It appears that Massachusetts' physician shortage that I mentioned in my June 2010 post "Coverage <> Access" continues to worsen. The Massachusetts Medical Society released a report today found 10 out of 18 specialties they studied to be in short supply.
Adding an additional 440,000 individuals to the insurance rolls in Massachusetts without a corresponding increase in the supply of providers seems to have really taken a toll on the ability of the state's residents to access the care their newfound coverage is supposed to have offered them.
Showing posts with label access. Show all posts
Showing posts with label access. Show all posts
Thursday, October 21, 2010
Friday, July 30, 2010
A Question of "Access" - Follow up on Adverse Selection
In a previous post on June 18th, I discussed the issue of "adverse selection" and how it could potentially lead to a collapse in insurance markets. It turns out that there has already been evidence of this occurring in Massachusetts. According to a report from the Massachusetts Division of Insurance, "the number of people who appear to be gaming the state's health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008." http://bit.ly/bin9mN
What is interesting is that the penalties for choosing not to purchase health insurance in Massachusetts are stiffer than those outlined in the national health reform bill. With relatively weak penalties and little ability to enforce the mandates in the national health reform bill, I would expect that we would see an even greater percentage of people "gaming" the system than we see in Massachusetts if the bill is implemented in its current state.
This really becomes both an access and cost concern as it will either make it more expensive for people to purchase insurance and/or drive insurance companies out of the market depending on how the government responds to people "gaming" the system.
Tuesday, July 13, 2010
A Question of “Access” Part 2: Coverage <> Access
As I mentioned in my last post, the healthcare reform bill has been touted as a way to increase “access” to healthcare for all Americans. I discussed the fact that the bill mainly serves to increase the coverage for healthcare expenditures through mandates. In today’s post, I will take a look at how ensuring coverage does not necessarily result in increasing access to the care itself. I will start by looking at the State of Massachusetts and the results of their efforts to increase access to healthcare.
In Massachusetts, one of the very first goals of their healthcare reform efforts was to ensure coverage for all citizens of the state through mandates. They have been very successful in their efforts. With over 97% of residents having some form of healthcare insurance, Massachusetts boasts one of the highest coverage rates in the entire country.
One of the first issues that Massachusetts began to see early in the process was that the supply of primary care physicians was not sufficient to meet the newly created demand for their services. Wait times to see primary care physicians increased, and many primary care physicians stopped taking on new patients.
This does not bode well for the newly insured who are seeking care in the primary care setting. In fact, there is recent evidence in Massachusetts to suggest that many have been driven to meet their care needs (including primary care) in the more costly, already crowded emergency room setting. While this does provide them with access to care, it is certainly not the most appropriate level of care for many of these cases, and it raises some major concerns about the cost of care to both the patients and the State of Massachusetts.
The shortages in Massachusetts are not limited to primary care either. Specialties such as neurosurgery and oncology are seeing shortages as well. Of particular interest is the fact that emergency medicine is one of the specialties identified as being in short supply in the state. At some point, you have to wonder whether even the combination of primary care providers and emergency care providers will be enough to meet the demand of the previously insured plus the 440,000 newly insured residents of the state.
There are certainly concerns about access on a national scale as well. Similar to the healthcare reform in Massachusetts, the national healthcare reform bill also attempts to address access via mandated coverage. This, of course, will be on a much larger scale as tens of millions of people gain coverage.
