This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Insurance firms infuse GOP with big doses of cash
By Noam N. Levey
October 4, 2010
Faced with wide-ranging new requirements in the health care law, the insurance industry is pouring money into Republican campaign coffers in hopes of scaling back regulations while preserving the mandate that Americans buy coverage.
Since January, the nation’s five largest insurers and the industry’s Washington-based lobbying arm have given three times more money to Republican lawmakers and political action committees than to Democrats.
That is a marked change from 2009, when the industry largely split its political donations between the two parties, according to federal election filings.
The largest insurers also are paying hundreds of thousands of dollars to lobbyists with close ties to key Republican lawmakers who could be shaping health policy in January, records show.
Cigna’s head lobbyist, G. William Hoagland, a former senior Republican Senate aide, said the company hopes to get a more receptive hearing next year. “This is all political now,” he said.
“We generally support candidates whose views align with our business and health care interests,” said Aetna spokeswoman Anjie Coplin.
And Indianapolis-based WellPoint Inc., which was vilified by Democrats this year for proposing huge rate hikes in California, has given nearly nine times as much to Republicans this year.
Karen Ignagni, America’s Health Insurance Plans president, said she wouldn’t speculate about what Republicans would do if they retake the House and Senate in November.
But she acknowledged the industry’s interest in the GOP. America’s Health Insurance Plans has given the party twice as much as it has given Democrats this year.
“The numbers speak for themselves,” Ignagni said.
Well, that didn’t last long. The insurance industry supported the Democrats just long enough to get passed into law their one policy proposal made in insurance heaven: a mandate for everyone to purchase their private insurance products. Now that we have to buy their plans, they want Republican-style market reforms to make sure that their insurance products are not priced totally out of the market, even if that leaves health care itself unaffordable.
What are these measures that Republicans support and that Democrats don’t?
* Insurers want to be able to sell their plans across state lines. By opening up markets in the less regulated states, insurers can sell more competitively priced products, even if they provide patients less protection against loss.
* They want to sell less expensive, high-deductible plans linked to health savings accounts that attract their favored healthier and wealthier clientele, even if it harms the sick by pushing them into more expensive, higher-risk insurance pools.
* They want to increase wasteful taxpayer subsidies of their private Medicare Advantage plans in order to create incentives to shift more patients from our government Medicare program into their own industry plans.
* They want relief from having to insure high-needs, high-cost patients. They would do this by shifting the burden to taxpayer-financed high-risk insurance pools or reinsurance programs.
* They don’t want to be exposed to some of the transitional programs such as requiring coverage of children with preexisting disorders.
* They want to be sure that required “standard benefits” are defined as loosely as possible to protect their market of low cost products, even if those products fail to provide adequate protection.
* They want to be sure that rules for waivers will be applied liberally so that they can continue to offer innovative products such as the mini-med plans for McDonald’s employees that have basic benefits paying a maximum of $2,000 per year, or up to $10,000 maximum per year for the deluxe plan. (These plans are a cruel hoax.)
* They want to be sure that overall regulatory oversight will be relaxed as much as possible so that the free market can offer the highest quality insurance products at the very best prices (sic).
Right now Sandy and I have the pleasure and honor of hosting some of the Mad as Hell Doctors at our home during their current California tour in support of single payer. At dinner last night, one of them asked me if, when I’m writing the Quote of the Day, aren’t there times that I want to say… like… Bullshit!!… or something like that.
Yes! Right now. Bullshit!! Today I’m also a Mad as Hell Doctor!
We have to get this uncaring, thieving industry out of our health care and out of our lives. The Republicans won’t do that, but don’t ever forget that it was the Democrats who set up the framework that will keep them there forever – unless we start exercising more effectively our responsibilities to participate in a citizen-run democracy.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
By Don McCanne
October 1, 2010
In the Quote of the Day for September 28, 2010, I wrote, “The $18,000 in average health care costs for a family of four is already over one-third of the median household income of $50,000.” Understandably, some readers perceived that I was implying that the average family with an income of $50,000 was paying an average of $18,000 out of that income for health care. That wasn’t my intent. I was trying to make the point that our current level of spending on health care is already far beyond the capability of the members of a typical household to pay their equally allocated share.
Also I should have refined the numbers a little bit more. The median household income is now $50,221, but the Census Bureau does not include the value of the employer contribution to the insurance premium in that number. According to the Hewitt report in my September 28 message, employers contribute $7612 per employee (including dependents if covered). So the median income with the employer insurance contribution added would be $57,833. The population with a median household income is not identical to the family of four described by the Milliman Medical Index (the average amount spent on actual health care for a family of four covered by an employer-sponsored PPO), but there is considerable overlap.
For purposes of describing how high health care spending is in relation to income, dividing the the Milliman Index of $18,074 by the adjusted median household income of $57,833 does provide a rough approximation of how much that is. It is still over 31 percent, though short of the “over one-third” I reported previously. Again, I can’t overemphasize that $18,074 is not the average amount that each family of four is paying directly out of its income, but it is the average amount that is being spent on health care on its behalf.
Even these numbers seem unbelievable. How could we possibly be spending that much when incomes are so low comparatively?
A very good friend of mine responded in appropriate disbelief. He wrote, “The information on the average health care costs that a family pays is difficult to determine, but the link here shows an average about $6,000 which is about 14% of the median household income.”
The link to an article on the cost of heath insurance:
Because it has been so difficult for many of us (including me) to grasp just how much we are spending on health care, I decided to provide a more detailed response. Since this reality check is so important, I decided to share my comments with others by making this the Quote of the Day for today (and you may wish to share it with others):
Response to a Dear Friend:
I knew that you would have a problem with these numbers. It doesn’t seem reasonable that the average health care costs for a family of four with employer-sponsored insurance is $18,000 when the median household income is $50,000. These numbers don’t seem to compute, but they are very real.
Let me start with the $6,000 (actually $6,328) for family insurance as cited in the article you sent. That number came from a report by AHIP (America’s Health Insurance Plans – the lobby organization that helped to orchestrate the reform bill).
AHIP – Individual Health Insurance 2009:
From page 4 of the report: “Nationwide, annual premiums averaged $2,985 for single coverage and $6,328 for family plans in mid-2009.”
That $6,328 is not health care costs, but rather it is the premium paid for family coverage in the individual insurance market. It is not the premium paid for an employer-sponsored family plan. That’s a very important distinction and here’s why.
