More than 82% of the 25 million children eligible for these taxpayer-funded health care insurance plans participate in them. However, in five states—Florida and four western states—less than 70% of eligible children participate in the programs: Nevada (55.4%), Utah (66.2%), Colorado (68.9%), Montana (69.3%) and Florida (69.8%). The states with the highest participation rates were in the Northeast: Maine (92%), Vermont (94%), and Massachusetts (95%).

The authors of the study were surprised that low-income families used the government programs more than higher income families did: Families earning up to twice the federal poverty rate of $44,100 for a family of four had the lowest rate of participation in the government-subsidized health insurance programs.

I was not surprised, however. It has been my experience consulting with families seeking health insurance that many middle-to-high income families are not aware that they might be eligible. Even when they learn they are eligible, many prefer to buy private insurance to avoid the stigma of receiving government assistance.

In addition, many families prefer to have the entire family covered on a single plan they can afford, rather than splitting coverage between private and public insurance.

The Patient Protection and Affordable Care Act, the national health care insurance law, mandates that all health insurance providers must spend a minimum of 80% of premium receipts from an individual or small-group health plan on health care. Insurance companies must spend fully 85% of premiums from large group plan on patient care.

The decision of what types of spending count toward patient care and what is excluded was left to the NAIC. On Tuesday, the NAIC adopted a definition of care that everyone—consumers and health insurance industry professionals alike—consider to be narrow.

Ethan Rome, the executive director of Health Care for America Now (HCAN), a consumer advocacy group, lauded the NAIC’s action. “Today the NAIC took a step toward ending the health insurance companies’ stranglehold on our health care,” Rome declared. “The top state insurance regulators from across the nation voted to put patient care above insurance company profits.”

Insurance industry executives disagreed. Karen Ignagni, the president and CEO of America’s Health Insurance Plans (AHIP), said that the definitions are far too limited, excluding fraud detection and other measures that result in tangible benefits to the insured. The narrow definitions, Ignagni said, “could have the unintended consequence of turning-back-the-clock on efforts to improve patient safety, enhance the quality of care, and fight fraud.”

Prior to the vote, AHIP sent a letter to the NAIC, asking regulators to include several specific practices under the rubric of quality improvements: claim reviews, “a key tool in targeting the dangerous overutilization of services, falsification of medical records, and medical identity theft;” the adoption of new medical billing codes that would “improve the ability of health plans to share clinical data among clinicians for quality improvement and care coordination activities;” review of redundant procedures, such as medical imaging, which are widely overused; and wellness incentives, which health care insurance reform law itself calls for.

By forcing the insurers to pay for these programs as part of their operational expense, the NAIC is hamstringing innovation, says Ignagni. “Preserving patients’ access to high-quality health care services is essential if the key goals of health care reform are to be achieved.”

The U.S. Centers for Disease Control and Prevention reports that 47 percent of people with individual health insurance and 20 percent of those with group health insurance through their employers have enrolled in high-deductible plans, taking on annual deductibles of $2,400 per family and $1,200 for individuals.

Other health care insurance consumers have accepted incremental increases to their deductibles to offset rising premiums.

Either way, people are paying more out-of-pocket medical expenses. What many people don’t realize is that they may be able to reduce those out-of-pocket costs simply by paying attention to their care and asking for discounts.

Speak Up

Saving money starts by making the healthcare provider aware that you—not your health care insurance company—will be paying for the care. Many doctors are practicing defensive medicine, erring on the side of caution, under the assumption that the insurer is picking up the bill. When you make it known that you are paying out of pocket, many doctors will reconsider those borderline tests and treatments.

For example, a doctor’s standard annual physical may cost $300, which in most cases will fall within an annual deductible. If you make it clear that you do not want any unnecessary tests, you might be able to eliminate one or two, shaving $100 or more off the bill.  

Here are some other tips for saving money on health care:

Offer Cash

Setting up payment plans, sending out bills, even processing credit cards—getting paid consumes a lot of time and attention in the medical office. By offering to pay cash, you are offering to cut down on the workload, and you often will be rewarded with a discount. “Some healthcare providers give anywhere from 10 percent to 60 percent off for paying cash,” says Carrie McLean, a consumer expert with online health care insurance broker eHealthInsurance.com.

Manage Your Care

As study by the Dartmouth Atlas Project reports that nearly a third of all medical care is not necessary. One way to cut down on the waste is to pay close attention to your care, looking to eliminate duplication of tests and procedures. If you remember a particular test being performed recently, speak up. Many offices are not aware of what has happened in other offices.

