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Guest post: Massachussetts leads the way!

Guest post by Michael Halasy Practicing Emergency Medicine PA, Health Policy Analyst, and Health Services Researcher

Massachussetts leads the way

We have talked about bundled payments here, and getting rid of the antiquated and inefficient fee for service model. It looks like Massachussetts is on board suggests The Washington Post.

Blue Cross is not alone. At Partners HealthCare, the famous Boston-based medical system that dominates health care here, Massachusetts General Hospital has been conducting a Medicare experiment in which nurses are assigned to coordinate care for about 2,500 older patients with multiple ailments. The experiment, which began five years ago, so far has reduced hospital re-admissions by one-fifth and cut medical spending by 7 percent.

They will be the first to implement integrated care organizations (really, a version of ACO’s) and a new bundled payment mechanism.

With 98% of the population insured, Massachussetts saw their costs soaring, at about 15% above the national average. The markets have already begun to respond, and some, like Partners, are already ahead of the curve.

At Partners HealthCare, the famous Boston-based medical system that dominates health care here, Massachusetts General Hospital has been conducting a Medicare experiment in which nurses are assigned to coordinate care for about 2,500 older patients with multiple ailments. The experiment, which began five years ago, so far has reduced hospital re-admissions by one-fifth and cut medical spending by 7 percent.

Massachussetts was bracing for this for some time. Last year, the insurance commissioner took on the health insurance companies for raising rates too rapidly. He rejected many of them outright. This was an important political maneuver, that really set the stage for the current willingness and cooperation of the insurers, providers, and hospitals.

As he says:
“We are preparing ourselves to grapple with a certain amount of constructive disruption in the industry,” Patrick said in a lengthy interview. “It’s a journey.”
Clayton Christensen would argue that it is JUST that disruption which is so sorely needed.

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Guest post: Regional Disparities in Health Spending in Medicare

by Michael Halasy Health Policy Analyst and Emergency Medicine PA

Regional Disparities in Health Spending…

Jason Shafrin, over at the Healthcare Economist, brings up an interesting paper examining the data from the Dartmouth Atlas. For those that are unfamiliar, the Dartmouth Atlas is a compendium of data examining Medicare spending per beneficiary, and then comparing that spending by geographic region. The differences are stark. I know. I use the Dartmouth Atlas data in my health policy talks all the time. The data was highlighted in an Atul Gawande article in 2009 on McAllen, Texas. Jason points us to an article from the New England Journal by Zuckerman…

“Unadjusted Medicare spending per beneficiary was 52% higher in geographic regions in the highest spending quintile than in regions in the lowest quintile. After adjustment for demographic and baseline health characteristics and changes in health status, the difference in spending between the highest and lowest quintiles was reduced to 33%. Health status accounted for 29% of the unadjusted geographic difference in per-beneficiary spending; additional adjustment for area-level dif ferences in the supply of medical resources did not further reduce the observed differences between the top and bottom quintiles.”

Now, sure, health status may reduce the difference in spending, but it doesn’t completely eliminate it. In fact, I would argue that 33% is still a large difference, and one that still needs to be addressed. Comparing the spending in Florida to Minnesota PER beneficiary is quite startling indeed.

crossposted with Health Policy Wonk

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United Health Foundation report 2010

Via Forbes the new report by United Health Foundation notes that the health of the population of each state are:

…published by the United Health Foundation and funded by insurer UnitedHealth Group ( UNH – news – people ), measures residents of all 50 U.S. states on 22 activities that can predict future health, such as smoking and exercising, and events that have already occurred, like death or violent crime. Scores for each state are determined by gathering data from a variety of public and private databases, and calculating how much each state performs against the national average for each measure.

The report is here. (pdf file)

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CGI, Day 3 – Addressing Cancer in the Developing World: Health Equity and an Overlooked Public Health Crisis

The panel is preceded by this video.