The individual insurance market is highly dysfunctional, and was one of the primary motivators for the regulatory changes in the Patient Protection and Affordable Care Act (ACA). About 30 percent of individuals who apply for individual plans are denied coverage. The private insurers will cover only individuals with an unblemished health record. Most health care costs for those individuals are very low and often below the deductible. This is why the insurers can sell an individual family policy for only $6,328 – these are healthy people who rarely file significant claims. In fact, when they do file larger claims, the private insurers routinely look to see if they could find an omission in the application such as a prior yeast infection not reported, and then they would reject all claims and rescind the coverage. Both of these practices are illegal for employer-sponsored group coverage, which is partly why group coverage is more expensive, but they were very effective in limiting claims losses in the individual market. The new law requires guaranteed issue (all applicants accepted) and prohibits rescission (retroactive revocation of insurance). These two changes will wipe out the individual insurance market as we know it, and will result in skyrocketing insurance premiums.
Another reason that individual plans are so cheap (if you call $6,328 cheap) is that they do not provide nearly as good coverage – both in benefits and cost sharing. Individual plans frequently omit pharmaceuticals, mental health services, maternity benefits, etc. Also they tend to have larger deductibles ($1,000 to $25,000) and high coinsurance (a percentage of fees which is usually much higher than co-pays would be). The bankruptcy studies have shown that medical debt contributes to about 60 percent of personal bankruptcies, and three-fourths of those with medical debt had health insurance. Individual plans have deteriorated to a degree that they don’t keep people out of bankruptcy when they develop significant medical problems. The new law will establish a standard benefit package which will also drive premiums up, though it will still permit excessive cost sharing (at an actuarial value of 60 to 70 percent).
Another study done for AHIP by PriceWaterhouseCoopers:
From page 5: “This analysis shows that the cost of the average family coverage is approximately $12,300 today.”
Once again, this is not the costs of health care, but it is the average of family premiums paid by those in both the individual and employer-sponsored group market. Already you can see that group coverage is going to be higher when you remove the individual plans from the calculations.
Okay, now the Milliman Medical Index does not represent premiums paid, but rather it represents the average amount paid for health care for a family of four with an employer-sponsored PPO plan (Blue Cross, Blue Shield, etc.). It does not include the administrative costs and profits for the insurer; it includes only the average amount that was paid for actual health care for the family. It is an important number for business entities because it shows what health care actually costs. You should read the first couple of pages of their report since it really brings home what we are paying in health care. (Note that Milliman is an actuarial consulting firm for industry – so these are not numbers that we concocted.)
Milliman Medical Index:
From page 1 (3rd page of document): “The total 2010 medical cost for a typical American family of four is $18,074.”
But it’s even worse. This is what businesses and their employees are paying for health care. Keep in mind that this sector is the relatively healthy workforce and their young healthy families.
When you think about it, the private insurance industry has skimmed off the largest and healthiest sector of our society and is selling insurance to them – America’s workforce. The private insurers are having great difficulties selling affordable plans to employers because these costs even for the healthy are so high. They have been shifting more costs to patients through higher deductibles and other cost sharing, but they still can’t keep their premiums affordable. This is why Karen Ignagni of AHIP said over and over again during the debate on reform that this is not going to work unless the GOVERNMENT does something to control costs – a tacit admission that the insurers are incapable of controlling costs.
But think about this. If $18,074 is the average amount that health care costs for a relatively healthy family of four, then what is average cost if you include everyone in the calculation? That is, what is the cost per capita if you add up all health care spending in the nation and divide that by our population of 310,000,000? That number is available from the Office of the Actuary, Centers for Medicare and Medicaid Services (CMS).
Health Spending Projections:
From the table on page 523:
Projected National Health Expenditures (NHE) for 2010: $2,589.6 billion
NHE as percent of GDP: 17.3%
NHE per capita: $8,289.9
So if we put all of our health spending dollars into one giant insurance fund, we would be paying out an average of $8,290 for each man, woman and child in this nation. For that family of four, their share is $33,160. Think about what that means when the median household income is $50,000.
These numbers are very accurate, yet how could that be? How could we be spending so much per capita and yet the average family does not see health bills of that magnitude?
First of all, we fragment our insurance risks into multiple pools. The less healthy 20 percent of people consume 80 percent of our health care. Workers fall into the 80 percent of people who use only 20 percent of the care. Thus isolating the healthy workers and their families into employer-sponsored pools dramatically reduces the per person insurance premiums because of the much lower per person costs of these healthy individuals.
Let’s see what that would be for this healthy family of four. Milliman shows that their average health care costs are about $18,000. The new health care bill says that the plans should have an actuarial value of 60 or 70 percent, but let’s use 70 percent (the insurance pays an average of 70 percent of health care costs and the family pays an average of 30 percent out of pocket). Thus the insurer pays an average of $12,600, and the family pays an average of $5,400. The law also allows the insurer to keep 15 percent of the premium to pay the bills and the administrative costs, so the premium for the family would be $14,824 ($12,600 divided by .85). Thus the family pays, under the new law, an average of $20,223 (the premium plus the out-of-pocket expenses). Again, with a median household income of $50,000 no middle income family could afford that. That is why the law provides subsidies for both the premiums and for the out of pocket expenses. However these subsidies will not be adequate for most, so, under the new law, financial hardship is an almost inevitable consequence for those who face significant medical problems.
There is a much more important reason why families are not paying an average of $33,000. Although they receive their health care financing through risk pools for the healthy, most higher cost patients have their care financed through expensive risk pools for the sick. Some examples include Medicare, Medicaid, the VA system, state high risk health pools, safety-net institutions for the uninsured, and so forth. What do these have in common? They are financed by us – the taxpayers! In fact, if you add those together, and include the tax subsidies we are providing for employer-sponsored coverage, and include the private health insurance that tax payers purchase for federal, state and local government employees, we are already paying 60 percent of our entire national health expenditures through the tax system. That is largely invisible to most of us. Also, it shows that our health care financing is much more progressive than most realize. The wealthy are paying much more than average-income families.
If that’s already true, then why don’t we leave it like it is? The reason is that this fragmented system of financing health care wastes hundreds of billions of dollars each year – money that could be going to pay for health care. Perhaps worst of all, from our perspective, is that the current law will leave tens of millions uninsured; it will establish underinsurance as the norm (60 to 70 percent actuarial value); and it will do very little to slow the outrageous escalation in health care costs. A single payer national health program – an improved Medicare that covers everyone – would control costs and cover everyone. How that works is another story.
By Paul Hochfeld and the Mad as Hell Doctors
[Editor’s note: you can follow these updates on a daily basis at madashelldoctors.com.]
California Road Trip, Day 9, Santa Barbara
October 1, 2010
By all accounts, last evenings presentation in Santa Barbara was packed and powerful. The “local” speakers were superb. I wasn’t there. I rejoined the MAHD California road trip today, after three days at the American College of Emergency Physicians meeting in Las Vegas, where I was startled by the number of docs who hadn’t heard of PNHP. There were a few (very few) talks of relevance to health reform, but I had the extreme pleasure of hearing ER Dr. Brent Asplin, from Minnesota, in a very well attended session, addressing the question, “How do we get VALUE for all the money were are spending on health care?”… and then go on to say, “The problem is cost. The solution is organization.” He stresses, as a society, we will never get value for our money unless everybody is covered. The cost of caring for people before they get sick is trivial compared to treating them after they fall into the ranks for the ill.
