What Will SCOTUS* Do?


Posted by Joel Wittman

After three days of hearing oral arguments on the legality of all, or parts, of the Patient Protection and Affordable Care Act (ACA), the Supreme Court is hopeful of rendering its decision in June.  Based on what we’ve heard so far, it doesn’t bode well for the ACA.  The primary issue of contention is the inclusion of an “insurance mandate” whereby citizens are required to purchase health insurance or pay a penalty.  The mandate seems to be the linchpin of the reform act; without this requirement will insurance premiums skyrocket and will access to health insurance be limited?  This also raises the question of severability.  If the mandate is struck down, will the entire ACA also be invalidated or can parts of it survive?  Will the law’s popular “guarantee issue” and “community rating” provisions survive without the mandate that virtually all Americans must have health insurance?  Guarantee issue prevents insurers from discriminating against people with pre-existing conditions and community rating standardizes insurance premiums for those living in the same area.  The states that have attempted to enact guarantee issue and community rating systems without instituting mandates saw their health reforms fail – insurance premiums skyrocketed, consumers had fewer choices and the number of uninsured went up.

So, what is the insurance industry to do?  Insurers must prepare for a worst-case scenario – a ruling that the individual mandate is unconstitutional, but insurers still must provide policies for all people.  In that situation, insurers say premiums will rise sharply because of people with chronic illnesses and pre-existing conditions, for example, would buy health coverage, but healthy people would not.  Short of persuading Congress to write a new law, the insurers are considering certain contingencies including:

– Penalizing those who enroll outside of short annual windows

– Denying treatment for specific conditions, especially right after a policy is purchased

– Rewarding certain insurance buyers, such as offering much lower premiums for younger and healthier people

– Expanding employers’ role in automatically enrolling employees for health insurance

– Urging credit- rating firms to use health insurance status as a factor in determining individuals’ credit ratings.

There remains, however, a divided opinion about the exclusion or inclusion of the individual mandate in the health reform act.  Some believe that its exclusion will cripple the ACA and all of its proposed benefits, while others contend that the penalty associated with the mandate is not onerous enough to deter individuals from not purchasing health insurance.

Things are never as simple as they seem to be.  The good intention of the current administration to increase access to health insurance coverage for all individuals at affordable pricing may not be good enough to preserve the goals of the ACA.  Do you throw out the baby with the bath water if the entire plan is deemed unconstitutional?  Do you preserve part of plan and try to make the best of the remaining regulations?  Or, do you leave the ACA as is and have the first meaningful health care reform since the Great Society?  Only SCOTUS can let us know.

* Supreme Court of the United States

Joel Wittman is an Adjunct Associate Professor at the Wagner School of Public service of New York University.  He is the proprietor of both Health Care Mergers and Acquisitions and The Wittman Group, two organizations that provide management advisory services to companies in the post-acute health care industry. He can be reached at joel.wittman@verizon.net.


Building an Exchange Strategy Part II – Understanding Your Political Climate


Posted By  Errol Pierre

By 2014 there will potentially be a health benefit exchange in every state across the country. Like snowflakes no exchange will be alike and politics will play a pivotal role in the differences found between them. While the healthcare reform bill signed into law requires the establishment of exchanges, the details of operation have yet to be determined. In fact, in March 2012, the Department of Health and Human Services (HHS) provided 600 pages of additional guidance to the states. The guidance given was more of a framework while much of the particulars were purposefully left out. This has made the role of the individual State Governors ever important. They are now in a position of power and play a very integral role in bringing exchanges from a theoretical policy concept to a legislative and operational reality.

Right or Left
At a high level, left leaning blue states will design their exchange to be an active purchaser. This will allow the Governor to take an active role in the day to day exchange operations. Under the direction of an exchange board, most likely selected by the Governor, these states would choose precisely which insurance companies participate, the types of policies sold, the rates of the selected products, and how enrollment and eligibility of those enrolled would work. In some more aggressive instances, states could even negotiate pricings with doctors, hospitals and pharmaceutical companies in the very same ways insurance companies do today in the private sector. This is obviously foreign territory to many of the states pursuing such a model. Nonetheless, proponents of the model see value in such an approach believing more oversight will lead to more affordability and better health outcomes in the long run.

Right leaning red states on the other hand will opt for a facilitator model. The state will merely be a marketplace for health benefit transactions between consumers and insurance companies to occur. They will set the high level guidelines and guardrails and merely outline the rules of engagement. Much of the market dynamics will be left up to private insurance and market forces to sort out. Benefit design, rate approval, distribution strategy, the “off-exchange” marketplace, and pricing will all be left up to “the invisible hand” of Adam Smith’s market forces. The idea of competition lowering healthcare costs has been refuted by the likes of many including Alain Enthoven – the father of managed competition – and Kenneth Arrow – the pioneer in research on asymmetric information as a market failure in healthcare. Nonetheless, American capitalism seems to have trumped over such doubts in these states. As a result, the role of government in these exchanges will be as minimal as the healthcare reform legislation will allow. There are already mandates that must be in place for each exchange. For example there must be four benefit categories ranked by actuarial values labeled bronze, silver, gold, and platinum for simplicity. The legislation also caps insurance company profit at 20% before operating costs are factored in. Lastly, the legislation requires health insurance companies to accept all enrollees and requires that the ratio between the pricing of the healthiest and the sickest consumer not exceed a 3 to 1 ratio. All in all, governors of these red states feel too much regulation stifles competition and the reform bill already has enough rules. As such, they are reluctant to add any further requirements on top of the federal ones. In this role the state will play referee rather than player/coach.

