Health Reform

Below is guest post written by a friend of the Asset Building Program, Mark Rukavina. Mark runs The Access Project and is one of the country's leding experts on medical debt and its debilitating impacts. 

If you think it is implausible that co-payments for doctor or hospital visits could increase your mortgage interest rate, think again.  Medical bills, even those that have been paid in full, can and do ruin credit and increase the cost of loans.   

The reasons for this vary.   Healthcare costs, for some, are simply unaffordable and bills go unpaid.  Others are confused by their bills and allow them to go past the due date or be sent to a collection agency.  Studies have found that American patients often do not understand claims well enough to know why they owe the bill or if it is correct.  An American Medical Association study found that one of every five claims is inaccurately processed by health insurers. 

In 2010, thirty million Americans were contacted by collection agencies for unpaid medical bills.  Research published in the Federal Reserve Bulletin found that more than half of all collection accounts on credit reports are medical in nature. 

Total healthcare spending in America amounted to $2.6 trillion in 2010.  Of this total, $300 billion was paid out of pocket, for example through deductibles and co-payment fees.   Between 2009 and 2010, the growth in out-of-pocket spending accelerated as more people switched to higher deductible plans or increased co-payments in exchange for lower premium costs.  

As out-of-pocket healthcare costs increase, people are left wondering whether they or their insurer is supposed to pay the bill.   Understandably, providers want payment in exchange for their services.  When they do not receive prompt payments, they initiate action similar to other businesses and send the bills to collection.

It is a common misconception that medical debt cannot hurt your credit score.  Collection agencies typically report medical bills to the credit bureaus and view all collection accounts as delinquent.  They do so without regard for why the bills were sent to collection. With medical collections, many people pay off the balance promptly upon hearing from a collection agency.  They are frequently surprised to find that these accounts stay on their credit report and lower their score.

Imagine yourself in front of your computer, looking up information about a drug prescribed by your doctor. Your Internet search tells you that there is a cheaper, maybe even a generic version available, but you have just paid top dollar for the brand name drug. You also learn that another treatment may be safer than the prescription you just filled. Now imagine you discover that your doctor gets paid by the manufacturer to promote the drug to other doctors.

Imagine you are sitting in first class on a plane, waiting for the plane to push off from the gate, when you see two people in uniform, the pilot and co-pilot, dash from the Jetway into the cockpit. A few seconds later, a voice comes over the intercom, saying, “This is Captain Jones, please be sure your seat belts are fastened. We’re ready for takeoff.” What crucial event could not have occurred in this scenario? The pilot and co-pilot did not go through their checklist of safety measures. Fuel tanks full? Check! Flaps up? Check!

Various groups, including the Attorneys General of twenty-six states, the National Federation of Independent Businesses, and several individuals, have sued the federal government over parts of the Affordable Care Act. Specifically, they've alleged that the mandate requiring individuals to purchase health insurance is unconstitutional -- it overreaches the enumerated powers of the federal government. The case was recently accepted by the Supreme Court, with oral argument scheduled for March and a decision likely by the end of June. If the Court accepts the plaintiffs' arguments, they could strike down the individual mandate (which could create huge moral hazard problems and be catastrophic for the insurance industry) or strike down the law in its entirety.

As the excitement builds for the coming arguments, Meghan McCarthy of the National Journal issued a call for opinions and predictions on the final fate of the individual mandate. Here's our take:

The final ruling on the individual mandate is tough to forecast, but we're fairly confident that the Court will not strike it down. The challenge is based on whether Congress's power to regulate interstate commerce extends far enough to allow the federal government to require all citizens to purchase health insurance or pay a penalty.

The ruling will depend in part upon how the Court sees uninsurance: is it an active choice for an individual to go bare, in effect to self-insure, or is it due to inaction? The precise definition of action and inaction is a bit murky, but here’s how the argument goes. If going without health insurance is inaction, the Court has to deal with the messy question of whether Congress can regulate inaction when it affects interstate commerce. (Throughout the case, opponents of the Commerce Clause justification for the individual mandate have asked the government just how far Congress's power stretches. Their favorite example has been the purchase of broccoli: can Congress require everyone in the country to buy broccoli? So far, the government has not said "no" -- after all, choosing to buy, or not buy broccoli affects a whole series of interstate markets for leafy green commodities. We won't weigh in on the validity of that argument, but we agree with the Cato Institute's Ilya Shapiro that the government's inability to establish a limiting principle for the Commerce Clause may prove problematic when this argument reaches the Supreme Court.