Compare Pricing

Your doctor will recommend that you visit a particular lab or imaging center, but that does not mean you are locked in. If you are paying out of pocket for the care, call around to see if a different facility offers a better price. Larger facilities, such as hospitals, often charge more than small ones, such as an ambulatory care center.

Learn the Lingo

Every medical test and procedure has been assigned a special code that is used to bill Medicare and private health insurance providers. This code is known as the Common Procedural Terminology code, or CPT. When asking for estimates of cost over the phone or online, communicate by using the CPT code. That way you can avoid confusion and zero in on the best price.

Document the Process

Negotiating lowers prices can be a fleeting experience—and easily forgotten by busy medical staff. If you are going for a discount, be sure to get the agreement in writing. Keep in mind that most medical offices use outside billing services to handle medical billing. As a result, the chances of miscommunication are great. If you have your discount in writing, you will have a much easier time correcting errors and paying less.

While preparing that blog post, I visited the federal government’s health care insurance website at http://www.healthcare.gov and followed the steps that led to the California state government’s health insurance site. Once there, I signed up to get an email with details for the high-risk health care insurance pool. Today the following email came from the State of California:

Hello:

Thank you for your interest in California’s Pre-existing Conditions Insurance Plan (PCIP), also known as the temporary federal high risk pool.  Currently, we do not have applications available for the PCIP. The Managed Risk Medical Insurance Board (MRMIB) continues discussions on the specific rules for developing, implementing and operating the PCIP.

California’s goal for implementing the PCIP is to begin accepting applications in August 2010 with the first effective date of coverage beginning in September 2010.

To be eligible for the new PCIP, federal law sets out three requirements:

1. Be a US Citizen, US National or lawfully present individual;

2. Have a pre-existing medical condition that meets the guidelines set by the federal government; and

3. Have not had health insurance or public health coverage for at least six (6) months.

Applicants must have been uninsured for at least six months at the time they apply for the PCIP but the State high risk pool does not have such a requirement. You can access info on the CA Major Risk Medical Insurance Program at http://www.mrmib.ca.gov/MRMIB/MRMIP.shtml.

If you have included your name, address, telephone number, and email address, we will place your name on the list for a PCIP application when they are available in the next month or so.  If you have not included this information, please re-submit your request with that information.

We will be posting updates on MRMIB’s website under “What’s New” on the homepage at http://www.mrmib.ca.gov/.  Also, if you know others who want a PCIP application ask them to send us an email with their name, address, telephone number and email address to FHRP@mrmib.ca.gov.

Again, thank you for your interest in California’s PCIP

If you have been denied health insurance coverage because of pre-existing medical conditions, I hope you find this information useful.

This high-risk health insurance pools will be dissolved on December 31, 2013. Starting on January 1, 2014, all private health care insurance companies will be required by the new federal law to cover consumers with pre-existing medical conditions. (To read what I believe the effects of this law will be on private health insurance, please see my previous posts.) Secretary of the Department of Health and Human Services Kathleen Sebelius sent a letter to the governors of the states, requesting their plans for implementing the high-risk health insurance pools.

In April 2010, Governor Schwarzenegger notified Secretary Sebelius that California would operate the temporary high-risk health insurance program alongside the state’s existing high-risk pool, known as the Major Risk Medical Insurance Program (MRMIB). California’s MRMIB is a partnership between government and the private insurance industry that uses private vendors supervised by the MRMIB to offer California residents health insurance through various programs, including California’s Healthy Families Progra, or Health Insurance Program (CHIP).

The criteria for eligibility to enroll in the high-risk pools will be different than the requirements for existing programs. This is an overview of the high-risk health insurance program:

Eligibility. The high-risk pools are available to American citizens or resident aliens who have not had health insurance coverage for a minimum of six months because coverage was denied due to pre-existing medical condition. To demonstrate eligibility, applicants must provide a letter of denial of coverage from a private health care insurance company.

Cost. The MRMIB has not announced which vendor will provide the coverage for people with pre-existing conditions, so the actual costs are not yet know. Based on what other states are charging, however, it is likely that with federal subsidies, premiums will range from $400 a month to $1,200 per month, depending on gender, age, and other variables. Annual deductibles could be as high $3000 for an individual and $6000 for a family.

