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.
Employers Held Health Benefit Cost Growth to 4.1% in 2012, the Smallest Increase in 15 Years
Mercer, November 14, 2012
Decisive action by employers in 2012 – in particular, moving more employees into low-cost consumer-directed health plans and beefing up health management programs – was rewarded with the lowest average annual cost increase since 1997. According to the National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer and released today, growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012.
With a growing number of employers now positioning a high-deductible, account-based consumer-directed health plan as their primary plan – or even their only plan – employee enrollment jumped from 13% to 16% of all covered employees in 2012. Many employers see these plans as central to their response to health care reform provisions that will raise enrollment. Over the past two years, offerings of CDHPs have risen from 17% to 22% of all employers, and from 23% to 36% of employers with 500 or more employees. Well over half (59%) of very large organizations (20,000 or more employees), which typically offer employees a choice of medical plans, now offer a CDHP.
Moving even a small number of employees out of a more expensive plan into a CDHP can result in significant savings for an employer. The cost of coverage in a CDHP with a health savings account is about 20% lower, on average, than the cost of PPO coverage – $7,833 per employee compared to $10,007.
“PPACA requires that health plans cover, at a minimum, 60% of eligible health plan expenses,” says Ms. Cunninghis (Sharon Cunninghis, US business leader for health and benefits). “Some employers are resetting their health plan value to move closer to that minimum, and saving money as a result.”
Offering a lower-cost CDHP is one way employers “reset” plan value in 2012. Others simply raised the deductible of an existing PPO plan. The average PPO in-network deductible reached $1,427 for an individual in 2012.
“Over the past decade, employers have figured out how to stabilize health benefit cost increases through cost-shifting and other cost management techniques. Now we’re seeing a move toward even greater control through defined contribution strategies,” says Ms. Cunninghis.
An example of a defined contribution strategy is determining in advance what the employer contribution to the cost of coverage will be, and requiring employees to pay anything above that amount. If the employer offers a range of plans, employees can save money by choosing a lower-cost plan. Nearly half of employers – 45% – say they currently use or are considering using a defined contribution strategy.
Pop the champagne corks! Businesses have held the rate of health benefit cost increases to only 4.1%! Though that is still twice the rate of inflation, it’s the smallest increase in 15 years!
How did they achieve this success? By moving employees into lower cost consumer-directed health plans. By increasing deductibles for the plans. By other forms of cost shifting. By lowering actuarial values of plans to 60% – the minimum required by the Affordable Care Act. By adopting defined contribution strategies. By shifting to private insurance exchanges. By herding employees into narrower provider networks.
So have the employers finally learned how to slow the escalation of health care costs? No! They have dumped their costs onto the backs of their employees!
So while they enjoy the bubbly in their executive suites, they have left too many of their employees without even any beer money.
If you didn’t read yesterday’s message that included the work of Thomas Piketty and Emmanuel Saez, you should. You will see that the solution is quite simple. Tax the crap out of the plutocrats and spend the proceeds on a public insurance program for all of us – an Improved Medicare for All. (I would use less inflammatory language except that wealthy employers who have such a low regard for their own employees do not deserve elegant language.)
Please note that this message does not apply to the multitude of small businesses which are struggling to maintain a modicum of success. These businesses are also victims of the burdensome health insurance costs. They too would benefit from an equitable public insurance program, if only they would make an effort to understand what it would mean for them. It’s our job to try to educate them.
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.
Transcript of President Obama’s Press Conference
The New York Times, November 14, 2012
Q (Jessica Yellin): Mr. President, on the fiscal cliff — two years ago, sir, you said that you wouldn’t extend the Bush-era tax cuts, but at the end of the day, you did. So respectfully, sir, why should the American people and the Republicans believe that you won’t cave again this time?
PRESIDENT OBAMA: Well, two years ago the economy was in a different situation. We were still very much in the early parts of recovering from the worst economic crisis since the Great Depression…
But what I said at the time is what I meant, which is this was a one-time proposition. And you know, what I have told leaders privately as well as publicly is that we cannot afford to extend the Bush tax cuts for the wealthy. What we can do is make sure that middle-class taxes don’t go up…
And what we can then do is shape a process whereby we look at tax reform, which I’m very eager to do. I think we can simplify our tax system. I think we can make it more efficient. We can eliminate loopholes and deductions that have a distorting effect on our economy.
Q: You’ve said that the wealthiest must pay more. Would closing loopholes instead of raising rates for them satisfy you?
PRESIDENT OBAMA: I think that there are loopholes that can be closed, and we should look at how we can make the process of deductions, the filing process easier, simpler.
But when it comes to the top 2 percent, what I’m not going to do is to extend further a tax cut for folks who don’t need it, which would cost close to a trillion dollars. And it’s very difficult to see how you make up that trillion dollars, if we’re serious about deficit reduction, just by closing loopholes in deductions. You know, the math tends not to work.
Taxing the 1%: Why the top tax rate could be over 80%
By Thomas Piketty, Emmanuel Saez, Stefanie Stantcheva
Vox, December 8, 2011
Top income tax rates on upper income earners have declined significantly since the 1970s in many OECD countries, again particularly in English-speaking ones. For example, top marginal income tax rates in the United States or the United Kingdom were above 70% in the 1970s before the Reagan and Thatcher revolutions drastically cut them by 40 percentage points within a decade.
At a time when most OECD countries face large deficits and debt burdens, a crucial public policy question is whether governments should tax high earners more. The potential tax revenue at stake is now very large.