Dr. Sanjay Gupta (Chief Medical Correspondent, CNN) leads the panel, featuring:

Lant Pritchett’s old point notwithstanding, the reality has become that the “developing world” now originates 56% of the cases of cancer in the world, up from ca. 14% a decade ago.  (Actually, this somewhat presents evidence for Mr. Pritchett’s point about trade-offs; the developing world is now able to live long enough and well enough that death from cancer has become important.)

Dr. Gupta starts by celebrating that some cancers that were not able to be treated anywhere in the world are now treatable everywhere in the world.  But the developing world cannot afford treatments for some types of cancer to the level needed. Dr. Gupta is a Board member of Livestrong, and speaks about the way the organization—especially through the discipleship of Lance Armstrong—has changed the way many people think about cancer.

HRH Princess Mired notes that much of the progress in Jordan occurred after King Hussein himself went very public with his battle with cancer, putting a public face on the disease.  HRH Mired notes that since then, the major cancer treatment center—the King Hussein Cancer Center—now includes the word “cancer” in its name and provides access to consultations, information, and treatment for people who live near the center and those who can communicate with it through a regional center.

She notes that there are areas in which they would like to make progress in Jordan, such as establishing Cord Blood Banks, and other things that people in the developed world “take for granted.”

Dr. Gupta asks Dr. Paul Farmer to speak specifically about Haiti.  Dr. Farmer notes that there is one (1) oncologist in Haiti, and none in Rwanda or Burundi.  It is difficult to use preventive measures once one already has leukemia—but need to make that much more of an effort in prevention and early detection.  Dr. Farmer notes that cervical cancer is a communicable disease;  there is a “cervical cancer belt” in the developing world.  There is a vaccine, there are preventive care activities, and there are many other possibilities for reducing the rate of death from cervical cancer—it is delivery mechanisms and education that need to be provided. (Dr. Farmer notes, for instance, that Partners in Health teamed with Gardasil to provide vaccinations for young girls and women in Haiti.)

Next up is Dr. Charles-Patrick Almazor, who reaffirms that there is significant progress that has been made, and notes some of the “on the ground” successes in post-earthquake Haiti.

Felicia Knaul and Lance Armstrong join the group.

Dr.Gupta notes that Lance Armstrong came to CGI and announced that he would be racing again, primarily to extend the reach and successes of Livestrong.  Armstrong notes that he wasn’t worried so much about the idea of winning another Tour de France or any “knock on [his] legacy” as he was in extending the work of the Livestrong Foundation.  And he believes that the effort has paid off well in those terms.

Ms. Knaul (who has a Ph.D., and therefore might be more properly referred to as Dr. Knaul), whose original commitment was “enhancing and empowering women health care workers,” notes that breast cancer is now the #2 killer of young (ca. 30-54) women in Mexico and the developing world. Ms. Knaul is a breast cancer survivor herself, and notes that what is worse than “having to take it in the vein is not being able to because you don’t have enough money to be able to pay for it.”  (Note: Ms. Knaul’s last round of treatment was last Wednesday; technically, she is not yet “a cancer survivor.”) She moves on to speak of “other kinds of failures,” such as the women who do not get mammograms because they expect that their husband will leave them if they are diagnosed with breast cancer. In that context, the Commitment made yesterday to teaching men is most encouraging for her.

Ms. Knaul also notes that she was in the audience when Lance Armstrong announced his Commitment in 2008, and that she herself was inspired by his actions to expand her own efforts.

Dr. Gupta highlights a few people in the audience who are also working to reduce cancer, including John Noseworthy of the Mayo Clinic, who “established the Healthcare Alliance for Tobacco Dependence Treatment” to work to support realization of the WHO Framework Convention on Tobacco Control; Dr. Lawrence Shulman of Dana-Farber and Harvard, which is working in several of the developing areas; HRH Princess Ghida Talal, who is leading an effort to establish a “personalized medical center” at the King Hussein Medical Center; and Letha Sanderson of Uganda, the founder of Wrap Up Africa.

