Under all of the bills now before Congress, new insurance market regulation requiring individual and small business health plans cover everyone and charge the same premium regardless of health status will do a great deal to increase affordability, especially for people with major health concerns.

The bills differ, however, on the levels of coverage and assistance offered. The latest version of the House bill, like the HELP bill, would expand Medicaid eligibility up to 150 percent of the federal poverty level. By comparison, the Finance bill expands coverage under Medicaid up to 133 percent of the federal poverty level.

Similarly, cost-sharing credits in the House plan for those who purchase coverage though the insurance exchange are more generous and extend farther up the income ladder then such credits in the Senate Finance bill. Cost-sharing is minimal under Medicaid for those under 150 percent of poverty under the House bill; for those between 133 percent and 150 percent of federal poverty level about 97 percent of medical costs would be covered. Subsidies for people living between 300 and 350 percent of poverty would increase the actuarial value of the basic plan to 72 percent.

By comparison, under the Senate Finance bill, cost-sharing subsidies for those between 100 and 150 percent of poverty would increase actuarial value of the lowest-tier plan to 90 percent, and, for those with incomes between 150 and 200 percent of poverty, to 80 percent.

Another provision key to ensuring affordability is having employers contribute to coverage–as they now do for 162 million people. Our analysis shows that an average family with employers contributing to coverage could expect to pay $6,700 a year in premiums and out-of-pocket costs, while a family without employer contributions could expect to pay $10,000 more–or a total of $16,700.

Under the House bill, employers are required to provide at least 72.5 percent of premium contributions for individuals and 65 percent for families, or pay 8 percent of their payroll. Under the HELP bill, employers are required to provide at least 60 percent of the premium contribution or pay $750/year per uncovered full-time worker. Employers are not required to pay anything toward premiums under the Senate Finance bill, though firms with more than 50 full-time employees must pay a flat fee equal to the national average tax credit for each employee who receives tax credit through an exchange.

While these issues will be difficult to resolve, reaching consensus on what constitutes affordability and committing the necessary funds to achieve it are crucial in securing access to essential care for all and protection from the financial hardship that illness can now bring.

Affordability for healthcare insurance is a function of three elements:  premium cost, cost sharing, and scope of covered services.  Ideally, no one should be required to pay more than 10% of their incomes for total health costs, but the ceiling of $900b on the net cost of a health bill makes this an impossible standard to meet.

While the House bill would greatly lower the cost for many people in the individual and small group markets, it would still impose costs above 10% for moderate and middle income individuals and families -- roughly those between 300 and 500% of poverty.  Furthermore, escalating health costs could easily worsen the affordability picture over time if cost containment measures are not effective in bending the cost curve.

I believe affordability for moderate income Americans will be an ongoing issue post enactment.    Very high cost sharing will be a real and ongoing challenge for those who need health insurance protections the most -- those will multiple chronic conditions.  And with age rating permitted at 2:1, the affordability challenge will be greatest for older adults.  The lack of adequate financing in the bill over time will be more obvious as we try to address these concerns.

So while the legislation makes real strides toward more affordable health coverage, the issue is not going away.  We will need to be bolder and more creative if we are to truly achieve affordable health coverage for all.

Low Cost Comes From Competition

Reformers have much more to do when it comes to making health care more affordable for Americans.  Three points stand-out in my mind:



1. Writing in Time magazine (10/26), Kate Pickert points out that during the ongoing open enrollment season millions of Americans with employer based health coverage are going to find themselves paying more for less.  Pickert points out that the percentage of workers with significant deductibles has more than doubled in the last three years while surveys indicate that 40% of workers will pay higher premiums next year in addition to facing increasingly higher out-of-pocket expenses.  She also points out that "of companies that offered health benefits in 2009, 86% offered only one plan." Shouldn't reformers find a way to make health coverage more affordable to this hard-hit group of workers?  Won't these Americans ask why health reform isn't working for them?



2. Doug Elmendorf, head of the Congressional Budget Office, told the Senate Finance Committee that under the legislation passed by that Committee less that 10% of the population will be eligible to go to the new health insurance exchanges, even seven years after the bill becomes law. The CBO estimated last week that about six million people will be in the House public option which CBO says will likely "attract a less healthy pool of enrollees." Both findings are based on the fact that the exchanges for the most part will only be available to the unemployed and the currently uninsured -- a population expected to be more expensive to insure as many in this group have up until now been unable to afford check-ups, preventive care, or chronic care maintenance.  How will creating exchanges with a risk pool that no commercial insurer in America would accept hold the private insurance industry accountable?  Isn't this what private insurers want? Shouldn't reformers be trying to open up the exchange to a larger risk pool with a healthier mix of subscribers?



3. At a time when affordability is so crucial what will happen to subsidies? Julie Appleby in Kaiser Health News 10/29 reports discouraging news: Subsidies are likely to drop, starting in the second year after the bill is passed. Why? Appleby asserts that because subsidies are based on a percentage of the premium paid for the first year--if premiums rise faster than inflation in the second year, millions of hard working middle class folks will have to pay the extra costs out of pocket.



In my mind, subsidies will never be enough to address these issues.  Rather the path to affordability for all Americans is injecting real choice and competition into the health care marketplace.  Health reform must lay out a path to open the exchanges over time so that not just employers, but more and more Americans will be empowered to choose the health insurance plan that works best for them and their family.  The only way to change insurer behavior is to put their entire customer base on the line.  Force them to compete on the basis of cost, quality and coverage.  I don't see how injecting competition into only 10 percent of the insurance market -- while guaranteeing that private insurers will keep the other 90 percent of their customers -- accomplishes that.  Of course opening up the exchanges means taking on what I like to call the "status quo caucus," the many powerful interest groups who claim to want change while hiring lobbyists to protect what works for them.  I believe that reform should address the needs of working families, which means empowering them to choose the health care that works best for them.

Around the country, however, America's families cannot fathom the difference between $800 billion, $1 trillion, or some similar figure. Instead, the value of health insurance reform for America's families, and families' real measure of affordability, will be determined by their own "pocketbook test": Will health reform result in sufficient savings so health coverage and care fit within family budgets.

