Lies, Damn Lies, and Statistics from Hell

Source: Kaiser Family Foundation

Source: Kaiser Family Foundation

by James A. Bacon

Katie Demeria ran an article in the Richmond Times-Dispatch today quoting data from the Kaiser Family Foundation and the Health Research and Education Trust showing a positive trend in health insurance premiums. In Virginia, premiums for employer-sponsored health plans grew an average of 4.8% per year from 2010 to 2015 compared to 7.6% from 2000 to 2010.

Demeria quoted Aviva Aron-Dine, a senior counselor with the Department of Health and Human Services, as saying in a news conference touting the report: “Since the Affordable Care Act was passed, we’ve experienced five of the slowest growth periods reported since Kaiser started doing its survey.”

Aron-Dine’s remarks calls to mind Mark Twain’s famous adage about lies, damn lies and statistics. It takes a special kind of audacity to credit Obamacare with slowing increases in private health plans even as Virginia insurers were requesting weighted average price hikes of nearly 18 percent for plans offered on the Obamacare health exchanges in 2017.

As far as I can see from perusing the Web, Aron-Dine has not identified a mechanism by which Obamacare regulations positively impacted the private health care marketplace. If she’d said that Medicare or Medicaid cost increases were moderating thanks to Obamacare, she would have at least a fig leaf of plausibility because those programs, after all, are designed and funded by the government. But she offers no more than a coincidence in time — the implementation of Obamacare occurred in the same years as private premiums were slowing — to justify her insinuation about market-based plans.

Ironically, the Kaiser Foundation itself explained in its report what is really responsible for the slowdown in private premium increases — private companies have been shifting aggressively to health plans with high deductibles and Health Savings Accounts.

deductables

Forcing employees to eat higher deductibles does two things. First, it lowers the company’s exposure to health care costs because employees are covering the first $1,000 in medical expenses (as see in the chart above), not the employer. That lowers the cost basis used to establish insurance premiums. Second, when employees pay for health care out of their own pocket, they are more selective about visiting the doctor and taking tests, which reduces costs. Third, Some companies are coupling these policies with wellness campaigns and resources to help employees shop around for better prices on discretionary procedures.

A couple of points to note: While increases in health care premiums may be slowing, that doesn’t mean that total payments, including out-of-pocket, are. Kaiser did not provide total-payment data. Nowhere is the tradeoff between premiums and out-of-pocket expenses clearer than the Obamacare health plans themselves, many of which increase deductibles as a way to offset higher premium.

While the Affordable Care Act does contain measures to contain exploding health costs, such as incentives for hospitals to reduce re-admissions, it also is accelerating the cartel-ization of hospitals, physicians and other health providers and, in response, the cartel-ization of health insurers. Economic power in the health care industry is more concentrated and less competitive than ever before.

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35 responses to “Lies, Damn Lies, and Statistics from Hell

  1. I don’t understand the connection between the Obamacare plans and employer plans vis a vis premium or deductible changes – positive or negative. As I understand insurance, including self-insurance, premiums depend on claim experience and expected claim experience for the covered group. And these are different groups of people. What is missing here?

    • In theory, the Obama administration could argue that changes implemented as a result of the Affordable Care Act have had spillover effects on private health markets. If hospitals and doctors were providing care more efficiently as a result of Obamacare directives and incentives, presumably their practices would carry over to privately insured patients. But I have seen no credible evidence of that.

    • People who get Obamacare – get primary care – which detects disease earlier and treats it rather than untreated then to the ER for care and those costs – shifted to those who have employer-provided insurance.

      • Larry, I’m sure you are correct in that some of the uncompensated costs of ER treatment are bundled into prices for other services that are reimbursed by insurance plans. However, from what I’ve seen in reviewing health care bills and insurance payments over the last ten years or so (so as to be time relevant), when using a preferred provider, both the patient and the insurance company get significant mark-downs from what the provider bills. I question, for example, whether a big insurance company such as Anthem Blue, especially for the federal employee program, pays much of a contribution to a hospital’s unreimbursed ER costs. Some reimbursements may well not cover much of the provider’s overheads at all, much less ER losses.

