Monthly Review & Commentary On Health Issues From A Rural Perspective - March 1st, 1997

Medicare Cost To Elderly Spurs HMO Growth
Why would anyone eligible for Medicare sign up with an HMO? Avoiding a monthly nightmare's worth of paperwork is more than enough reason. But Medicare is neither free nor comprehensive. In addition to a $43.80 monthly premium deducted from Social Security checks, there are significant out-of-pocket costs for deductibles, copayments and uncovered services, such as:
Medicare's Hospital Insurance ("Part A")
Deductible - $760 per year
Coinsurance - $190 a hospital day (61st through 90th)
Medicare's Medical Insurance ("Part B")
Deductible - $100 per year
Coinsurance - 20% of approved charges
Alternatively beneficiaries pay premiums for supplemental insurance, known as a Medigap policy or Medicare Select if offered by an HMO; in some areas they can instead buy insurance from an HMO who has entered into a "risk contract" with Medicare. (A risk contract means the HMO provides all services for a fixed monthly fee from Medicare.)
The chart below shows the ten standard Medigap Policy packages required by law and developed by the National Association of Insurance Commissioners. (Wisconsin and a few other states have a slightly different set of options due to various historical reasons.)
Below are sample annual premiums in Wisconsin for similar benefits; rates vary by insurer, age, place of residence and benefit options picked:
Medigap Policy, traditional insurer: $1,015
Medicare Select, HMO offering Medigap Policy: $768
Medicare Risk Policy, HMO has "Risk Contract": $0
Which would you chose if you had limited income, had already been in an HMO, the Medicare HMO covered all Medicare benefits and offered additional benefits like a good drug benefit or no supplemental premium?

Medicare HMOs Big In A Few Counties
The following is from a report from Coopers & Lybrand L.L.P., a professional services firm, entitled Trends In The USPCCs and AAPCCs: 1985 Through 1996:
"Historically, enrollment in the Medicare risk contracting program has been concentrated in a small percentage of the country. This pattern continued in 1995, with 82% of all risk enrollees residing in only 45 of the 3246 counties. The county with the largest number of risk enrollees is Los Angeles (306,051), followed by San Diego (134,513) and Maricopa (Phoenix) (107,138)."
"Though beneficiaries are required to receive their care only from physicians affiliated with the HMO (the "lock-in" provision), Medicare risk contracts enjoy broad acceptance by nearly half of all beneficiaries in counties in southern California. As can be seen below, ten counties have penetration rates of one-third or more of Medicare beneficiaries; 30 counties have penetration rates of one-fifth or more. High penetration rates probably result from beneficiaries' desire for relatively low, predictable out-of-pocket costs and guaranteed access to providers."