The affordability test will be extremely important for middle-class as well as moderate- and low-income people and families. It makes sense, therefore, that sliding-scale subsidies be extended to people and families with incomes of at least 400 percent of the federal poverty level. At 400 percent of the federal poverty level -- $88,200 in annual income for a family of four -- health insurance premiums are difficult to afford: Average premiums for family coverage today exceed $13,000, which, even without the inclusion of deductibles and co-payments, constitute a significant portion of families' incomes.

For low-income families and the near-poor, however, the provision of adequate help is even more important. It is these groups that constitiute the bulk of the uninsured today. For them, an apparent nominal premium requirement -- even of two or three percent of income -- is quite likely to make insurance premiums unaffordable.

For this reason, the new House bill, which extends Medicaid eligibility to 150 percent of the federal poverty level (slightly above $33,000 in annual income for a family of four), makes abundant sense. Medicaid's out-of-pocket protections for premiums, deductibles, and co-payments are uniquely tailored to make coverage and care affordable for those who need help the most.

When the final legislation is crafted in the Senate-House Conference Committee, the conferees would be wise to retain this laudable expansion of the Medicaid program.

Real-Life Affordability Debate Will Come

There is no doubt that policies offered to people in the exchanges will be better than what they could get in the broken non-group insurance market. But, depending on how details of the legislation are resolved, questions are likely to be raised about whether policies will be affordable for people who now will be required to have them as a matter of law. There are two key numbers to watch in assessing affordability: the subsidies provided to help people pay there premiums, and the scope of the underlying coverage itself and the size of the deductibles and out-of-pocket costs people will have to pay. In policy terms affordability is measured in terms of a percentage of family income. However, in the real world whether or not a policy is affordable to a family facing a penalty if they don't buy it depends on what else is going on with their family budget. Are they struggling to put kids through college? Do they have a lot of credit card debt? Are they having trouble paying the rent or the mortgage?

Policymakers face a very real dilemma here: they want to keep the overall price tag of the legislation down but they also want policies to be affordable, both to assure access to insurance and to prevent a political backlash to the law. As the process moves to single bills in the Senate and the House and then a final bill in conference the issue of affordability is likely to come more sharply into focus. While benefits for lower income people are stronger, deductibles for middle class people earning between $66,000 and $88,000 in some of the bills are quite high even compared with high deductible plans in the marketplace. It’s possible that there will be pressure to improve the benefits for the middle class before the final deal is done.

Senate Democratic leaders seem intrigued with the idea. CongressDaily on Friday quoted Sen. Charles Schumer, D-N.Y., as saying, "Liberals live with it. Moderates live with it. It's in the middle."

But what about the policy implications? While such a proposal could potentially get enough votes to pass Congress, would a public option really lower costs if only some states offered it? How many would opt out, and why?

While we do not know the details of what kind of public plan states would be able to “opt-out” of, we suspect the center of gravity is closer to a level playing field approach, such as that proposed by Senator Schumer (where the plan would have to negotiate payment rates with providers) as opposed to the version supported by progressive Democrats in the House (where the plan would administer prices based at least in part on Medicare rates).  If the level-playing field approach is in fact adopted, assertions that the plan would simply “underpay providers” rather than “driving real reforms that bring down costs and improve quality” are unfounded. 

Also, let’s remember that all versions of the public plan under serious consideration require it to be self-financing.  Taxpayers will not be subsidizing the public plan.  Rather the main cost of reform will be providing low-income subsidies that can be used to purchase the policy of individual’s choice – public or private.  Americans will get these subsidies whether or not their state chooses to offer them a choice of the public plan, and whether or not they choose the public plan if it is offered to them.  Therefore, the argument that somehow residents of opt-out states will be footing the bill to finance a public plan they are unable to access is just wrong.  The public plan will not be financed by taxpayers.

Repeated fears that the public option will pay less than market rates and somehow be subsidized by taxpayers deny what is being considered seriously by Congress and signal paranoia about the future.  Critics are right to be vigilant.  But we should not decide against doing something that could add real value in markets where insurer competition is lacking just because it might possibly be “turned” into a bad idea by a future Congress.  If someone proposes to give the public option unfair advantages in the future, let’s debate it then, fairly and forthrightly. 

Senator Reid’s announcement is not the end of the public health insurance plan debate.  A weakness of the opt-out approach is that many of the states most likely to “opt-out” because of ideological reasons are the same states that you could argue need the public plan the most because of lack of competition and affordable policies. 

Moving forward we should be on the look-out for new public plan ideas that possibly meld Schumer’s “level playing field” with Reid’s “opt-out,” Snowe’s “trigger,” and Carper’s state “opt-in.”  Stay tuned.

The downsides associated with whether or not states opt in or out pales in comparison to the potential downsides associated with a public option that is not well thought out. Creating a government-run, price-controlled, Medicare-like public plan would be disastrous to the country regardless of who does or does not participate. Many years of experience with Medicare has shown that, despite across-the-board cuts in reimbursement, costs have continued to spiral out of control drawing the country closer to financial ruin.

Effective insurance reform should include mandating that individuals purchase insurance through employers, on the individual market, through cooperatives or through private insurance exchange models like the Federal Employees Health Benefit Program (FEHBP).  The appropriate role for government would be to help people afford the insurance through sliding scale subsidies based on need. Employers could also choose to offer coverage or assist employees in purchasing coverage.

Private insurance must be reformed to eliminate pre-existing condition exclusions and other penalties patients incur from using their insurance as well as incentives to adopt and maintain healthy lifestyles.

This approach offers several benefits including allowing people to choose the type and amount of coverage they want.

He put a public health insurance option in the Senate bill, the merged version of the two health care bills passed out of committee that will now go to the Senate floor for debate, amendments, and passage.

This is a huge victory. Putting the public health insurance option in the Senate bill that goes to the floor makes it much harder to remove later. Opponents will need 60 votes to amend the Senate bill, meaning a high bar will have to be cleared to take out or change the public health insurance option.