Politics at Play
State by state, there will be different shades of blue as states consider the ramifications of building a health benefit exchange. Health insurers must be prepared to understand how these different shades will impact the development of health policy. Vermont, for example, will be one of those very bold blue states. On May 26, 2011, Governor Peter Shumlin signed into law a historic universal healthcare bill which would cover every citizen in the state under a single payer system called Green Mountain Care. It will be in place by 2017 and the state has been drawing down federal funds from the national health reform bill as it prepares.

Like blue states, there too will be shades of red. Arkansas is a perfect example of a bright red state. Legislative opposition to a state run exchange was so great, Jay Bradford, the State Insurance Commissioner, had to  start preparing for a federally run exchange. By law, when a state cannot come up with its own legislation to run an exchange, the federal government is required to step in and set one up. Ironically, legislators that are so vehemently against Obama’s healthcare reform legislation will end up with a federally run exchange led behind Kathleen Sebelius, the current Secretary of Health and Human Services and former democratic Governor of Kansas.

Understanding the political environment of your state of operation is paramount to assessing the viability of a successful exchange strategy for a private insurance company. An active purchaser model lends itself to be a market where the constraints may be too great to be successful and sustainable. If the market is too controlled, healthcare coverage quickly becomes a commodity and erodes the levers of differentiation used to be competitive. Health insurance companies could come to the conclusion that participating in such a state will not be viable and opt to stay on the sidelines. However, the state would technically have the right to mandate (either directly or indirectly) insurance company participation, which could turn the state into a defacto-single payer.

On the other hand, a facilitator model lends itself to be the more favorable for an insurance company to operate within. However, a state that has done everything to obstruct healthcare reform progress like Arkansas is just as dangerous. It most likely will end up with a federally run exchange which could potentially be more burdensome than a facilitated one a red state would have had the option to create.

Errol Pierre works at a large insurance company focused on business development, sales, and strategy for employee benefits. He is currently pursuing a degree in Health Policy and Management with a specializing in health finance. He can be reached at errol.pierre@nyu.edu

 


Four Recommendations to Achieve Health Care Savings


Posted by Joel Wittman

The now-defunct so-called congressional “super committee” that was charged with the task of identifying deficit reductions received several recommendations that would create significant health care savings over a ten year period.  Despite the failure of the committee to successfully achieve its mandate, it is well worth exploring the cost reduction suggestions the committee received from health care executives.  These chief executives of both for-profit and not-for-profit health care companies, members of the Healthcare Leadership Council (HLC), presented a set of reform proposals that would not only generate $410 billion in savings over 10 years, but would also strengthen Medicare’s long-term sustainability.  In fact, according to Mary R. Grealy, president of HLC, “the reform recommendations will contribute to deficit reduction without placing an unfair or disproportionate burden on patients, healthcare consumers, or our most vulnerable citizens.”

HLC’s recommendations to the “super committee” included:

Create a new “Medicare Exchange” in which private insurance plans would compete on the basis of cost, quality, and value.  

While acknowledging that this recommendation would be compared to the Medicare reform concept contained in Congressman Paul Ryan’s proposed budget, the HLC indicated that the differences include the fact that there Medicare beneficiaries would have the option of staying in traditional fee-for-service Medicare and there would be a more generous inflation factor – growth in GDP plus one percent – for premium subsidies.

The thought behind this proposal is that Medicare beneficiaries should have the same freedom of choice as Medicare Part D prescription drug program participants, federal employees and members of Congress participating in the Federal Employees Health Benefits Program, and those who will utilize the new state-level insurance exchanges created as part of the Affordable Care Act.  The competitive environment will require healthcare providers, plans, manufacturers, and distributors to achieve greater cost-efficiencies while still offering quality and value to beneficiaries.

As Ms. Grealy stated: “ If given the choice between deeper provider cuts, which will reduce patient access to care, and reducing costs by using consumer choice to incentivize  cost-effective innovation, it doesn’t seem like a difficult decision.”  However, does it seem similar to the public option plan that was vigorously opposed when being considered as part of the ACA?  And, can competition be the driver of health care cost reductions in an imperfect market place?

Gradually increase the Medicare eligibility age from 65 to 67.

As more Americans remain healthy over a longer period of time, this transition would mirror the increase in the Social Security retirement age and reflect today’s longer average lifespans.  The increase would be implemented over roughly a decade, raising the eligibility age by two months annually.  The shrinking ratio of active workers to Medicare beneficiaries makes this change inevitable.  The Affordable Care Act makes such a change possible in that Americans in their mid-60s not yet eligible for Medicare would be able to purchase health insurance on the new state exchanges without their health status affecting their ability to acquire coverage.  But at what cost?  More than the price of Medicare Part B premium coverage?

Reform Medicare’s cost-sharing structure.

This reform would involve making the Medicare Part A and B beneficiary cost-sharing uniform, with a reasonable deductible and co-pays as well as a cap on annual out-of-pocket costs.  This would make Medicare costs more predictable and consistent for beneficiaries while also ensuring that seniors wouldn’t be devastated by catastrophic care costs or faced with limits on hospital stays.  Another part of this proposal would be a requirement that individuals with incomes of $150,000 and greater pay their full premium costs for Medicare Parts B and D.  Supposedly, this would affect less than 3% of Medicare beneficiaries and would generate budget savings while protecting financially vulnerable beneficiaries.  Uh-oh.  Is this an “us against them” issue?

Implement medical liability reform.

HLC members recommended liability reform measures including a cap on non-economic damages in medical malpractice cases, a one-year statute of limitations from the point of injury to the filing of litigation, and a “fair share” rule to have defendants pay damages commensurate with their responsibility for the injury involved.  Acknowledging the partisan difficulty in advancing tort reform legislation, alternative approaches including linking liability protections to healthcare providers’ use of health information technology and practice of evidence-based medicine should be considered.

