Patients’ Costs Skyrocket; Specialists’ Incomes Soar NY Times Sunday January 19, 2014 CONWAY, Ark. — Kim Little had not thought much about the tiny white spot on the side of her cheek until a physician’s assistant at her dermatologist’s office warned that it might be cancerous. He took a biopsy, returning 15 minutes later to confirm the diagnosis and schedule her for an outpatient procedure at the Arkansas Skin Cancer Center in Little Rock, 30 miles away. That was the prelude to a daylong medical odyssey several weeks later, through different private offices on the manicured campus at the Baptist Health Medical Center that involved a dermatologist, an anesthesiologist and an ophthalmologist who practices plastic surgery. It generated bills of more than $25,000. “I felt like I was a hostage,” said Ms. Little, a professor of history at the University of Central Arkansas, who had been told beforehand that she would need just a couple of stitches. “I didn’t have any clue how much they were going to bill. I had no idea it would be so much.” Ms. Little’s seemingly minor medical problem — she had the least dangerous form of skin cancer — racked up big bills because it involved three doctors from specialties that are among the highest compensated in medicine, and it was done on the grounds of a hospital. Many specialists have become particularly adept at the business of medicine by becoming more entrepreneurial, protecting their turf through aggressive lobbying by their medical societies, and most of all, increasing revenues by offering new procedures — or doing more of lucrative ones. It does not matter if the procedure is big or small, learned in a decade of training or a weeklong course. In fact, minor procedures typically offer the best return on investment: A cardiac surgeon can perform only a couple of bypass operations a day, but other specialists can perform a dozen procedures in that time span. That math explains why the incomes of dermatologists, gastroenterologists and oncologists rose 50 percent or more between 1995 and 2012, even when adjusted for inflation, while those for primary care physicians rose only 10 percent and lag far behind, since insurers pay far less for traditional doctoring tasks like listening for a heart murmur or prescribing the right antibiotic. By 2012, dermatologists — whose incomes were more or less on par with internists in 1985 — had become the fourth-highest earners in American medicine in some surveys, bringing in an average of $471,555, according to the Medical Group Management Association, which tracks doctors’ income, though their workload is one of the lightest. In addition, salary figures often understate physician earning power since they often do not include revenue from business activities: fees for blood or pathology tests at a lab that the doctor owns or “facility” charges at an ambulatory surgery center where the physician is an investor, for example. “The high earning in many fields relates mostly to how well they’ve managed to monetize treatment — if you freeze off 18 lesions and bill separately for surgery for each, it can be very lucrative,” said Dr. Steven Schroeder, a professor at the University of California and the chairman of the National Commission on Physician Payment Reform, an initiative funded in part by the Robert Wood Johnson Foundation. Doctors’ charges — and the incentives they reflect — are a major factor in the nation’s $2.7 trillion medical bill. Payments to doctors in the United States, who make far more than their counterparts in other developed countries, account for 20 percent of American health care expenses, second only to hospital costs. Specialists earn an average of two and often four times as much as primary care physicians in the United States, a differential that far surpasses that in all other developed countries, according to Miriam Laugesen, a professor at Columbia University’s Mailman School of Public Health. That earnings gap has deleterious effects: Only an estimated 25 percent of new physicians end up in primary care, at the very time that health policy experts say front-line doctors are badly needed, according to Dr. Christine Sinsky, an Iowa internist who studies physician satisfaction. In fact, many pediatricians and general doctors in private practice say they are struggling to survive. Studies show that more specialists mean more tests and more expensive care. “It may be better to wait and see, but waiting doesn’t make you money,” said Jean Mitchell, a professor of health economics at Georgetown University. “It’s ‘Let me do a little snip of tissue’ and then they get professional, lab and facility fees. Each patient is like an ATM machine.” For example, the procedure performed on Ms. Little, called Mohs surgery, involves slicing off a skin cancer in layers under local anesthesia, with microscopic pathology performed between each “stage” until the growth has been removed. While it offers clear advantages in certain cases, it is more expensive than simply cutting or freezing off a lesion. (Hospitals seeking to hire a staff dermatologist for Mohs surgery had to offer an average of $586,083 in 2010, even more than for a cardiac surgeon, according to Becker’s Hospital Review.) Use of the surgery has skyrocketed in the United States — over 400 percent in a little over a decade — to the point that last summer Medicare put it at the top of its “potentially misvalued” list of overused or overpriced procedures. Even the American Academy of Dermatology agrees that the surgery is sometimes used inappropriately. Dr. Brett Coldiron, president-elect of the academy, defended skin doctors as “very cost-efficient” specialists who deal in thousands of diagnoses and called Mohs “a wonderful tool.” He said that his specialty was being unfairly targeted by insurers because of general frustration with medical prices. “Health care reform is a subsidized buffet and if it’s too expensive, you go to the kitchen and shoot one of the cooks,” he said. “Now they’re shooting dermatologists.” The specialists point to an epidemic, noting there are two million to four million skin cancers diagnosed in the United States each year, with a huge increase in basal cell carcinomas, the type Ms. Little had, which usually do not metastasize. (A small fraction of the cancers are melanomas, a far more serious condition.) But, said Dr. Cary Gross, a cancer epidemiologist at Yale University Medical School, “The real question is: Is there a true epidemic or is there an epidemic of biopsies and treatments that are not needed? I think the answer is both.” A fair-skinned redhead who teaches history at the University of Central Arkansas, Ms. Little had gone to a private