Funding. According to the Congressional Budget Office (CBO), the entire budget for the PPACA now exceeds $1.05 trillion for the first ten years, but the amount set aside for the high-risk pools is just $5 billion, or less than one half of one percent of the total budget. That money will be spent within two years, according to the CBO.

Enrollment. If you have been denied health insurance coverage because of a pre-existing condition, you can log-on to the U.S. government’s health care insurance Web portal at http://www.healthcare.gov. By completing the online fields and following the links, you will learn more about applying for this new, temporary coverage.

As I predicted in my previous post, Congress rushed through an amendment to the health insurance reform bill eliminating the scheduled 21% cut in fees paid to doctors treating patients insured through Medicare. The new law prevented bookkeeping nightmares by applying retroactively to June 1, 2010, the date that the previous stop-gap measure expired. This is the tenth time Congress has blocked such cuts in the last eight years, including four times since January of this year.

As I also predicted, Congress did not attempt to pass a permanent change in the way the Medicare health care insurance payments are calculated, causing President Obama to comment, “Kicking these cuts down the road just isn’t an adequate solution to the problem.” House Speaker Nancy Pelosi agreed, criticizing the bill as “totally inadequate.”

The reason Congress balked at a permanent fix, of course, is an election-year phobia about deficits. Fixing the Medicare payment structure would add $245 billion to the deficit over the next ten years. To avoid that prospect, Congress went for a 6-month fix. In addition, the short-term doc fix bill is paid for with new taxes on corporations, Medicare savings, and anti-fraud measures.

The so-called savings are a bit of a shell game. Two-thirds of the Medicare doc fix is paid for with $4.2 billion trimmed from Medicare payments to hospitals—in other words, taking from one pocket and putting it into another. Are the hospitals going to play along? Or are they going to demand a “hospital fix?”

The corporate tax hikes sounds like another tax on the “rich,” but that’s not exactly the case. The new law allows corporations to increase their profits by decreasing their contributions to pensions. The taxes that pay for the doc fix will come out of these added profits. In other words, the Medicare doctors benefit and the corporations benefit—only the pensioners are hurt. Yet the White House blog touts the doc fix law as “Protecting Seniors’ Care.”

The CBO originally said that the bill’s $420 billion in new taxes would more than offset its new spending, reducing the federal deficit by $140 billion over ten years.

In March, the CBO revised its 10-year forecast for the cost of the health care insurance legislation upward by $152 billion, wiping out the projected savings and adding to the federal deficit. In May, the CBO added another $115 billion to the price tag to pay for the cost of implementing the program. Now President Obama is asking Congress to spend another $245 billion over ten years to eliminate the scheduled reductions in payments to doctors through Medicare Part B—also known as the “doc fix.”

The reductions in doctor payments were enacted by Congress in 1997 as part of an attempt to control the spiraling costs of Medicare. Congress linked physician payments to the Sustainable Growth Rate (SGR), a payment index that has not kept up with the Gross Domestic Product (GDP). The SGR would reduce Medicare payments, but Congress has not allowed that to happen. As the CBO wrote in its analysis of the cost of the new health reform legislation:

The sustainable growth rate mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments, and legislation to do so again is currently under consideration by the Congress.

Indeed, the American Medical Association spent millions of dollars on an advertising blitz in May to make sure the “doc fix” legislation passes. Its ads chastised the U.S. Senate for going to its Memorial Day recess before “fixing a scheduled 21 percent cut to Medicare.”

At one point, Congress planned to fix the Medicare payment reductions as part of its comprehensive reform of healthcare. That idea was shelved, however, after the CBO announced that the cost of a permanent “doc fix” would cost $245 billion for the first ten years, pushing the cost of comprehensive health insurance reform into deficit spending. This is something the president did not want to see happen. In his address to a joint session of Congress on September 9, 2009, President Obama said:

I will not sign a plan that adds one dime to our deficits—either now or in the future.  (Applause.)  I will not sign it if it adds one dime to the deficit, now or in the future, period.  And to prove that I’m serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize. 

[Italics mine.]

To avoid the appearance of deficit spending, the Democratic leadership in Congress removed the “doc fix” provision from the health insurance reform bill, reducing the spending by $245 billion and leading the CBO to estimate the bill would reduce the deficit by $140 billion over the first ten years.

The deficit reduction came not from economies in health care reform, but from the fact that the bill would collect $420 billion in new taxes over the first ten years.