The above four recommendations would generate just over $410 billion in budget savings over a ten-year period, based on Congressional Budget Office estimates and other published budget projections.  Alas, the “super committee” wasn’t so super after all and could not generate a program acceptable to the partisan participants. But, should that mean that some worthwhile recommendations not be explored further with the thought of strengthening our healthcare system?  Or do we slowly move along and be subject to on-going sequestration reimbursement rate reductions?

Joel Wittman is an Adjunct Associate Professor at the Wagner School of Public service of New York University.  He is the proprietor of both Health Care Mergers and Acquisitions and The Wittman Group, two organizations that provide management advisory services to companies in the post-acute health care industry. He can be reached at joel.wittman@verizon.net.


It’s a Rotten Apple for NY’s Small Businesses: A look at health care regulations that uniquely contribute to high health insurance costs in NY


Posted By Errol Pierre

Want to start a small business and help our staggering economy? Think twice about NY. Studies continue to show that affordable health coverage is the top concern for small businesses in this state. Contrary to popular belief health insurance profits and administrative costs barely contribute to the rising cost of coverage representing only 6% of total health spending. Despite this reality, this is exactly where policy makers have focused their time and energy with a desire to rein in costs. Profit margin in the NY small business insurance market is among the lowest in the country. In fact, many health insurance companies in NY are losing money, barely breaking even, or attaining modest 2-3% margins. Instead, we should focus on the big ticket items. That is, let’s focus on the factors that are unique to NY that contribute the most to higher costs. If modified to match national standards, these factors could substantially reduce insurance rates in this state making affordable health coverage available to more small businesses and in effect, more New Yorkers. After all, small businesses are the engine of the NY economy and the catalyst for NY job creation.

The primary driver of high insurance premiums in NY is the unusually high cost of health care delivery. NY is one of two states (California being the other) that lead the nation in spending at $163 billion per year. Each New Yorker makes up about $8,300 in annual health care costs per year; 22% higher than the national average. However, NY’s high spending rates have not translated into healthier New Yorkers. NY is only in the middle of the pack when it comes to quality (21nd out of 50 states). The state comes in dead last (50th out of 50 states) when it comes to avoidable hospital use. Statistics continue to show that hospital care is the #1 contributor to total health care spending in the America and this is exactly where NY has its problems. As health spending increases in this state, the price to insure New Yorkers increases as well.

Why is this happening?

Here are several regulatory factors unique to NY that exacerbates the high cost of coverage listed in order of magnitude:

High Medicaid Enrollment – A huge detriment to the affordability of small business health insurance rates is the number of New Yorkers enrolled in Medicaid. Of the 10 states that lead the nation in health insurance rates, high Medicaid enrollment is a reoccurring theme among them all. 1 out of every 4 New Yorkers receiving Medicaid benefits making it the 6th highest of any other state. Despite not leading the country in Medicaid enrollment, NY is the highest spending Medicaid state in the entire country. This means we are paying more per person without offering better care. In its meager attempts to rein in these high rates of spending, NY continually cuts the payments given to hospitals and doctors that provide care to NY Medicaid enrollees. These cuts set off a chain reaction causing hospitals and doctors to subsidize patient revenue losses with income from patients that have private insurance. This disproportionately impacts small businesses because there are fewer tools at their disposal to combat cost shifts. As a result, NY is the 2nd most expensive state for small business health insurance in the country averaging $554 a month for an individual and $1,455 a month for a family. How does that compare to the rest of the country? NY rates are 30% higher than the national average.

SOLUTION:  NY should immediately implement the recommendations from the NY Medicaid Redesign Team formed under the leadership of Governor Cuomo. The #1 cost contributor to small business health insurance is its subsidization of Medicaid spending in the state. If NY wishes to attract and retain small businesses, it must enact legislation that stops it from being the highest spending Medicaid state in the nation.

Pure Community RatingNY stands alone as the only state that requires health insurance companies to charge all small businesses purchasing the same plan in a similar region the same price regardless of business size, demographic makeup, industry type, or health history. The other 49 states allow pricing to differ on a variety of factors which provide lower rates for healthier, younger, and even larger small businesses encouraging enrollment. Enrollment from diverse companies balances the insurance risk pool making coverage affordable for all. Inherent to the smallest of companies are higher operating costs and more fluctuations in health status and demographics which cause pricing for this population to be higher than average. However, because of this law, NY must charge all small businesses the same price regardless of size. This has caused NY to be the highest priced state in the nation for companies with 11-50 employees, which becomes a huge disadvantage for the NY economy.  Small businesses in this segment size represent more than 60% of the total small business workforce in NY making neighboring states like CT, NJ, and PA more attractive to larger small businesses. When fewer small businesses opt to offer coverage and the ones that do are smaller in size, the cost of insurance drives up at even faster rates than the normal health trend.

SOLUTION:  Adopt “modified community rating” as outlined in the federal health care reform bill which allows small business rates to vary by age and  tobacco use. This will allow more favorable pricing that will attract a both larger small businesses that employ more people and attract younger/healthier New Yorkers into the insurance risk pool.

Hidden TaxesThe single largest small business tax in NY is on private health insurance coverage. NY collected over $4.1 billion in revenue through these various taxes, fees, and assessments in 2011. Private health insurance has historically been targeted for solving state budget deficits. As such, these taxes have increased year after year adding more than $500 million to insurance costs since 2007. No other state has such an onerous tax burden and it is only likely to get worse as Federal health care reform is implemented. Both Health Benefits Exchanges and Market share assessments will result in more taxes imposed on the privately insured).