dermatology practice in Heber Springs, Ark., to check some moles on her arms when the physician’s assistant on duty noticed a whitish bump — like a “tiny fragment of thread” — on her face, she said. Her family practitioner had told her it was just a clogged pore. A diligent medical consumer, Ms. Little had read up on the Mohs technique (invented by Dr. Frederic Mohs in 1938) before she and her husband arrived for her surgery in November 2012 in a doctors’ office building at Baptist Health Medical Center here. Pressed for time as the end of the semester approached, she asked Dr. Randall Breau, the dermatologist, why the tiny growth needed the specialized surgery, as she had asked the physician’s assistant earlier. They both answered that it was because it was on her eyelid, a delicate area where Mohs surgery is always required; she repeatedly insisted that it was on her cheekbone below her eye. After the 30-minute removal, the dermatologist told her that she would have to go across the street to the Arkansas Center for Oculoplastic Surgery, another private doctors’ office on the hospital’s campus, to have the wound closed by a plastic surgeon with “a couple of stitches.” When Ms. Little protested that she did not want a plastic surgeon and did not care about having a tiny scar, the doctor told her she had no choice, she said. The vast majority of Mohs procedures are sewed up by the dermatologist or just bandaged and left to heal. Yet when Ms. Little arrived at the second practice, nurses took her clothes, put in an IV, and introduced her to an anesthesiologist who would sedate her in an operating room. Sitting in her cozy office recently, Ms. Little, who has a faint scar under her eye on her right cheek, still fumes at the thought. “It was no bigger than many cuts that heal on their own, and it definitely could have been repaired by one doctor, but at that point what was I going to do?” she recalled. “I have