When a portion of the population isn’t “covered,” the hidden and not so hidden costs, both financial and social, to everybody are substantial. Though he didn’t mention single payer, he appears to make a case that without an inclusive, real system, we will never find value and never control costs. And how will we EVER find value while we literally waste 20-25% of ALL our health care dollars servicing the insurance industry that adds nothing to health and complicates the lives of those who actually care for you?
On the escalator, after the talk, I asked an older doc, even older than I, what he thought. With great angst, he stated, “Whenever we mix money, politics and medicine, we will get nowhere. I used to care. Now, I am just trying to finish my career.” I identify with his despondency, but can we really afford to not care?
California Road Trip, Day 8
September 30, 2010
Sarcastic News Flash!!! Insert tongue into cheek now.
Today we learned from our friends in San Luis Obispo that California has solved the problem of obtaining health care for their 6.5 million uninsured and their millions of underinsured! Two days ago the Governator signed into law a bill that allows health care clinicians from out of state to come to California to provide free medical care, just like clinicians do in other third world countries.
This legislation was sparked by the group Remote Area Medicine who first brought their medical and dental teams to Los Angeles last year. On the first day, they were overwhelmed as thousands of people lined up at their door. Many of the people who showed up had insurance but had found that they still couldn’t afford necessary care. Welcome to third world America!
But let’s get serious, the news isn’t all bad. Our experience in San Luis Obispo is that this is a passionate community of physicians and health advocates. We had lunch with 4 local doctors who wanted to learn more about single payer. One doctor had spent the past ten months organizing a comprehensive free clinic for the community.
Our forum at the local library was attended by over 120 people who shared their caring and their stories with us. One physician told us that he was happy to be employed by the state prison system. The pay is good and he can focus on taking care of his patients without insurance company hassles. He reminded us that prisoners cannot legally be denied necessary medical care, unlike those outside of prison. He was able to spearhead an initiative to ban all tobacco products in the prison which resulted in a 40% decrease in referrals to cardiologists. Oh the horrors of socialized medicine!
We need a health care system that is universal and promotes preventative measures to improve health, just like those in the California prison system. We need single payer now.
California Road Trip, Day 8, Las Vegas
September 30, 201
Special report from Paul Hochfeld…
Since when is Las Vegas in California? Explanation. After the Santa Cruz event, I left the Road Trip for three days to attend the American College of Emergency Physicians meeting, in Las Vegas, where PNHP has a table among the other “exhibitors.” Every so often, a supporter shakes our hands then shakes his/her head in agreement, “We didn’t fix it, did we?” Occasionally, someone questions, “What are you selling?” We explain the history and purpose of Physicians for a National Health Program. Single payer supporter or not, every doctor agrees that our sick care non-system is profoundly broken.
The Exhibit Hall
Vegas is surreal. The exhibit hall is equally surreal. Our humble PNHP table is surrounded by multi-hospital emergency groups (who charge local groups up to 32% for “management fees”), billing/coding companies, drug pushers, purveyors of a variety of software packages, and assorted medical gizmo manufacturers.
“Vendors” use every trick imaginable to seduce emergency physicians to ask about their wares. Examples includes shapely ladies (of course), free ice cream serves by a ’50s era candy store owner, raffles, and plenty of other giveaways, including the usual pens, bags, candy, coffee, and water bottles. The most insulting was the Elvis impersonator bedecked with sequins! That’s the depths to which our sick care non-system has sunk.
Their shared goal is to “game” the system to maximize collections from patients and third party payer. More revenue for providers translates into more money to share with those providing products and services to physicians. Sadly, the complexity of dealing with fourteen hundred insurance carriers makes so many of these vendors valuable. After all, health care is a commodity and the goal is maximum profits.
I rejoin the MAHD Road trip tomorrow night after our Santa Barbara presentation. We will “lose” Margaret Flowers on Friday, but Carol Paris, also of Baucus Eight notoriety, will join us for several presentations in the L.A. area. We’re like a well oiled machine with replaceable parts.
California Road Trip, Day 7
September 29, 2010
“The evidence is conclusive that our people do not yet receive all the benefits they could from modern medicine. For the rich and near-rich there is no real problem since they can command the very best science has to offer.… Among the majority of the population, however, there are great islands of untreated or partially treated cases.…Although it is a principle of far-reaching and, perhaps, of revolutionary significance, I think there are few who would deny that our ultimate objective should be to make these benefits available in full measure to all of the people.”
This quote was spoken by Dr. Ray Lyman Wilbur, the first President of Stanford University, in 1932 and sadly it is still appropriate now. Today we traveled to Stanford to speak to faculty and medical students about PPACA and Single Payer.
In defense of the political feasibility of PPACA, but not really explaining its nuances or fatal flaws, was Dr. Arnold Milstein. Out of only a handful of slides was a photo tribute to a woman he considers a “friend” and “smart and reasonable.” The infamous Nancy Ann DeParle. This is the same DeParle who earned $6 million from sitting on the boards of at least 6 companies that were targets of federal investigations, whistleblower lawsuits and other regulatory actions, and now is commonly known as Obama’s “Healthcare Czar.” Dr. Milstein’s main point focused on the fact that smart people in Washington did the best they could.
In defense of single payer was Mad As Hell Doc Margaret Flowers. Her job was simple because all that she had to do was show the evidence of the failure of the market when it comes to health care and the evidence of the success of single payer. Margaret compared PPACA to HR 676 based on 9 criteria such as universality, affordability, and sustainability and the striking differences couldn’t have been more obvious.
Following the presentations, the MAHD marched with local single payer advocates to the “Gates of Hell” in the Rodin Sculpture Garden where we expressed our anger at health injustice in this nation and our conviction to end it.
“Political feasibility” ignores true human suffering and continues to tie our sick care non-system to a sinking ship. We just rearranged the deck chairs on the Titanic and think we’ll miss the iceberg.
California Road Trip, Day 6
September 28, 2010
Santa Cruz, Sept. 28
“We’re number 1!” Not hardly.
During our “physician briefing,” prior to our Santa Cruz presentation, we learned that the Public Health Agency of Canada has published a travel advisory for, of all places. California, which is in the midst of the biggest outbreak of pertussis (whooping cough) in 50 years. Because of four thousand cases and nine infant deaths, so far, this year, California is being treated as we treat underdeveloped countries, whose health care systems are primitive or otherwise failing, thereby putting travelers at risk.
