• Baucus issues “framework” for reform
• Data on competitiveness of health insurance market is inconclusive: GAO

• Americans underestimate savings needed for health care in retirement
• Small business owners need “education” on health insurance benefits: NAIC
• Satisfaction high among those enrolled in "Healthy San Francisco" program

Baucus issues “framework” for reform

In advance of a meeting of the Senate Finance Committee on Sept. 8, committee chairman Max Baucus (D.Mont.) issued what he termed a “framework” for health care reform. The 18-page document, which does not include specific legislative language, reflects the most recent thinking of committee members regarding reform legislation.

The framework lays out a variety of private insurance market reforms, including the requirement that to offer coverage on a guaranteed issue basis and would be prohibited from excluding coverage for pre-existing health conditions. State-based insurance exchanges would be established to help individuals and small businesses purchase insurance.

There would be a shared individual and employer mandate regarding health insurance. Individuals would be required to purchase an individual health insurance plan, be covered under an employer-sponsored plan, or be covered under a public plan like Medicare or Medicaid. Employers would be required to offer insurance to their employees or pay a fee to the federal government for each employee who receives the tax credit for health insurance through an exchange.

The framework also calls for the establishment of a Consumer Operated and Oriented Plan (CO-OP) program to foster the creation of nonprofit, member-run health insurance companies that serve individuals in one or more states.

The framework would allow states to expand Medicaid coverage to more people than are currently eligible for Medicaid. Prescription drug coverage would become mandatory under each state Medicaid plan. Each state’s disproportionate share hospital allotment would be decreased as a state’s uninsured population decreased.

Medicare would cover a health risk assessment and wellness visit with a primary care provider for all beneficiaries every other year. Also, cost sharing for preventive services under Medicare would be eliminated.

The framework proposes a value-based purchasing program for hospitals starting in 2011. Under this program, a percentage of hospital payment would be tied to hospital performance on quality measures related to common and high-cost conditions, such as cardiac, surgical and pneumonia care. Also, groups of health care providers would be able to establish accountable care organizations to help improve the quality of care provided to beneficiaries.

The proposal would direct the Secretary to develop a voluntary pilot program encouraging hospitals, doctors, and post-acute care providers to achieve savings for the Medicare program through increased collaboration and improved coordination of patient care by allowing the providers to share in such savings.

Primary care practitioners, as well as general surgeons practicing in a health professional shortage area would receive a 10% Medicare payment bonus for five years. Further, the scheduled 21% reduction in Medicare physician payment rates in 2010 would be replaced with a 0.5% increase.

The proposal calls for payment reforms for both the Medicare Part C program and Part D prescription drug benefit program.

The proposal includes a provision to establish an independent Medicare Commission (MC) that would have the authority to propose specific changes to the Medicare program that Congress would have the authority to amend; however, the commission’s proposals would go into affect absent any changes from Congress.

The proposal includes specific enhancements related to Medicare and Medicaid program integrity and fraud and abuse.

Finally, the proposal includes a number of revenue provisions. An excise tax of 35% would be levied on insurance companies and insurance administrators for any health insurance plan that is above $8,000 for singles and $21,000 for family plans. Contributions to health Flexible Savings Accounts (FSAs) would be limited to $2,000 per year. An annual fee of $2.3 billion would be imposed on the pharmaceutical manufacturing sector beginning in 2010. Various other fees on industry sectors would be imposed.

Data on competitiveness of health insurance market is inconclusive: GAO

Is recent consolidation in private health insurance markets stifling competition in pricing and provider compensation? Adequate data to determine the answer to this question for most of the health insurance market is difficult to find, according to John E. Dicken, director of the Government Accountability Office’s (GAO) section on health care, in a letter to Sen. Herb Kohl (Wis.), chairman of the Senate Judiciary Committee’s subcommittee on antitrust, competition policy and consumer rights.

“Health care providers and members of Congress have raised concerns that consolidation in the private health insurance industry may be resulting in less competitive markets and contributing to rising health insurance rates paid by consumers and employers,” Mr. Dicken wrote. “However, measuring the extent of changes in market competition over time or the effects of changes is challenging. In particular, reliable, longitudinal data to measure concentration, that is, the number of competitors and their relative market share, are only available on HMOs but not on preferred provider organizations or other insurance products that may comprise the market.”

In Competition in Health Insurance Markets (GAO-09-864R), the GAO examined 41 peer-reviewed research studies on concentration in private health insurance markets and the relationship between the level of competition and other variables, such as premium prices and provider reimbursement rates. One study concluded that market concentration at the state level in 2003 was relatively high by federal standards and that the top three firms typically dominated each market. Although the studies generally found that more competitive markets were associated with lower premium rates, mergers did not necessarily lead to “sustained” premium increases.

Greater competition might be associated with decreased utilization of inpatient services, but it was not clear if the same was true for outpatient services. One study examined HMO and PPO data from 2001 to 2004 for selected metropolitan statistical areas and found that greater HMO concentration was associated with an increased use of inpatient services, while higher PPO concentration was associated with more outpatient visits.

Higher concentration was thought to create efficiencies of scale and, presumably, lower prices, particularly for hospitals, although another study concluded that the combination most likely to yield efficiencies and cost savings was mergers between small and large HMOs. Greater competition among HMOs was associated with lower profits, depending on the similarity in focus of the HMOs in a market, but mergers do not always result in increased profits.

For more information, visit http://www.gao.gov.