Senators Proposing Medicare Commission
From the Washington Post, 2/13/97:
"In a move aimed at provoking bolder action from President Clinton, the Senate Finance Committee's chairman and ranking Democrat plan to call for creation of a commission to draft a long-term rescue proposal for Medicare."
"Sen. William V. Roth Jr. (R-Del.), the committee's chairman, said yesterday that he and Sen. Daniel Patrick Moynihan (D-N.Y.) will introduce legislation as early as today that would establish a 15-member advisory panel to propose solutions to Medicare's financial woes."
"The panel Roth and Moynihan propose would be authorized to 'make recommendations to restore the short-range and long-range solvency' of the Medicare program, according to a summary of the proposal."
"Proposals in the budget Clinton sent to Congress last week would reduce Medicare costs by $100 billion over the next five years and extend the solvency of the Medicare hospital fund to 2007. But those changes would do little to lessen huge cost increases expected to kick in around 2010 as the baby boom generation reaches retirement."
"Under the approach advocated by Roth and Moynihan, the president would appoint only three of the panel's 15 members. The House and Senate would each appoint six members of the panel, but no more than eight could be affiliated with the same party. The chairman of the group would be selected by the Senate majority leader and the speaker of the House. The panel would be required to make its recommendations within a year."
Additional Competitive Medicare Models
From a HCFA press release, 1/30/97:
"The Health Care Financing Administration announced today that it will test the effects of greater market competition among Medicare managed care plans in the metropolitan Denver area. The Medicare Managed Care Competitive Pricing Demonstration project will use competitive bidding to set payment rates. The project also will help Medicare beneficiaries to be more informed consumers, which will foster competition among managed care plans."
"Denver has six managed care plans participating in the Medicare program, and they have enrolled more than one-third of the area's Medicare beneficiaries. Denver's managed care plans are paid slightly higher than the current national average."
"The demonstration will test how Medicare can take advantage of competitive market forces in setting the rates it pays managed care plans. Plans will submit bids for providing Medicare benefits, and these bids will be used to set the rate Medicare pays. The bidding process will begin later this year, and the new rates will take effect by 1998. Currently, Medicare sets these rates through a statutory formula based on costs in the fee-for-service Medicare program. This method has long been criticized for ignoring the potential of competition among managed care plans to restrain Medicare costs."
Medicare Changing Without Congress
Even without the expected Congressional action to further limit Medicare spending, the Congressional Budget Office is now predicting a reduction from prior estimates of $40 billion in Medicare spending over the years 1998 through 2002. In addition, major changes in the distribution of Medicare spending are projected: spending on hospital services drops from 58% to 50% of total expenditures, physician services from 21% to 17% while payments to HMOs go up from 21% to 34%.
From "The baseline game," Modern Healthcare, 1/27/97: Those lower spending growth rates may make it easier for congress and Clinton to achieve Medicare savings goals without slashing payments... However despite the adjustment in growth rate estimates, the Medicare hospital fund still will be insolvent in 2001."

Federal Rural Advisory Group Speaks Up
National Advisory Committee On Rural Health Update--the winter meeting of this advisory committee to the Secretary of the Department of Health & Human Services was particularly productive. A number of key recommendations passed and are in the process of being sent to Donna Shalala and the Congress:
Bottom Line: Competition Means Something
I've heard enough in my travels to think denial about the evolution of the health care market is alive and well. We shouldn't be passively herded into a brave new world but ignoring shifting market fundamentals is perilous to both community and provider health. The evolution of the health care market away from one relatively unstructured (unrelated organizations, minimal price competition) means more than annoying TV commercials. It means a shift for providers from managing sickness to also managing health and financial risk.

The Hype Of Dealmaking
"Another record year for dealmaking...
The number of hospitals involved in merger and acquisition activity increased 5% to 768, according to Modern Healthcare's third-annual list of mergers and acquisitions." Modern Healthcare, 12/30/96
"Tapping the brakes. Merger activity slowing...
As healthcare deals face more scrutiny by state attorneys general and others in their communities, the torrid pace of merger and acquisition activity is beginning to slow." Modern Healthcare, 1/27/97
News Or Propaganda?
Before sending me email about people living in glass houses, please remember that this newsletter is labeled up front as "commentary." From ""Something Doesn't Love a Wall" by Max Frankel in The New York Times Magazine, 1/26/97:
"The overnight transformation of George Stephanopoulos from partisan pitchman to television journalist highlights a disturbing phenomenon: the progressive collapse of the walls that traditionally separated news from propaganda."
"When ABC News first announced the hiring of Stephanopoulos, it said he would be both a 'political analyst' and a 'correspondent'... A second announcement quickly emphasized that the new recruit would not be reporting news or questioning guests. And that, it was said, would avoid any 'appearance of conflict.' Oh, sure. Who could possibly find conflict in an analysis of the words of the deeds and motives of Bill Clinton and his Administration by one of the architects of his Presidency who just happens to owe his celebrity and new job entirely to that President?"
"The trouble with news programs that lapse into bouts of opinion is that panelists end up scoring points instead of illuminating events. The ultimate perversion occurs on 'The McLaughlin Group,' whose members are encouraged to rudely shout out ill-argued conclusions, often three or four at the same time. If television is serious about its reputation for disinterested analysis, it had better cement those walls."
OHCI Aides Wisconsin Grantsmanship
From the Wisconsin's Office of Health Care Information (OHCI) web site: "OHCI collects and reports utilization and charge data on hospitals, hospital discharges, hospital-based outpatient surgery and selected freestanding ambulatory surgery throughout Wisconsin. It also compiles profile information about other health care providers, such as physicians and nurses. OHCI now features on-line access to its health information data bases, with one set of interactive tools for the general public and another for those more familiar with health data terminology."
This is a case where hype and performance are coming together. RWHC is deep into the writing of several major grant applications and it has never been easier to find relevant state data; the vision of many is now on the way to being realized. This collective resource makes writing a proposal easier and undoubtedly will improve the quality and competiveness of grant applications from Wisconsin.
I have found their Health Info Index and OHCI On-Line particularly helpful. Their address is unusually long so either find by use of a search engine or access them through the RWHC page of recommended links. An example of the use of data already available on line is shown below in the graph on average hospital charges for normal deliveries.