SOLUTION: Make New Yorkers aware of the taxes, fees, assessments hidden in health insurance rates. New Yorkers have a right to know where tax revenue for the state is generated.

o   $2.33B was raised by surcharges placed on hospital and health services given to consumers of private insurance

o   $1.16B was raised by an assessment based on a health insurer’s enrollment

o   $353M was raised by taxes placed on the prices commercial insurance companies charge their customers

o   $270M was raised by assessments on health insurance companies to fund running the Department of Financial Services

o   $240M was raised by an assessment based on a health insurer’s enrollment to specifically fill NY State budget shortfalls.

Benefit Mandates NY has a laundry list of over 40 specific conditions and treatments that all health insurance policies must cover by law, regardless of an employee’s health needs or preferences. Compared to states like Idaho (12 mandates) and Alabama (18 mandates), NY is one of the states that lead the nation in mandates. These mandates in many instances supersede Federal standards, increasing NY’s health care costs by more than a 12%. In fact depending on the mandate, insurance costs can increase between 1% and 5% for each additional mandate.

SOLUTION:  Change the current set of benefit mandates that exceed the Federal standards to be “made available for purchase” rather than being mandated for inclusion in all small business plans offered.  This will allow employers to choose the plan that best suit their business needs. Larger employers that self-insure have been able to free themselves of many burdensome and costly mandates through ERISA rules which have not created a level playing field and disproportionately impacted smaller businesses.

Health Insurance Rate Review (Prior Approval Law) In 2010, NY passed a law requiring all small business insurance rates to be approved by the Department of Financial Services. It also requires that $0.82 of every $1.00 in revenue be spent on medical care. As feared, this new rate approval process has become highly politicized rather than being a true actuarial exercise. First, $0.82 is higher than the federal requirement of $0.80 found in the recent health care reform legislation. Secondly, insurance companies in NY spend closer to $0.87 of ever $1.00 in the small business market and after operating costs, profit margins average only 2%. These actions create a hostile market place for competition and have led to fewer insurance companies offering coverage to small businesses in NY.

SOLUTION: Remove the onerous and political nature of rate increase reviews and improve the timeliness of state decisions

Individual Market FailuresHealth insurance coverage for an individual in NY exceeds $1,000 a month in most cases. These rates are almost 60% higher than those for small businesses, causing some individuals who are priced out of the marketplace to form phony small businesses to avoid the high costs and market failures of the individual market.  As a result, insurance companies inadequately price small business insurance coverage to properly reflect the risk.

SOLUTION: Enact a “facilitated model” for health benefit exchanges as outlined in the health care reform legislation. This will increase competition and fix the individual market by removing the restrictions of plan options that must be sold in the state. Today, NY requires all health insurance companies to offer basic HMO and POS products that costs more than $1,000 a month for an individual. Fewer regulations in the pricing and the plans offered to individuals would unleash the creativity and innovation found in products health insurance companies sell to larger businesses.

SOLUTION: Modify the NY “Young Adult Option” law that allows unmarried young adults through age 29 to purchase health insurance through their parent’s plan. This law should be modified to lower the cost of insurance to adequately reflect the health status of an average 29-year-old. Today, the pricing reflect the health status of the current population, which is much older and less healthy, making it unaffordable for many young workers in NY.

The NY Dilemma

Based on a 2010 AHIP study below, NY health insurance pricing is more attractive to the very small businesses that cause rates to sky-rocket. This is an unsustainable state of affairs that only hampers NY’s ability to have a strong and fast economic recovery.

Premiums by State, 2010 (Top 5 Most Expensive States)
       
Small Employers w/ 26-50 employees Avg. Monthly Premium
  State

Single

Family

1. New York

$565

$1,485

2. New Hampshire

$512

$1,345

3. Nebraska

$443

$1,164

4. Illinois

$435

$1,147

5. California

$428

$1,125

Avg. United States

$406

$1,065

   

Small Employers w/ 11-25 employees Avg. Monthly Premium
  State

Single

Family

1. New York

$577

$1,514

2. New Hampshire

$523

$1,374

3. Nebraska

$449

$1,179

4. Massachusetts

$439

$1,153

5. Illinois

$438

$1,151

Avg. United States

$419

$1,100

   

Small Employers w/ 10 or fewer employees Avg. Monthly Premium
  State

Single

Family

1. Nebraska

$579

$1,519

2. Massachusetts

$545

$1,430

3. New Hampshire

$539

$1,415

4. New York

$536

$1,408

5. Florida

$489

$1,283

Avg. United States

$446

$1,172

AHIP Small Group Health Insurance in 2010: A Comprehensive Survey of Premiums, Product Choices, and Benefits, July 2011

Errol Pierre works at a large insurance company focused on business development, sales, and strategy for employee benefits. He is currently pursuing a degree in Health Policy and Management with a specializing in health finance. He can be reached at errol.pierre@nyu.edu


What’s Trending in Global Health


Posted by Debbie Koh

Trends are a part of our lives. Fashion, YouTube videos, Twitter hashtags – they all come and go. International health and development is not immune to these cycles either. On January 30, Bill Gates announced the commitment of pharmaceutical companies, public and private donors in the “London Declaration” to eliminate neglected tropical diseases (NTDs) by 2020. This overdue focus certainly should be celebrated – you know it’s bad if the fact that nobody pays attention to this group of diseases has been worked into their name.