We actually don't think the case needs to address the issue of action versus inaction at all. In the case of health care and health insurance, there simply is no inactive choice. Going without health insurance is inherently different from going without broccoli, because everyone has some interaction with the health care system at some point. Even if you choose not to buy health insurance, there is a good chance that you will need health care at some point. You are in a car accident, you get brain cancer, you fall down your stairs and break your leg. Since virtually everyone will, at some point, need  health care (and must therefore have a way to pay for it), choosing to go without private or public insurance is, in fact, choosing to self-insure. Since choosing self-insurance is an action that affects interstate commerce, it's clearly within Congress's power to regulate.

Alternatively, the Court might just accept the notion that the mandate is a tax (since its only enforcement mechanism is a penalty), in which case it is unambiguously within Congressional power. That might be more palatable to Justices uncomfortable with striking down the law, but who also don't believe in the expansive Commerce Clause power that the government's position implies.

During one of our recent events, Sheldon Garon of Princeton University and Ray Boshara of the Federal Reserve Bank of St. Louis referred to the weak household balance sheet as one of the core economic challenges of our time, suggesting that households must focus on asset-building rather than rely on credit and debt.

The Robert Wood Johnson Foundation (RWJF) recently released findings from a study of American physicians about the links between health and unmet social needs. These needs included basic necessities like adequate nutrition, access to public transportation, and safe housing. Physicians overwhelmingly identified unmet needs as fundamentally related to their patients' health conditions, particularly among lower-income patient populations. Unfortunately, four out of five doctors surveyed (a sample of 1000 primary care physicians and pediatricians) said they did not feel confident in their capacity to meet these needs, which limited the effectiveness of the care they provided. Over half of surveyed doctors said their patients did not have access to the resources they needed to stay healthy. As Jane Lowe of RWJF noted in a press release, "America’s physicians understand that our health is largely determined by forces outside of the doctor’s office. Housing, employment, income and education are key factors that shape our health, especially for the most vulnerable among us.”

This is the fourth and final installment in a series of interviews with policy experts who participated in an event we hosted on November 22nd, "Poverty, Inequality, Mobility, Oh My," where we explored different ways of assessing how families are doing post-Great Recession and how applying these different approaches to the design of public policies might improve the conditions and opportunities of low-income families.

Three opinions. Right?

Well, apparently not--at least not on some issues. The University of Chicago's Institute on Global Markets has pulled together a panel of respected academic economists, and is asking them to agree or disagree with a series of policy-related statements. Watching the consensus (or lack thereof) is interesting on a variety of topics, but we found last week's statement particularly notable:

There are no consequential distortions created by the tax preference that favors obtaining health insurance through employers.

Obviously, we care because it's health-related, but the level of consensus is interesting as well. Contrary to the common perception of economists as constantly disagreeing with each other, 95% of economists surveyed either disagreed or strongly disagreed with the proposition. Taking their confidence in their answers into account, 97% disagreed (63% strongly).

The poll doesn't ask whether the employer-sponsored system, or even the tax preference, is a good thing--it only asks if it creates distortions. On that, the near-unanimity sends a strong messge: both labor markets and health care markets are affected by the subsidy. It keeps people pinned to jobs that they'd prefer to leave, and induces over-insurance and over-consumption of health care. Addressing that overconsumption--and the incentives that create it--is critical to bringing down our long-term health costs.

Thanks to Jodi Beggs of Economists Do It With Models for the tip on the IGM Forum.

The folks downstairs at the Committee for a Responsible Federal Budget clued us in last week to an ongoing debate they've been having with the Center on Budget and Policy Priorities. The central piece of the debate is CRFB board member Erskine Bowles's recommendations to the Supercommittee, which included about $600 billion in reduced Medicare and Medicaid spending. The posts are interesting throughout, and as the deadline approaches, we felt it was important to check in on the federal budget side of health policy.

Here's the debate, with a our commentary:

The initial post: Bowles Plan Offers Path to Compromise

The most important aspect of Bowles' plan, from our perspective, is the method proposed by the Fiscal Commission for fixing the Sustainable Growth Rate (the ironically unsustainable Medicare reimbursement cuts that Congress pushes back each year). In order to pay for a long-term "doc fix" (which would bring down spending on physician fees by cutting rates of reimbursement), the commission recommended that Medicare "develop an improved physician payment formula that encourages care coordination across multiple providers and settings, and pays doctors based on quality instead of quantity of services."

This recommendation is critical. Moving away from the current fee-for-service system is among the most important ways to change how doctors make decisions; at a bare minimum, the Supercommittee should recommend changing reimbursements to reflect the value of primary care instead of encouraging the overcapacity of specialists we have right now.

CRFB didn't specifically mention it, but another critical Medicare fix that the Fiscal Commission recommended is removing the hospital exemption from IPAB recommendations. Given that hospitals make up a huge amount of our total medical spending and are the setting for a huge amount of unnecessary treatment, it's crucial that IPAB have the authority to recommend changes that improve hospitals' incentives to treat patients efficiently.