an IV in my arm and a hole in my face that Dr. Breau refused to stitch. And the anesthesiologist is standing there with his mask on.” Her bills included $1,833 for the Mohs surgery, $14,407 for the plastic surgeon, $1,000 for the anesthesiologist, and $8,774 for the hospital charges. Mohs surgery is preferable when the removal of a skin cancer is complicated or in a sensitive area, because it typically excises less tissue and leaves less of a scar than other treatments and allows dermatologists to see the borders of a growth and be confident that it is removed entirely. The surgery is generally not used for melanomas, which require more extensive cutting. In an email, Dr. Breau declined to discuss Ms. Little’s case, but noted, “When I make decisions concerning patient care, I have only the patient’s best interests in mind.” He said that he and one partner own the Arkansas Skin Cancer and Dermatology Center and receive no payments from the hospital or the doctors to whom they refer patients. In most cases, he said, he takes care of the wound left by Mohs surgery himself. The plastic surgeon did not respond to requests for comment. It is often impossible in any one case to determine whether a course of treatment was necessary or cost-effective. Even among doctors there are differences of opinion about optimal treatments. That is partly because the guidelines for when to perform many procedures are often ill-defined or based on the specialists’ experience rather than carefully controlled research. “Though Mohs surgery is disseminating rapidly, there are very few comparative studies and the evidence is still evolving about when it’s beneficial,” said Dr. Gross, the Yale epidemiologist. “When people are trained to perform a procedure, and believe in it, and equip their offices to do it, they will do it. That’s just human nature.” The same specialties tend to appear at the top of physician earners: orthopedics, cardiology, anesthesiology, radiology, dermatology, plastic surgery, urology, gastroenterology and ophthalmology. Physicians in those fields typically earn more than $350,000 annually, according to American Medical Group Association, a trade organization. In many specialties, income has risen more than 10 percent since 2011, according to Medscape, a Web company that follows the industry. Physicians often complain that government and commercial insurance reimbursements for seeing patients are decreasing while their office expenses are going up to deal with mountains of paperwork and demands from insurers. Congress currently is considering a bill that would freeze doctors’ Medicare fees for the next decade. Still, many doctors have found alternative income streams that do not show up on surveys. Dr. Mitchell of Georgetown University estimates, for example, that many urologists make 50 percent of their income from dealing with patients and the rest from investing in the machines that deliver radiation for prostate cancer or to treat kidney stones. In 2012, urologists had an average income of $416,322, according to Medical Group Management Association data, which often does not include the investment income. Oncologists benefit from the ability to mark up (and profit from) each dose of chemotherapy they administer in private offices, a practice increased dramatically in the late 1990s. The median compensation for oncologists nearly doubled from 1995 to 2004, to $350,000, according to the M.G.M.A. One study last year attributed 65 percent of the revenue in a typical oncology practice to such payments. When policy makers reduce one type of payment, some specialists find another. Though orthopedists’ reimbursement from Medicare for performing joint replacements has gone down in the last two decades, the Medscape survey on physician income showed that orthopedists’ average compensation has risen 27 percent since 2011. They are still paid handsomely by many private payers for many minor procedures, and — more important — often own the surgery centers, scanners and physical therapy offices they use. In a country where top hospital executives typically make more than a million dollars a year, American physicians may feel entitled to high fees, especially because they face costs that their European counterparts do not: Medical school is expensive and new doctors graduate with an average of about $150,000 in debt. Likewise, some specialists face malpractice premiums of over $100,000 a year. Though medical societies tend to point to the long haul of medical training and the unpredictable hours to justify generous salaries, health economists point out there is often little correlation between compensation and that investment of time. Obstetricians, for example, arguably have the most rigorous schedules but are relatively modest earners. A number of high-income specialties — radiology, ophthalmology, anesthesiology and dermatology — are often called the “lifestyle specialties,” because training is more compatible with a home life than some other disciplines and there are fewer emergencies in these fields. Eighty percent of dermatologists see patients 40 hours or fewer each week, according to a 2013 Medscape report, less than the average doctor.