Why did Senator Reid do it? As he said:

I believe that a public option can achieve the goal of bringing meaningful reform to our broken system. It will protect consumers, keep insurers honest and ensure competition and that's why we intend to include it on the bill that will be submitted to the Senate for consideration.

For these reasons, the public option is what America wants. In poll after poll, in rally after rally, month after month, the American public has spoken. We want a public health insurance option to keep the insurance industry honest, to increase competition, and to give us somewhere to go if we don't want to be at the mercy of the private insurance industry any longer.

When the Washington Post - harbingers of cautious beltway conventional wisdom - has their polls showing 57% of Americans support a public health insurance option, you can be sure that this is a mainstream position. Senator Reid deserves our thanks today for leading America forward. The fight is far from over, and to be sure, there is plenty in the Senate bill that needs to be fixed. We need:

• To make sure health care is truly affordable to everyone
• Ensure employers are responsible for helping to provide good health benefits to their employees
• Fairly finance reform rather than taxing higher-cost plans

However, Senator Reid stood up for America and he should be encouraged to keep fighting.

Further, consider the implications of punting this to the states. Right now a cabal of far leftist groups have vowed to spend nearly $100 million pushing a public option. On the federal level, this won't go that far, because they have powerful opponents (like the business community) who are organized and prepared to stand up to them and broadcast the truth. On the state level, that money would go a lot further - so don't kid yourself, as soon as an "opt-out" government-run plan was passed, these groups would move their campaigns to the state level.

And if you want to debate whether it's easier to pass bad health care laws on the state level, look at the issue of state coverage mandates - 1000's have been passed on the state level. At the behest of these and other activist groups, many states have literally destroyed their insurance markets. And on the federal level? Opposition from the business community and our allies has prevented all but 5, some (or all) of which we worked to make palatable before eventually endorsing and helping to move forward.

Further, Reid said at his (why was he alone?) press conference that states would "have until 2014 to opt out". What does that mean? Does a state governor make the call? Does a state have to amend its state constitution? Hold a referendum? It might end up being very hard to opt-out even if a state decides they can withstand all the political pressures and attacks and don't mind spending money on a program for other states.

At the end of the day, an "opt-out" government-run plan is unlikely to dissuade many opponents, may alienate some proponents, and will surely still be viewed as the next entitlement crisis to hit all of our pocketbooks in the form of higher spending, higher taxes, and more debt.

The divisive debate about a government-run plan is a roadblock to reform.  It’s time we focus instead on broad-based reforms that will ensure the affordability and sustainability of our health care system

President Barack Obama and his congressional allies want to create yet another government-run health insurance program (call it Fannie Med) to cover yet another segment of the American public (the non-elderly non-poor).  

The whole idea that Fannie Med would be an “option” is a ruse. 

Like the three “public options” we’ve already got – Medicare, Medicaid, and the State Children’s Health Insurance Program – Fannie Med would drag down the quality of care for publicly and privately insured patients alike. Yet despite offering an inferior product, Fannie Med would still drive private insurers out of business because it would exploit implicit and explicit government subsidies. Pretty soon, Fannie Med will be the only game in town – just ask its architect, Jacob Hacker. 

Now the question before us is, “Should we allow states to opt out of Fannie Med?” It seems a good idea: if Fannie Med turns out to be a nightmare, states could avoid it. 

But the state opt-out proposal is a ruse within a ruse. 

Taxpayers in every state will have to subsidize Fannie Med, either implicitly or explicitly. What state official will say, “I don’t care if my constituents are subsidizing Fannie Med, I’m not going to let my constituents get their money back”? State officials are obsessed with maximizing their share of federal dollars. Voters will crucify officials who opt out. Fannie Med supporters know that. They’re counting on it. 

A state opt-out provision does not make Fannie Med any more moderate. It is not a concession. It is merely the latest entreaty from the Spider to the Fly.

Advocates for a public health-care plan continue to look for a way to give political cover to moderates while advancing their goal of implementing a government-run health-care system. Their latest proposal is to create a federally controlled public plan that states can opt out of if they so choose.

The public plan is pitched as if it would simply encourage competition and provide another choice for consumers. But a government-run plan is not just another plan, offering just another choice. It is designed to undercut private insurance.

A government-run plan is dangerous for three reasons: One, it would be cheaper for employers to stop offering private insurance and funnel their employees into the government-run plan. Employers, not employees, would get to make that choice. Two, the government-run plan would use the coercive force of government to dictate the prices that could be charged by others — by doctors, nurses, and hospitals — in a way that private entities cannot. Three, the government-run plan would be subsidized by American taxpayers, while private plans are not.

Let no one be deceived into thinking that Congress would not subsidize the government-run plan. Once in place, Congress would favor it with all kinds of innovative provisions designed to “help” participants “make the right choice.” HR 3200, for example, would offer low-income subsidies — but only for those who choose the government-run plan.

Financial subsidies for a public plan, whether direct or indirect, would be financed by taxpayers — by taxpayers in all fifty states. States would not be allowed to opt out of having their residents pay these federal taxes. They would only be allowed to opt out of receiving their share of the federal subsidies.

Imagine state legislators being faced with the proposition of denying residents of their state access to a subsidized public plan, knowing their residents would be still be required to pay the taxes used to pay for it. What state legislator would vote to do that?

The state “opt-in” is a transparently false choice. It is just another gimmick to try to find votes for an unwise policy that would increase the federal government’s control over health care.

State opt out is appealing to some because political cultures vary across states, thus potentially permitting compromise on what is mostly an ideological issue. What the implications are beyond ideology depends heavily on what type of public option we are talking about. If it is the version where the public plan pays hospitals and physicians at Medicare rates, an extensive pattern of distortions could result. How Medicare rates compare with those negotiated by private insurers varies to a very large degree across geographic areas and also within a geographic area. One result could be that those states with the highest rates relative to Medicare will opt out in response to pressure from providers, substantially diminishing the exercise of purchasing power that some advocates of public plans place a priority on. This could diminish the CBO score for the public option. Distortions could come in populous areas that are divided by state boundaries. For example, if Virginia opted out and D.C. had a public plan, hospitals would get paid much more for treating Virginia residents than residents of the District enrolled in the public plan. This could have an effect on where hospitals build new facilities.