        I would think a better case can be made that hospitals, for example, recover some of their losses from those people paying their own bills, either because they have no insurance or have a high deductible major medical plan. Similarly, a hospital might recover some losses from the insured who are still paying their annual deductible. But once a person pays that amount, I truly wonder whether they help cover ER losses.

        My guess is that hospitals and other care providers eat large amounts of money from “charity care” or from people too broke or crafty to pay. I think that is why they are pushing to shift costs to taxpayers via Medicaid expansion.

        • @TMT – when we say “eat costs” does that imply that they are making a profit and end up making less profit?

          at some point – you have to pay the actual costs of operating an ER – as well as the charity care for people that get admitted.

          where does this money come from if the people being treated don’t or can’t pay?

          someone ends up paying these costs – right?

          • No, Larry. I don’t believe the facts show that hospitals are able to recover all or even most of their costs for unreimbursed ER care from other patients and insurance companies. Simply because a business incurs a cost, it does not have an assured means of recovering those costs. They may not be able to recover those costs from other customers. Existing contracts may limit prices to other customers and market forces may also limit prices.

            And “yes,” I agree that an inability to recover all ER costs may push down a hospital’s profits or surplus. Some of the shortfalls may be passed along to administrators, doctors, nurses, suppliers, the government through lower taxes (if the entity is for profit), etc. There is nothing that I know of that ensures hospitals and other health care providers will be held harmless. I think that’s motivating them to support Medicaid expansion. I think they believe they will make more money/have greater revenues by getting access to admittedly low Medicaid reimbursements than they do under today’s system. Why else would they?

        • Thanks, TMT, for these reflections on the ER as the community health center of last resort. Hospital pricing in particular seems opaque to the point of deliberate deception, and it’s the least insured, the least able to pay, who pay the greatest markup (until they receive one of those subjective discounts). It’s always seemed to me that some form of universal health care was destined to be the inevitable outgrowth of “charity care” in this country, and now that we’ve got Obamacare as our starting point, for better or worse, we need to build on it not destroy it. I wish we could begin the broad discussion that’s needed over how to fix it, or even replace it entirely, but forget this pointless posturing over repeal without alternatives.

          • The political problem with universal care is that either the government takes away some coverage from those who have non-government insurance or it operates a gold-plated system for everyone that collapses because of cost.

            Let’s take federal employees and retirees for example. How much in benefits cut would they accept to move everyone to universal coverage? I’d wager the answer is “damn little” or, more likely, “nothing.”

            Everyone (well, most everyone) realizes that state and local government retirement plans, generally defined benefit plans, must be reformed. Unfunded pension liabilities are starting to crowd out other government programs and services, as well as employee raises. Yet, the political will to begin even basic reforms for new employees is not there. Witness Fairfax County and its Schools. The Schools even have a second pension plan that pays SS equivalency until age 62 to encourage teachers to retire in their 50s.

            If state and local government cannot even start fixing this problem, how can the federal government cut back health insurance for those who have it by pushing them into a universal care plan with equal, but lower, benefits for all? Universal coverage just will not happen, IMO.

  2. I don’t get the connection either. Plus, we are getting the usual pro-management, pro-business spin here at the expense of workers who haven’t seen much in wage increases since the mid-2000s, at least. When you add in the nearly total lack of transparency with setting and understanding rates, this turns into a really bad joke.

    I love this part:

    “Second, when employees pay for health care out of their own pocket, they are more selective about visiting the doctor and taking tests, which reduces costs.”

    Sorry but my bullshit meter just went off. Do you really think that when you go to a doctor and he or she orders tests, that the patient scans the list and says, “Yes, no, no, yes.” The patient has very little idea why the tests are needed or how much they really cost. They just go along, their insurance pays what it will and then you get a truly obnoxious bill our of the blue from LABCORP screaming, “Open Immediately” soon followed with a “PAST DUE” notice.

    This is the same old crap about bringing the free market to medical care.

    • “Do you really think that when you go to a doctor and he or she orders tests, that the patient scans the list and says, “Yes, no, no, yes.” The patient has very little idea why the tests are needed or how much they really cost.”