In a detailed analysis of the estimated impact of the healthcare reform bill, the chief actuary of the Centers for Medicare and Medicaid Services expressed much concern that the combination of supply issues and unfavorable reimbursement rates would likely result in both higher prices and decreased access to care for Medicare and Medicaid patients:
“In practice, supply constraints might interfere with providing the services desired by the additional 34 million insured persons. Price reactions – that is, providers successfully negotiating higher fees in response to the greater demand – could result in higher total expenditures or in some of this demand being unsatisfied. Alternatively, providers might tend to accept more patients who have private insurance (with relatively attractive payment rates) and fewer Medicaid patients, exacerbating existing problems for the latter group. Either outcome (or a combination of both) should be considered plausible”
“[P]roviders for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”
Since it takes many years to educate and train new physicians and to have physicians from other markets move and enter underserved markets to meet the demand, it is unlikely in the short run that the supply of physicians will catch up to the newly created demands for care. In the long run, we will need to consider the possibility that the supply may never catch up to demand. In fact, an AAMC study estimates that the US will be short by more than 150,000 physicians by the year 2025 given current patterns of declining first-year medical school enrollment.
While the health reform bill is very likely to increase the coverage of the uninsured, it fails to truly increase access to actual healthcare services. It is apparent from what we have already seen in Massachusetts that coverage and access are not synonymous. Increasing access to healthcare services will require other solutions that include a re-examination of government reimbursement and funding and the use of solutions that improve the operational efficiency and effectiveness of the healthcare providers themselves (topics for a future post) to increase the available supply of those services.
In Massachusetts, one of the very first goals of their healthcare reform efforts was to ensure coverage for all citizens of the state through mandates. They have been very successful in their efforts. With over 97% of residents having some form of healthcare insurance, Massachusetts boasts one of the highest coverage rates in the entire country.
One of the first issues that Massachusetts began to see early in the process was that the supply of primary care physicians was not sufficient to meet the newly created demand for their services. Wait times to see primary care physicians increased, and many primary care physicians stopped taking on new patients.
This does not bode well for the newly insured who are seeking care in the primary care setting. In fact, there is recent evidence in Massachusetts to suggest that many have been driven to meet their care needs (including primary care) in the more costly, already crowded emergency room setting. While this does provide them with access to care, it is certainly not the most appropriate level of care for many of these cases, and it raises some major concerns about the cost of care to both the patients and the State of Massachusetts.
The shortages in Massachusetts are not limited to primary care either. Specialties such as neurosurgery and oncology are seeing shortages as well. Of particular interest is the fact that emergency medicine is one of the specialties identified as being in short supply in the state. At some point, you have to wonder whether even the combination of primary care providers and emergency care providers will be enough to meet the demand of the previously insured plus the 440,000 newly insured residents of the state.
There are certainly concerns about access on a national scale as well. Similar to the healthcare reform in Massachusetts, the national healthcare reform bill also attempts to address access via mandated coverage. This, of course, will be on a much larger scale as tens of millions of people gain coverage.
In a detailed analysis of the estimated impact of the healthcare reform bill, the chief actuary of the Centers for Medicare and Medicaid Services expressed much concern that the combination of supply issues and unfavorable reimbursement rates would likely result in both higher prices and decreased access to care for Medicare and Medicaid patients:
“In practice, supply constraints might interfere with providing the services desired by the additional 34 million insured persons. Price reactions – that is, providers successfully negotiating higher fees in response to the greater demand – could result in higher total expenditures or in some of this demand being unsatisfied. Alternatively, providers might tend to accept more patients who have private insurance (with relatively attractive payment rates) and fewer Medicaid patients, exacerbating existing problems for the latter group. Either outcome (or a combination of both) should be considered plausible”
“[P]roviders for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”
Since it takes many years to educate and train new physicians and to have physicians from other markets move and enter underserved markets to meet the demand, it is unlikely in the short run that the supply of physicians will catch up to the newly created demands for care. In the long run, we will need to consider the possibility that the supply may never catch up to demand. In fact, an AAMC study estimates that the US will be short by more than 150,000 physicians by the year 2025 given current patterns of declining first-year medical school enrollment.
While the health reform bill is very likely to increase the coverage of the uninsured, it fails to truly increase access to actual healthcare services. It is apparent from what we have already seen in Massachusetts that coverage and access are not synonymous. Increasing access to healthcare services will require other solutions that include a re-examination of government reimbursement and funding and the use of solutions that improve the operational efficiency and effectiveness of the healthcare providers themselves (topics for a future post) to increase the available supply of those services.