Dr. Gupta asks Dr. John Seffrin of the ACS to talk about the American Cancer Society’s efforts to reduce tobacco use in developing countries. Dr. Seffrin notes that cancer is becoming the #1 cause of death in the world “for the first time in all of history.”  Livestrong and the ACS published a study about a month ago, noting that the cost to the world is about $895 Billion per year, “not including health-care costs associated with the treatment of cancer.”  The economic burden of the top fifteen diseases shows clearly that cancer is far and away the worst.  And the spread of smoking tobacco has clearly exacerbated this in the developing world.  Killed 100 million people in the last century; will kill 1,000,000,000 in this century if there is no intervention.

The first question from the floor is about possibility of using of local herbs and natural

Fran Drescher, a CGI regular whose own commitment in this area can be found at the link,  follows, asking how we educate and motivate women to go from “My husband will leave me if I have cancer” to “What will happen to my family if I die of cancer?”  Princess Mired notes that taboos don’t come from nowhere; they come from ignorance. People start from the expectation that cancer is contagious, that prevention and early detection are not possible.  Need to have the information disseminated, and especially to work on the men to change both the social behavior.  In four years, they have reduced the rate of people in Stage 3 and Stage 4 cancer from 70% to 35% through an”early detection” program that was started after people started to see survivors. Need to show survivors.

Ms. Knaul notes that the mortality rate in Mexico from cervical cancer has gone from 16% to 8% in the past ten years—primarily because of earlier detection and treatment, but also because of improvements in the treatment itself.  She notes that this especially can be applied in the Developed World, where opportunities for research and

Jonathan Quick of Management Sciences for Health noted the parallel between treating cancer and treating AIDS in the developing world. In the case of AIDS, they got through the four “barriers”: (1) the mental barrier (“it can’t be done”), (2) the cost barrier (treatment costs reduced from $12,000 to $3,200), (3) the money barrier (addressed by a global fund), and (4) the “practicality barrier.”  Where are we with cancer?  Dr. Farmer notes that those four barriers have been overcome in many cities, but that rural areas still need all four barriers to be overcome.  “People who say “there is no market” are trying to stop a conversation, not start one.”  When you don’t know any survivors in your neighborhood, it’s more difficult to accept that one can survive.  (The examples of King Hussein and, especially, Lance Armstrong seem especially relevant.)

Dr. Gupta asks Lance Armstrong about Livestrong’s decision to “go global.”  Armstrong notes that they were responding to demand: discovered that the idea of Livestrong resonated in places such as Mexico and India.  It is left to Mr. Armstrong to note that cancer is such a diverse disease—“we talk about cancer—boom, six letters—but it’s different than that.”  It’s correct to be honest about it:we’re going to have to knock of this disease on type at a time.  We know the diseases we can cure today (testicular cancer, some lymphomas, cervical cancer and breast cancer with early detection).  “It’s not a simple three-page document, but it is doable.”

With straightforward chemotherapy approaches, have been able to cure kids with various sarcomas.  We do have to scale up the program.

Former HHS Secretary Donna Shalala asks about geography: having to travel reduces ability to treat rural cancer patients..  She notes that more than fifteen years ago, Egypt set up regional cancer centers and flew oncologists to those areas once a month—a great political and popular success. (There were also pay incentives for the oncologists, to cover the travel requirement.)

Ms. Knaul notes that. when you add the technologies available, you don’t necessarily have to move the patient or the doctors so much; St. Jude’s is able to offer pediatric cancer care in Jordan while the oncologist remains in Memphis.  Princess Mired re-emphasizes this, nothing that the Jordanian doctors have weekly “training sessions” with the doctors in Memphis.

Have to understand that cancer has potentially become the most curable of all diseases; could be saving 10,000 lives a day if could apply the advances in the United States alone to the rest of the world.

Lance Armstrong again takes it down to a human level:  if we teach a kid never to pick up a cigarette, we just “cured” cancer.  Need to re-emphasize sharing: information, resources, programs.

Ms. Knaul notes that there are some countries, such as Mexico, that are considering financing reform so that people have access to cancer treatment—a move that will strengthen the health care system itself.