      That’s certainly the way it used to work. But it’s changing, especially in health plans offered by large, self-insured corporations. Changing the culture of passivity among health care consumers is a slow process, but change is occurring with discretionary tests and procedures. Sorry, that’s not “crap” or “bullshit” but reality.

  3. I thought the following a little funny

    ” Forcing employees to eat higher deductibles does two things. First, it lowers the company’s exposure to health care costs because employees are covering the first $1,000 in medical expenses (as see in the chart above), not the employer. That lowers the cost basis used to establish insurance premiums. Second, when employees pay for health care out of their own pocket, they are more selective about visiting the doctor and taking tests, which reduces costs.

    … then you say:

    ” Nowhere is the tradeoff between premiums and out-of-pocket expenses clearer than the Obamacare health plans themselves, many of which increase deductibles as a way to offset higher premium.”

    so aren’t you saying that BOTH employer-provided AND Obamacare are using higher deductibles to achieve the same thing but you characterize that a a “good” thing for employer provided but a “bad” thing for Obamacare?

    so – is it a “good” thing or a “bad” thing to have the higher deductibles – for both or not?

    • You characterize that a “good” thing for employer provided but a “bad” thing for Obamacare?

      No, I don’t. That’s you viewing what I wrote through your ideological prism again. I make no value judgments of any kind in this post. I describe how higher deductibles are slowing the increase in health care premiums for private insurance policies and Obamacare as well.

      You are the one applying the labels, not me.

      • you characterized them not the same though. right?

        I was asking why you characterized the SAME technique of higher deductible for BOTH employer-provided AND Obamacare differently .

        AND does the phrase “Forcing employees to eat higher deductibles” indicate a “good” thing or a “bad” thing?

        I just asked you the question based on what YOU SAID – not me?

        You make statements like this – that when combined with others – walk and talk like value judgements to me – and so I do ask
        for you to clarify your intent when you do that.

        it’s not an “ideological prism” to ask you to say what you mean.

        In other commentary -I do get the impression that you do think that people owning more of the costs is a “good” thing but then when it comes to health care and insurance- I end up wondering if you feel the same way or you feel that higher deductibles is a “bad” thing.

        so I’m asking…

        • Forcing employees (or Obamacare subscribers) to pay higher deductibles incentivizes them to utilize health care more carefully. Whether that’s a “good” thing or a “bad” thing depends on your frame of reference. If you’re a patient, it’s probably a bad thing. If you’re concerned about over-utilization of the health care system, it’s probably a good thing. The issue is a total digression from the main point of my post… but that’s nothing new.

  4. The basic premise of ObamaCare is this:

    If you screen, detect and treat heart disease and diabetes and cancer early on it’s cheaper than allowing those diseases to progress undetected until they are at a stage where they will cost hundreds of thousands of dollars of late stage treatment.

    everything else – is more speculative and more debateable…but this central premise is pretty straight forward.

    People do not die quick nor cheap from progressive disease… it’s a terrible way to die and an expensive way to die and if you don’t care about the former – then you ought to care about the latter if your own health care costs are affected.

    Somehow – we manage to delude ourselves on this fundamental premise.. inexplicably so.

  5. PeterG, I agree with your comment about the “bullshit meter.” Then again, everything I’ve read says that consumers really do respond to higher deductibles with greater reticence to seek medical attention. I think rather than parse out each piece of what the doc is telling you to do or not do, these are people who’s need for the doc is marginal to begin with and they simply don’t go to the doctor. The decision to go to the doctor’s office is a balancing of lots of factors including the disruption of daily routine, the nuisance of making the appointment, the drive, the wait, the hope for reassurance from knowing versus not knowing, the hope for symptomatic relief and quicker recovery and less complications, the expectation of sympathy. And I haven’t even mentioned paying out-of-pocket for it yet. But once they’ve made the decision to go see the doc, I think most people are “in” all the way.

    • I have to agree with most, not all, of what Acbar is saying…. basically that people are not going to go to the doctor -even if they have “insurance” – if:

      1. they think they are healthy
      2. -and it’s going to cost them out of pocket.

      but if the are sick… then what?

      or they actually get a test and it says they have “something” and it needs to be treated…and it’s going to cost them out of pocket.

      then what?

      and I’d ask the question three ways:

      1. – they’re sick and they have employer-provided.
      2. – they’re sick and they have obamacare
      3. – they’re sick and they do not have insurance.

      one one more: they’re in an auto accident and have a broken leg

      what happens in 1, 2 and 3?