Two days later, the New York Times ran an op-ed by Paul Farmer,“Why the Global Fund Matters,”in which he essentially pleads for the continued existence of the formerly behemoth funding mechanism. Before the establishment of the Global Fund to Fight AIDS, Tuberculosis and Malaria and the Presidents Emergency Plan for AIDS Relief (PEPFAR) in the early 2000s, development assistance for HIV/AIDS was less than $1 billion. By 2005, more than $3 billion was being spent to fight HIV/AIDS. Throw TB and malaria into the mix (and the establishment of the President’s Malaria Initiative) and the total amount of development assistance for health by mid-decade was more than $17 billion. Between 2001 and 2008, the total development assistance for health more than doubled.[i]

So what’s the problem? By 2008 and 2009, development assistance for HIV/AIDS and TB slowed while areas like maternal, newborn and child health enjoyed rapid growth. This is in no doubt aided by the rapidly approaching 2015 deadline for achieving the Millennium Development Goals, including Goal 5 – reducing the maternal mortality ratio by three quarters.As someone working in maternal health, I already get the sense of needing to strike while the iron is hot, before the attention and funding moves on, if it hasn’t started to already.

Agriculture and food security, social franchising, and mobile health technology are just a few areas gathering momentum. I am not arguing for any one over the other, and reality is that the total amount of funding for HIV/AIDS still remains high, even if growth is slowing. I’m as guilty of following the herd as anyone else:  I jumped from HIV/AIDS work to maternal health and eagerly track what’s new and upcoming in the field. I do worry, though, that these recent developments are indicative of shortening attention spans in a field that requires sustained commitment and focus.

The fight against HIV/AIDS continues to be a drawn out, difficult battle with “wins” that are very different from what we envisioned a decade ago. Truly reducing maternal mortality in the world will require a long-term and complex combination of health interventions, economic growth, political will, education and empowerment. NTDs are low hanging fruit now, but who will be there to address the social, environmental, and other unanticipated factors that will inevitably thwart these new efforts?

Paul Farmer’s plea serves as a reminder that achieving true, lasting impact in global health is a long haul. Lives are at stake in our work. Let’s not forget our commitment to them.


[i]Institute for Health Metrics and Evaluation. Financing Global Health 2011: Continued Growth as MDG Deadline Approaches. Seattle, WA: IHME, 2011.

Debbie graduated from Wagner in 2010 with her MPA in Health Policy and Management, International Health. She returned to her native California in 2011 and currently works for Venture Strategies Innovations. Follow her on Twitter at @thedebkoh or connect via LinkedIn. All views expressed are her own.


Five Cost-Cutting Health Care Trends to Watch


Posted by Joel Wittman

With health care reform requiring close scrutiny of financial performance, hospital and health systems are closely examining ways to reduce spending.  Following is one person’s thoughts about how fiscal responsibility can be achieved:

1. Mergers and Consolidations

Mergers and acquisitions in the health care sector are at an all-time high in terms of dollar value.  Hospitals and physicians are no doubt integrating and other providers are combining and coordinating care delivery models in response to the current and expected changes resulting from health care reform.  There are experiments in reimbursement and payment methodologies that should lead to fiscal sanity but can also lead to a concentration among providers.  Some believe that this will lead to less expensive care while others argue that it will lead to monopoly and its attendant effects on the health care financial landscape.  What do you think?

2. Reduced Readmissions

Tied to reimbursements, readmission rates are the target of hospitals to reduce the number of patients for the same condition.  Previous studies have found that a number of things can help reduce readmissions, such as home health use after hospitalization, patient engagement and education, use of nurses for patient follow-up, and remote health monitoring.  Hospitals should be focused on reducing readmissions and unnecessary admissions for conditions that probably would not have led to an admission if the person had gotten proper primary care.  Will accountable care organizations help in this regard?

3. Comparative Effectiveness Research

As leading institutions continue to look at evidence-based medicine and patient outcomes, new research is being developed about what is most effective.  A most hopeful trend is occurring in health systems where they are really looking in detail at examining what doctors actually do and what the results are in terms of outcomes and then feeding it back into the system.  Look into Geisinger and Kaiser Permanente as leaders in this practice.  but, will this be widely accepted by physicians as their medical decisions and care are more frequently scrutinized?

4. Care Coordination

With initiatives already in motion for accountable care organizations and patient-centered medical homes, more attention will focus on outcomes from care coordination and managing the entire care spectrum of the patient.  There is a trend to reimbursing health care providers based on outcomes instead of paying for more care.  Will the government (read Medicare and Medicaid) focus on this paradigm of paying providers or will extraordinary pressure be exerted by various advocacy organizations to maintain fee for service reimbursement?

5. Collaborative Communication

With increasing requirements for compliance, hospitals and providers will need to collaborate in their communication efforts.  New ways to work together will evolve resulting in more lines of communication.  Hopefully, the expansion of health information technology will lead to virtual connections between providers.  But at what cost and in what time frame?

And so it goes.  Payors are aligning with providers either through acquisitions or other creative forms of working together.  With increased emphasis on outcomes-based medicine, companies that provide care coordination oversight and patient care management will assume more importance in the health care cycle.  Was Humana prescient in its acquisition of SeniorBridge Family of Companies with the strategy of positioning them to favorably respond to the changing health care environment?  Will others follow?  Stay tuned.

Joel Wittman is an Adjunct Associate Professor at the Wagner School of Public service of New York University.  He is the proprietor of both Health Care Mergers and Acquisitions and The Wittman Group, two organizations that provide management advisory services to companies in the post-acute health care industry. He can be reached at joel.wittman@verizon.net.


SOTU: What Obama Didn’t Say


Posted By Errol Pierre

President Obama filled up close to 90 minutes of TV airtime giving his 3rd State of the Union Address last week. With 6,953 words (about 12 pages) to choose from political pundits filled the airwaves all across the country with animated reactions commenting on everything from the details of his plans to his tone, his demeanor, and overall performance. But all too often we forget that with great orators, it is more important to focus on the words that were not said than the ones that were….