Dr. Farmer talks about competition, competing for scarce resources.  Only a partnership will work.  Resources are less limited than at any other time in human history.  Cannot make the same mistake—contrasting prevention with care—that was made in the past.  One of the main causes of death is that people become destitute providing care.  Need for that not to happen.

Dr. Almazor presents optimism; Princess Mired notes that we cannot change our future without change.  “Cancer does not even appear as a line item on any Global Health Agenda.” All of the successes and survivors—AIDS, TB, etc.—have the specter of having to face cancer and heart disease.  She closes by noting that we need to measure the cost of cancer not in human deaths, but prefer to see hospitals and treatment centers that remedy the problem.

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Virginia opposition given standing in federal district court

by Linda Beale
Excerpt from Ataxingmatter

The post in its entirety can be found at Linda’s Ataxingmatter Health Care Reform: the Virginia opposition given standing in federal district court:

The judge states that the “central issue” in the case is Virginia’s interest in upholding it’s “health care freedom act”–a declaration that Viriginia citizens do not have to buy insurance (in spite of the federal mandate). As Jack Balkin so ably comments (see link below), the judge’s acceptance of this argument opens the way for states to challenge anything in the Internal Revenue Code by passing a declaratory resolution indicating that they don’t think it should be treated as constitutional or that conflicts with the particular provision in question.

As for the commerce clause power, the court also treats Wickard v. Fillburn (the Supreme Court case that held that growing wheat for one’s own use is subject to the commerce clause power) as not decisive on this issue. Virginia claims that the decision not to purchase is not an economic act, compared to the decision to purchase or the decision to grow one’s own as a substitute for purchase. That distinction does not appear to have any merit. The decision not to purchase insurance and the decision not to purchase wheat are surely similar decisions to try to avoid the commercial flow by managing on one’s own. Yet surely one’s interaction with the health care system is much more clearly a question of interstate commerce even than one’s ability to grow wheat at home and avoid the purchase of wheat–even people who pretend to provide their own health care at home will at one time or another impinge on the health care system in all likelihood, whether because they are in a transportation accident, an accident outside their home, a work injury or illness, or taking advantage of free medical care such as vaccinations, etc. The judge however, concludes that the precedent is inconclusive and that the government has failed to show that the state has not stated a valid commerce clause claim.

Finally, the judge follows Virginia in conflating the Commerce Clause and Taxation Power arguments. It accepts the idea that if “economic inactivity” (which is a misnomer, since it is clearly economic activity to provide one’s own care, just as imputed income from providing one’s own home is real economic activity) is not accessible under the commerce clause, then it shouldn’t be reachable under the tax power. This is an extraordinarily poorly reasoned section of the opinion.

For a thoughtful and articulate analysis of the standing issues, see Jack Balkin’s blog, Judge Preserves Constitutional Challenge to Individual Mandate (Aug. 2, 2010) [hat tip Ellen Aprill and the Tax Prof discussion group].

Allowing this case to go forward leaves health reform in turmoil. It could take years for the different cases to wend their way through the courts, and ultimately the Supreme Court will likely have to rule.

Linda Beale

Beverly Mann, whose expertise is in certain areas of constitutional law and federal-court jurisdiction at the Annarborist, and who guests at Angry Bear, notes on the same topic (lifted from an e-mail to me):

Yeah. I read Lyle Denniston’s article about that opinion on Scotusblog a couple hours ago, and this sentence really strikes me: “‘While this case raises a host of complex constitutional issues,’ the judge wrote, ‘all seem to distill to the single question of whether or not Congress has the power to regulate — and tax — a citizen’s decision not to participate in interstate commerce’ — that is, a private decision not to buy health insurance.”

Actually, the argument that that part of the legislation is within Congress’s purview under the Commerce Clause is that a citizen’s decision not to participate in interstate commerce—that is, a private decision not to buy health insurance—actually is not a decision not to participate in interstate commerce but instead (for many people at least) a decision to participate in interstate commerce by having others pay their emergency medical bills. If they are, say, injured in a car accident and treated at a hospital and then cannot pay their medical bills, the public pays those bills.