Profitable Dermatology In America’s for-profit, fee-for-service medical system, dermatology has proved especially profitable because it offers doctors diverse revenue streams — from cosmetic treatments that are fully paid by the patient to medical treatments that are covered by insurance. Cosmetic dermatology is a big moneymaker in high-income markets like New York and Miami. Botox injections take 15 minutes and cost a minimum of $500; doctors pay about $100 for the amount of medicine needed for a typical session, according to dermatologists. Still, cosmetic work makes up less than 10 percent of all skin procedures, studies show, and their volume tends to fluctuate with the economy. For medical treatment, many dermatologists have been able to compensate for cutbacks in insurance payments by offering new services and by increasing their patient volume through hiring “physician extenders” — nurse practitioners and physicians’ assistants — to do basic tasks like biopsies and chemical peels. Whether the physician or the nurse wields the scalpel, the charge is generally the same. The dermatology office where Ms. Little’s initial biopsy was performed is one of six satellite offices operated by the Arkansas Skin Cancer and Dermatology Center. They are often staffed by physician assistants, who refer patients to the dermatologists in Little Rock for Mohs surgery. The dermatologists also do their own pathology, meaning that they can sometimes bill extra for that service. (That also means there is no independent confirmation of a cancer diagnosis.) With such practices, even minor dermatology procedures can lead to big bills. When Ashley Lanning, 28, of Oregon was seen by a nurse practitioner for a mole removal, the tab came to $915.46 — “way more than I’d anticipated,” she said. The growth was scraped off with a scalpel and no stitches were required. In New York last year, Kyle Snow Schwartz, 26, went to a dermatologist at New York University Medical Center to have a wart removed from his foot. The visit took five minutes, including a chat about his plans to teach English in Vietnam and a squirt of liquid nitrogen on the growth. The invoice from the billing office: $500. Both patients have insurance with high deductibles, so they faced large out-of-pocket payments. In contrast, in Germany where private doctors’ allowable charges are set by the government, dermatologists are paid $30 for a whole body skin check, $40 for a standard biopsy and $20 for a pathology exam, said Dr. Matthias Augustin, who studies the practice of dermatology at the University Medical Center of Hamburg-Eppendorf. There is far less use of Mohs surgery in Germany than in the United States, he said. Most patients with a possible skin cancer get a biopsy and come back a few days later for full removal if it is positive. Harris Williams and Company, a consulting firm, estimates the $10.1 billion dermatology market in the United States will grow to over $13 billion by 2017, in part because of an aging population. The Affordable Care Act requires 100 percent coverage for preventive dermatology screening sessions for seniors, which will inevitably lead to more biopsies and treatment. With more doctors being trained in Mohs surgery — generally an extra year of training, though it is not required — it has become a go-to treatment. Dr. Coldiron, who is a past president of the American College of Mohs’ Surgery, said it was “not generally overvalued,” adding that the cure rate after a single treatment was somewhat higher than with other techniques, avoiding the need for a second procedure. He said that Mohs typically cost only 30 percent more than the standard procedure. But Healthcare Blue Book, which tracks pricing in the private market, found that payments by insurers for Mohs surgery were typically twice as high. Dr. Coldiron acknowledged that Mohs was not appropriate for “every little bitty thing.” Indeed, to stem the use of Mohs surgery where cheaper procedures would suffice, the American Academy of Dermatology in 2012 issued “appropriateness” guidelines about what kinds of cancers should be treated with the technique — such as those on the eyelids or nose, or those that were large or deep. At the annual meeting of the Pacific Dermatology Association this fall, Dr. Sumaira Aasi, a Stanford dermatologist, told her colleagues that Medicare would come after dermatologists if those guidelines were not heeded, noting: “We might be killing the goose that laid the golden egg ourselves.” The Medical Lobby More than 750 lobbyists represent groups of health professionals in Washington, pushing back on any effort to limit their incomes. The biggest spenders on lobbying — $80 million annually by health professionals — closely align with the highest-paid specialties. Medicare’s valuation of physicians’ services is based on a complex algorithm that is intended to take into account the time and skill required to perform a medical task, with an adjustment made for a specialty’s malpractice rates. Many insurers follow Medicare’s lead, often paying anywhere from 80 percent to 200 percent of the Medicare