How can this be? Don’t we have the best health care system in the world? Nope. Number 37th actually. Many health insurance plans don’t cover routine immunizations, many of which are recommended as for public health. Isn’t PPACA going to change this by covering preventive care? Nah. It only applies to new/renewed policies and many older group policies will remain “grandfathered” which means that some provisions will never apply to them. They will pay for a portion of expensive treatment, but not for prevention. Their profits will put YOUR infant at risk by keeping whooping cough endemic in your community.
That’s why I call it a sick care non-system.
California Road Trip, Day 5
September 27, 2010
Yesterday, Margaret Flowers joined us on the stage at La Pena Cultural Center and will remain with us through Santa Barbara. As expected, the “standing room only” crowd was mostly the choir. One might ask, “What’s the point?” The choir is our best tool, but only if they get out of the choir pews. Only by giving them (you?) the intellectual tools, insights and confidence to speak with friends, neighbors and communities we will be able to educate those who don’t yet understand the subtleties of the single payer solution and why PPACA didn’t fix it. We surely can’t count on media to do this for us.
As an aside, en route to our morning event at Santa Clare Valley Medical Center, I visited a grade school friend and his wife, who recently underwent an outpatient “lumpectomy.” The hospital bill, not including physicians fees, was $50,000, which will be discounted substantially for her insurance carrier. Without insurance, she would be expected to pay the full bill. Of course, different carriers “settle” for different amounts. Are there ANY other “industries” where different customers pay such drastically different amounts for the same services? With everybody in the same risk pool, everybody would pay the same amount… and the average primary care provider would not have to spent more than $60,000 per year on billing services to navigate the chaos… as they do today.
California Road Trip, Day 4
September 26, 2010
NEWSFLASH!!!! Yesterday, the Associated Press released the results of a poll performed in partnership with the Robert Wood Johnson Foundation and Stanford University that confirms what Fox has been telling us. It’s true that 60% of Americans are NOT supportive of the Patient Protection and Affordable Care Act (aka PPACA, Obama Care, Baucus Care, PeePee-Caca). As it turns out, however, twice as many of those who don’t support it think it should have gone farther. They believe we need more government involvement in health care so we can have a real system that isn’t designed to service the insurance industry. We are not alone.
On the road again…Days 1 – 3, posts by Paul Hochfeld
September 23, 2010
Morning #1, Willow Creek, Sept. 23.
On the road again… Yesterday, we wound our way through the fabulous Trinity Alps to our host’s house near Willow Creek, half way up the side of a mountain. As the near-full moon sets and the Sun is about to illuminate the valley below, let’s call this Morning #1.
Fittingly, the first phase of health care reform – PPACA (aka Obama Care) – begins today. Is it good or bad? Over the last few days, the Mad As Hell Doctors have explored this important question through a series of meandering email exchanges that resemble yesterday’s mountain roads. Winding and harrowing.
Here’s our “party line”… Undeniably, PPACA does a few good things that are beneficial to a few people, but overall it further entrenches Health Insurance Industry by subsidizing their flawed product with more tax dollars. We still don’t have anything resembling a real system, with true universal and equal access to care. Rising costs remain a cancer to our economy and, without question, some of your neighbors will continue to suffer unnecessarily because of financial barriers to care. We can do better.
Morning #2, hosted in the wooded hills behind Arcata, the Hippie Capital of the West.
Last evening, our event at the Bayside Grange drew an enthusiastic audience of over two hundred who, I hope, learned something that they can share with their friends and neighbors. Since, it’s apparent that we can’t count on Major Media, it up to YOU to take the discussion to your communities, either one-on-one or in small gatherings. It’s OUR job to make sure you have the tools to answer difficult questions about Single Payer health care. Isn’t that Socialism? What about choice? How can we afford it?
The easy answer to the last question is “We can’t afford not to do it!” Consider all the money we are now spending on health care as our “health tax,” as do just about all the other industrialized countries. That’s over $7,000 per capita. By putting everybody in the same risk pool, getting rid of the 1,400 middlemen (insurance companies) that don’t add anything to our “health,” we can save 20-25% of the total. With those savings, we can accomplish true universal access and make sure everybody gets the care they need when they need it… instead of wandering into our emergency rooms in critical condition costing ALL of us more money in our sometimes futile attempts to “save them.”
We’re all paying for everybody anyway so why don’t we create a system to reflect it!
Morning #3, Santa Rosa, Sept. 25
Before leaving Eureka, Philip (dwarfed by the tree) and I shared a couple of beers with a dear friend and his grown son who own the local concrete/gravel company. Of course, the talk turned to health care. By their accounts, like other small businessmen, virtually, every time they interface with the “government,” whether dealing with environmental regulators or marketing/supplying their products to local, county or state governments, they find waste and workers who have little regard for the efficiencies they cherish in the private sector. I can’t argue with their experience, yet I explain that the laws of supply and demand are upside down in health care. The suppliers (that would be doctors) dictate demand by the tests/interventions that we order. Furthermore, unlike any other industry, we are all paying for everybody anyway and the for-profit private health insurance industry is a middle man that adds NOTHING to the quality of the product (health) while adding 20-25% to total cost. My friends “get it,” but when it comes to discussing the solution, they go right, embracing smaller, less intrusive government, while I go left, to a single payer system managed by those charged with the well being of all of us, aka government.
The following day, en route to Santa Rosa, I stopped briefly to gawk at the Redwoods, where it occurred to me that without government regulations, all of the large groves would eventually disappear into lumber for our decks. Isn’t it the responsibility of government to reign in the self-serving urges of private (and corporate) interests, who have a long history of profiting from plundering the planet while leaving the REAL cost of repairing their damage to all of us? It may be a stretch, but so it is with health care.
The for-profit private health insurance industry spends a lot of money dividing us into risk pools: Medicare, Medicaid (Medi-Cal), the Vets, Employees of large/small companies, and Individuals with/without previous medical conditions. Using taxpayer subsidies, they profit from being the middle man in the care of those who are least expensive, while the government (that would be the taxpayer) pays for the care of those who are most expensive … the old, the sick, and the disabled. The taxpayer gets screwed again while corporations manipulate the political process thereby ensuring their continued profits.
By simply putting everybody in the same risk pool, we could save a substantial amount of money which would give us more resources to care for everybody. Who administers the risk pool? That would be the single payer. The government. Can we trust them to do it? Wait, wait. “Them” is “we.” We trust the government to run the post office, we have cheapest postal rates in the world, and they never lose a package. The VA Health System gets better results that the community, has high patient satisfaction, and does so at less cost. Virtually every other developed country of the world has some form of “single risk pool”… and they get better results at half the cost. In the meantime, United Health Care spends “our” money on very slick, expensive television ads try to convince you they are more concerned about YOU than their profits.