Friday, June 18, 2010
A Question of "Access"
My first post in this series starts with the question of access. When it comes to the issue of access, the health reform bill has focused on access to insurance and government programs for paying for healthcare rather than on access to healthcare itself. Since so much of the reform effort has been in the area of insurance reform, it is important to understand how some of the changes called for by the bill in the name of improving access have ultimately led to government mandates that are likely to be ineffective in improving access and may actually drive up the cost of insurance for everyone.
We will start with a basic insurance concept known as “adverse selection”. The Insurance Information Institute defines adverse selection as “the tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk.” Adverse selection in an insurance market has a tendency to drive insurance premiums higher since it results in a risk pool that tends to use more healthcare. In the most extreme scenarios, adverse selection could even lead to the collapse of insurance markets.
There are several ways to avoid adverse selection:
1) Waiting periods and exclusions for pre-existing conditions
2) Charging higher premiums for greater coverage
3) Adjusting premiums based on information about an individual or population of individuals
4) Mandating that everyone purchase health insurance
Let’s consider what happens when we take away the insurer’s ability to exclude based on pre-existing conditions. Without these exclusions, individuals may choose not to purchase insurance until they are actually sick and need it. If I am healthy and I know that I can purchase insurance when I happen to get sick, I am likely to determine that it does not make sense for me to purchase insurance until I do get sick. If I later find out that I have developed a heart condition, I am now more likely to consider purchasing insurance to protect myself from the risk posed by that condition.
An insurer can offset this to some extent by charging higher premiums for greater coverage or greater risk. The idea here is that there is a correlation between an individual’s health (or anticipated healthcare needs) and the amount of insurance he/she will purchase. Sicker people tend to want more coverage because they anticipate a need for it. Healthy people want to purchase less because they do not expect to benefit as much from having more insurance. They are more likely to choose a plan with a lower premium and higher out-of-pocket costs for care (high deductible plans, HSAs, etc…) since they do not expect to need as much healthcare or simply not purchase health insurance at all.
To a more limited degree, insurers can also offset this by adjusting premiums based in information about the health of an individual or a group of individuals. Take insurance policies that protect against specific diseases (cancer) as an example. These plans tend to have much higher costs to purchase. It makes sense. If, for example, I have a strong family history of cancer, a cancer policy is much more appealing to me than if I am completely healthy and have no family history of the disease. My strong family history of cancer means that it is more likely that I will actually need to use the insurance. With these types of policies, the insurer has adjusted the price based on the increased risk associated with the population that is being covered.
The first three options I covered above for combating adverse selection are solutions that have come out of a free-market approach to insurance and healthcare. The current healthcare reform bill essentially takes most of these free-market solutions off the table as options for preventing adverse selection. It takes away the ability of insurers to exclude on pre-existing conditions, limits the ability of the health insurers to adjust premiums based on factors such as age and gender, and actually requires insurers to submit justification before any premium increases. In addition, it requires that insurers must accept every individual or employer that applies for coverage (guaranteed issue). http://bit.ly/b0UkCw
So, let’s think about what happens now. Without any significant mechanisms for preventing adverse selection, some of the healthiest individuals begin to make the decision to cancel or simply not purchase health insurance. The perceived benefit of insurance for these individuals is no longer worth the cost of the premiums. Now, the risk is spread over a smaller, sicker population of individuals. This will cause insurers to raise premiums. The higher premiums will cause yet more of the healthy, low-risk individuals to cancel or choose not to purchase health insurance. This leads the insurers to again raise premiums. Again, healthy people drop out of the risk pool. The cycle continues until healthy people no longer have any incentive to purchase insurance and the sick and unhealthy can no longer afford the premiums to purchase insurance.