fee. But “time and skill” are easier to quantify for procedures than continuing patient management. And, experts say, Medicare has not reduced payments for many procedures that now take far less time than when they were invented, because of improvements in efficiency or technology. But renegotiating payments involves a highly contentious process that plays out behind closed doors at the American Medical Association’s Relative Value Scale Update Committee, which consists of doctors representing 26 medical disciplines who advise Medicare. In dermatology trade journals, Dr. Coldiron, who has served on the committee, describes it like this: “Everybody sits around a table and tries to strip money away from another specialty.” It’s like “26 sharks in a tank with nothing to eat but each other.” Primary care doctors — who make up only 12 percent of physicians in practice — say they have little clout, with at most five representatives on the panel. “That committee keeps the perverse incentives in place,” said Brian Crownover, a family physician from Boise, Idaho. Indeed, less than two years ago, Dr. Coldiron predicted that reimbursement for Mohs surgery could drop 20 percent. But that did not happen. When Medicare placed Mohs on its list of potentially misvalued procedures last summer, it was deluged with protests from dermatologists, and the A.M.A. Update Committee declared Mohs surgery worthwhile. This year, Medicare reimbursement will drop only about 2 percent to about $1,000 for a typical procedure. (In recent years, the American Academy of Dermatology Association — the dermatology academy’s political action committee — has also fought proposed Medicare requirements that dermatologists provide preoperative pictures of lesions they had treated with Mohs surgery, and it has pushed states to classify Botox injections as well as skin procedures using lasers as “the practice of medicine,” to prevent spas from offering such services.) Critics say the robust revenues from doing procedures has led to overuse — colonoscopies by gastroenterologists, steroid injections by pain specialists and M.R.I. scans by orthopedists, to name a few. Dr. Thomas Balestreri, a recently retired anesthesiologist from Washington State, said in an interview that to increase revenue, some fellow specialists used an ultrasound to guide placement of a nerve block when it was not really needed. But in some cases dollars from procedures keep practices afloat, because insurers pay so little for time with patients. Dr. Stephen Asher, a neurologist in Boise, Idaho, said his 50 to 60 hours a week seeing patients accounts for only about 10 percent of his income. To cover office expenses he relies on revenue from performing a few procedures — Botox injections for eye movement disorders and muscle conduction studies — as well as from an M.R.I. scanner that he co-owns with a group of orthopedists and neurologists. Outrage at Charges Ms. Little left Baptist Health Medical Center with a tiny skin flap and more than two dozen stitches. For five days she said she was “hung over” from the IV sedation that she had not wanted — a problem because she drives 60 miles on rural Arkansas roads to her university each day. She spent months arguing down her bills, which were finally reduced: About $1,400 for the Mohs surgeon, $765 for the anesthesiologist, $1,375 for the ophthalmological plastic surgeon, plus $1,050 in operating-room charges from the hospital. For her follow-up, she refused to return to Baptist Health and went instead to the University of Arkansas Medical Center, where a dermatologist told her she likely had not needed such an extensive procedure. But that was hard to judge, since the records forwarded from Baptist did not include the photo that was taken of the initial lesion. And she was outraged as she wrote checks for the nearly $3,000 she owed to the doctors under the terms of her insurance. “It was like, ‘Take out your purse, we’re robbing you,’ ” she said.

The Hill by Elise Viebeck –

January 8, 2014:

A growing number of corporations are blaming ObamaCare as they pass further healthcare costs on to workers, according to a new survey of financial executives.

Consulting firm Deloitte reported that 42 percent of chief financial officers who have shifted additional healthcare costs to workers cited the Affordable Care Act as their impetus.

The number blaming the healthcare law rose to 63 percent for CFOs planning to shift costs in the next year.

The statistics suggest that ObamaCare is aggravating the trend of employers charging staff higher healthcare costs in order to contain spending, and came as most CFOs expressed rising optimism about their companies' prospects.

High-deductible plans are increasingly common for people receiving health insurance through their jobs, and experts predict they might account for half of all work-based health policies within a decade, up from about 10 percent in 2006.

Nearly two-thirds of CFOs have taken steps to control healthcare costs, primarily charging higher premiums or deductibles, according to Deloitte. Comparatively few have reduced the scope or value of benefits in order to reduce spending.

The survey highlights an unintended consequence of the Affordable Care Act, as employers cite the law in shifting further costs to workers.

ObamaCare contains many provisions to limit consumers' exposure to unaffordable medical expenses and debt, though critics argue its overall impact will be to raise premiums and deductibles.

The Deloitte survey contained some good news for the act, however, stating that it has had “no major impacts” so far on companies' hiring or staffing decisions.

Only 8 percent of CFOs have constrained hiring as a result of ObamaCare, and only 4 percent have shifted toward part-time staffing, the survey found.

These figures cast doubt on arguments by Republicans that the law is exacerbating unemployment and shifting full-time workers into part-time schedules.

The GOP specifically blames the law's employer mandate, which requires larger firms to offer health insurance to staff working 30 hours or more per week. That provision will take effect in 2015.

The reform's impact on healthcare benefits has also been minimal, occurring mainly on the margins, the survey suggested.

Ten percent of CFOs have added coverage for staff that was not previously eligible, and 10 percent have reduced the scope or value of their healthcare benefits.

Another 13 percent said they have reduced their earnings forecasts as a result of the law.

The quarterly “CFO Signals” survey consists of responses from nearly 100 financial executives, 79 percent of whom work for companies with more than $1 billion in annual revenue, according to Deloitte.

The New York Times by Robert Pear –

January 6, 2014:

National health spending grew slowly for the fourth consecutive year, increasing 3.7 percent in 2012 to $2.8 trillion, the federal government said Monday. But officials disagreed over whether the Affordable Care Act or lingering effects of the recession were primarily responsible for the remarkable trend.

