March 29, 2024

Economic View: What Sweden Can Tell Us About Obamacare

While in Sweden this month as a visiting scholar, I’ve asked several Swedish health economists to share their thoughts about that question. They have spent their lives under a system in which most health care providers work directly for the government. Like economists in most other countries, they tend to be skeptical of large bureaucracies. So if extensive government involvement in health care is indeed a recipe for doom, they should have clear evidence of that by now.

Yet none of them voiced the kinds of complaints about recalcitrant bureaucrats and runaway health costs that invariably surface in similar conversations with American colleagues. Little wonder. The Swedish system performs superbly, and my Swedish colleagues cited evidence of that fact with obvious pride.

The United States spends more than $8,000 a person per year on health care, well more than twice what Sweden spends. Yet health outcomes are far better in Sweden along virtually every dimension. Its infant mortality rate, for example, was recently less than half that of the United States. And males aged 15 to 60 are almost twice as likely to die in any given year in the United States than in Sweden.

In fairness, those differences result partly from lifestyle. In Sweden, workers are more likely to commute by bicycle than by car, for example, and obesity is far less common. Absolute poverty and income inequality — both associated with adverse health outcomes — are also lower.

But when illness strikes, the Swedish health care system responds efficiently. Managers have exploited economies of scale by consolidating services into fewer but larger hospitals. The American system has also gone through consolidation, but, by contrast, boutique hospitals are also more common here — partly in response to demands from patients with very high-cost health plans. In large hospitals, CT scanners and other expensive diagnostic and treatment machines are in nearly constant use, versus only a few hours of weekly use in some small ones.

Larger hospitals with heavier patient flows also enable their staff to hone their skills through specialization and experience. If you are getting a knee replacement or coronary bypass surgery, you want teams that do scores of such procedures each month.

Doctors in the two countries also face different financial incentives. In the United States, under the fee-for-service model, they can bolster their incomes, often substantially, by prescribing additional tests and procedures. Most Swedish doctors, as salaried employees, have no comparable incentive.

Another important difference is that, unlike many American health insurance providers, the government groups that manage Swedish health care are nonprofit entities. Because their charge is to provide quality care for all citizens, they don’t face the same incentive to withhold care that for-profit organizations do. That more hip-replacement operations are performed per capita in Sweden than in most other countries is almost certainly a reflection of the generous care options rather than of any inherent deficiency in Swedes’ hip joints.

The Swedes also provide drugs and other treatments only when evidence establishes their effectiveness. People can spend privately on unproven treatments, but the government refuses to impose their cost on taxpayers.

IS there a catch? When I asked my Swedish hosts to describe any downsides to their system, several mentioned the waiting times for certain nonemergency services. One told me that whereas in the United States a wealthy or well-insured patient might schedule a hip replacement with only a week’s notice, in Sweden the wait could be as long as three months. He described such waits as a design feature, noting that they allowed facilities to be used at consistently high capacity, and thus more efficiently.

Obamacare also contains many evidence-based provisions for medication and other treatments. But at least in its initial stages, it will not be able to match the cost savings achieved in Sweden.

That’s because the legislation’s design was heavily constrained from the outset. Surveys showed that most Americans were satisfied with the existing health plans provided by their employers, so any new system that required people to abandon them would have been a political non-starter. As I discussed in an earlier column, however, such plans are an extremely inefficient way to pay for health care. They arose as an unfortunate historical accident during World War II, when employers used them to sidestep the wage controls that had resulted in extreme labor shortages.

Employer health plans have been disappearing steadily, and may one day be gone entirely. The encouraging news is that the Affordable Care Act was intended to foster the evolution of a new system that can capture many of the gains currently enjoyed by countries like Sweden.

For that to happen, however, Congressional critics must abandon their futile efforts to repeal Obamacare and focus instead on improving it. Their core premise — that greater government involvement in health care provision spells disaster — lacks support in the wealth of evidence from around the world that bears on it.