If, on the other hand, the public plan negotiates rates with providers, then having state opt out would not have much impact. I say this because I believe that such a public plan would not be able to negotiate lower rates than private insurers. The plan would lack advantages of incumbency of the leading private plans in an area and would be subject to pressures from Congress about including all providers, even those with high rates in relation to the quality of the services they provide. Such a public plan is unlikely to have much impact on costs.

One thing I find puzzling about the debate about public plans is how little attention has been given to governance of the public plan. Perhaps many are assuming that such a plan would be run by professionals devoted to serving the public. But recent experience with Medicare is not encouraging. Congress appears to be interfering with CMS decision making at an increasing rate. The latest issue, which strikes me as the most serious to date, involves attempts to block CMS from following through with its proposed rule for the physician fee schedule based on a new practice expense survey conducted by the AMA. Specialties likely to lose from these changes, are much better funded than those likely to gain, such as primary care. Creation of an IMAC or MedPAC with power, assuming that it is given authority over Medicare provider payment, seems essential to the integrity of the Medicare program. With a public plan basing its payment rates on Medicare, the integrity of Medicare payment rates would become even more important.

What is the best way to define universal coverage, and what are the most important factors that could keep the nation from getting there? How many of the uninsured should be covered under health reform?

Improving "population health" generally means "helping people live longer."

To paraphrase, Uwe then writes:

If helping people live longer were our objective in health reform, we could do better than universal coverage.  But health reform is not (solely or primarily) about helping people live longer.  It is (also or primarily) about other things, like relieving the anxiety of the uninsured.

I applaud Uwe for acknowledging a reality that most advocates of universal coverage avoid: that universal coverage is not solely or primarily about improving health.

Will Uwe go farther and acknowledge that, since universal coverage is largely about some other X-factor(s), that necessarily means that advocates of universal coverage are willing to let some people die sooner in order to serve that X-factor?

I get my health care through MassHealth [Medicaid in Massachusetts] and I went through 20 names before I finally found a doctor who would see me. I wasn’t going through the Yellow Pages. I was going down a list that MassHealth gave me!

It has been known for many years that, at the aggregate level, the use of health care as we define it is only one of numerous factors that drive the average health status of populations (what we call "population health"). In fact, in health-production-function work or other research on the drivers of population health status, health care per say is only a minor player. Education, nutrition and environment rank higher.

So it is true that if "population health" were our objective in health reform, we would could do better than merely to finance more spending on health care per se. For example, the blasphemous thought occcurs that more could be done for the health status of particular the lower-income and less well educated strata of the population if the Catholic church reallocated real resources drastically away from hopitals systems and towards parochial schools in inner cities.

Even so, these insights are not that helpful when an axious person visits a physicians, looking for a diagnosis and treatment for whatever ails him or her. Telling someone stricken with cancer to forego health care and read a book is not really a staisfactory solution to the problem the uninsured face.

Furthermore, in this country one must contend with the Betsy McCaughey's, Sarah Palin's, Rush Limbaugh's of this world, along with large sections in the Congress, where Cost Effectiveness Analysis evokes talk of  Adolf Hitler and death panels.

So Helen Levy's and David Meltzer's message is interesting among people who can and will think, but unfortunately it is a hard sell in this country.

All of us, I am sure, will from time to time encounter situations or statement that push uas beyond our intellectual capacity. Usually, at meetings, we remain quiet about it, lest someone discover our intellectual limitations.

How refreshing then that John openly admits them, for all of us to see.

Uwe

The more important question is: should Congress even try to achieve universal coverage? 

If the goal is to improve health, then the answer is clearly no. 

Ironically, even though universal coverage is presumably about helping the sick, the Democrats’ pursuit of universal coverage demonstrates not how much, but how little they care about their neighbors’ health.

Economists Helen Levy and David Meltzer explain, in a book published by the Urban Institute, “There is no evidence at this time that money aimed at improving health would be better spent on expanding insurance coverage than on…other possibilities,” such as clinics, hypertension screening, nutrition campaigns, or even education. In the Annual Review of Public Health, they explain further: “The central question of how health insurance affects health, for whom it matters, and how much, remains largely unanswered at the level of detail needed to inform policy decisions…Understanding the magnitude of health benefits associated with insurance is not just an academic exercise…it is crucial to ensuring that the benefits of a given amount of public spending on health are maximized.”

If Democrats were serious about improving health, they would first gather evidence about which of those strategies produces the most health per dollar spent.  (As I recommend elsewhere, the $1.1 billion Congress allocated for comparative-effectiveness research should just about do the trick.) Democrats would then fund the most cost-effective strategies, which may or may not include broader insurance coverage.

But the fact that Democrats are pursuing universal coverage without any such evidence necessarily means that they are willing to sacrifice potentially greater health improvements to achieve…whatever else they hope universal coverage will achieve. 

Universal coverage is not about improving public health. It is about subordinating health to some X-factor that supporters value even more. 

Which leads to an even more intriguing question: what is that X-factor? 

Financial security? (If so, would universal coverage achieve that? Or are there better strategies?) Political power? Dependence on government? Industry subsidies? The appearance of compassion?

I’d like to see that question put to the group.

(Cross-posted at Cato@Liberty.)

But then the question we are answering is sort of nonsensical. Universal coverage has not been the goal since the Democratic Primary contest ended -- some time last August.

Now there is only one goal: pass a bill.

The definition has at least two distinct dimensions: (a) the benefit package that is considered minimally adequate and (b) the fraction of discretionary income (disposable income minus estimated minima spending on food, housing, utilities, etc.) that is absorbed by health spending on that minimum package (out-of-pocket spending on it plus premiums paid).

So we would count as "uninsured" anyone who has less than that minimum package or spends mor than the normative percentage of discretionary inome on it or is characterized by both..

People who spend less than  the normative percentage of their income on the benefit package (perhaps zero) but could afford it within that limit (perhaps with the help of subsies) would be called "self-insured).