AHA's New Eye On Patients
The following is from the American Hospital Association's new web site, Eye On Patients and well worth a visit (Eye On Health has decided against initiating an ugly battle over the obvious play on its own pithy name), access through the page of recommended links at RWHC web site or directly at:

"The real business of health care is about much more than mergers and acquisitions, financing mechanisms, or structural reforms that have occupied center stage on the public agenda for much of the past decade. It is about preventing ill-health, caring for people who are sick, meeting the needs of people who must live Information for their lives with disabilities or chronic disease, and Consumers and making people in communities healthier."
"The public knows this--and questions whether health systems, institutions, and caregivers preoccupied with narrowly defined strategic interests and the economics of care delivery will act in the best interests of patients. Doctors, nurses, and other health care professionals also know this--and grow ever more alienated from a system that thwarts their humanitarian instincts. The fate of any health care reforms and the survival of any health systems or institutions will depend upon their ability to carry out their real business--serving the needs of patients--more effectively."
"Acting on the conviction that the key to health care reform lies in understanding the patient's point of view, the American Hospital Association and The Picker Institute have joined forces to gather information about patients' perceptions and experiences with care and to help health care providers and organizations find ways to be more responsive to patients' needs. This joint effort will produce a series of reports about how the American people feel about their health care system and the way they receive care. The report will identify the fears and concerns of the public in a time of great change in health care delivery, provide insight into the issues that patients think the system should focus on, and give both providers and the public a "road map" to guide improvements and measure progress along the way."
"This first Eye on Patients report reviews preliminary findings and offers a "snapshot" of patients' concerns and experiences in 1996. Future reports in the series will delve deeper into patients' experiences with particular types of care, including maternity care and care for chronic illnesses and conditions; compare experiences in different settings of care; and feature case studies of programs and activities that have improved patients' experiences."
"How is the health system doing?
Caring For Our Children's Health
This month, proposals to assure that all children have health insurance have been introduced both in Wisconsin and in Washington D.C.. This is in recognition of the need, of the moral claim children have for us to care for them, of the politically easier sell and at least in Wisconsin, the achievability of the goal given the relatively low number of uninsured children. The following data is from "Children's Health in Wisconsin, Statewide Estimates," Center for Health Statistics, Wisconsin Department of Health and Family Services, 11/96:
"Based on combined data for the years 1990-94 from the Family Health Survey, an estimated 80 percent of Wisconsin children aged 1-14 had private insurance; 10 percent had Medicaid, and 9 percent had no health care coverage of any kind, public or private (see graph). At any given time during these five years, approximately 102,000 children aged 1-14 had no health care coverage." Of course, it is important to remember that to be listed as insured neither speaks to the adequacy of the particular insurance policy nor the individuals access to local care.

We Need To Get Off Our Collective Butts
From Community Health Profiles, Center for Health Statistics, Wisconsin Department of Health and Family Services, 9/96: "About half of Wisconsin adults engage in little or no leisure time physical activity, making this the most prevalent behavioral risk to health. For adults of all ages, sedentary lifestyle ranks first in statewide prevalence of behavioral risks to health; smoking cigarettes constitutes the second most common behavioral risk for people ages 18-44. Among middle aged people (ages 45-64) and those age 65 and over, being overweight represents the second leading behavioral risk."
The above chart shows four health risks by major age groupings. "(1) Sedentary lifestyle is defined by no leisure-time physical activity, or activities done for less than 20 minutes or fewer than three time per week. (2) Overweight is determined by a body mass index (weight in kilograms divided by height in meters squared) of 27.3 or greater for women and 27.8 or greater for men (and you thought it was tough to figure out your cholesterol numbers). (3) Smokers are those currently and have smoked more than 100 cigarettes in their lifetime. (4) Chronic drinkers are those who report consuming 60 or more drinks in the previous month."