Back to my friends, throughout the (late) evening, we laughed, listened, agreed to disagree, caught up on family stuff and looked forward to our next opportunity to verbally spar, while sharing our friendship. Respectful conversations with those who don’t yet share our insights are crucial to the “cause” of single payer. Don’t be afraid to talk to those who aren’t already part of the choir. Are we going to change their minds? Probably not in the short run, but we’ll have fun trying.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Hoping for Economic Recovery, Preparing for Health Reform: A Look at Medicaid Spending, Coverage and Policy Trends
by Vernon K. Smith, Ph.D., Kathleen Gifford and Eileen Ellis
Kaiser Family Foundation
In FY 2010, 48 states implemented at least one new policy to control cost and 46 states plan to do so in FY 2011 with some states reporting program reductions in multiple areas. While many states mentioned that ARRA (American Recovery and Reinvestment Act of 2009) helped to avoid or mitigate provider rate cuts, states still took action in this area. In FY 2010, 39 states implemented a provider rate cut or freeze compared to 33 states in FY 2009. In FY 2011, 37 states have planned provider rate restrictions. More than any other area, provider rates are linked to economic conditions. Under budget pressure, states turn to rate cuts to have an immediate budget impact and when conditions improve states are able to restore or enhance rates. States must balance the need to control costs with ensuring that provider rates are sufficient to maintain participation and access to services for enrollees.
In FY 2010, 20 states implemented benefit restrictions, the largest number in one year since the surveys began in 2001 and double the number from FY 2009. In addition to this record level of benefit restrictions in FY 2010, 14 states have planned benefit restrictions in FY 2011. These benefit restrictions include the elimination of covered benefits as well as the application of utilization controls or limits for existing benefits.
Under health reform, Medicaid will be expanded to cover nearly all individuals with incomes below 133 percent of poverty resulting in a large adult expansion in most states, particularly adults without dependent children who had historically been barred from coverage under the program. This expansion provides the foundation for new coverage under health reform. Not surprisingly, Medicaid officials are playing a lead role in preparing for health reform implementation, in many cases alongside insurance commissioners. Some of the key challenges that states will face in implementing reform include implementing the Medicaid expansion, transitioning to a new income eligibility methodology for Medicaid, setting up Health Insurance Exchanges and re-designing eligibility systems to coordinate with the Exchanges. These challenges are magnified by recent administrative cuts and state workforce reductions limiting states’ capacity to focus on new responsibilities. Many states said that they need
timely regulations and guidance as well as financial support to help them move forward and meet tight implementation timelines.
In spite of the infusion of funds from the American Recovery and Reinvestment Act of 2009 (ARRA), states are implementing Medicaid provider rate cuts and implementing Medicaid benefit restrictions. Yet with the enactment of the Patient Protection and Affordable Care Act (ACA), the Medicaid program will be greatly expanded to include almost everyone with incomes below 133 percent of poverty.
Medicaid always has been and always will be a welfare program for low-income individuals. Serving a population that lacks an adequate political voice, it also has been and always will be a chronically underfunded program.
Most physicians who do accept Medicaid patients do so, in spite of inadequate reimbursement, because they believe that everyone should have health care. With a much greater volume of Medicaid patients some physicians will certainly face the dilemma of crowd-out of privately insured patients because of the Medicaid overload in their appointment schedules.
Imagine a physician facing Medicaid overload, declining net revenues, and frustrations of trying to help patients negotiate a system with diminishing benefits and with impaired access to specialized services because of a lack of willing providers.
Certainly some physicians will feel that they have no other choice than to close their practices to Medicaid patients. What will that do to other physician practices that are already overloaded with Medicaid patients?
Adverse selection can sink insurers, but it would be much more tragic to see adverse selection sink the practices of those physicians who are trying their hardest to do the right thing.
If everyone were in the same health care program, say an improved Medicare for all, an underfunded, segregated sector of stigmatized and humiliated welfare patients wouldn’t even exist. They would have access to the same care the rest of us have. Wouldn’t that be nice for a change.
By Benjamin Day
Most of you will have missed a short article tucked away in yesterday’s Boston Globe, which – when put in context – speaks volumes about our health care system. Robert Weisman reports that Harvard Pilgrim – Charlie Baker’s former health insurance company – will be canceling all of its Medicare Advantage plans in Massachusetts and two other states, and will instead offer a plan allowing seniors to purchase supplemental coverage to traditional Medicare. This is particularly interesting in light of the recent retrospective article on Charlie Baker’s 1999 decision to pull Harvard Pilgrim out of Rhode Island, leaving 128,000 residents without health coverage.
Medicare Advantage plans were created in 2003 under George W. Bush and a Republican majority in both houses of Congress to privatize Medicare: it allowed seniors to choose a private insurance company to manage their Medicare benefits instead of the traditional public Medicare plan. The law was written to intentionally overpay Medicare Advantage plans. It allows them to cherry pick enrollees in parts of the country with the highest reimbursement rates, and Medicare Advantage plans have often used this overpayment to offer more extensive benefits and lure seniors away from public Medicare. This is not exactly what you would call an open market with a level playing field! The number of seniors enrolled in privatized, Medicare Advantage plans has ballooned to 28% of all enrollees in 2008, and insurance companies that provide Medicare Advantage coverage have been paid on average 14% more than it costs our public Medicare plan to cover the same people (see source here). Sounds like a lucrative business – so why would Harvard Pilgrim be jumping ship in Massachusetts? The answer is national health reform. It was a priority of Democrats to start reducing those overpayments to private insurance companies, for the simple reason that the country cannot afford them. This proposal, you may remember, elicited nationwide fear-mongering that Obama was attempting to slash benefits for seniors. Even with death-panels and granny-killing, the new national health reform will freeze Medicare Advantage reimbursement rates in 2011 and slowly begin eliminating the 14% overpayment in the following years.
This suddenly puts in perspective Harvard Pilgrim’s decision: ‘”We became concerned by the long-term viability of Medicare Advantage programs in general,” said Lynn Bowman, vice president of customer service at Harvard Pilgrim.’ In short, Harvard Pilgrim does not believe it can compete with traditional Medicare on an even playing field, and is getting out of the business.
Traditional Medicare is not a single payer insurance plan for seniors. The efficiency of a single payer system comes from providers – hospitals, doctors offices, nursing homes, etc – dealing with only one payer. That one payer is also able to plan and budget across the health care system. Medicare can not do any of these things and it, like the private insurance system, faces unsustainable cost growth. However as a public insurance program, Medicare is much more efficient than a private insurance company, spends less on overhead expenses, and is able to set lower but equitable rates for providers.
Today’s article tells us an interesting story about the incredible waste of our private insurance system, and the growing role it plays as an unnecessary middle man that drives up our costs. Hopefully we will be able to reclaim Medicare in the following years as an efficiently managed public service for seniors, not a profit center for health entrepreneurs, and pave the way for Medicare for All.