America's Health Insurance Plans Sunday created a stir when it released a report commissioned from PriceWaterhouse Coopers that pointed to four provisions in the Finance Committee bill as potentially increasing private insurance costs for individuals, families and businesses above what their costs would be minus reform. With the enactment of four specific provisions, the cost of coverage would increase by 111 percent, according to the report. The problems, it says, are "insurance market reforms coupled with a weak coverage requirement, a new tax on high-cost health care plans, cost-shifting as a result of cuts to Medicare, and new taxes on several health care sectors."

With these provisions in place, would health insurers still benefit from reform?

In his weekly radio address, President Obama says private health insurance companies are “filling the airwaves with deceptive and dishonest ads.”

Gee, I wonder if the insurers will dishonestly deceive even half the number of people that President Obama did during his address to Congress.

(Cross-posted at Cato@Liberty.)

Their report and its conclusions are completely false, as Ezra Klein and Scarecrow explain, so they're not working with facts here. Rather, they are threatening to raise their rates if health reform hurts their profits.

The insurance industry's complaints come down to a proxy battle - they're attacking the weakened individual mandate provisions and the excise tax in the Senate Finance bill (the one that's a bailout for the very same insurance industry) as a way of attacking health reform in general, as well as an attempt to move the conversation away from the other bills in Congress, bills that do make health care affordable and do have a public health insurance option.

Instead, this report highlights how important it is to tightly regulate this criminal industry and make sure we all have a choice of a public health insurance option, so we're not left at the mercy of big insurance any longer.

As David Dayen explains:

The industry appears to want it both ways: they want to force everyone to buy their insurance, while cherry-picking the healthiest members of the uninsured for themselves, and sacrificing nothing in profits – in fact increasing them.

Insurance companies said that if they don't get what they want - force people to buy their overpriced insurance or pay a high fine - they will raise rates for all of us. It's a bare threat, especially in a country where over half of bankruptcies are caused by their bad practices.

Insurance companies are threatening us with more bankruptcy, attacking our livelihood and our economy, so they can continue with their criminal ways. We need freedom from the insurance industry's monopoly, and the only way we'll get it is with health reform that makes insurance affordable for people, and a public health insurance option to give us the choice to say no to big insurance.

The report released by American's Health Insurance Plans (AHIP) on the impact of health reform on the cost of private health insurance coverage argues that higher costs associated with an individual mandate AHIP considers weak, taxes on high-end policies and health sector industries, and slowed growth in Medicare payments will passed along to the consumer in the form of higher health insurance premiums. This doesn't take into account any of the potential benefits from the structural reforms in the health reform proposals. Instead, this report isolates the impacts of only a few provisions, while ignoring many others, such as coverage of the uninsured, insurance market reforms, and consumer protections, which would elicit savings that would more than offset the costs of these specific provisions for insurers and households.

Additionally, the analysis is based on the assumption that the projected growth in the cost of health care services is a given, so Medicare reforms designed to control costs represent underpayment. Yet, a major health reform objective is to slow projected health care spending. With the structural changes that all of the health reform bills include, the growth in Medicare payments will slow down along with overall cost growth, so there won't be any excess costs to "shift."

In any case, the idea that all of the difference between the projected cost of health services and payments from Medicare and Medicaid will be passed from providers onto private payers is not consistent with even the most inflated representations of "cost shifting." Moreover, the impact of universal coverage on providers' revenues may be much greater than that reflected in the AHIP analysis, which would mean that the "reduced cost shift from uncompensated care" would enable insurers to achieve lower prices from providers and lower premiums. The analysis also overstates the number of insurance plans that will affected by the tax.

The very assertion that all of the costs that AHIP associates with these provisions would be passed on to the consumer and that private insurers do not have effective tools for slowing the growth in premiums reinforces the need for a change in the way the health insurance market works. The lack of real competition among insurance companies in many areas means that any additional costs faced by plans can simply be passed on to their subscribers, because there are few alternatives and relatively little market pressure preventing them from doing so. In a national insurance exchange framework (especially with a public plan option), private insurers would not find it so easy to pass on these "costs," and would have a strong incentive to push back against excessive provider payment increases and institute effective private sector cost containment tools.

The industry's report signals the beginning of the final stage in the health reform debate and possibly also their sense that reform will now pass in some form. They may want to get the best deal they can while there is still time.

The insurance lobby now claims that health care reform will cause significant premium increases, conveniently forgetting that they imposed significant premium increases during the past decade that are making health coverage unaffordable for families and businesses.

In the decade of 2000 to 2009, average family insurance premiums for employer-based health coverage increased from $6,772 to $13,073-an increase of 93 percent while median worker earnings rose by only 19 percent.

As a result, premiums rose 4.9 times faster than earnings - even though those rising premiums purchased 'thinner' coverage with higher deductibles and copayments as well as fewer benefits.

The insurance lobby's scare tactics are ironic and deplorable. They are like a poker player who complains about his hand when, in fact, he is the dealer.

I suspect the PWC study is correct. If anything, it may err on the conservative side. Everywhere guaranteed issue and community rating have been imposed, premiums increase substantially. How could it be otherwise?

And yes. These premium increases are a tax on the middle class. They are being forced to pay for someone else's benefits. Remember Obama's campaign promise: We're going to insure everybody and it won't cost the average voter one red cent. I hope you did't belive that.

This is hardly the 11th hour.  More like the end of the beginning, where the problem that Democrats have faced from Day One is finally coming to a head.

The Left and the health care industry both want universal health insurance coverage.  The industry, because universal coverage means massive new government subsidies. The Left, because that’s their religion.

But universal coverage is so expensive that Congress can’t get there without taxing Democrats.

• Sen. Jay Rockefeller (D-WV) is the biggest opponent of Sen. Max Baucus’ (D-MT) tax on expensive health plans because that tax would hit West Virginia coal miners.
• Unions vigorously oppose that tax because it would hit their members.
• Moderate Democrats in the House oppose Rep. Charlie Rangel’s (D-NY) supposed “millionaires surtax” because they know it would hit small businesses in their districts.

And on and on…

But if congressional leaders pare back those taxes, they lose the support of the health care industry, which wants its subsidies.