As a share of the economy, health spending declined slightly, to 17.2 percent in 2012, from 17.3 percent in the prior year. For decades, health spending has grown faster than the economy, taking a bigger bite out of workers’ wages and the federal budget.

Health spending averaged about $8,900 a person in 2012, according to the annual report issued Monday by the government.

The authors of the report — civil servants at the Centers for Medicare and Medicaid Services — said that the Affordable Care Act, adopted in March 2010, had only “a minimal impact on overall national health spending growth through 2012” and had not yet significantly reined in or accelerated its growth.

“The relatively low rates of growth that

we’ve seen over the last four years are consistent with the historical trends that we’ve seen when we look at health spending and gross domestic product,” said Aaron C. Catlin, an economist and co-author of the report. “It’s consistent with what we’ve seen in post-recessionary periods in the past.”

But the White House said the data vindicated President Obama’s health care policies.

“The years 2009 to 2012 saw the slowest growth in U.S. health care expenditures since the government started collecting this information in the 1960s,” said Jeanne M. Lambrew, a health policy coordinator at the White House.

“While there is a debate about how much the Affordable Care Act has contributed to this health cost slowdown,” Ms. Lambrew said, “there is no Even real drug abusers may cocaine detox kits their body with cocaine detox kits kits that available in the present time. doubt that it reduced Medicare spending growth, and most experts believe that Medicare savings spill over into the private sector.”

Some experts, including the Congressional Budget Office, have reduced their projections of federal health spending, based in part on their belief that

pervasive changes in the health care system would endure.

However, the authors of the new report, published in the journal Health Affairs, were more cautious.

“From our perspective,” they wrote, “more historical evidence is needed before concluding that we have observed a structural break in the historical relationship between the health sector and the overall economy.”

The last recession, the worst in decades, ran from December 2007 to June 2009. Mr. Catlin said that delayed effects of the recession — curtailed growth of the economy, employment and personal income — appeared to be the main reason for relatively low growth of health spending in recent years.

Some provisions of the new health care law increased spending and others reduced it, but the overall effects on spending were modest, said Anne B. Martin, an economist who was the principal author of the report. She estimated that the law had increased national health spending by a cumulative total of one-tenth of 1 percent from 2010 through 2012.

Comparing the experience of recent years, the report said that spending on hospitals and doctors increased at a faster rate in 2012 than 2011, while spending on prescription drugs and nursing homes grew more slowly.

Spending on hospital care increased 4.9 percent in 2012, to $882 billion, mainly because of a rise in prices and in the intensity and complexity of services, the report said. By contrast, the increase in 2011 was 3.5 percent.

At the same time, the report said, spending for doctors’ services and outpatient clinics grew by 4.6 percent in 2012, to $565 billion — up from growth of 4.1 percent in 2011.

But, it said, spending for prescription drugs grew just four-tenths of 1 percent

in 2012, to $263 billion, compared with an increase of 2.5 percent in 2011.

“This reduced growth rate was driven largely by a slowdown in overall prices paid for retail prescription drugs as numerous brand-name blockbuster drugs — most notably Lipitor, Plavix and Singulair — lost patent protection in late 2011 and in 2012 and as generic versions became available,” the report said.

Almost three-fourths of all prescriptions filled in 2012 cost $10 or less per prescription, the study said. Generic drugs accounted for 77 percent of all prescriptions filled in 2012, up from about 70 percent in 2011, it said.

The aging of the baby boom generation is reflected in the new data. Enrollment in Medicare increased 4 percent in 2012, the largest one-year increase in 39 years, the report said. More than half of the new beneficiaries joined Medicare Advantage plans managed by private insurers under contract with the government. More than one-fourth of the 50 million Medicare beneficiaries are now in such private plans.

Spending on Medicare increased 4.8 percent, to $573 billion in 2012, while federal and state spending on Medicaid, for low-income people, grew 3.3 percent, to $421 billion, the report said.

The Modesto Bee by Ken Carlson –

December 22, 2013:

A much smaller percentage of California residents receive health insurance through an employer than was the case 25 years ago, a report said.

Data compiled by the California Healthcare Foundation showed that 54 percent of residents received coverage through their jobs last year. That’s down from 63 percent in 1988.

