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Links Worth Reading

The Finance Side of the Healthcare System: Links

For today's post, here are a few resources about health policy that I found interesting.

Affordable Care Organizations

A December 2006 Health Affairs article by Dartmouth's Elliott Fisher et al, Creating Accountable Care Organizations: The Extended Hospital Medical Staff, suggests ACOs should consist of local hospitals and the physicians who work around them. The authors observe that "virtually all physicians are either directly or indirectly affiliated with a local acute care hospital, whether through their own inpatient work or through the care patterns of the patients they serve." This allows them to "empirically define the multispecialty group practices that [they] refer to as an 'extended hospital medical staff.' " 

A January 2011 article by Jeff Goldsmith of the University of Virginia, Accountable Care Organizations: The Case for Flexible Partnerships between Health Plans and Providers, makes the case that "health care services [should be divided] into three categories: long-term, low-intensity primary care; unscheduled care, including unscheduled emergency services; and major clinical interventions that usually involve hospitalization or organized outpatient care. Each category of care would be paid for differently, with each containing different elements of financial risk for the providers."

A January 2014 article by Arnold Epstein of Harvard School of Public Health et. al., Analysis of Early Accountable Care Organizations Defines Patient, Structural, Cost and Quality-of-Care Characteristics, analyzes the profile of ACO enrollees and compares it to non-ACO enrollees in order to establish a baseline for further program assessment.

ACOs have also been the topic of a number of Health Affairs blog posts, such as this one (payment reform landscape), this one (a look ahead for 2014: fantastic resource about the growth in ACOs, lives covered and geographic dispersion), this one (on current data about which ACOs, whether Pioneer, Medicare Shared Savings Program, Commercial or Medicaid, were financial winners or losers) and that one (about the Totally Accountable Care Organization, with the very unfortunate acronym TACO, although the authors themselves use that acronym and thus must be rather happy with it - maybe someone just has to come up with something healthcare-related that would make the acronym BELL and the health care system will be saved! Side note: in French, a tacot - you don't pronounce the T - is an old, beat-up vehicle, basically a clunker. I swear I'm not making it up. The authors' TACOs refer to Medicaid ACOs. They explain that: "“Totally” refers to the expectation that these organizations will be responsible for services beyond just medical care (for example, mental health, substance abuse treatment and other social supports), as well as the aspiration that these organizations will assume accountability for all associated costs of care, ultimately, through global payment mechanisms.")


From a 2013 Kaiser Health News article comes a description of the ACA's Reinsurance Tax, which charges each health plan $63 per enrollee to help cover 80% of the costs for claims between $60,000 and $250,000 per person. According to the Department of Health and Human Services, premiums for individual coverage would be about 10-15% higher without the reinsurance tax (see link in the KHN article). Interestingly, it seems from the KHN article that the tax is also assessed on enrollees of employer-sponsored plans, although those employers and their health payers cannot access the tax's benefits. 

A 2005 report from the Commonwealth Fund provides a good overview of reinsurance and how it can help states lower premiums. If you don't have time to read the PDF, you can always read the issue brief instead. At the time the brief was written, state-level reinsurance programs had only been implemented by New York (excess-of-loss) and Arizona (aggregate stop-loss). Being the analytical nerd that I am, I found the details of those two reinsurance programs just fascinating. First, definitions: as you might have guessed, New York focuses on reinsurance for individual enrollees, i.e., it protects insurers "for the risk of extraordinarily high costs incurred by any individual." In contrast, the Arizona program "provides protection to insurers for the risk that a large number of enrollees may have above-average but not necessarily extraordinary expenses—a situation that typically occurs when they are more likely to have chronic health problems."

The programs also offer different incentive structures for insurers. In New York, "the insurer is responsible for 10 percent of the costs between $5,000 and $75,000 and all of the costs above $75,000." In Arizona, "the plan encourages insurers to reduce total costs."

The report also has data on how reinsurance lowered premiums. For instance, "In New York City in 2004, Healthy New York premiums were 40 percent lower than the average small group HMO premium and two-thirds lower than the self-pay individual market premium, while in Arizona, "the total state subsidy was $8 million per year [at the inception of the program in FY2001]. By FY2004, because expenses had been significantly reduced, this subsidy could be cut to $4 million."

There is also an interesting 1997 report on reinsurance prepared for HHS, but it is so old that the numbers provided in the analytics part have become completely outdated. 

Narrow Networks

This Kaiser Health News article aggregates several news articles about trends in 2015 regarding narrow networks. A great reference if you're curious to learn more about what's going on.


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