Here are the facts:

– “Health” was used only 7 times during his speech (roughly 0.001% which takes up less than 1 line on a page).

– His comments regarding Healthcare made up only 332 words. That represented 4.7% of his speech (about a page and half). A little better but still severely lacking in substance.

How can that be?

– Health expenditures in this country represent more than 16% of our GDP while the average percentage among high income nations is roughly 10%.

– 13.1 million Americans lack a job but more than 50 million Americans in this country lack health insurance. Doesn’t healthcare deserve more attention?

– Since inauguration, he has spent 60% of his time in office getting what he called his #1 domestic policy agenda, healthcare reform, passed through Congress. If you recall, he entered office on January 20, 2010 and healthcare reform was passed on March 23, 2011. So 15 out of his now 25 months were dedicated to the pursuit of universal healthcare.

– Lastly, most of the popular provisions of the law have already been instituted. Millions of young adults in their twenties have been able to get insurance through their parents. And even more promising, no child under 18 can be denied coverage for pre-existing conditions.

So why were there so few words on healthcare? Discussing income inequality yet avoiding healthcare is not having an honest discussion about the problem. America spends more money on healthcare than any country on the planet. What is not widely known are the percentages spent by the government versus the private sector and how that impacts the American pocketbook. This country is actually on par with other high income nations spending 7.4% of their GDP on government health expenditures like Medicare, Medicaid, and Veteran healthcare. For a comparison, countries like France (8.7%) and Germany (8.1%) are at higher levels with government run universal healthcare. However, when it comes to expenditures from the private sector, America spends an additional 8.5% of its GDP representing almost half (52.2%) of total health costs for the entire country. That is 4 times higher than most like nations. In fact those private sector figures put us in 50th place between Rwanda (49th) and Gambia (51st) according to the World Health Organization.

WHY IT MATTERS

Most Americans get health insurance through their employer leaving American businesses on the hook for large portions of the country’s private health expenditures. It’s been the catalyst for corporations moving jobs overseas. It’s why the United States Postal Service is teetering on the edge of insolvency. It’s why America bailed out General Motors and restructured their Union contracts to be the #1 car company in the world again.

Most Americans work for businesses with 200 or more employees. According to the Kaiser Family Foundation, 99% of the time these businesses are offering health insurance to those employees. The foundation goes on to highlight that the cost of these employer health plans have gone up by 113% over the past 10 years with employers paying close to 73% of those costs on behalf of their employee population. As a result they have shielded much of the exorbitant healthcare increases from their employees. This has had grave repercussions to the average American salary. You cannot talk about income inequality and ignore non-salaried benefits like health insurance. These increases have poked huge holes in the bucket of funds that corporations use to payout employee compensation. You also cannot blame health insurance companies for these increases either. Their profit margins barely surpass 4% compared to pharmaceutical companies that enjoy 15% margins. The blame really goes to the actual cost of providing healthcare.

The U.S Social Security Administration has tracked the national average wages in this country since 1951. In 2001 it was $32,921. In 2010 it is $41,673. So despite the increases in health insurance costs, wages have still gone up 27% in the past 10 years. American employees however have seen 131% growth in the amount of money they must contribute to their health plan. It has gone from $1,787 in 2001 to $4,129 in 2010. So Americans have literally went from paying 5% of their salary on health insurance to 10% in 10 years not even accounting for the increase in co-payments, deductibles, and out of pocket costs.

If you truly want to tackle income inequality, look no further than tackling the increases in healthcare spending. Healthcare reform did not go far enough on this issue. It increased access via health exchanges, protected more patients via insurance regulations like profit ceilings and mandated benefits. But it did nothing to tackle costs. Even worse, our healthcare system will continue to shield costs from the consumer by giving subsidies to lower income Americans so that insurance can be more affordable. But these subsidies are paid for by taxes and fees levied on health insurance companies ($60 billion), on Americans with rich “Cadillac” type health plans ($32 billion), on pharmaceutical companies ($27 billion), and on high income earners use of hospitals ($210 billion). The only problem with these types of revenue streams are the laws of economics. Since individual Americans and large businesses will be required by law to purchase insurance by 2014, they as consumers will be more inelastic than their suppliers. In the end most of these taxes and fees will be passed on to the most vulnerable consumers further eating away at their hard earned income.

President Obama concluded his healthcare remarks conceding that he was “willing to look at other ideas to bring down costs, including one that Republicans suggested last year — medical malpractice reform to rein in frivolous lawsuits.” The only problem is here is the sad reality. According to the Kaiser Family Foundation only 11,000 malpractice claims were paid in 2009 amounting to $3.6 billion. That sounds like a big number but it is only 0.2% of total U.S. health costs. So the only question left is how much medical malpractice reform could help to actually close the income inequality gap. Well, the average malpractice suit is only $11.99 per capita, putting $12 bucks back in everyone’s pocket. I guess the good news is this kind of policy change would help fight the common cold giving every American the extra disposable income to buy a bottle of Robitussin from CVS.

Errol Pierre works at a large insurance company focused on business development, sales, and strategy for employee benefits. He is currently pursuing a degree in Health Policy and Management with a specializing in health finance. He can be reached at errol.pierre@nyu.edu

 


Working for the Federal Government


Posted by Debbie Koh

Welcome to 2012! Moving forward, I will alternate my posts between more career development-focused entries and more general musings on the public service field (similar to last month’s “The Business of Non-Profits”).So, let’s get started.