See Mass-Care’s website for more information.
Benjamin Day is Executive Director of Mass-Care.
What if everyone had Medicare?
By Henry Abrons
San Francisco Chronicle
September 24, 2010
The Census Bureau released its annual report on income, poverty and health insurance coverage in the United States earlier this month, and it’s no surprise to learn that we’re in bad shape. The number of people living in poverty was 43.6 million (14.3 percent), up sharply from 2008, and real per capita income declined 1 percent.
Looking at health insurance, the situation is truly dire. There was a dramatic spike in the uninsured – 4.3 million more, to a record 50.7 million – in spite of the expansion of government health insurance rolls by nearly 6 million.
Those opposing government health insurance should ponder the fact that private health insurance coverage dropped to the lowest level since comparable data were first collected in 1987. On the other hand, those who look to the new health reform law – the Patient Protection and Affordable Care Act (PPACA) – for a solution should be deeply disturbed.
PPACA was not designed to provide universal coverage. In fact, if the new law works as planned, in 2019 there will still be 23 million uninsured. Yet the consequence of being uninsured can be lethal: Research published last year shows about 45,000 deaths annually can be linked to lack of coverage. That number is probably more than 50,000 today.
As Don McCanne, senior health policy fellow at Physicians for a National Health Program, has observed, PPACA is an underinsurance program. Employers, seeing little relief, will expand the present trend of shifting more insurance and health care costs onto employees.
Individuals buying plans in the new insurance exchanges (which won’t start until 2014) will discover that subsidies are inadequate to avoid financial hardship. Inevitably, they will end up with underinsurance, spotty coverage and high deductibles.
And workers who are unemployed or without employment-based insurance will move into Medicaid (Medi-Cal in California), where providers are reimbursed at such low rates that many will not accept patients.
When Congress passed the new law last spring, it based its decision on a faulty assumption – namely, that the rest of the population will have sustainable private health insurance. But between 2008 and 2009, the number of people covered by private health insurance decreased from 201.0 million to 194.5 million, and the number covered by employment-based health insurance declined from 176.3 million to 169.7 million.
If this trend continues, as it’s bound to do under current economic conditions, the ranks of the uninsured will expand and the new law will fall far short of the mark – either the cost will exceed projections, or coverage will be need to be reduced.
The Census Bureau report underscores the urgency of going beyond the Obama administration and swiftly implementing a more fundamental reform – a single-payer national health insurance program – improved Medicare for all.
Improved Medicare-for-all, by replacing our dysfunctional patchwork of private health insurers with a single, streamlined system of financing, would save about $400 billion annually in unnecessary paperwork and bureaucracy. That’s enough to cover all of those now uninsured and to provide every person in the United States with quality, comprehensive coverage.
A single-payer plan would also furnish us with effective cost-control tools, like the ability to negotiate fees and purchase medications in bulk. It would permit patients to go to the doctor and hospital of their choice.
Short of a full national plan, some states, like ours, are eyeing a state-based single-payer model. The new health law allows states to experiment with different models of reform, but not until 2017. Congress should move that date forward. There is no time to waste.
(Henry Abrons, M.D., is a member of Physicians for a National Health Program-California – www.pnhpcalifornia.org.)
Henry Abrons’ message is certainly very familiar to supporters of an improved Medicare for all, but we have to keep repeating it over and over until more people start listening.
Census Bureau Releases 2009 American Community Survey Data
U.S. Census Bureau
September 28, 2010
Median Household Income
Real median household income in the United States fell between 2008 and 2009 — decreasing by 2.9 percent from $51,726 to $50,221.
U.S. Health Care Cost Rate Increases Reach Highest Levels in Five Years, According to New Data from Hewitt Associates
September 27, 2010
According to Hewitt’s analysis, the average total health care premium per employee for large companies will be $9,821 in 2011, up from $9,028 in 2010. The amount employees will be asked to contribute toward this cost is $2,209, or 22.5 percent of the total health care premium. This is up 12.4 percent from 2010, when employees contributed $1,966, or 21.8 percent of the total health care premium. Average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, are expected to be $2,177 in 2011—a 12.5 percent increase from 2010 ($1,934). These projections mean that in a decade, total health care premiums will have more than doubled, from $4,083 in 2001 to $9,821 in 2011. Employees’ share of medical costs—including employee contributions and out-of-pocket costs—will have more than tripled, from $1,229 in 2001 to $4,386 in 2011.
Milliman Medical Index
The annual Milliman Medical Index (MMI) reports total annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program. The MMI represents the total cost of payments to healthcare providers, and excludes the non-medical administrative component of health plan premiums.
The total 2010 medical cost for a typical American family of four is $18,074.
Think about this. Median household income is now back down to $50,000. The average cost of health care for a family of four with an employer-sponsored PPO plan is $18,000. Premiums for employer-sponsored plans have doubled in the last decade, while the employees’ spending on health care has tripled!
The Patient Protection and Accountable Care Act (PPACA) was specifically designed to leave the large market of employer-sponsored private health plans intact – the “you can keep the insurance you have…” strategy for reform. Most individuals and families will see little change as a result of PPACA since they will continue to receive their insurance coverage through their employment.
Very specifically, employees of larger companies will not see premium subsidies like for those who purchase plans in the state exchanges, nor will they see the subsidies for out-of-pocket expenses. The architects of PPACA decided that employer contributions to the premiums would obviate the need for subsidies – glibly suppressing the fact that employer contributions are actually paid by the employees in the form of forgone wage increases.
The health care financing structure of PPACA is an unmitigated disaster. For most families, health care costs will encroach at increasing percentages on their budgets for basic essentials such as housing, food, and transportation, not to mention education, retirement plans, and other discretionary expenses. The $18,000 in average health care costs for a family of four is already over one-third of the median household income of $50,000.
We desperately need to enact policies that will bring costs under control while establishing an equitable method of financing that makes health care affordable for everyone. PPACA doesn’t even come close. What will work is a single-payer national health program – an improved Medicare that includes everyone.
(Why aren’t people talking about this? Why is all of the media coverage about the tweaks to our fragmented, dysfunctional system – tweaks that will never get us there? Doesn’t anyone care?)
AP Poll: Many think health overhaul should do more
By Ricardo Alonso-Zaldivar and Jennifer Agiesta
The Associated Press
September 26, 2010
A new AP poll finds that Americans who think the law should have done more outnumber those who think the government should stay out of health care by 2-to-1.
The poll found that about four in 10 adults think the new law did not go far enough to change the health care system, regardless of whether they support the law, oppose it or remain neutral. On the other side, about one in five say they oppose the law because they think the federal government should not be involved in health care at all.