Wisconsin's Lion & Sheep Lie Down Together
In order to emphasize the critical need for Medicare HMO payment equity before the entire Wisconsin Congressional delegation, it was of some interest that both Marshfield Clinic and Blue Cross attended a delegation briefing on February 12th. Also participating in this session were RWHC, the Midelfort-Mayo Clinic, the Wisconsin Hospital & Health Association, the State Medical Society, the Coalition of Wisconsin Aging Groups and Susan Foote from the Fairness Coalition.
Both Senators indicated that this was a very high priority item; Congressman from the greater Milwaukee area indicated support as long as the remedy doesn't disadvantage their constituents. Congressman Ron Kind expressed his strong support.
NRHA's Policy Institute
Each February members of the National Rural Health Association meet in Washington to discuss and learn more about federal policies that overshadow much of rural health care. This year, with NRHA's "new" health policy board reaching its full stride, additional staff in our Washington office and upgraded electronic information resources, the Institute was particularly productive.
The only thing that could have been better was more of you using this as an opportunity to get involved and to visit with members of your delegation about rural health. You would be surprised how welcoming they are; our team had good individual conversations with Senator Russ Feingold and Congressmen Scott Klug and Ron Kind and met with senior staff of Senator Kohl and of Congressman Obey. We took with us the following white papers as well as our 1997 Legislative Agenda (written by NRHA members; becomes NRHA policy when adopted by the Policy Board):
Call NRHA at 816-756-3140 to order (typically $5 member, $10 non-member for postage and handling).
Values For Sale?
The following story was recently told to Emily Friedman by one of the participants. Emily, a nationally renown health care historian and commentator, gave me her permission to repeat it. "Huge National For-Profit Chain (your first guess is right) was trying to "partner" with a single Catholic hospital. A Sister associated with the hospital was unsettled about proceeding; in explaining her position to the company's vice president for acquisitions she shared her concern re the importance of the hospital's values and mission. "No problem,' responded the vice president, 'what values do you want?' "
The Start Of Medical Savings Accounts
From Reuters 12/24/97:
"Humana, the Louisville, KY-based managed care company, said it will offer medical savings accounts (MSAs) with high-deductible preferred provider organization (PPO) and indemnity plans in 14 states (including Wisconsin) beginning in January."
"Humana will not offer MSAs with an HMO product, because high-deductible plans contradict the idea of HMOs, which provide first-dollar coverage without deductibles. The deductibles under the MSAs will typically be $1,500 or $2,250 for single coverage, according to Humana."
"Humana will offer the program through its Employers Health Insurance Co. unit. Humana's President and COO Greg Wolf said on December 13, 'With this program consumers will make most of their medical buying decisions on their own.'' Enrollees in Humana's PPO/MSA will pay a 10% copayment for in-network services and 30% for out-of-network services."
From Modern Healthcare 12/23/97:
"Under the program, individuals can accumulate tax-free funds, through individual or employer contributions to pay for their medical care. Recent federal health reform legislation authorizes a four year MSA pilot limited to employers with 50 or fewer workers, the self-employed and uninsured individuals. MSAs can be offered to no more than 750,000 people a year."
Entries For $1,000 Rural Essay Due April 15
This competition is open to all students of the University of Wisconsin-Madison, who are associated with the Center for Health Sciences.
The Essay Prize was established in honor of the memory of Hermes Monato, Jr., a December 1990 graduate, as well as to highlight the University's growing understanding of the importance of rural health.The writer of the winning essay will receive a check for $1,000 paid from a trust fund established at the University by the Cooperative, family and friends of Hermes.
The deadline for submission of essays for the 1997 Prize is April 15th. Complete information available on the RWHC web site or by calling the RWHC office.
Recommended: A Field Guide to Cows by John Pukite (Falcon Press in Helena Montana, $9.95). For information or to order call 1-800-582-2665.

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