from general tax revenue, but not a cap on the amount flowing in like payroll taxes do.
  • 2011. A post on the State of the Health Reform debate, coming after a week in which I say I dropped totally out of the discussion during a spring break trip. I claim to have been depressed by the lack of actual policy discussion leading to a deal between the two sides for the next step after the ACA.
  • 2010. On the old blog, a quick hit piece on CLASS Act and Long Term Care, and use of genetic markers to underwrite private long term care insurance. And I announced I got tenure at Duke! Yay team and all that.

North Carolina could use Sec 1331 of the ACA with the federal exchange

My white paper on health reform in North Carolina suggested that the state should run its own health exchange, move ahead with the Basic Health Plan option under section 1331 of the ACA, and expand insurance coverage via a “private” option using the section 1331 vehicle.

I have been asked whether North Carolina could develop a Basic Health Plan under Section 1331 using the federally run exchange? The short answer is yes; I confirmed this informally with several persons who work in the Obama Administration.

North Carolina could develop a BHP even if we don’t run our exchange. Further, a waiver is not needed to create a Basic Health Plan option that is allowed in Section 1331 of the ACA starting in 2015 for persons between 133%-200% of poverty (the waiver referred to in my white paper would be if we expanded insurance coverage via a private option, and not traditional Medicaid; essentially extending the BHP concept to 0% of poverty). The Basic Health Plan (BHP) allows a state to take 95% of the insurance and cost sharing subsidies that residents would qualify for individually, and bundle them together in a variety of ways. For example, persons in the BHP could be auto-enrolled into the lowest-cost private exchange plan in their county, expanding coverage. In addition to traditional insurance, organizations that were going to become Medicaid ACOs under the extand Medicaid reform plan could also bid for BHP individuals. The BHP could thus encourage competition in a state that has very little in the exchange, as well as to help accelerate the type of thinking that will be necessary for the regionalized Medicaid reform that seems likely to represent the way North Carolina will move.

While I think we should expand coverage to fill in the “coverage gap” using private insurance as the vehicle, developing a BHP for persons between 133-200% of poverty would be a reasonable step that could increase competition and expand insurance coverage in this income group next year.

Burwell Nomination: Faint echoes of a deal post ’14?

President Obama has nominated Sylvia Burwell to replace Kathleen Sebelius as Secretary of HHS. Burwell is the Director of the Office of Management and Budget and is noted for relatively good relations with Congressional Republicans. She is the type of person who could help broker a deal for modifications of the ACA after the 2014 election.

Changes to the ACA at some point are as inevitable as water seeking the lowest point when poured out of a glass. The question is when the politics allow the first deal that can improve the policy? In any sane system, we would have already revisited multiple things, but Republicans have heretofore chosen complete opposition. That may still be their best 2014 election strategy, but they are in dangerous territory of rendering themselves to be post-policy in the most important and difficult long run issue facing our country.

As easy and perhaps as effective as repeal blah blah blah is for 2014, I will be shocked if it is anything but a disaster for Republicans in 2016. A smart Republican nominee would want Congressional Republicans and the White House to reach a deal on some modifications. Hillary Clinton likely wouldn’t mind, and the Big Dog certainly would not be. And Burwell is a signal that the POTUS wants this as well.

What are some relatively simple modifications?

  • Replace the individual mandate with auto enroll procedures plus open enrollment with underwriting allowed if you don’t come in during the enrollment period as proposed by the Coburn-Burr-Hatch policy put out in January 2014.
  • Smooth the “cliff” effect of the ACA exchange subsidy structure by allowing persons with incomes above 400% of poverty to deduct their health insurance premiums. Most people get federal subsidy for their health insurance. We need a rationalization of the amounts and circumstances, but that will take time. This would be a placeholder and would reduce worries about employment effects of high implicit marginal tax rates from the subsidy cliff (that Coburn-Burr-Hatch shares).
  • Replace the cadillac tax with a capping of the tax exlcusion. Coburn-Burr-Hatch initially proposed quite an aggressive cap level, then backed off, but the private score has never been updated. So, they talk up one score, but another policy. In any event, not sure of the level, but capping the tax exclusion of ESI is a better policy because it signals the change to the person getting the now unlimited subsidy–people like me with good employer sponsored health insurance.