2010 Health Care Reform Survey
By Stanford University with the Robert Wood Johnson Foundation
The Associated Press
HC1. In general, do you favor, oppose, or neither favor nor oppose the law changing the health care system that the U.S. Congress passed last March?
9% – Favor strongly
21% – Favor somewhat
30% – Neither favor nor oppose
17% – Oppose somewhat
23% – Oppose strongly
0% – Refused
(Ask if HC1 = oppose strongly, oppose somewhat or neither favor nor oppose):
HC1A. Which of the following best expresses your view of the health care law that Congress passed last March?
28% – I oppose most or all of the changes made by the law
20% – I oppose a few of the changes made by the law
23% – I favor most or all of the changes made by the law, but I think that law doesn’t do enough to improve the health care system
28% – I oppose the law because I think the federal government should not be involved in health care at all
1% – Refused
(Ask if HC1 = favor strongly, favor somewhat or neither favor nor oppose):
HC1B. Do you think that the health care law passed last March by Congress should have done more to change the health care system, or do you not think that?
61% – It should have done more
36% – Do not think that
3% – Refused
HC2. How much, if at all, should the health care system in the United States be CHANGED from what it was like in February, 2010, before Congress passed the law to change the system? Would you say it should be changed…
17% – A great deal
22% – A lot
35% – A moderate amount
16% – A little
9% – Not at all
1% – Refused
PR6a. Do you favor, oppose, or neither favor nor oppose a law that would require every American to have health insurance, or pay money to the government as a penalty if they do not, unless the person is very poor?
8% – Strongly favor
17% – Somewhat favor
25% – Neither favor not oppose
16% – Somewhat oppose
33% – Strongly oppose
8% – Refused
Poll results (32 pages):
Twice as many Americans believe that the Patient Protection and Affordable Care Act should have done more to change the health care system than those who believe that the government should not be involved in health care at all, according to a release this weekend on the AP/Stanford/RWJ poll. Framed this way the statement would lead you to believe that the majority of Americans want more reform, when, according to this poll, only about two-fifths hold that view, whereas only one-fifth believe that the government should not be involved at all.
Another confusing result stems from the fact that those favoring reform and those opposing reform were asked two different questions (HC1A and HC1B), yet those neither favoring nor opposed were asked both questions. It would not be surprising to learn that those favoring reform would want to see more done, but it would have been helpful to know how many of those opposed were opposed because not near enough was done. The number probably would have been fairly small since only 23 percent of those opposed plus those neutral wanted more done.
There are some conclusions that we can draw from the poll that do seem to be valid:
* Nine-tenths of Americans agree that the health care system should be changed from what it was like before the legislation passed.
* Four-fifths favor “making sure that more Americans get the health care they need.”
* Four-fifths favor “reducing the amount of money that patients pay for health care.”
* Half are opposed and only one-fourth favor the individual mandate to either buy health insurance or pay a penalty – an essential element of a system based on private health plans.
* Those polled were split on their understanding of various measures that may or may not have been included in the legislation. Thus these are the opinions of a relatively uninformed electorate.
The reassuring findings in this poll are that Americans do support the goals of reform: 1) Americans should have the health care that they need, and 2) Health care should be affordable for patients.
The poll also shows that the public is not well informed on health policy, so we need to do a much better job in showing them how they can achieve the health care reform goals that they want by enacting an improved Medicare program that covers everyone.
By Claudia Chaufan, M.D.
So today California Healthline reported the “good news” about health reform U.S. style, joining in the celebratory mood with the New York Times, which announced that “For Many, Health Care Relief Begins Today”, because, as California Healthline noted:
These are only a few of the many provisions that take effect as of today, and that as it appears we are supposed to celebrate. But are we?
Not just yet. Let’s look at the “good news” through an alternative, and equally plausible, lens:
Number 1: While insurers may not be permitted to rescind coverage for technical mistakes made on patient applications, they will be able to do so based on other considerations. For instance, based on“intentional misrepresentation”, the number 1 reasons insurers allege to cancel policies.
Number 2: While lifetime monetary limits on insurance coverage will end, these limits apply only to covered services. Uncovered ones will be on patients, as they always have been. And as insurers are permitted to sell policies that cover as little as 60% of covered services (again, only covered services), patients will be extremely vulnerable to financial ruin if they become seriously ill.
Number 3: Yes, your “adult child” will be able to remain on your plan (assuming you have one and you or your “child” pay for the coverage) until age 26. And if you signed up to receive email alerts from Barack’s cheerleaders, Organizing for America, you may have read illustrative stories about the law’s goodness. For instance, you may have read that Kristin, a recent grad living in Scottsdale, Arizona, laments that health reform was not implemented last year, because it would have allowed her to remain on her mom’s plan, something that young folks now are able to do….until they turn 26, of course. But clearly this is only good news compared to the status quo, yet why should this be our standard? If Kristen lived in Canada, or in the UK, or anywhere else in the industrialized world, including Taiwan (and soon in China) she would not be hoping to remain forever young just to have access to her parents’ coverage – at least not for those reasons – because her health care needs would be covered as a matter of right, and for life.
Number 4: Yes, insurers will be required to provide certain no-cost preventive services, but, who do you think is going to foot the bill? You guessed it! All of us in the form of increased premiums — together with the bill for any other provision that affects insurers’ bottom line, such as the provision that insurers spend no more than 20% in administrative overhead.
Indeed, in a less cheerful mood just yesterday, New York Times reporter Robert Pear wrote that “state insurance regulators told the White House…that health insurance markets in some states would be disrupted unless President Obama gave insurers a temporary dispensation from one major provision of the new health care law” – remarkably, that which requires that insurers spend no more than 20 or 30 cents of every premium dollar on paper shuffling or profit rather than on health care (For the record, the Robert Wood Johnson Foundation estimated that insurers’ expenses on physicians and clinical services amount to a mere 21.2%, so insurers are complaining about having to spend no more than roughly the same amount for “administering” our money).
Just getting a tad ahead of us (and of the law), as California Healthline noted earlier this week, Blue Shield of California has ended its “one-year rate guarantee”. This means that Blue Shield will be able to increase health plan rates throughout the year, instead of waiting for the annual renewal period. As a company spokesperson reported, Blue Shield opted to end the rate “because of forthcoming changes under the federal health reform law”. All which, according to the same source, has left Democrats and Republicans scratching their heads, seeking reasons behind hikes in premium costs (really???).
Ok. If depression has not prevented readers to read this far, let’s examine “reason for celebrating number 5″. As it appears, as of today “consumers” (we’re all consumers now) will be allowed to appeal claims decisions through an external review process. Now, assuming that it is good news that the bad guy will be still around yet now we are allowed to defend ourselves from him, the downside is that it is unclear who will be in charge of those appeals, or more importantly, who will pay for them. Indeed, just days ago, the same California Healthline announced that “state agencies have limited resources to implement reform law”.