The truth appears closer to the reverse: Because of pervasive market failures in private health care markets, this may be the sector that benefits most from collective action.

Robert H. Frank is an economics professor at the Johnson Graduate School of Management at Cornell University.

Article source: http://www.nytimes.com/2013/06/16/business/what-sweden-can-tell-us-about-obamacare.html?partner=rss&emc=rss

Bucks Blog: Workers’ Share of Health Costs Is Likely to Continue Rising

Towers Watson/NBGH

Workers are paying a greater share of their health care costs, and that trend is likely to continue over the next several years, a new report on employer-based health plans finds.

Employers still bear most of the cost of workplace health plans. But employees contribute 42 percent more for heath plan coverage than they did five years ago, as against a 32 percent increase for employers, according to the study from the benefits consultant Towers Watson and the National Business Group on Health, a nonprofit industry group whose members are large employers concerned rising about health care costs. (This change is shown in the graphic above.)

Meanwhile, though, the share of the total cost of health care borne by employees, including both premiums and costs paid out-of-pocket, climbed to 37 percent in 2013, from 34 percent in 2011, the report found.

Annual salary increases, meanwhile, have averaged less than 2 percent percent over the last three years, so workers are losing ground. “From a total rewards perspective, ” the report concludes, “rising health care contributions are taking their toll on employee take-home pay.”

The report is based on an e-mail survey, conducted from November through January, that questioned benefits managers at 583 employers about their health care benefits. The participants collectively employ about 11 million full-time workers.

The majority — about 80 percent — of employers said they planned to continue to raise the share of premiums paid by employees over the next three years.

Employees paid, on average, about 23 percent of total premium costs last year, and are expected to pay nearly a quarter in 2013, as companies take steps to control their costs. In terms of paycheck deductions, this translates into an average employee contribution of $2,658 to premiums in 2012. That is expected to rise to $2,888 in 2013 — an increase of nearly 9 percent in one year.

How do you expect to deal with the increase in health care premiums and out-of-pocket costs?

Article source: http://bucks.blogs.nytimes.com/2013/03/07/workers-share-of-health-costs-is-likely-to-continue-rising/?partner=rss&emc=rss

Walgreen Faces Loss of Millions of Pharmacy Customers

Express Scripts and Walgreen have been battling over payment issues for months. Walgreen said Wednesday that it has been unsuccessful at getting most of its customers who have their drug coverage managed by Express Scripts to switch to another pharmacy benefit manager, or P.B.M.

Barring a last-minute agreement, the relationship will end Jan. 1. Customers covered by an Express Scripts prescription plan will then have to switch to another pharmacy or pay higher costs for their drugs if they stay at Walgreen.

“While we remain open to any fair and competitive offer from Express Scripts, we firmly believe that accepting their proposal was not in the best interests of our shareholders,” said Walgreen’s chief executive, Gregory D. Wasson, in a statement. The company said its negotiations with health plans and employers have resulted in retaining just 11.4 percent, or about 10 million, of the 90 million prescriptions managed by Express Scripts that were filled by Walgreen in the fiscal year that ended Aug. 31.

Walgreen, based in Deerfield, Ill., is the nation’s largest pharmacy chain with more than 8,200 locations in the United States. Its retail stores operate under the Walgreens and Duane Reade names.

Walgreen said it expected a negative impact of 21 cents a share in fiscal 2012 from the loss of Express Scripts customers. The company would not release a specific estimate of the lost revenue, but analysts expect more than $4 billion could be at risk, given the retention figures released Wednesday. Walgreen generated $5.3 billion, or 7 percent of its $72 billion in fiscal 2011 revenue, from customers with drug coverage managed by Express Scripts.

Walgreen shares, which fell sharply early on Wednesday, were down about 1.5 percent in midday trading to about $33.

The contract dispute has already had a slight impact on Walgreen earnings.