More complicated, but places I could see a deal going.

  • Provide more routinized state flexibility for states to do a variety of things with the low income portion of Medicaid. States can get waivers and the like as Arkansas is doing for a privatized Medicaid expansion, but this process could be made easier. I would want to be very cautious with changes in the dual eligible and long term disabled portions of Medicaid. We need a way to get the South to participate fully in health reform.
  • Decide what the maximum deductible should be, and create a “copper” level plan that might even simply be financial protection. Such a plan could even be what States auto enroll persons into. I would be open to an explicitly different max deductible amount by age (more for younger, less for older) and seek to get as close to universal coverage as we could. There are quite high deductibles in allowed in ACA plans now.

Eventually there will be a deal, just like water flows to the low point. The question is when will the politics be right for some of the things above?

Release of Medicare Part B data

I was a guest on NPR’s “Here and Now” today, discussing the release of Medicare Part B data. I think this portends a good move, especially for researchers. I have my doubts about the ability of consumers to use the data for personal health care decision making, but we shall see. A key issue: it is ridiculous that Medicare Advantage plans are censored for Medicare claims records for research purposes. Now that FFS Medicare has released full hospital (last year) and physician payment data this year, it is time to make Medicare Advantage claims accessible to researchers, at a minimum.

It is about 12 minutes long and includes Shannon Pettypiece from Bloomberg. Here is a link.

RAND study on health insurance

The RAND study on health insurance that leaked last week is out (or at least a fact sheet). update: link to longer document. A few top line findings

  • Rate of uninsured dropped from 20.5% in September 2013 to 15.8% in Mid-March 2014 (so before the surge at the end of open enrollment). The study appears to be ongoing, so there should be essentially tracking poll-like information.
  • They do a good job of demonstrating movement in and out of insurance and amongst types. From September to March, 14.5 Million gained coverage, while 5.2 Million lost it.
  • Net gain in coverage driven by: gains in ESI (+8.2 Million), Medicaid (+5.9 Million), and exchange based plans through mid-March (+3.9 Million)
  • They note that most newly covered by Medicaid were previously uninsured, while one-third of those covered by exchange plans were (again, prior to the March 2014 surge).
  • They say less than 1 Million persons had individual market plans and are now uninsured
  • 80% of adults had same coverage in March that they had in September

The best news is that they say they will update soon; more data is always good.

The survey results reported here were collected through March 28, 2014, but many panelists responded earlier in the month and may have made new insurance choices since then. Respondents will be surveyed again in April and our figures will be updated when new data is available.

Further, they note the error related to surveys:

Given the strong interest in understanding the impact of the ACA, a variety of different organizations, including the Urban Institute, are conducting surveys to estimate the impact of the ACA on insurance enrollment. When making comparisons, it is important to keep in mind that there is always a margin of error. In this case, because we are extrapolating from a small survey to the entire U.S. population, the margin of error is relatively large. For example, while we estimate 9.3 million individuals become newly insured, the margin of error is 3.5 million people.[2]Furthermore, the timing of surveys may vary. Given the surge in enrollment at the end of March, whether that period is included in the survey may dramatically affect results. Thus, it should not be surprising that our estimates may not match perfectly.

Cost savings–a bleg

My small brain is turned in knots on the seemingly simple question laid out below.

Say I have a clinical trial where the intervention is stopping the drug, and there are no mortality differences between treatment and control groups, and I want to estimate the cost savings of stopping the drug, based on the assumption that it is a good thing to do since it didn’t reduce mortality.

  • Option 1. cost savings are defined after randomization as: incurred costs of the continued group (assume +$10) + the avoided costs of the discontinue group (assume -$10). Savings = $20/person
  • Option 2. cost savings are defined after randomization as: the avoided costs of the discontinued group alone (assume =$10). Savings = $10/person

Option 1 highlights the counterfactual of continued use of the drug, and shows what could be achieved if you managed to get lots of folks to follow the results of the trial (I think). Option 2 is more conservative and only focuses on reduced costs/person who stops.

Which is correct?


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