Despite its reputation for sunny beaches and affluent lifestyles, California has more residents than any other state who live without insurance to pay for medical bills, which restricts their access to doctors and makes them vulnerable to financial ruin if they get sick.

Although more residents have resorted to public health programs, 1 in 5 Californians under age 65 have no insurance, the seventh-highest uninsured rate in the nation.

The report, “California’s Uninsured: By the Numbers,” was released last week to provide a snapshot of the uninsured before major provisions of the federal health law take effect next month. The state is considered a testing ground for President Barack Obama’s initiative to extend coverage to more

Americans through insurance exchanges operated in each state.

The report includes estimates that 3.1 million people in California will remain uninsured despite the federal law. The latest numbers on employer-provided insurance show that:

• One in 4 adults who work are uninsured.
• About 40 percent of those working for small businesses with fewer than 10 employees are likely to have no insurance.
• More than 30 percent of the uninsured have annual household incomes of $50,000 or more, and 62 percent of uninsured children have parents who worked full time in 2012.

The report offers no explanations for the steady erosion of employer-provided health coverage in California, which follows a national trend. An April report on the national decline in employer-based insurance, released by the Robert Wood Johnson Foundation, suggested the main factor was the rising benefit costs shared by employers and their workers.

“Employers continue to shoulder about the same percentage of costs from employees’ health insurance as they did 10 years ago, but everyone’s costs have increased dramatically,” said Risa Larizzo-Mourey, chief executive officer of the Robert Wood Johnson Foundation. “Higher costs naturally translate into fewer employers offering insurance coverage and fewer employees accepting it, even though it is offered.”

Nationwide, the average cost of annual premiums for a single employee was about $5,000 in 2011, double the cost in 2000; the annual cost of family coverage rose from $6,415 in 2000 to $14,500 in 2011.

In California, almost 25 percent of adults ages 35 to 44 were likely to be uninsured in 2012, compared with 18 percent in 2000. The likelihood of being uninsured was 22 percent for people ages 45 to 54, up from 16 percent in 2000.

Last year, Latinos accounted for 57 percent of the state’s uninsured population, even though the ethnic group represented 41 percent of the general population under age 65. Whites accounted for 25 percent of California’s uninsured, 11 percent were Asian, 5 percent were black and 2 percent were in other ethnic groups.

The report from the California Healthcare Foundation said the Affordable Care Act should reduce the number of uninsured, “although a significant number will be left behind.”

It projected that 2.6 million people will be newly insured in 2015, including 1.6 million who obtain private coverage and 939,000 who will be enrolled in the expanded Medi-Cal program.

Of those obtaining private coverage, an estimated 1.18 million people will have subsidized or catastrophic health plans through the Covered California exchange, 173,000 will receive employer benefits and 282,000 will have nonsubsidized health plans.

The report estimated that 3.1 million people will remain uninsured, including 959,000 undocumented immigrants who are not eligible. More than 700,000 people eligible for Medi-Cal are not likely to enroll because of lack of awareness or the program’s history of a difficult enrollment process and limited access to care, and 1.4 million won’t enroll even though they are eligible through Covered California.

The New York Times by Robert Pear

–

December 9, 2013:

For months, the Obama administration has heralded the low premiums of medical insurance policies on sale in the insurance exchanges created by the new health law. But as consumers dig into the details, they are finding that the deductibles and other out-of-pocket costs are often much higher than what is typical in employer-sponsored health plans.

Until now, it was almost impossible for people using the federal health care website to see the deductible amounts, which consumers pay before coverage kicks in. But federal officials finally relented last week and added a “window shopping” feature that displays data on deductibles.

For policies offered in the federal exchange, as in many states, the annual deductible often tops $5,000 for an individual and $10,000 for a couple.

Insurers devised the new policies on the assumption that consumers would pick a plan based mainly on price, as reflected in the premium. But insurance plans with lower premiums generally have higher deductibles.

In El Paso, Tex., for example, for a husband and wife both age 35, one of the cheapest plans on the federal exchange, offered by Blue Cross and Blue Shield, has a premium less than $300 a month, but the annual deductible is more than $12,000. For a 45-year-old couple seeking insurance on the federal exchange in Saginaw, Mich., a policy with a premium of $515 a month has a deductible of $10,000.