Related to the initial post: Actually, Raising the Medicare Age Is Also A Good Idea

CRFB's discussion of raising the Medicare age from 65 to 67 is the primary inspiration for this post's second title: we just can't find any good reason to support it.  (If you're really interested in why, we recommend The Incidental Economist's podcast on the subject.)

The thing is, we agree with CRFB on the facts surrounding the issue. Raising the Medicare age would decrease federal health spending somewhat. (The CBO numbers they mention are higher than the ones cited by Carroll and Frakt in the podcast, but not unreasonably so.) On the other hand, they also acknowledge that the shift would increase costs in the private market beyond the savings to the government (because Medicare pays lower reimbursement rates than private insurance). We at New Health Dialogue are concerned with the high total level of spending on health care, rather than simply the level of federal spending on health care. Unnecessarily increasing total medical spending therefore seems like a high cost to pay for a slight reduction in the federal budget which would probably be shortlived, since many of those 65-67 year olds would need help getting insurance, probably through the exchanges specificed in the ACA.

CBPP's initial response: Bowles “Compromise” Proposal to the Right of Boehner Offer to Obama in July

We have to point out a framing problem in CBPP's analysis: not all Medicare and Medicaid cuts are created equal. Some cuts (like those generated by raising the Medicare age) are simply shifting costs from the federal budget to beneficiaries. Those can be fairly labeled as "cuts," and they do increase the burden of health care spending on the elderly. Some of the $600 billion in lower Medicare/Medicaid spending, though, is intended to come from eliminating overtreatment and waste in the medical system. We're well aware that "eliminating waste, fraud, and abuse" is usually what politicians say they'll do to pay for things that they have no intention of actually paying for. However, the Dartmouth Atlas and other analyses have demonstrated that health care really does have a huge amount of wasteful care. Deciding to give patients only the medical care they need, rather than whatever local practice patterns dictate, deserves to be called what it is: responsible management of taxpayer dollars (and of the health system more generally). Demagoguing against such cuts because they reduce health entitlement spending ignores the possibility of making the health system work better, and stands in the way of real progress.

Editor’s Note: This is part of a series of posts contributed by Andrew Wickerham, who attended the 139^th Annual Meeting of the American Public Health Association this week in Washington, DC.

Think back to high school or college when a teacher would offer comments on a test or essay, along the lines of,  “B-, could have included more background on FDR’s reason for passing Social Security.”  That's not far off from the exercise the Department of Health and Human Services (HHS) undergoes periodically as part of its HealthyPeople Leading Health Indicators (LHIs) program, only the note to the country is more alongs the lines of,  “C-, work on diet, exercise, and making sure people with high blood pressure take their medication.” 

Unfortunately, most Americans, like bored, uninterested students in history class, don't seem to care. We have yet to make improvements to our health—and by many measures are worse off than we were a decade ago. So why does the federal government bother with the regular (read: expensive) process of revising the HealthyPeople guidelines?

HealthyPeople (HP)  started with a 1979 Surgeon General’s report intended to focus America’s public health agenda, prevent disease, and promote overall wellness. Three reports—HP1990, HP2000, and HP2010—followed, offering a decennial update to the national health improvement framework. Each report listed a series of LHIs, with the intent of focusing efforts for the coming decade. HP2020 launched in December 2010, and on Monday, HHS Assistant Secretary for Health Howard Koh, MD, MPH announced the newly updated list of 26 LHIs during a press conference at the American Public Health Association annual meeting.

Now, goals and objectives are certainly good things—they can serve to guide policy and reinvigorate practice. “The Leading Health Indicators imply priorities,” former Texas Commissioner of Health Eduardo J. Sanchez, MD, MPH, said at Monday’s event. Yet, the process of setting new goals for HealthyPeople seems rather conflicted.

Early reports on the relative successes and failures of HP2010 suggest that only a few hundred out of almost 1,000 HP2010 goals were achieved, and that ground was lost in the critical area of chronic disease management, with Americans suffering higher rates of obesity and hypertension. Nevertheless, HP2020 rolls out hundreds of new goals and objectives, in addition to the new LHIs.

There was one bright spot at the meeting. For the first time HP2020 includes consideration of the social determinants of health—the non-clinical factors that affect human health—as part of the LHIs. Socioeconomic disparities are widely recognized health indicators because disparity affects ability to access health care, self advocate, and make healthier behavior choices.  High-school graduation rates will be tracked as an LHI under HP2020 as a way to study the socioeconomic factors that influence health, and to encourage policymakers and providers to take a more holistic approach to improving population health.