      • If they pay out of pocket, it’s for one of three reasons:
        1. They have insurance and are still under the deductible threshold. Q: do they pay the ‘full rate’ hospital charges or the insurer-negotiated-discount hospital charges?
        2. They have insurance and are paying a co-pay. Q: Is the co-pay based on the higher ‘full rate’ hospital charges or the negotiated lower charges?
        3. They have no insurance. TMT says they are billed the higher ‘full rate’ charges that cover the cost of “charity care.” Q: Roughly what percentage who receive a bill for those higher charges actually pay a lower, negotiated amount? Or, pay zero?

        I’m assuming that LarryG’s 1 & 2 and broken leg have the same answer as my 1. Are we wrong about that?

  6. re: ” No, Larry. I don’t believe the facts show that hospitals are able to recover all or even most of their costs for unreimbursed ER care from other patients and insurance companies. Simply because a business incurs a cost, it does not have an assured means of recovering those costs. ”

    How do you pay your doctors, your nurses, your equipment and supplies providers if you’re not taking in enough money to pay for these things?

    I’m flummoxed listening to this concept.

    either you think the hospitals are piling up extra money – and I don’t mean a few bucks for higher paid administrators.. we’re talking about millions of dollars per hospital.

    Do you think they’d keep their doctors or nurses if they reduced their compensation? Do you think suppliers would continue to deliver their supplies for fix their equipment if they did not get paid?

    Seriously – am I missing something here? My perception is that hospitals have to pay their bills or else suppliers refuse to deliver an doctors and nurses go elsewhere…

    So I’m asking.. what am I not understanding?

    • Larry, a business that doesn’t make as much money as it wants looks for other ways to cut costs. Maybe the employees get a 1/2% smaller raise or no raise at all. Maybe, the administration pushes back on the contractors that do painting when they say prices need to go up by 5%. The contractor may be told, “Freeze your prices for a year, or we will go elsewhere.” The board may tell the CEO that the bonus will be 20% less than last year.

      And a lot of these hospital chains have a boat load of surplus. How else is INOVA getting into the high tech medical research business without massive surpluses? Maybe that surplus is falling. The plain and simple truth is that the costs of uncompensated ER are not necessarily passed along to other patients and insurance companies.

      • @TMT – most hospitals are not in the NoVa market where people have gold-plated insurance in addition to their high end incomes. What they’re selling is value-added services not offered by many hospitals and not covered by insurance… things like higher end joint replacements… sports

        but you apparently believe that most hospitals take in more than enough money to pay for the uncompensated care and that the uninsured are not costing other people money or the cause of increasing employer-provided premiums?

        not ragging on you – just trying to understand your view.

        • Larry – I suspect hospital finances run the gamut from wealthy to teetering on the brink of collapse and for a variety of reasons. As I stated, I think hospitals may be able to recover some unrecovered costs from insurance, but believe the big insurance plans and companies big enough to self-insure negotiate some pretty lean reimbursement arrangements. As a result, hospitals seemingly try to recover added costs from individuals paying their own bills and from elective procedures, but likely eat a lot of the losses.

          Everyone from the left to the right tend to agree that Medicaid reimbursements are very low. Many health care providers won’t take Medicaid patients. Yet, the health care industry has been pushing for Medicaid expansion. That action clearly indicates they believe they would be better off accepting meager Medicaid payments than trying to get other patients to pay for uncompensated care losses. No other conclusion makes sense to me.

          • Hospital accounting and finances are so opaque that no one — and that probably includes the hospitals — truly understand the subsidies and cross-subsidies they engage in. One thing we do know, however, is that all major hospital systems in Virginia are highly profitable.

          • Reed Fawell 3rd

            My mother always had excellent health insurance coverage. One day some eight years ago after she had spent a week in a DC hospital, she died.

            Two months’ later I, executor of her estate, received a bill for $37,000 for her last “care in the hospital.”

            I called the hospital and asked why, given her coverage and the law, had I been sent the bill?