The problem with the judge’s argument is that people do not decide whether to have a serious medical emergency. When they do have one, and they receive major medical treatment, there is a bill for that.

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The Maine Chance

Robert Waldmann

One strange thing about the health care reform debate is that insurance companies claim to support reform. I have tended to suspect that they are just playing possum.

Now I find positive proof that WellPoint is willing to do what it takes to make sure health care reform passes — they sued the state of Maine claiming they have a constitutional right to make a profit !?!

In fact they seem to support a public option. It will be a bit hard for Sens Snowe and Collins to explain why they think no public option is needed after this.

I have a challenge. Can anyone think of anything anyone could do which is better for the public option that this ?

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Quote of the Day

Health Affairs tells the truth and shames…well

Unlike for-profit firms, a public plan has no incentive to cut corners and prevent providers from giving their patients quality evidence-based care, because its ultimate goal is public health, not private profit. Nor does it have any interest in sideswiping regulations and shortchanging consumers. Free market proponents argue that private health insurers should be lightly regulated to give Americans the best value. We have seen the results of that sort of regulatory neglect in many industries in the past eight years; the harm to all Americans, businesses and the overall economy could not be more profound.

Read the Whole Thing, since you probably won’t find it being cited at The Atlantic.

UPDATE: Bonus quote, since it gets to the core of the matter:

[Health insurance is an] oligopoly [market] with high entry barriers in which prices and profits have escalated rapidly.

Traditional economic theory holds that there are no economic profits in a true market.* That the Health Insurance industry has realised higher profits while spending a lower portion of each dollar received on claims over the past twenty years is, economics tells us, an indication of market failure. Strangely, the mass of economists don’t seem to be saying this. Which is a market failure of another type.

*There is, of course, a fair Return on Investment embedded in the equation, but that is assumed to be the stable risk-adjusted return, not increasing in an equilibrium state.

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What about me!

by divorced one like Bush

So I’ve been thinking: What, since the passage of Medicare has the federal government implemented that actually reduced the risk of living for the US citizen?

No, tax cuts do not count. They do not reduce risk. We have reduced risk for business all over the place. NAFTA, CAFTA, exemption of HMO’s from anti-trust, removal of banking regulation, reduction of oversight, allowing payment in the form of stock options, all of these promoted ever larger and thus less competition and thus less risk. All of them allowed a bigger piece of the income pie, thus reduced risk by increasing income. Tax reductions do not increase income, just decrease expense and ultimately reduce services that people relied on to reduce the risk of living in the US. We protected Harley Davidson, we financially backed bad business results. We reduced the 5 mph bumper to 2.5 for the auto industry. None of this has reduced the risk of living, and have actually increased the risk of living in the US.

Katrina? Lead paint in Asian products, contaminated food. Cut’s in education, medical, civil services, infrastructure failure. Privatization may have reduced some costs, deregulation may have decreased some costs (the supposed Walmart benefit), but all of it shifted cost to the individual removing it from the collective. It has resulted in a greater risk of financial ruin in an environment that has decreased the share of income to the 99%. Not having a corresponding rise in income with a rise in productivity only served to increase risk to US.

I want to know of a piece of legislation that actually removed or significantly reduced the risk of living life in the US such that the US citizen was that much closer to succeeding in their pursuit of happiness. I’m not interested in some little piece for a sector of the citizenry. I want to know if anyone can name a piece of legislation such as Social Security, 40 hr work week, Civil Rights, Medicare that has passed since Medicare that actually reduce risk for US such that We the People felt that much more secure in our individual lives in that fear has been reduced.

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Re-tooling the Medicare/medicaid model


I read the Op-Ed in the Boston Globe and asked Doug to write a piece or pieces in a more detailed fashion. There have been allusions to this issue as a cost factor, but no policy consideration here to date.

Post by Doug Brown

Due to the complexity of organizations today, there is commonly a “silo mentality” that develops where one department often doesn’t know what another is doing. Employees are good at looking at the “trees” within their silo, but very few are seeing the forest. We have all seen it. The result is usually organizational dysfunction. Nowhere is this more pronounced than at one of our largest government agencies – the Centers for Medicare and Medicaid Services (CMS). What’s worse, this dysfunction has enormous consequences for the cost and quality of health care that is delivered in this country. And yet, as we embark on the most significant reform to our health care system in over forty years, no one is talking about this issue.