The scenario I have described assumes that the insurer is actually able to increase premiums to adjust for the higher risk. If they are not able to adjust their premiums adequately based on reforms, the insurance market will still collapse as insurers determine they can no longer cover the risk of the covered population with their current premiums.
To fill the void left when the free-market solutions for avoiding adverse selection have been taken away or limited, the government has chosen to implement the fourth option I mentioned above for preventing adverse selection. The health reform bill mandates that all individuals obtain health insurance coverage or face a penalty. http://bit.ly/cvsWiP Assuming the mandate is enforceable, the healthy, low-risk individuals are now re-introduced into the risk pool, and the adverse selection spiral is prevented.
This assumes that compliance with the mandate is high. Some individuals could still decide that it is more cost effective to pay the penalty rather than purchase insurance. If this happens, we still could see adverse selection driving premiums up. Non-compliance rates for government mandates have historically been around 14 – 15%. Hawaii is an example of a state that actually has had mandated health insurance since the 1970s. While there are penalties for non-compliance, the state of Hawaii still experiences a non-compliance rate of roughly 10%. http://bit.ly/bnyQ7C
So, has the reform bill truly addressed the issue of “access”? Not really… If you think about it, the current healthcare reform bill only serves as a vehicle for increasing access to health insurance and government programs that pay for healthcare, not to the actual healthcare services themselves. In fact, we are introducing millions of new people into the system without a similar increase in the supply of providers and healthcare delivery organizations (a topic for a future post). While individuals could potentially have more access to insurance and government programs to pay for their care, it is likely that there will be less care to go around as the demand for care outstrips the supply. In addition, the expected success of a government mandate in increasing access to insurance itself is at best questionable given the historically high non-compliance rates with other mandates.
Should the reform bill move forward as-is, we may very well see a future where efforts to increase access to insurance and government programs have failed, and access to affordable, high-quality healthcare services has simply never been addressed.
We will start with a basic insurance concept known as “adverse selection”. The Insurance Information Institute defines adverse selection as “the tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk.” Adverse selection in an insurance market has a tendency to drive insurance premiums higher since it results in a risk pool that tends to use more healthcare. In the most extreme scenarios, adverse selection could even lead to the collapse of insurance markets.
There are several ways to avoid adverse selection:
1) Waiting periods and exclusions for pre-existing conditions
2) Charging higher premiums for greater coverage
3) Adjusting premiums based on information about an individual or population of individuals
4) Mandating that everyone purchase health insurance
Let’s consider what happens when we take away the insurer’s ability to exclude based on pre-existing conditions. Without these exclusions, individuals may choose not to purchase insurance until they are actually sick and need it. If I am healthy and I know that I can purchase insurance when I happen to get sick, I am likely to determine that it does not make sense for me to purchase insurance until I do get sick. If I later find out that I have developed a heart condition, I am now more likely to consider purchasing insurance to protect myself from the risk posed by that condition.
An insurer can offset this to some extent by charging higher premiums for greater coverage or greater risk. The idea here is that there is a correlation between an individual’s health (or anticipated healthcare needs) and the amount of insurance he/she will purchase. Sicker people tend to want more coverage because they anticipate a need for it. Healthy people want to purchase less because they do not expect to benefit as much from having more insurance. They are more likely to choose a plan with a lower premium and higher out-of-pocket costs for care (high deductible plans, HSAs, etc…) since they do not expect to need as much healthcare or simply not purchase health insurance at all.
To a more limited degree, insurers can also offset this by adjusting premiums based in information about the health of an individual or a group of individuals. Take insurance policies that protect against specific diseases (cancer) as an example. These plans tend to have much higher costs to purchase. It makes sense. If, for example, I have a strong family history of cancer, a cancer policy is much more appealing to me than if I am completely healthy and have no family history of the disease. My strong family history of cancer means that it is more likely that I will actually need to use the insurance. With these types of policies, the insurer has adjusted the price based on the increased risk associated with the population that is being covered.