Should we be surprised? Not at all. Indeed, the law was not passed to make ordinary Americans happy, although that was certainly the rhetoric. It was passed to satisfy the real constituency of the folks in Washington, a corporate lobby that has hijacked American democracy. In fact it was drafted by a member of that lobby, a WellPoint executive, himself. And they surely have reason to celebrate, now that they’ve been given at least $447 billion in taxpayer money to subsidize the compulsory purchase of their shoddy products.
Can we do something about it? Yes we can. We can, and must, demand a public single payer system that streamlines administration, stops wasting money in paper pushing or inflated prices, puts back medical decisions where they belong — in the hands of providers and patients — and allows us to make badly needed improvements in the health care delivery system – increasing the number of primary providers, emphasizing primary care, and so forth.
We need a new civil rights type movement. We need to demand health care justice for all.
The Perennial Quest to Lower Health Care Spending
By Uwe Reinhardt
The New York Times
September 24, 2010
… the nation bravely set upon the mission of reducing the left-hand side of the dreaded health care equation — that is, National Health Care Spending = National Health Care Incomes — without the temerity of touching its right side. For obvious reasons, touching the right side always turns out to be the third rail of health reform.
Last year, health care spending in the United States absorbed slightly more than 17 percent of G.D.P. (For most other industrialized nations, the figure is still around 10 percent or less.)
What would the critics have the president and Congress do?
To explore that question, let us deconstruct national health spending, as shown in the chart below. Here we artificially assume that there is a well-defined thing called “health care,” measurable in standard units that have a defined single price per unit. Thus the rendering is merely conceptual, a guide to order the discussion.
NHE = Pg x Qg x Ng + Pp x Qp x Np
NHE = national health expenditures
Pg = prices for health care paid by public insurers
Pp = prices for health care paid by private insurers
Qg = volume of health care used per capita under public insurance
Qp = volume of health care used per capita under private insurance
Ng = number of persons served under public insurance
Np = number of persons served under private insurance
What, then, can any president and Congress do to the variables on the right side of that equation to reduce the future trajectory of national health spending on the left-hand side, especially in the current political climate?
As we have learned in the last year, any attempt to bend down the future trajectory of public-sector fees (Pg) will be met with outcries:
(1) that hospitals and doctors will be driven into bankruptcy;
(2) that publicly-insured individuals will lose access to physicians who will refuse to work for the low public-sector fees;
(3) that doctors, hospitals and other providers who do treat publicly-insured patients have no choice but to recover more of their costs from private payers, who are assumed to have little countervailing market power to resist such increased charges.
Therefore, strike Pg from a strategy of bending the cost curve.
The future trajectory of the volume variable, Qg, might possibly be bent down ever so slightly through cost-effectiveness analysis of alternative therapeutic approaches, or by more widespread use of living wills – an idea once actively promoted by Newt Gingrich.
But those ideas were met in the past year by dark allusions to “rationing,” to Nazi-style death panels and to “killing Granny.” Therefore, strike lowering Qg, as well, from a strategy for bending the cost curve.
Another option is to reduce the time path of the number of people served by public insurance (Ng).
This could be done by raising eligibility thresholds for Medicaid, or raising the eligibility age for Medicare, or partially privatizing Medicare through Medicare Advantage plans, or by converting the program from a defined benefit to a defined contribution program. But any of these options would merely move health spending off the books of government and into private-sector health spending.
There is no robust empirical evidence to suggest that such a shift would lower national health spending, unless the move increased the number of uninsured Americans for whom, on average, per capita health spending is less than half of the spending incurred on similarly situated insured Americans.
In fact, shifting Medicare beneficiaries out of traditional Medicare into private Medicare Advantage plans in past years is known to have increased the burden on taxpayers and is apt to have increased overall health spending. Therefore, strike Ng as well, unless we want the number of uninsured to climb.
In sum, any attempt to reduce health spending on the public-spending side (Pg x Qg x Ng) is limited by powerful political constraints and is unlikely to reduce overall health spending – especially if the providers of health care have the market power to recoup from private payers any reductions in public health spending coming their way.
This leaves private-sector spending as a potential source of reductions in health spending. But what control does any president or Congress have over those variables (Pp x Qp x Np)?
The last president with the temerity to control spending in the private sector directly was Richard Nixon, who imposed outright price controls on the sector the mid-1970s. One can only imagine what storm of protest that approach would unleash today.
Can private insurers or patients be counted on to bend down the future path of private-sector health care prices Pp? I doubt it.
For one, neither has left a stellar record in this regard over the last three decades. Furthermore, the cost-shift argument alluded to above suggests that in most local health care markets, private payers have rather limited power to exert much downward pressure on the prices they are charged for health care.
Thus, if the future path of private-sector health spending will be deflected downward at all, it will most likely come through reductions in the per-capita utilization (Qp). That may be achieved through ever-higher cost-sharing by patients at point of service – that is, through ever-higher deductibles and ever-higher coinsurance, if not outright lack of health insurance.
Some analysts think that higher cost-sharing will also force down prices (Pp), as patients, using their own money, shop around for a deal. But that could happen only if the veil of secrecy that has traditionally kept private-sector prices opaque from patients could be lifted.
So far the quest to get this done has had only limited and temporary success.
One should, of course, not labor under the illusion that reducing use of health care (Qp) through higher cost-sharing by patients would avoid rationing health care. As every economist knows, using price and ability to pay is merely one of several approaches to rationing scarce resources among unlimited wants.
Thus, absent some miracle – for example, that bundled payments per episode of illness to so-called Accountable Health Organizations will actually serve to bend down the future time path of health spending noticeably – the nation is likely to rely in the years ahead on rationing more and more of health care by income class.
Perhaps this is what the legendary “median voter” now wants.
Of course, other nations do provide all of their citizens with health care at a much lower level of national health expenditures (NHE). So what is there in this conceptual rendering (Professor Reinhardt’s formula) that other nations have discovered and applied that we haven’t?
In his May 8, 2009 blog, Professor Reinhardt provided a taxonomy of public and private financing and health insurance. Essentially all other nations have found success by using some form of social insurance. Even when private insurers are used, they function much more in the G (government) portion of the equation than they do in the P (private) portion.
Professor Reinhardt also co-authored a landmark article titled, “It’s the Prices, Stupid.” Thus the secret of other nations: Even if they use private insurance plans, they control national health expenditures through various means of government control of prices. In contrast, the volume of health care and number of persons remain relatively fixed. Private control of prices (market control) has played a negligible role in controlling NHE.
Although Professor Reinhardt can describe several models through which this can be accomplished, some of us remain convinced that the simplest and most efficient model would be a single payer national health program – an improved Medicare that covered everyone. Regardless, the Patient Protection and Accountable Care Act won’t get us there.
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