• That’s why the health insurance lobby funded this PriceWaterhouseCoopers study saying that premiums would rise under the Baucus bill: the $500 billion bailout they would receive isn’t enough.  They also want – they demand –  steep taxes on Americans who don’t buy their products.
• The drug companies, the hospitals, and the physician groups are likewise demanding big subsidies, and will run ads to kill the whole effort if those subsidies aren’t big enough.

As always, health economist Uwe Reinhardt put it colorfully:

It’s no different from Iraq with all the different tribes…‘How does it affect the money flow to my interest group?’  They are all sitting in the woods with their machine guns, waiting to shoot.

Once the shooting starts, industry opposition will sway even Democratic members, because there are physicians and hospitals and employers and insurance-industry employees in every state and congressional district.

Can President Obama and the congressional leadership satisfy both groups?  My guess is, probably not, and a misguided effort at “reform” will therefore die.  Again.

Thankfully the Urban Institute, in work funded by the Robert Wood Johnson Foundation, has recently released a thorough and devastating rebuttal to the Blue claims.  So my comments below focus mostly on the AHIP paper. 

Consider the source.  Most think tank work is funded by Foundations, which by law are nonpartisan. They focus more on objectively informing the public debate than on promulgating particular points of view.  On the other hand, consulting firm work is often funded by an interested party with a major stake in the outcome of a policy debate.  Readers should be very careful before repeating or reporting claims made by reports that were funded by people (or businesses) with a "dog in the hunt." 

Consider the openness of the data and methods. Good policy research uses nationally and statistically representative data so that its conclusions reflect behavior of the actual population. The PriceWaterhouseCoopers report uses proprietary data which are not representative of anything. Just because you have lots of data does not mean it accurately reflects the population.

As a great example, the Urban team describes their methodology and their model in great detail, so that its work is subject to scientific standards of scrutiny and reproducibility.  The same cannot be said for the report AHIP commissioned from PriceWaterhouseCoopers. The consulting firm neither allowed neutral parties to check its methods, nor did it send it out for review by neutral parties before releasing to the press.  The timing of the release (the Sunday of Columbus Day weekend, two days before the Finance Committee vote) indicates this report was about influencing the vote, not increasing the amount of good information in the debate.

The report ignores the subsidies included in the Finance Committee bill. Eighty-five percent of people getting coverage from the new insurance marketplace are going to receive financial assistance to pay for it.  The estimates ignore this. How can you claim to analyze premiums without taking into account subsidies to help people afford that coverage? Providing subsidies to make insurance affordable is one of the primary goals (and costs) of reform.  This is a stunning omission on the part of PriceWaterhouseCoopers.

The report ignores the excise tax on high-cost plans. It says: "Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is applied."  You cannot purport to complete an economic analysis, and then ignore the behavioral effects of economic analysis!  The claims that the excise tax will add to the cost of small and large group coverage should be ignored.  The Congressional Budget Office (CBO) and most economists believe that the dual incentive for insurers to offer more value for dollar and consumers to choose less-expensive policies is one of the surest ways to slow the rate of health care cost growth. 

The report assumes that all Medicare savings will be converted into private sector cost shifts.  In other words, it assumes that all Medicare savings realized through the legislation would ultimately translate into reduced payments to providers, which will be shifted into higher prices for private payers.  In fact, the biggest savings from the Medicare program in the legislation are realized from reducing the current formulaic overpayments to Medicare Advantage plans (a.k.a. private insurance plans), instead requiring them to bid competitively.  Long-run changes to payment policy are really about creating incentives for higher-quality, efficient care -- not simply about paying providers less.  In reality, many high-quality providers will make more under the proposed reforms. (This is why so many provider groups and coalitions like Health CEOs for Health Reform support smart reforms that realign incentives.)

The report assumes that premium growth in the absence of reform will be the same as per capita health care cost growth. They made this "assumption" even though premium growth has outpaced health care cost growth for the last 10 years.  Ironically, this is primarily because some insurers have increased their market share, reducing competition in the marketplace.  By underestimating expected growth in premiums, this baseline is biased against reform. 

The report ignores the fact that under the Senate Finance bill, "If you like your coverage, you can keep it."  The report overemphasizes the number of Americans who will have to "buy up" under reform.  Not only does the Finance Committee bill allow existing plans to be "grandfathered," but it provides young adults with the option of purchasing a less-generous policy.  When combined with provisions to allow young adults to stay on their parents insurance until they are 26, this will help keep costs down for young adults.  Further, a vast majority of insured Americans now have plans that meet the actuarial value standards in the bill.  The Finance Committee takes steps to stabilize premiums even further by providing a reinsurance fund for the transitional years in the new health insurance exchange. 

The report conflicts with CBO's assessment of the individual mandate.  There is a legitimate point, raised by insurers, about the individual mandate. If Congress reduces the penalties for remaining uninsured too much, it weakens the mandate. And that in turn impacts how the insurance markets -- predicated on the reform linchpin of guaranteed issue -- will function. However, the CBO has analyzed this question. It concluded the combination of subsidies and bidding incentives in the Finance bill does not hit the danger zone.  Vigilance and further thought on this point is important, but this inflammatory report should not be taken seriously by lawmakers weighing the merits of comprehensive health reform.   

The report everyone should be reading is the new paper by Linda Blumberg and colleagues at the Urban Institute. They found that limiting (or even eliminating) the amount premiums can vary based on age does not add to aggregate subsidy costs.  The Urban report makes short shrift of the claim by the Blue Cross Blue Shield Association that markets cannot survive if insurers cannot vary premiums five-fold based on age (i.e. charge older people five times more than they charge younger people). 

I have long defended the private insurance industry's ability to add value to a reformed and regulated insurance marketplace where they compete based on price, quality and customer satisfaction -- not on underwriting.  I still believe this to be true.  But we cannot solve a challenge as great as our health care crisis if we are not honest about the facts and the implications of reform.  Aside from the obvious conflict of interest associated with a report funded by the very industry it analyzes, PriceWaterhouse's basic analytic assumptions -- by their own admission -- are at variance with the bill and the opinions of most analysts.

House Democrats have ruled out an excise tax on high-end insurance plans as a way to pay for health reform, although that is a primary revenue raiser in Senate Finance Committee Chairman Max Baucus’s plan. 