The first three options I covered above for combating adverse selection are solutions that have come out of a free-market approach to insurance and healthcare. The current healthcare reform bill essentially takes most of these free-market solutions off the table as options for preventing adverse selection. It takes away the ability of insurers to exclude on pre-existing conditions, limits the ability of the health insurers to adjust premiums based on factors such as age and gender, and actually requires insurers to submit justification before any premium increases. In addition, it requires that insurers must accept every individual or employer that applies for coverage (guaranteed issue). http://bit.ly/b0UkCw
So, let’s think about what happens now. Without any significant mechanisms for preventing adverse selection, some of the healthiest individuals begin to make the decision to cancel or simply not purchase health insurance. The perceived benefit of insurance for these individuals is no longer worth the cost of the premiums. Now, the risk is spread over a smaller, sicker population of individuals. This will cause insurers to raise premiums. The higher premiums will cause yet more of the healthy, low-risk individuals to cancel or choose not to purchase health insurance. This leads the insurers to again raise premiums. Again, healthy people drop out of the risk pool. The cycle continues until healthy people no longer have any incentive to purchase insurance and the sick and unhealthy can no longer afford the premiums to purchase insurance.
The scenario I have described assumes that the insurer is actually able to increase premiums to adjust for the higher risk. If they are not able to adjust their premiums adequately based on reforms, the insurance market will still collapse as insurers determine they can no longer cover the risk of the covered population with their current premiums.
To fill the void left when the free-market solutions for avoiding adverse selection have been taken away or limited, the government has chosen to implement the fourth option I mentioned above for preventing adverse selection. The health reform bill mandates that all individuals obtain health insurance coverage or face a penalty. http://bit.ly/cvsWiP Assuming the mandate is enforceable, the healthy, low-risk individuals are now re-introduced into the risk pool, and the adverse selection spiral is prevented.
This assumes that compliance with the mandate is high. Some individuals could still decide that it is more cost effective to pay the penalty rather than purchase insurance. If this happens, we still could see adverse selection driving premiums up. Non-compliance rates for government mandates have historically been around 14 – 15%. Hawaii is an example of a state that actually has had mandated health insurance since the 1970s. While there are penalties for non-compliance, the state of Hawaii still experiences a non-compliance rate of roughly 10%. http://bit.ly/bnyQ7C
So, has the reform bill truly addressed the issue of “access”? Not really… If you think about it, the current healthcare reform bill only serves as a vehicle for increasing access to health insurance and government programs that pay for healthcare, not to the actual healthcare services themselves. In fact, we are introducing millions of new people into the system without a similar increase in the supply of providers and healthcare delivery organizations (a topic for a future post). While individuals could potentially have more access to insurance and government programs to pay for their care, it is likely that there will be less care to go around as the demand for care outstrips the supply. In addition, the expected success of a government mandate in increasing access to insurance itself is at best questionable given the historically high non-compliance rates with other mandates.
Should the reform bill move forward as-is, we may very well see a future where efforts to increase access to insurance and government programs have failed, and access to affordable, high-quality healthcare services has simply never been addressed.
Thursday, June 17, 2010
Healthcare Reform
Healthcare reform discussions in our country initially suggested that the purpose of the reform was to deliver improvements in the following three major areas:
Even the title of the bill “Patient Protection and Affordable Care Act” suggests that it will ultimately address the issues in these areas. In my first series of posts, I will look at each of these areas and provide thoughts on the ways healthcare reform does or does not address these areas and on some of the implications of reform for healthcare delivery organizations and providers.
- Access
- Quality
- Cost
Even the title of the bill “Patient Protection and Affordable Care Act” suggests that it will ultimately address the issues in these areas. In my first series of posts, I will look at each of these areas and provide thoughts on the ways healthcare reform does or does not address these areas and on some of the implications of reform for healthcare delivery organizations and providers.
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