In Santa Cruz, Calif., where the exchange is run by the state, Robert Aaron, a self-employed 56-year-old engineer, said he was looking for a low-cost plan. The best one he could find had a premium of $488 a month. But the annual deductible was $5,000, and that, he said, “sounds really high.”

By contrast, according to the Kaiser Family Foundation, the average deductible in employer-sponsored health plans is $1,135.

“Deductibles for many plans in the insurance exchanges are pretty high,” said Stan Dorn, a health policy expert at the Urban Institute. “These plans are more generous than what’s prevalent in the current individual insurance market, but significantly less generous than most employer-sponsored insurance.”

Caroline F. Pearson, a vice president of Avalere Health, a consulting company that has analyzed hundreds of plans, said: “The premiums are lower than expected, but consumers on the exchange will often face high deductibles and high co-payments for medical services and prescription drugs before they reach the cap on out-of-pocket costs,” $6,350 for an individual and $12,700 for a family.

Those limits provide significant protection, even though those sums are substantial for most consumers. In addition, the federal website, HealthCare.gov, informs people that they may qualify for subsidies to reduce their out-of-pocket costs if their household income is below 250 percent of the federal poverty level, meaning that it is less than $28,725 for an individual or $48,825 for a family of three.

These “cost-sharing reductions” are available for a specific kind of midlevel plan known as a silver plan. People with lower incomes can get more help with out-of-pocket costs, but only if they choose silver plans.

Mr. Dorn said the government had not done much to inform people of these potential savings. “Consumers are giving up cost-sharing reductions of enormous value if they enroll in a bronze plan because it has the lowest premium,” he said.

Plans in the marketplace are separated into four categories — bronze, silver, gold and platinum — indicating the generosity of

coverage, or the share of costs paid by insurance for an average enrollee.

Many people buying insurance on the federal and state exchanges are expected to qualify for subsidies. But in the first month, for reasons that are not clear, only 30 percent qualified. The others must pay the full premium and will be subject to the full deductible.

Most people shopping in the exchanges are expected to choose bronze or silver plans, which provide less generous coverage than most employer-sponsored plans.

A study by Jon R. Gabel and colleagues at NORC, a research organization affiliated with the University of Chicago, found that 65 percent of employees in group health plans had higher-value coverage that would be classified as gold or platinum under the Affordable Care Act.

At the same time, most policies in the exchanges are more generous than what people have been buying for themselves in the individual insurance market. Mr. Gabel found that 84 percent of policyholders in the individual market had coverage that was less than or equivalent to the bronze level.

James T. O’Connor, an actuary at Milliman, an employee benefit consulting firm, said: “Larger employers generally have more generous coverage than small employers, and small group plans, on average, are richer than what people can typically buy with their own money in the new health insurance exchanges.”

Mark A. York, a 60-year-old freelance writer in Hailey, Idaho, said he began shopping after he received a letter saying that his current insurance policy would be canceled because it did not meet the requirements of the health care law. In the exchange,

he said, he found policies with premiums similar to what he is now paying, $440 a month, but “the deductibles were so high — $4,000 to $6,000 a year — that it defeats the purpose of having insurance.”

Brian H. Snoddy, 35, of Palmyra, Va., said his wife and two children had a policy with a $330 premium and a $2,500 deductible, but it is being canceled. For new plans with comparable coverage on the federal exchange, he said, “the deductibles are way higher, $5,000 or $6,000.”

For visits to a medical specialist, many plans on the federal exchange require co-payments of $50 to $75 or more.

Federal officials often point to premiums as evidence that the health care law has made insurance affordable. “Nearly six in 10 uninsured Americans can pay less than $100 a month for coverage in the health insurance marketplace,” Kathleen Sebelius, the secretary of health and human services, has said.

Higher deductibles are one tool that insurers can use to hold down premiums. Many have also held down premiums on the exchanges by limiting the choices of doctors and hospitals available to consumers in their provider networks.

Kellye Norris, 53, of

Dallas said that after trying for more than a month, she completed an application on the federal exchange and enrolled in a Cigna plan with a premium of about $500 a month and no subsidies.

“My deductible is nearly $3,000, which is ridiculously high, in my opinion,” Ms. Norris said. “But as someone with pre-existing conditions, I’m grateful to be able to buy insurance at all.”