Americans underestimate savings needed for health care in retirement

Nearly three-fourths (72%) of Americans are at least somewhat concerned about health care costs in retirement, with those closest to retirement expressing the most concern, the First Command Financial Behaviors Index™ survey conducted in July revealed. Respondents severely underestimated the additional amount of savings that they will need to cover health care costs during retirement—they guess they will need about $33,000, a mere fraction of the $166,000 in out-of-pocket expenses estimated for someone retiring today and living to age 100, First Command Financial Services observed. First Command Financial Services is an investment adviser firm based in Fort Worth, Texas.

“As difficult as it is to say, Americans have every reason to be concerned about health care costs in retirement,” said Scott Spiker, chief executive officer of First Command Financial Services. “As government programs—including Social Security and Medicare—become increasingly stretched to keep up with the growing population, retired Americans should be prepared to bear more of the financial burden. That’s why it’s important to take health care expenses into account now as you plan for your retirement.”

While Medicare covers many medical costs for retirees, it does not cover all financial needs. Annual costs total $5,842 only for current premiums for Medicare Part B (medical) and the average for the Part D prescription drug plan and the maximum out-of-pocket drug costs before Medicare Part D begins paying 95% of drug costs. Assuming a 5% return on savings and an average premium increase of 3.7% for Part B through 2016, an individual retiring at age 65 today and living to age 100 would need an estimated $166,000 to meet these expenses. For a couple, the figure doubles to $332,000.

Even though many Americans are concerned about the increasing costs of health care and their ability to pay for those costs in retirement, fewer than one-third of respondents include health care costs as part of their retirement planning. The percentage of nonretired Americans including health care costs as part of their retirement plan is nearly double (41%) for those with a written financial plan from a financial adviser, compared to those without a financial plan.

“Whether retirement is five years away or 50 years away, Americans must take into account the costs associated with health care during retirement,” Mr. Spiker said. “Medicare and Social Security deficits, combined with higher health care costs and longer retirements, are poised to create a perfect storm. Ignoring the problem won’t make it go away, and Americans shouldn’t rely on government to solve these issues. Financial advisers have the tools and expertise to help consumers determine how much to set aside to cover medical expenses and prepare now for the standard of living they desire in their retirement years.”

Data for the First Command Financial Behaviors Index was compiled by Sentient Decision Science, LLC, to assess trends among the American public’s financial behaviors, attitudes, and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly.

For more information, visit http://www.firstcommand.com.

Small business owners need “education” on health insurance benefits: NAIC

Small business owners are struggling to provide health insurance for their employees and do not feel confident in determining the health insurance that best fits their employees’ needs, according to a recent survey conducted by the National Association of Insurance Commissioners (NAIC). The finding highlights the need for more insurance education, even as the debate over national health care reform continues around the country, the NAIC said.

In the NAIC survey, conducted July 22-31, 2009, among a participant sample of 500 small business decision-makers, 64% of small business owners indicated that they are not confident about selecting a health insurance policy that fits their budgets and their employees’ needs. One-third felt that they cannot afford to provide health insurance to their employees.

The NAIC study revealed small employers’ gap in understanding the fiscal responsibilities related to offering health insurance to employees. Of the small business owners surveyed, 60% lacked confidence in their understanding of the tax implications of paying a portion of their employees’ health insurance premiums. Only 27% said that they understand all of the factors that can affect their small group health insurance premiums.

“In this economic environment, small business owners need to be especially mindful of any decision that will affect their financial future,” said NAIC president and New Hampshire Insurance Commissioner Roger Sevigny. “Now, more than ever, it is important they get smart about their choices and consider the implications that making a bad decision could have on their business and their employees’ future.”

Satisfaction high among those enrolled in "Healthy San Francisco" program

Satisfaction is high among those enrolled in Healthy San Francisco, and most participants report positive experiences with the program, according to an August 2009 report from the Kaiser Family Foundation. In addition, the Survey of Healthy San Francisco Participants found that in comparison with previous surveys of the uninsured in San Francisco, there is some evidence that the program is improving access to care for this group.

In July 2006, San Francisco enacted a plan for universal health care coverage of city residents that requires many employers in the city to contribute to the cost of health care for their employees. At the time the law was passed, San Francisco had an estimated 82,000 uninsured individuals, the majority of whom were either employed or in a family with an employed individual. According to Kaiser, as of October 31, 2008, more than 32,000 uninsured residents were enrolled in Healthy San Francisco.

Ninety-four percent of those surveyed said that they are at least somewhat satisfied with the program overall, including 63 percent who said that they are very satisfied. In addition, nine out of 10 respondents said that they would recommend the program to a friend. Healthy San Francisco also is meeting the health care needs of participants, with 90 percent noting that their health care needs are being well met. This includes 57 percent who said that their health care needs are being met "very" well. In contrast, Kaiser found that 66 percent said that their health care needs were being met well before they joined the program, and only 34 percent said "very" well.

Kaiser found that there are several challenges that face the Healthy San Francisco program. For example, 28 percent of enrollees are confused about the costs that they are personally responsible for paying. The percentage who said that they do not understand what they must pay is even higher among Spanish speakers (41 percent); those without a high school diploma (36 percent); those in fair or poor physical or mental health (36 percent and 34 percent, respectively); and those with incomes below the federal poverty level (32 percent), according to the survey.

The survey was conducted in March 2009 of those enrolled as of October 31, 2008, and still enrolled as of March 1, 2009, in order to include individuals who had been in the program for at least four months. For more information, visit http://www.kff.org/kaiserpolls/upload/7929.pdf.