Nor was the “doc fix” the only assumption that seemed dubious at best. In fact, since the passage of the Patient Protection and Affordable Care Act, the CBO has revised its estimate of the bill’s cost upward by $267 billion (see previous post), not only wiping out the $140 billion in deficit reduction, but increasing the federal deficit by $127 billion during the next ten years. With the $245 billion “doc fix” added in, the deficit for federal healthcare spending over the next ten years will run to $372 billion.

The White House has yet to announce what spending cuts it will put forward to ensure that the Patient Protection and Affordable Care Act will not add “one dime”—let alone $372 billion—“to our deficits.”

Opponents of the health insurance reform bill questioned the accuracy of those figures. Critics suggested  that the analysts at the CBO intentionally underestimated the cost of the bill to keep it below $1 trillion—a figure that many believed would send taxpayers into “sticker shock.”

Just days after President Obama signed the health insurance reform act into law, the CBO changed its estimate of the legislation’s cost. Instead of costing $788 billion over the first ten years as originally forecast, the CBO said health reform would actually cost a staggering $940 billion—just shy of the dreaded $1 trillion price tag.

Even the revised estimate was a sham, critics of the bill maintained. Accordingly, Congressman Jerry Lewis of California, the top Republican on the House of Representatives Appropriations Committee, which authorizes congressional spending, asked the CBO for clarification of its analysis of the cost of health care insurance reform. This week, Douglas W. Elmendorf, the director of the CBO, sent Representative Lewis a letter indicating that the bill would cost even more.

The CBO analysts found another $115 billion that needed to be added to the cost of the bill. Good-bye $1 trillion ceiling. The revised estimate puts the total cost of the bill for the initial ten years at $1.05 trillion. But what’s $115 billion between friends?

One million dollars is a lot of money, but you would have to multiply it by 115,000 to get $115 billion in new spending—and that’s merely one tenth of the overall cost of health insurance overhaul. We are talking about $3200 in new spending for every man, woman, and child in the United States—or $12,800 per family just for the health insurance program. That is not instead of private health insurance premiums, but on top of them.

Actually, it will be more. Possibly much more. In his letter to Lewis, CBO Director Elmendorf reported:

CBO does not have a comprehensive estimate of all of the potential discretionary costs associated with PPACA, but we can provide information on the major components of such costs. Those discretionary costs fall into three general categories:

• The costs that will be incurred by federal agencies to implement the new policies established by PPACA, such as administrative expenses for the Department of Health and Human Services (HHS) and the Internal Revenue Service for carrying out key requirements of the legislation.

• Explicit authorizations for a variety of grant and other program spending for which specified funding levels for one or more years are provided in the act. (Such cases include provisions where a specified funding level is authorized for an initial year along with the authorization of such sums as may be necessary for continued funding in subsequent years.)

• Explicit authorizations for a variety of grant and other program spending for which no specific funding levels are identified in the legislation. That type of provision generally includes legislative language that authorizes the appropriation of “such sums as may be necessary,” often for a particular period of time.

CBO estimates that total authorized costs in the first two categories probably exceed $115 billion over the 2010-2019 period, as detailed below. We do not have an estimate of the potential costs of authorizations in the third category.

[Emphasis mine.]

Give Congress the authority to raise “such sums as necessary” to fund new programs for various constituent groups, and the cost is literally incalculable. And these amounts are not part of the CBO estimates.

Do you think I could operate my business like that? Suppose I quoted you the cost of a health insurance policy, but added a clause that would allow me to charge “such sums as necessary” to keep my business growing. I doubt if you would sign on the dotted line.

But that is what we as taxpayers just did.

Q. Were you a supporter of health care insurance reform before the debate began last year?

A. Yes, I have supported healthcare reform for at least twenty years.

Q. What is your concern?

A. In a word: costs. Healthcare costs are bankrupting American families. When I started out as a doctor in 1981, only 8 percent of bankruptcies were driven by medical costs. Twenty years later, in 2001, that figure had more than quintupled, to 46.2 percent of bankruptcies. But it didn’t level off. In 2007, almost two thirds—62.1 percent—of all bankruptcies were health related. The reason, of course, is not that families are making less, but that the cost of care is skyrocketing. In 1970, the amount of money spent on all facets of healthcare, known as the National Health Expenditure (NHE), was 7.2 percent of our gross domestic product (GDP). By 2005, the NHE had more than doubled to 16 percent of GDP. Estimates are that the figure will stand at 19.5 percent of GDP by 2016. This is a cost curve that cannot be sustained.