In a July 20 Op Ed in the Boston Globe entitled Retooling the Medicare/Medicaid Model, I explored this issue. Specifically, I highlighted a program in Massachusetts that successfully breaks down the silos between these two programs to do what’s best for patients.

This care delivery model, called Senior Care Options, pools funding from Medicare and Medicaid to allow private organization to integrate care for dually eligible individuals (those eligible for both Medicare and Medicaid, and some of the most costly individuals on our public programs) to provide truly coordinated care that is patient centered and cost effective. The model has been very successful in keeping seniors out of expensive nursing homes and making them happy and satisfied. So the question is: in light of what seems to me to be such an obvious opportunity, why aren’t more states doing something about it and why aren’t more people talking about it?

I received a number of interesting responses to my Op Ed, some of which speculate on this question. One was from Renee Markus Hodin of Community Catalyst, a well respected consumer advocacy organization. She reported that her organization has been trying to make headway on this issue for years. They even got a provision inserted into the original House health reform bill to specially protect and encourage more SCO programs. But the provision was eliminated, apparently due to a misunderstanding. I am told it was opposed by some beneficiary groups “who were wary of the provision being abused by states that want to dump their duals into private plans and/or by plans that were not committed to providing the kind of care delivery system that we see under the SCO program.” That has not been the experience of SCO at all. But unfortunately, it seems that some of the new “Special Needs Plans” (SNPs) that were created recently by Congress to try to address dual eligibles are not working as intended and do not fully integrate care like SCO does.

The beauty of the SCO program is that there is a three-way contract; between the state Medicaid agency, Medicare and the SCO. This is critical to ensure full integration among both programs. Renee tells me they are trying again and hoping to garner more support.

I received another response from Jennifer Baron, a senior researcher at the Harvard Business School. She too has been working on this issue for a number of years. Here was her post to the online version of my Op Ed:

In April 2008, Harvard Business School Professor Michael Porter and I published a case study profiling Commonwealth Care Alliance (CCA), one of the three organizations offering a SCO plan. This case is one of the few examples we’ve found of a high-value approach to insurance coupled with an innovative care delivery model. Invariably when the case study is taught, students approach us after class to inquire how they can become involved with CCA or SCO.

We’ve found it particularly inspiring that under the pooled Medicare/Medicaid payment model, CCA managed to successfully serve one of the most complex and costly patient populations on the planet. In 2006-7, the only patient population for which CCA’s costs exceeded average premiums was the institutionalized population. Average premiums for the frail elderly patients who remained outside of institutional settings all exceeded costs. Talk about aligning financial and patient incentives!

My understanding is that once SCO graduated from a demonstration to a Special Needs Plan in 2009, the single three-way contract with Medicare and Medicaid – one of the most innovative aspects of the reimbursement model – disappeared. Though both Medicare and Medicaid continue to fund the plan as a SNP, I believe they must now contract separately with participating organizations.

For additional information, the CCA case study abstract is posted on the Institute for Strategy & Competitiveness website.

My best judgment of why this is not getting better traction is twofold: first, Medicare and Medicaid are incredibly complex and few inside and outside of healthcare really understand either one, let alone the way they intersect (that is why I tried hard to make my Op Ed explain the issue as simply as possible; you can let me know whether I succeeded). Second, we have lacked leadership and focus at the federal level. CMS has become such a large bureaucracy that it is overwhelming to even think about how one might reorganize it so that it better serves patients. But in my view it must be done. I remain very hopeful that with a new administration and a new focus on health reform, we have a unique opportunity to finally address this issue. I would love to hear your thoughts and ideas on the subject, including ways we might try to help make this happen.
by Doug Brown

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Will catastrophic only health insurance be rescinded in the end?