House Democrats are considering limiting their proposed health care surtax to individuals earning above $500,000 a year, and that leaves about a $100 billion funding shortfall for reform, CongressDaily reported October 8 [[[link the story]]]. To help fill the funding hole, they are considering taxing securities transactions and/or taxing insurance company profits. But insurer profits are “much less than other industries within the health care sector,” Robert Zirkelbach, spokesman for America’s Health Insurance Plans, argued. “The data’s clear that health plan profits are not what’s driving rising health care costs,” he said.

Should House Democrats be worried about insurance industry profits? And is Zirkelbach correct in his assertion that insurer profits aren’t driving rising health care costs?

The Congressional Budget Office and the staff of the Joint Committee on Taxation have issued a preliminary analysis of the Senate Finance Committee chairman's mark for the America's Healthy Future Act of 2009. They note it would reduce the federal budget deficits by $81 billion over the 2010-2019 period. Here are excerpts from CBO Director Douglas Elmendorf's blog:

"The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children's Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period. In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty.

"By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent. Roughly 23 million people would purchase their own coverage through the new insurance exchanges, and there would be roughly 14 million more enrollees in Medicaid and CHIP than is projected under current law. Relative to currently projected levels, the number of people either purchasing individual coverage outside the exchanges or obtaining coverage through employers would decline by several million.

"All told, the proposal would reduce the federal deficit by $12 billion in 2019, CBO and JCT estimate. After that, the added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion."

What's your take?

Accountable Care Organizations -- Realistically Speaking

Is it realistic to think that most doctors will radically change their practice structure to assimilate into broad multi-specialty practices and potentially become employees of large, integrated health systems?

Today, most doctors still operate in small group practices. Yet, major congressional health reform bills are counting on doctors to significantly change their business model. They hold up large, integrated health care systems like the Mayo Clinic and the Cleveland Clinic, both of which employ doctors, as models. They propose accountable care organizations, which would require doctors to at least affiliate with physicians of other specialties. They also propose bundling payments, which would necessitate financial arrangements with other types of medical providers.

Will doctors really buy into this? Would such a system improve quality and lower costs?

Two points:

1. Baucus 2.0 would cost $2 trillion or more, not $829 billion. 
2. Baucus 2.0 would increase the deficit, not reduce it.

1. The actual cost. The $829 figure everyone heralds as the Congressional Budget Office’s preliminary cost estimate ignores another $108 billion in government spending under Baucus 2.0.

The $829 billion figure is actually only the CBO’s estimate of new federal spending on health insurance. Former CBO director Donald Marron finds $75 billion of additional new federal spending. The bill would also impose unfunded mandates on state governments, which the CBO projects would increase state-government spending by $33 billion. Voila: $937 billion of new government spending.

But even that ignores the private-sector mandates. 

Baucus 2.0 would require most Americans to purchase health insurance. That mandate would force people to spend their money in ways they otherwise would not. Those mandated payments (to private insurers) are part of the cost of the bill.

Massachusetts enacted a similar health care overhaul in 2006. The Massachusetts Taxpayers Foundation estimates that the private-sector mandates account for 60 percent of total costs.

If the ratio of private-sector mandates to new government spending is similar, then the total cost of Baucus 2.0 is actually north of $2 trillion ($937 billion times 2.5).

2. A budget-buster. The CBO estimated that Baucus 2.0 would reduce the deficit by $81 billion. Yet the bill only achieves that feat by assuming about $234 billion in spending cuts that everyone knows ain’t gonna happen.

Baucus 2.0 assumes that in 2012 Congress will permit the very Medicare cuts that Congress has blocked over and over again since 2003. So yes, Baucus 2.0 would reduce the deficit – conditional on something as likely as, say, the sun rising in the West.  

But rather than, say, scrutinize the actions of an elected official, the media have crowned Baucus the king of Deficit-Reduction Land. 

All of which leads me to a third point:

1. The media have completely botched this story.

"A celebration of the deficit effects masks who pays the bills.  This package includes hundreds of billions of dollars in new taxes and fees.  Most Americans with health insurance will see their premiums increase.  That's according to CBO and JCT, the non-partisan experts.  Premiums would increase as early as 2010, before most of the health reforms, including tax credits to help people pay for health insurance, take effect. Uninsured individuals would pay a tax for not obtaining government-approved health insurance.  Employers who already offer health insurance would face a penalty if their workers choose subsidy-eligible insurance.  With all of this, the bill spends nearly a $1 trillion and still leaves 25 million people without health insurance.  That's not much bang for the buck.  When people have been laid off or are worried about getting laid off, the idea of new taxes on employers and individuals should concern all of us.  I'd like to see Congress insure more Americans with less stress on the weakest economy, including family finances, in decades."

The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments. As a result, CBO estimates that of the $6 billion in federal funds that would be made available, about $3 billion would be spent over the 2010–2019 period.

Co-ops are so ineffective you can't even give away the start-up money. As our ads said, the co-op idea doesn't work.

Igor at Think Progress has more on the CBO score that's worth reading.

CBO and the staff of the Joint Committee on Taxation (JCT) have just issued a preliminary analysis of the Senate Finance Committee Chairman’s mark for the America’s Healthy Future Act of 2009, incorporating the amendments that have been adopted to date by the committee. That analysis reflects the specifications posted on the committee’s Web site on October 2, 2009, corrections posted on October 5, and additional clarifications provided by the staff of the committee through October 6. CBO and JCT’s analysis is preliminary in large part because the Chairman’s mark, as amended, has not yet been embodied in legislative language.

Among other things, the Chairman’s mark, as amended, would establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance “exchanges” through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage; significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare’s payment rates for most services (relative to the growth rates projected under current law); impose an excise tax on insurance plans with relatively high premiums; and make various other changes to the Medicaid and Medicare programs and the federal tax code.

According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period. The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period. In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty.

By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent. Roughly 23 million people would purchase their own coverage through the new insurance exchanges, and there would be roughly 14 million more enrollees in Medicaid and CHIP than is projected under current law. Relative to currently projected levels, the number of people either purchasing individual coverage outside the exchanges or obtaining coverage through employers would decline by several million.