            The voice of the women on the other end of the line said “because sometimes people pay the $37,000.”

            “What happens if they don’t?” I asked

            “Nothing,” said the voice on the other end.

            On the last day of her life three doctors told me that my mother would be dead in 12 hours if she did not have her intestines removed. She had declined the operation, and they had resisted her wishes despite her living will.

            So in the hospital room with her I demanded to see the surgeon who would perform operation. When he arrived he and I were standing out in the hallway when I asked him how the operation would impact her.

            “It’ll be like she’s been hit by a Mack Truck,” he said.

            “What then, if she survives?” I asked.

            “She’d spend the rest of her life on a ventilator.”

            “Would you do that to her if she were your mother?”

            “Absolutely Not.”

            When my mother died that day she was 94 years old.

            My father also had a living will when he had a massive stroke around two am in the morning. I got him with 30 minutes to Naval Medical Center outside Bethesda. Dad knew that place very well having spent the better part of a year there getting put back together in that hospital in 1945 after Iwo Jima. This time, more that 50 years later, a doctor had been called over from NIH. His advice in those early hours was clear and unambiguous:

            “Don’t let them operate. He’d never come back. Keep him comfortable. And let him go.”

            The NIH doctors soon left, replaced by a string of Navy doctors. I presented with the NIH doctor’s advice and Dad’s living will that dealt with this very situation we now confronted.

            The attitude of these Navy doctors raised my suspicions so I acted accordingly. I watched everything they did, including their alleged administration of morphine to ease the pain, and I did not leave him alone with others.

            At 1 am the next morning I was still there in the corner of his room watching when a Hispanic women came into his room. I’ll will never forget her. It was obvious she didn’t see me off in the corner. She walked as if in a sacred space attentive only to him. Gently with great care she rearranged the sheets around him then stood there over him, her head lowered, obviously in prayer.

            She’d just crossed herself when I said from the shadows “thank you.”

            My voice startled her. She had thought she was alone with my father.

            “Thank you so much,” I said. “I am so glad he is not in pain.”

            “But he is”, she said.

            No, that is morphine, I said, nodding toward the slow drip of the IV.

            “No, I tried to be so careful with the sheets, but could not help him.”

            “Show me” I asked and she did.

            The doctors has lied to me. The hydration was only water. Within a few minutes I had the senior doctor, the commander of the place in my father’s room asking the doctor in charge of my father why my father was not getting the morphine required by my father’s living will.

            “It’s addictive” he said.

            My father passed away twenty minutes later.

  7. re:
    ” The political problem with universal care is that either the government takes away some coverage from those who have non-government insurance or it operates a gold-plated system for everyone that collapses because of cost.”

    the reality is – no matter what insurance you have – whether it’s
    govt or non govt – in this country or in others with universal care – coverage is not unlimited – is capped.

    No entity – private or govt is going to cover everything.

    “Let’s take federal employees and retirees for example. How much in benefits cut would they accept to move everyone to universal coverage? I’d wager the answer is “damn little” or, more likely, “nothing.” ”

    they already have “cuts” and will continue to see more as insurance companies that have to stay in business and cover their costs will have to balance premiums verses payouts.

    Govt employees are not entitled to entitlements ( guaranteed health insurance at 1/2 the actual price – because of untaxed money for premiums) than anyone else.

    the insurance they have is not guaranteed by the employer- it’s guaranteed by the HIPPA law that requires all employer-provided health insurance to offer it to all regardless of their health status – for the same price to all… while others who work just as hard for a living do not have that same entitlement.

    that’s what Obamacare was designed to do -to offer equitable access to health insurance for those whose employers did not offer it.

    “Everyone (well, most everyone) realizes that state and local government retirement plans, generally defined benefit plans, must be reformed. Unfunded pension liabilities are starting to crowd out other government programs and services, as well as employee raises. Yet, the political will to begin even basic reforms for new employees is not there.”

    TMT – you do recall that the US govt went from CSRS to FERS – it had the political will to do that -right?