On Wednesday, Walgreen said higher costs across the company contributed to a 4.5 percent decline in profits to $554 million in the company’s first quarter, ended Nov. 30. Net income rose a penny to 63 cents a share, from 62 cents, in the year-ago quarter, trailing most analysts’ estimates of 67 cents.

Walgreen said its decision not to be a part of Express Scripts pharmacy network cost 1 cent a share in comparable pharmacy sales and 1 cent a share in related expenses. Walgreen said sales rose 4.7 percent to $18.1 billion in the quarter.

Mr. Wasson would not speculate on any additional potential impact to Walgreen should Express Scripts complete its proposed $29 billion acquisition of Medco Health Solutions, another leading pharmacy benefit manager. That deal has raised antitrust concerns among some lawmakers, and the Federal Trade Commission has requested additional information from the companies before deciding whether to approve the combination.

Walgreen said it expected its total prescription volume for fiscal 2012 to dip 1 to 3 percent. That is in contrast to recent annual growth, amid favorable demographics that include an aging population of baby boomers and a rising number of Americans with chronic conditions that require taking medicines every day. Walgreen’s prescription volume rose more than 5 percent in its fiscal 2011 to 819 million prescriptions.

Walgreen has made a major push to get health plans and employers to end relationships with Express Scripts and contract directly with Walgreen. The drugstore chain said more than 100 health plans, employers and other clients have either changed benefit managers or taken steps to maintain access to Walgreens pharmacies in 2012. But some major clients, including the health insurance giant Wellpoint and the United States military’s Tricare plan, stuck with Express Scripts.

Mr. Wasson said Walgreen continued to negotiate with employers and health plans and said the company would gradually win back business over the course of next year as employer and health plan contracts with Express Scripts expired.

“These results, and what we’re seeing in the marketplace, confirm our confidence as next year’s P.B.M. selling season begins,” said Mr. Wasson in a statement. “We’re already working with many health plans and P.B.M.’s who value the role Walgreens and community pharmacies play in lowering overall health care and prescription costs.”

Meanwhile, Walgreen rivals like CVS Caremark and Wal-Mart have been marketing aggressively, including running radio ads, to woo its customers. A CVS spokeswoman said the pharmacy chain expected to pick up 20 million prescriptions managed by Express Scripts in 2012 that were previously filled by Walgreen.

“We have significant overlap with Walgreens stores,” said Carolyn Castel, the CVS Caremark spokeswoman, in an interview. “Forty-three percent of our stores are within one mile of a Walgreens store; 78 percent are within three miles; and 85 percent are within five miles. We think many customers are more likely to move to another major chain due to convenience, pharmacies with drive-throughs, 24-hour locations and service reputation versus any other channel.”

Article source: http://feeds.nytimes.com/click.phdo?i=45d5e9585c4dde39929e3f4fe7204778

Bucks Blog: Medical Debt Cited More Often in Bankruptcies

Andrew Harrer/Bloomberg

Medical debt is increasingly a factor in personal bankruptcy filings, an analysis of data at a large credit-counseling agency finds.

Roughly 20 percent of those seeking financial counseling this year and last cited medical debt as the primary cause of their decision to seek bankruptcy protection, according to CredAbility, an Atlanta-based nonprofit credit counseling agency that serves clients nationally. That’s up from about 12 to 13 percent in the prior two years. The analysis included more than 47,000 clients for the first half of this year, and more than 100,000 in each of the prior years. (Federal law requires anyone filing for bankruptcy to receive counseling in case other options are available.)

With unemployment persistently high, more people have lost health coverage along with their jobs, says Michelle Jones, the agency’s senior vice president of counseling. Health costs are escalating for employed people, as well, in the form of higher premiums and deductibles. More health plans are offering lower monthly premiums in exchange for higher deductibles, but that means people find themselves on the hook for more out-of-pocket costs, if they get sick.