Taunter explains how the .5% rescission rate figure discussed in the hearings on health insurance premiums and coverage is used to dismiss Congressional concerns as inconsequential and actually is a good business practice that will not change. It is worth going to the post to accurately follow the train of thought. Taunter concludes that the chances for rescission for a serious illness is:

If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population). If you take the LA Times estimate that $300mm was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population. If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier – then the probability of having your policy torn up given a massively expensive condition is pushing 50%. One in two.

Rescission definition practice can be found here and unfair examples here. Here is why door number two is NOT 50/50.

It is suggested that application forms are formed to allow for inaccuracies and that some criterion used to cancel policies is easily avoidable at the time of the application, the implication being future use for the inaccuracy makes it worthwhile to allow ambiguity and not vet information, mainly for those who wind up claiming over $35,000 and who have severe, chronic conditions that make premiums from that person irrelevant to profit.

This may have not been the intent long long ago, and certainly fraud occurs, but rescission having a basis purely monetary and not legal (from a common consumer point of view on what fraud is), is the policy today if testimony is to be believed.

The first notion, that it is a small problem except for the person involved, is discussed in the first post. The key to amended %’s lies in the fact that Medicare takes care of the 65/over group of chronically ill and elderly clients, so the privately covered population is smaller than the per centages indicate as well, a major oversight. The second and third part of the problem will be in Part 2 and 3 (clever, huh?)

StatsGuy wrote in comments to the Taunter Media post:

The same light bulb went off when I read the 0.5%, but I could not have explained it _nearly_ as well. Very nice post.

I still wonder, though, whether it might be slightly worse than even this picture.

1) I believe your data is for the US population as a whole. (If I’m wrong, then this comment is meaningless – apologies.) But, in fact, much of the sickest part of the population receives health care via Medicare because older people are (to use your technical term) sicker.

So the % of people in the top tier AMONG PEOPLE NOT ON MEDICARE is much lower, which means that the conditional probability of suffering rescission given that you need treatment is much higher. Roughly, if the % of people among under-65 (and not on Medicaid) in the top bracket was half of what it is for the entire population, then the probability of suffering rescission given that you have a large claim is double even your current estimates.

2) The probability of losing the policy given that you really need it may be X% in any given year. But there’s a cumulative effect – over time, you build up a reservoir of uninsurable who lost insurance due to rescission, and now cannot get it back because they have a chronic condition.

on July 29, 2009 at 10:03 am | Reply Taunter
You are absolutely correct about #1, and this is a huge error factor. 10% of Medicare costs take place in the last month of life alone, and Medicare is roughly 45% of the national health care spend. So all of those patients are clogging up the top end of national distribution and not on private insurance in the first place. Unfortunately, I can’t find a private-only, or individual-pay-only distribution, and of course if I did find an individual-pay-only distribution it would be skewed on the top with denied claims (some people should be spending a lot, but actually spend much less, because their policy was pulled). The Reuters article says Medicare spends 30% of its outlay on the top 5% of its population, which means it has a flatter curve than non-Medicare (I would assume, without evidence, that fewer Medicare beneficiaries have negligible health expenses). This implies non-Medicare spending is even more highly concentrated with a few very high spenders.

On #2, I’m a little less confident, and it was one of the reasons I may have misunderstood James’ original post. There is a cumulative effect, but that effect is blunted to some degree by the fact that the people who account for the very high medical expenditures do not necessarily change much from year-to-year (with the obvious exception of the end-of-life expenses typically borne by Medicare). In fact, one of the reasons I suspect rescission became such a powerful phenomenon is that if Sally has breast cancer at a young age, she is going to be in the 99th percentile several times; the carrier is weighing years of such expenses against her premium. So it might not be the case that in a forty year career an average person has a 33% chance of ending up at some point in the top percentile (1-(.99^40)); it is probably the case that most people have a tiny chance of ever getting an expensive chronic condition (or at least an expensive, chronic condition before turning 65), and some people have a large chance of repeatedly being in the top percent.

Keep the discussion going. It is clear a profit motive has serious impact for some people…how would you bet even catastropohic only insurance premium money?

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