A Non-Official Guide to Possibly Working for the Federal Government

I’ve talked to enough people curious about how to crack into this area, so here’s my quick and dirty primer for Wagner students looking to work for the federal government. My disclaimer: I am not an expert. This is based on my personal views and experience at the US Agency for International Development (USAID) and only the tip of a very large iceberg. While at Wagner I did attend an excellent overview by someone who is an expert: Paul Binkley, Director of Career Development Services at the Trachtenberg School of Public Policy at George Washington University. His presentation, “U.S. Federal GovernmentCareer Opportunities,”is still available via Career Services.

1. Identify your agency: for many people with a desire to work in international health and/or development, USAID is the logical first step. But other “domestic” agencies, like the Centers for Disease Control and the U.S. Department of Health and Human Services, also do internationally focused work.(HHS recently developed its own Global Health Strategy). Or, consider smaller agencies like the Millennium Challenge Corporation.

Lesson learned: government agencies are huge and may do work in your area of interest, despite first impressions. Start with the big names, but don’t overlook less obvious opportunities.

2. Do you really want to work for the government: getting a job working directly for the government (known in DC parlance as a “direct hire” position) is harder than it sounds.There is a whole science and strategy to applying to usajobs.gov or avuecentral.com that I won’t even attempt to broach. The best-case scenario is to identify some sort of fellowship or program that will narrow down the application pool of thousands; eligibility is typically based on current enrollment in a graduate program. Below are a few starting points:

  1. Presidential Management Fellows (PMF): though still highly competitive, PMF is a two-year fellowship that allows for appointment into a government position upon completion. I came across PMFs at USAID who completed their two years there and others who began working there after completing their fellowships at other agencies. Check in with Career Services for instructions on the application process, as schools are only allowed to nominate a certain number of applicants. You may only apply during your final academic year.
  2. Student Temporary Employment Program and Student Career Experience Program (STEP/SCEP): I knew a USAID summer intern who returned to her masters program in the fall, returned to USAID as a SCEP intern and then converted to a position at the Agency. I know the least about these programs because I wasn’t eligible, but USAID details its own STEP/SCEP opportunities.
  3. Other fellowships/internships: this is where you have license to use creative Internet searches and your networks. For example, the USAID Indonesia Mission is recruiting interns in Health, Education, Democratic Governance, and Economic Growth (application deadline February 2012) but the announcement didn’t make the main website. A good start for those thinking about international health is the Global Health Fellows Program. Eligibility requirements may vary.

Lesson learned: current Wagner students should take advantage of their status and look for opportunities now. Don’t wait until after graduation!

3. So you don’t really want to work for the government: recent grads haven’t missed the boat. A better strategy may be to identify some of the many organizations and companies (“contractors”) that won government contracts and are looking to hire. I won’t mention any specific contractors but to start, here’s a list of 2011’s Top 100 Contractorsvia Washington Technology and one of many international development coalitions. Again, start big but try to identify smaller companies where competition may be less fierce. Many people jump between contract and direct hire work; it’s all about getting your foot in the door at first.

A not-so-recent grad with at least a couple years of experience, including work in developing countries, and a willingness to be based overseas may also consider a direct hire option at USAID called the Development Leadership Initiative (DLI). This initiative is meant to double USAID’s Foreign Service workforce. I saw new batches of DLIs coming in fast and furious, but the program is scheduled to end this year.

Lesson learned: decide whether one’s best option is to work direct hire or contract and proceed from there.

My advice is to pursue several strategies at once. I failed at one of PMF’s many elimination rounds and received rejections or no responses from multiple internships. When I landed an internship and got to Washington D.C., I attended workshops and presentations, volunteered at conferences and talked to as many people as I could about how they got where they were. Eventually, I transitioned into a contract position. It just took some perseverance.

Debbie graduated from Wagner in 2010 with her MPA in Health Policy and Management, International Health. She returned to her native California in 2011 and currently works for Venture Strategies Innovations. Follow her on Twitter at @thedebkoh or connect via LinkedIn. All views expressed are her own.


Building an Exchange Strategy Part I – Changing Your Vantage Point


Posted By Errol Pierre

Health benefit exchanges are set to be fully operational by 2014. As part of the Patient Protection and Affordable Care Act (PPACA), these exchanges seek to be a marketplace for consumers to purchase affordable coverage. Subsidies to reduce both the cost of insurance and the out of pocket expenses from copayments and deductibles will be available to eligible consumers as well. Estimates suggest close to 30 million Americans will find coverage through this avenue lowering the uninsured rate to 3%.

These exchanges will revolutionize the way health insurance companies operate. Most Americans receive insurance through their employer. As such, insurance companies have built their world around marketing to them rather than directly to individual consumers. Over the years, insurance company processes, products, and strategies have all conformed to employer choice and preferences. Even the way customer service is organized and how information is shared caters to an employer-centric business model.  However, by 2014 health insurance companies will need to operate differently to capitalize on the million of new health consumers entering the market.

Consumers purchase products much differently than employers. Consumer motivation is largely based on personal preferences and emotions while companies make rational decisions based on economic value.  So business to consumer (B2C) marketing has been much more demanding and onerous than business to business (B2B) marketing. Health insurance companies as a result have gotten away with minimal efforts in advertising using business publications and newspaper ads that reach CEOs, CFOs, benefit consultants, and decision makers. Marketing campaigns targeting decisions makers has been an easier road to handle than attempting to market the average consumer.  In fact most of the insurance policies sold in the United States are through brokers or independent agents hired by a business that receives compensation from the company whose product gets sold. Consequently, the construct of this industry has kept marketing innovation and ingenuity at bay. For years the basic message segmentation for B2B advertisements has been limited to industry and firm size.