Although CBO does not generally provide cost estimates beyond the 10 year budget projection period (2010 through 2019 currently), Senate rules require some information about the budgetary impact of legislation in subsequent decades, and many Members have requested CBO analyses of the long-term budgetary impact of broad changes in the nation’s health care and health insurance systems. However, a detailed year-by-year projection, like those that CBO prepares for the 10-year budget window, would not be meaningful because the uncertainties involved are simply too great. CBO has therefore developed a rough outlook for the decade following the 10-year budget window by grouping the elements of the proposal into broad categories and assessing the rate at which the budgetary impact of each of those broad categories is likely to increase over time.

All told, the proposal would reduce the federal deficit by $12 billion in 2019, CBO and JCT estimate. After that, the added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion. Consequently, CBO expects that the proposal, if enacted, would reduce federal budget deficits over the ensuing decade relative to those projected under current law—with a total effect during that decade that is in a broad range between one-quarter percent and one-half percent of GDP. The imprecision of that calculation reflects the even greater degree of uncertainty that attends to it, compared with CBO’s 10-year budget estimates.

These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments. The projected savings for the proposal reflect the cumulative impact of a number of specifications that would constrain payment rates for providers of Medicare services. The long-term budgetary impact could be quite different if those provisions were ultimately changed or not fully implemented. (If those changes arose from future legislation, CBO would estimate their costs when that legislation was being considered by the Congress.)

I am most inspired by the vision of President Obama with respect to health system reform, and his principles for effecting needed changes to America’s health care system.

I believe the principles he has provided to this conversation are in full alignment with the principles developed by the College during the past year. I firmly believe the President has taken a pragmatic approach that will bring persons on both sides of the aisle together to get reform passed this year. His concern and desire to address the flawed SGR payment formula and to work with Secretary Sebelius to reduce defensive medicine through achievable tort reforms is also most welcome to all physicians. It is essential that the nation move forward in 2009 with a meaningful and historic health reform proposal.

We look forward to working with the President, Secretary Sebelius, and the Administration to help move legislation through Congress this year and then to work on the process of implementation over the coming years. 

In every other area of our economy, we have straightforward way to separate the good ideas from the bad ones with respect to low-cost, high-quality production. It’s called a competitive marketplace. People with the best ideas succeed and make profits. People with the worst ideas fail and go out of business.

I can think of only one other field where we invite people who are not actually in the trade (including politicians) to tell the producers how to produce: Education.

Nonteachers have teen telling teachers how to teach for 25 years. How well has it worked? About as well as nondoctors telling doctors how to practice medicine is likely to work.

Physicians are committed to improving patient care, and health reform should help them take advantage of proven strategies to improve quality and to participate in pilot projects for new models of care, such as ACOs. Pilot programs for ACOs will need to be flexible enough to allow different types of practices to become engaged in this new model to see if it really does work to improve quality and reduce growth in costs. ACOs could facilitate "shared savings" arrangements, where participating physicians agree to work together to manage and coordinate care for patients and qualify for bonus payments if the organization as a whole meets certain quality and spending benchmarks.

To truly make systematic changes in medical practice that will benefit all patients, updates in antitrust and other laws will be critical to ensuring the flexibility and collaboration necessary to pursue these innovations. Removing the antitrust barriers that restrict physicians' ability to work together to create efficiencies, improve quality, and advocate on behalf of their patients must be done to advance this reform and vastly improve the health care system as a whole.

These trends provide hospitals an opportunity to create integrated delivery systems. But I doubt that many will take that initiative without major reform in the provider payment system. Much of today’s alignment from the hospital perspective is motivated by the longstanding strategy of gaining the allegiance of physicians who can be admitters of patients to the hospital. Hospitals learned a painful lesson about what can happen when employed physicians have no incentives during the early 1990s, so many employment contracts today have a series of incentives designed to simulate those in small practices. So many of today’s employed physicians are motivated to generate additional volume. Pairing this with higher rates from hospital leverage with health plans is a much more attractive business model today than creating truly integrated delivery systems that focus on the health of populations.

A final point is that small practices may not be a barrier to integrated delivery. Advances in health information technology offer a platform to a hospital system or larger group to bring smaller practices into its delivery system. Geisinger appears to have been successful in bringing many small practices in small towns into its system through contracts rather than through ownership.

I believe that the key challenge to succeed with ACOs is to develop a payment system that sets up the right incentives. This will involve fixing the distortions in the fee-for-service system because this will play a large role in ACO payment, at least during a transitional phase. It also will take involving patients, something leaders have been reluctant to address.

If we are to significantly reform health care in the United States to deliver better value (better outcomes, safety and service to patients at a lower cost), it is imperative that the health care delivery system change to become integrated and coordinated.  That means that physicians, nurses, hospitals  will need to change the way we all practice.
 
There are many ways to achieve the integration and coordination that result in better outcomes, better safety, better service and lower costs. One is to organize into a integrated clinic systems like Scott White in Texas, Lahey in Massachusetts, Aurora in Wisconsin, Ochsner in Louisiana, Geisinger in Pennsylvania, Marshfield and Gunderson in Wisconsin, Virginia Mason in Washington state, Intermountain in Utah,  Cleveland in Ohio and Mayo in Minnesota, to name a few  -- but it is not the only way. Physicians in small group or individual practices can organize in real and virtual ways with others in their communities, regions and across the country by creating learning organizations supported by electronic information and knowledge systems. The communities of Grand Junction, Colorado; Cedar Rapids, Iowa; and Appleton, Wisconsin are examples of communities in which physicians and other health care providers have already found creative solutions to coordinating care and providing better outcomes at lower costs.   Furthermore, integrated clinics, like those listed above, have already started to coordinate with other providers in their regions and in the country so patients can be sure of safe, appropriate, affordable care regardless of what provider they see in any location.
 
Accountable care organizations and bundled payments help facilitate the change that is necessary to incentivizing all types of health care providers to communicate better, integrate and coordinate care, and provide better outcomes cost effectively.