One reason people tend to get into trouble with medical debt is that they are reluctant to default on health care payments, Ms. Jones said. So, rather than not pay their doctor, they take out a new credit card — often with high interest rates, if their credit is less than stellar– and run up debt on their credit cards to cover health care costs. The short-term problem is alleviated, but the interest begins to compound and in short order they’re in trouble.

“With medical bills, people are very compelled to make good on those debts,” she said. “If you’re sick, it’s the person taking care of you. So they feel bad about not making the payment. People take extraordinary steps to pay them.”

People who have lost their jobs, but are continuing their group coverage under the federal law known as COBRA, may find it difficult to make the higher premium payments and end up putting them on their credit cards if they can. Another scenario, she noted, is that if patients need continuing therapy, they may have to put payments on their credit cards, or they can’t continue treatment: “If they don’t pay, services won’t be provided.”

Medical debts can be particularly stressful because they tend to be referred to collection agencies quickly, since it’s expensive for clinics and hospitals to chase payments that aren’t covered by insurance.

There may be alternatives to a bankruptcy filing, she said, for those who have run up credit-card debt paying off their medical bills. They may, for instance, qualify for a debt management plan, which is a plan negotiated with creditors to allow the cardholder to pay down the debt over time, she said.

Have you incurred higher credit card debt because of medical bills?

Article source: http://feeds.nytimes.com/click.phdo?i=cd7a41b15635ea7d181e0aa36fc0f487

Program Offering Waivers for Health Law Is Ending

No more applications will be accepted after Sept. 22, federal health officials said.

Steven B. Larsen, director of the federal Center for Consumer Information and Insurance Oversight, said employers and labor unions had until that date to seek exemptions or request the extension of waivers already granted.

The new health care law generally requires employers to provide at least $750,000 in coverage to each person in their health insurance plans this year. Many restaurants, retailers and small businesses do not meet the standard. Some provide “mini-med” coverage with annual limits that may be as low as $10,000.

“Mini-med plans do not provide comprehensive health coverage, but unfortunately they are the only insurance options some consumers have today,” Mr. Larsen said.

The minimum amount of coverage will increase. Federal rules require health plans to provide at least $1.25 million in coverage next year and $2 million in 2013. In 2014, annual limits for new health plans will be banned. In that year, individuals and small businesses will be able to buy comprehensive coverage through state-supervised insurance exchanges.

Waivers granted or renewed in the next three months will run through 2013. To date, the administration has granted waivers to 1,433 health plans covering 3.2 million people.

On Friday, the administration disclosed that it had denied 100 applications and then approved nearly one-third of them after reconsidering the evidence.

To obtain waivers, employers and health plans must show that compliance with the federal requirements would cause a significant increase in premiums or a significant decrease in access to benefits. Without waivers, some employers said, they would have increased premiums or dropped coverage this year because they could not afford to provide higher health benefits.

Republicans have seized on the waivers as evidence that the law is fundamentally flawed.

“If the law is so good, why are more and more employers begging for a waiver to get relief from its burdensome mandates?” asked Senator John Barrasso, Republican of Wyoming. “Americans need waivers from the president’s law because it causes health premiums to go up.”

The policy announced Friday may eliminate the waivers as an issue in the 2012 election year. Under the policy, the administration said, employers and insurers with annual coverage limits below $2 million will have “a reasonable opportunity” to apply for waivers in the next three months.

Republicans have repeatedly asserted that the administration was giving preferential treatment to its political allies by granting waivers to health plans sponsored by labor unions that had supported the legislation. But in a study this week, the Government Accountability Office, an investigative arm of Congress, said health officials had used objective criteria in deciding whether to grant waivers.

E. Neil Trautwein, a vice president of the National Retail Federation, a trade group, said that ending the waivers was “a wise, appropriate step for the administration to take.”

“This step will avoid unnecessary politics and furor over the waivers,” Mr. Trautwein said.

Article source: http://feeds.nytimes.com/click.phdo?i=cef12022462a2fa249f89677b9d0ce4a