Not all insurance companies suffer from this lack of consumer centric segmentation however. The car insurance industry is a perfect example of what the health insurance industry will aspire to be by 2014. Geckos and cave men, made up stores with humorous sales representatives, over the top actors representing natural disasters and unfortunate accidents, and catchy jingles all represent the car insurance industry’s push for market share catering to consumer preferences. Geico, Progressive, Allstate, and State Farm have all used innovative TV, internet, and other media ads recently to differentiate themselves. One main reason is because car insurance is largely purchased at the consumer level. As such, the industry caters solely to the wants, needs, and desires of the personal shopper. They have developed enhanced customer service levels, easy to use online tools, and a wide array of products and services all with a focus on consumer appeal. The consumer is essentially the center of the strategy. After all, it is the consumer who has the power to terminate the policy at any time; not the consumer’s employer.

Health insurance companies have a tough road ahead if they wish to compete at the same level. Moving from an employer-centric model to a consumer-centric model is more than just a mission and a vision. It really is a shift in corporate culture. It starts from the top down as much as it does from the bottom up. The CEO must believe in the change as well as the customer service representative answering the phone. There must be a commitment to innovation, ease of use, positive public perception, and consumer preference. The products offered must allow for customization and flexibility. The policies for grievances, appeals, and complaints must be customer friendly and aimed at pleasing the client. Such attributes have unfortunately been foreign to the health insurance industry and they have less than 2 years to quickly figure it all out.

Errol Pierre works at a large insurance company focused on business development, sales, and strategy for employee benefits. He is currently pursuing a degree in Health Policy and Management with a specializing in health finance. He can be reached at errol.pierre@nyu.edu


Sticky Notes & Pairs: Dial Up Staff Collaboration and Improved Solutions in your Performance Improvement Work!


Posted by Paloma Medina

Situation: You have an organizational issue that would benefit from the use a team approach. Perhaps you need to update a work flow or improve organizational performance on a specific measure. However, during staff meetings you find that engagement is low, brainstorming lacks innovation, specific people dominate the meeting, and/or inter-departmental tensions impede collaboration.

Solution: Change your meeting structure! The following “Meeting Recipe” will dial up staff energy and lead to better performance improvement solutions!

What you’ll need:

Meeting time of 1 – 2 hours (epending on the depth of the problem or area you’re focusing on)

20 or more sticky notes and one pen per attendee

Dry erase board or flip charts

A volunteer to act as a high-energy facilitator & time keeper

Instructions:

  1. Assign attendees into random or strategic pairs
    Have them sit together in their pairs
    I highly recommend being strategic — think about how pairs might increase collaboration among departments or individuals. You could pair up nurses with providers, administrators with front-line workers, etc.
  2. Pass out sticky notes and pens to each attendee
  3. State the challenge and the goal. Be clear and concise
    For example, “We want to increase provider productivity by 20% in three months” or “We want to improve our patient check-in process to decrease patient and staff stress”
  4. Give individuals 5 minutes to brainstorm on their own ideas for how this could be done
    Rules:
    1. One idea per sticky note
    2. Each attendee must write down  4 – 10 ideas (yes – this is doable!)
    3. At least one idea must be crazy, really fun, or pie-in-the-sky big (I often award candy to craziest ideas — this greatly energizes and revs up divergent thinking)
  5. Have individuals now share ideas in their pairs
    Give them 2-3 minutes per person to share their ideas, call “time” when it’s time to switch and have the other person share
  6. Have pairs generate ideas
    Give them 10 minutes to come up with 10 more ideas with their partners. Ideas can be  completely new or building on each others. Again, one idea per sticky, at least 2 new crazy ideas.
  7. Call everyone back together and round-robin to report back ideas
    Rules:
    1. Have pairs come up and post their sticky notes as they explain their idea onto the dry erase board or flip charts
    2. Hold off on judgement – responses to ideas can only be praise or clarification questions
    3. Limit reporting to 60 seconds per idea – make it a fun but strict cut-off to assure pairs report concisely and energy stays high in the room
    4. If an idea was already presented, just have pairs say “ditto on ___ idea” rather than repeat it
    5. Spread out the area where you’re posting the stickies, the more spread out, the better
    6. Anyone at any point can “build” on an idea that is being presented and write down a new sticky note for it
  8. Everyone vote for their 5 favorite ideas
    Have everyone walk up at once and move around to review the ideas, then “vote” by marking the chosen sticky notes with a star. Give this just 5 minutes for this to assure people move fast and energy doesn’t drop – you’re almost there!
  9. Now re-vote to narrow it down
    Take down all but the top 10  voted-on ideas. Have everyone vote again but this time everyone gets one vote – this will lead you to your top 2-3 ideas to test out.
  10. Decide on next steps
    As a group decide what are the next steps to test out the chosen ideas, include time frames. Have pairs volunteer to take on the tasks. Pairs can them meet outside the meeting to plan how they’ll carry out their tasks. Have everyone report back in a meeting within a week.

After the meeting: Have someone transcribe all the ideas and note which were the highest rated. Refer back to these when you’re ready to try out a new test.

Real-life example:

A New York community health center faced this exact challenge — front-line staff were tasked with improving their productivity numbers but felt frustrated by leadership’s lack of support for their ideas. Months of meetings went by with little improvement in the situation and their numbers remained low.  The front-line workers requested to have a potluck lunch meeting with leadership to re-energize the group and used this “recipe”. They paired up management team members with frontline staff members to break down hierarchy walls. After the meeting both leadership and front line workers reported loving the voting structure and noted the high energy among everyone- a significant change from prior meetings! They now plan on using “pairs” for all of their performance improvement work.

Paloma Medina is an MPA HPAM 2012 candidate with a specialization in organizational coaching and development. Her background is in homeless health care, community development and design. In her spare time Paloma can be found tailoring her clothing, re-organizing her craft supplies or coming up with new toppings for hot dogs.