Q. Where did the president and congress go wrong with the bill that passed?

A. The main deficiency is the absence of any tort reform. For physicians in the United States, the threat of a malpractice lawsuit is real. Without legislative relief, ‘defensive medicine’ will continue to take a significant chunk out of healthcare dollars. Estimates suggest that savings accrued from tort reform could account for 20-25% of the NHE and may be prudently used to reduce the healthcare costs. When President Obama addressed the American Medical Association in June 2009, the first thing out of his mouth was that tort reform was off the table. At that point, the AMA members should have gotten up and walked out of the room.

Q. Were the Republicans right to oppose the law?

A. No. They should have demanded changes in the law, rather than making political hay out of it. During the debate, they argued that the outcome of such legislation would be the rationing of care and “death panels” that would decide who receives care at the end of life. The truth is, we already have soft rationing of care. We need an honest discussion of what the priorities are for us as a nation. How important is it to screen new born for all the genetic disorders? How important is it to employ all available technological advances at the end of life? How important is it to provide all possible reproductive services for infertility? How important is it to have instant surgery or advanced testing irrespective of the cost and the specificity? We can not afford instant health care for every Americans every time. Educating public so that they do not have undue expectations is as important as the launch of healthcare reform itself.

Brandeis’s proposed scheme recently has been tried by the state of Massachusetts. In 2006, the state enacted a health insurance overhaul that is strikingly similar to the national health care insurance legislation signed into law by President Obama in March. The Massachusetts experiment has been in place long enough now to find out if it is sustainable.

Recent news out of the Bay State suggest it is not.

Many of the points I made in this space during the debate over health care insurance have been proven true by the Massachusetts experiment. Particularly, I predicted that mandates placed on the insurance providers requiring the coverage of people with pre-existing medical conditions would cause the costs for everyone to skyrocket. How else would the astronomical cost of insuring seriously, chronically, or even terminally ill patients be covered?

According to a story in The Boston Globe, this is exactly what is happening. The largest health insurance providers proposed a rate increase to help offset the cost of insuring those with pre-existing conditions. Hoping to mask the true cost of their health reform legislation, state regulators denied the rate increase. Facing millions of dollars in losses and eventual insolvency, the six largest health insurance providers in Massachusetts filed suit to have their rate increases approved. Robert Weisman of The Boston Globe reported:

A half-dozen health insurers yesterday filed a lawsuit against the state seeking to reverse last week’s decision by the insurance commissioner to block double-digit premium increases — a ruling they say could leave them with hundreds of millions in losses this year.

The proposed rate hikes would have taken effect April 1 for plans covering thousands of small businesses and individuals. Insurers wanted to raise base rates an average of 8 percent to 32 percent; tacked on to that are often additional costs calculated according to factors such as the size and age of the workforce.

Yesterday’s legal action sets the stage for a showdown between state regulators and the health insurance industry.

Governor Deval Patrick has made reining in runaway health care costs a centerpiece of his administration and his campaign for reelection — contending they are stifling the capacity of small businesses to create jobs. At the same time, health insurers argue that government is forcing them to sell policies at a loss that is unsustainable as the costs of medical services climb.

I also predicted that the fines the federal legislation calls on the IRS to levy against taxpayers who do not enroll in a health insurance plan are not large enough to force those who do not want insurance to buy it. In fact, any motivation to buy health insurance created by the fines is more than offset by the more serious mandate that allows the uninsured to wait until they are sick or need medical attention before enrolling in a health insurance plan. A certain number of people will game the system—especially in a down economy. This is exactly what the Massachusetts experiment has revealed.

A staff reporter for The Boston Globe name Kay Lazar wrote about how thousands of Massachusetts residents are waiting until they need medical attention before signing up for health insurance. Since the health insurance providers cannot turn them down, the patients are having their care paid for by the insurance companies. Lazar reported:

Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state’s largest private insurer provided the Globe.

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month. The previous year, the company’s data show it had even more high-spending, short-term members. Over those two years, the figures suggest the price tag ran into the millions.

“These consumers come in and get their service, and then they leave because current regulations allow them to do it,” said Todd Bailey, vice president of underwriting at Fallon Community Health Plan, the state’s fourth-largest insurer.

It doesn’t take a genius to foresee the pitfalls of ignoring actuarial reality. The foundation of insurance is actuarial science. Massachusetts has proven in the social laboratory that the laws of actuarial science are immutable.