    ” Witness Fairfax County and its Schools. The Schools even have a second pension plan that pays SS equivalency until age 62 to encourage teachers to retire in their 50s.”

    not just Fairfax… many school systems do.

    but I agree with you – and not just for schools – but US Govt also.
    no more retire at 55 and not 20 year retirements in the military either unless the solider actually did serve in an active combat zone.

    “If state and local government cannot even start fixing this problem, how can the federal government cut back health insurance for those who have it by pushing them into a universal care plan with equal, but lower, benefits for all? Universal coverage just will not happen, IMO.”

    The State and Local have NEVER taken the lead on these things. The Federal govt has always had to force changes by removing or cutting back on tax and HIPPA law that are de-facto “entitlements” also – not really much different than the obvious entitlements like Medicare.

    Taxpayers not only subsidize Medicare and Medicaid – they subsidize govt Civilian and Military entitlements also.

    you have people working at jobs , that do not have such benefits – and they pay taxes to provide these entitlements to others – both employer-provided and Medicare/Medicaid.

    In Va – people who work full time do not get Medicaid while people who own their own homes and need nursing home care – and could pay with a home equity loan – instead – working Virginians without health insurance nor Medicaid pay for their nursing home care so they can pass their own wealth – like their homes on to their kids.

    when we say “political will” – what we are really saying is that the people who benefit from an inequitable system -are not willing to support a more equitable system.

  8. Bacons,
    I haven’t seen any changes yet. It is still in the bullshit basket of deplorables. Maybe it is the glimmer of some med planner’s eye, but then again, maybe we’ll be treated by a robot or a Vulcan a la Starship Enterprise.

    The problem is that you read something that might be and then get into a mindset that it’s already here. You might ant to go to a real emergency room and hangout some day.

    Din’t forgot that not long ago, you were touting as a real advancement “concierge” health care even though it would apply to a very tiny minority of people capable of affording it.

    • I’ve always been of two minds about concierge medicine. It’s wonderful for the doctors and patients involved. But as more and more doctors go the concierge route, carrying a patient load of 600 patients instead of 3,000, they accentuate the national primary care physician shortage for everyone else. And I’ve said so on this blog.

  9. Not what you said in Boomergeddon. I keep a copy on my nightstand next to the Bible and Satanic Verses.

  10. re: ” concierge route” this is like the Uber of medicine… it focuses on the “needs” of those who “have” and are willing to pay more to “get” more and better.

    I don’t have a problem with it myself.

    I’m not “envious” of it… people do work hard and smart to earn their wealth and are entitled to spend it to their own benefit whether it be on uber, better doctors, speciality care hospitals, etc…

    the problem is what do we do about the folks who cannot even get insurance nor regular preventative care and end up with advanced disease and go to the hospitals for charity care?

    some folks – TMT – here believe that charity care is not paid for by taxpayers or other insured but instead is absorbed by hospitals in their overall revenues.

    If true -then all of the discussion and Obamacare – and MedicAid and the expansion are much ado about nothing.. that no money will be saved… charity care is already “baked” into the health care system.

  11. Here’s some pretty interesting reading from the

    Thomas Jefferson Institute for Public Policy
    “Hospitals and the Proposed Virginia Medicaid Expansion”

    Disproportionate Share Hospitals and Hospital Closures

    on page 11

    http://www.thomasjeffersoninst.org/files/3/Hospital%20Study%20April%202015.pdf

  12. re: ” Forcing employees (or Obamacare subscribers) to pay higher deductibles incentivizes them to utilize health care more carefully. Whether that’s a “good” thing or a “bad” thing depends on your frame of reference. If you’re a patient, it’s probably a bad thing. If you’re concerned about over-utilization of the health care system, it’s probably a good thing. The issue is a total digression from the main point of my post… but that’s nothing new.”

    ” Lies, Damn Lies, and Statistics from Hell”

    okay – so what was your point – that I apparently did miss?

  13. re: ” Hospital accounting and finances are so opaque that no one — and that probably includes the hospitals — truly understand the subsidies and cross-subsidies they engage in. One thing we do know, however, is that all major hospital systems in Virginia are highly profitable.”

    so you do agree with TMT that charity costs are already baked into the cost and things like Obamacare and MedicAid are irrelevant – even harmful because they allocate monies that are not needed – that hospitals already can cover those costs?

    correct?

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