There is indeed a strong correlation between the reductions in top tax rates and the increases in top 1% pre-tax income shares from 1975–79 to 2004–08 across 18 OECD countries for which top income share information is available. For example, the United States experienced a 35 percentage point reduction in its top income tax rate and a very large ten percentage point increase in its top 1% pre-tax income share. By contrast, France or Germany saw very little change in their top tax rates and their top 1% income shares during the same period. Hence, the evolution of top tax rates is a good predictor of changes in pre-tax income concentration. There are three scenarios to explain the strong response of top pre-tax incomes to top tax rates. They have very different policy implications and can be tested in the data.
First, higher top tax rates may discourage work effort and business creation among the most talented – the so-called supply-side effect. In this scenario, lower top tax rates would lead to more economic activity by the rich and hence more economic growth. If all the correlation of top income shares and top tax rates were due to such supply-side effects, the revenue-maximising top tax rate would be 57%. This would still imply that the United States still has some leeway to increase taxes on the rich, but that the upper limit has already been reached in many European countries.
Second, higher top tax rates can increase tax avoidance. In that scenario, increasing top rates in a tax system riddled with loopholes and tax avoidance opportunities is not productive either. However, a better policy would be to first close loopholes so as to eliminate most tax avoidance opportunities and only then increase top tax rates. With sufficient political will and international cooperation to enforce taxes, it is possible to eliminate most tax avoidance opportunities, which are well known and documented. With a broad tax base offering no significant avoidance opportunities, only real supply-side responses would limit how high top tax rate can be set before becoming counter-productive.
Third, while standard economic models assume that pay reflects productivity, there are strong reasons to be sceptical, especially at the top of the income distribution where the actual economic contribution of managers working in complex organisations is particularly difficult to measure. In this scenario, top earners might be able to partly set their own pay by bargaining harder or influencing compensation committees. Naturally, the incentives for such ‘rent-seeking’ are much stronger when top tax rates are low. In this scenario, cuts in top tax rates can still increase top income shares, but the increases in top 1% incomes now come at the expense of the remaining 99%. In other words, top rate cuts stimulate rent-seeking at the top but not overall economic growth – the key difference with the first, supply-side, scenario.
To tell these various scenarios apart, we need to analyse to what extent top tax rate cuts lead to higher economic growth. There is no correlation between cuts in top tax rates and average annual real GDP-per-capita growth since the 1970s. For example, countries that made large cuts in top tax rates such as the United Kingdom or the United States have not grown significantly faster than countries that did not, such as Germany or Denmark. Hence, a substantial fraction of the response of pre-tax top incomes to top tax rates may be due to increased rent-seeking at the top rather than increased productive effort.
Naturally, cross-country comparisons are bound to be fragile, and the exact results vary with the specification, years, and countries. But by and large, the bottom line is that rich countries have all grown at roughly the same rate over the past 30 years – in spite of huge variations in tax policies. Using our model and mid-range parameter values where the response of top earners to top tax rate cuts is due in part to increased rent-seeking behaviour and in part to increased productive work, we find that the top tax rate could potentially be set as high as 83% – as opposed to 57% in the pure supply-side model.
In the end, the future of top tax rates depends on the public’s beliefs of whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence social beliefs (through think tanks and media) and policies (through lobbying), thereby creating some reverse causality between income inequality, perceptions, and policies.
An important result of the election is that now both Republicans and Democrats agree that an increase in tax revenues will be one requirement to avoid plunging off the fiscal cliff (i.e., avoiding the trap that Congress set for itself that would result in spending cuts that neither side wants).
There does remain a sharp divide over what should be the source of those increased revenues.
The Republicans prefer to broaden the tax base primarily by reducing tax expenditures (reducing deductions for home loan interest, charitable contributions, state taxes, etc.), but they are adamantly opposed to any increase in income tax rates. In fact, they want a further reduction in tax rates, obviously creating more deficit that must be made up by further broadening the tax base, even though there really isn’t much leeway, if any.
Democrats have supported allowing the temporary Bush tax cuts to expire for those with over $250,000 in income. They have indicated that they are willing to negotiate, suggesting that they might leave the rates at 35% instead of the reversion to 39.6%, if they could achieve similar results through the broadening of the tax base.
This is why the work of Piketty, Saez and Stantcheva is so important. They show that we should do both. We should broaden the tax base by eliminating tax avoidance opportunities, and we should increase tax rates to a level that will fully fund all important public functions. We could set top tax rates as high as 57% without having any adverse impact on the economy, or we could set rates even higher at 83% if we wanted to compensate for rent-seeking (simply stated, the means by which the wealthy extract large amounts of money from the rest of us without providing any substantial value in return).
Although we could easily eliminate our budget deficits through these two tax policies – eliminating tax avoidance opportunities and increasing tax rates for the highest income bracket – our politicians are also proposing spending reductions. Of particular concern to health reform advocates is that some politicians want to reduce “entitlement” spending for Medicare. It is not just the Republicans since President Obama already had agreed to significant Medicare reductions in his tentative “grand bargain” he made with Speaker Boehner. This attack on Medicare should be opposed vigorously since we need to protect Medicare until we are able to replace it with a better program.
So what does this all have to do with single payer? Quite simply, it provides an answer to those who say that we cannot afford the taxes that would be required to fund equitably a single payer system. Clearly, not only could we collect enough taxes to fund the system without having a negative impact on other sectors of the economy (and health care is one of the most important sectors), but we would also accomplish two other important economic goals: 1) establish a transfer from the wealthy to fund health care for low- and moderate-income individuals and families who can not longer bear their full equally-divided share of our national health expenditures, and 2) finally begin to reverse the unfair and inequitable distribution of excess wealth to the rent-seekers.
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.
The Prevalence and Cost of Deductibles in Employer Sponsored Insurance:
A View from the 2012 Employer Health Benefit Survey
Kaiser Family Foundation, November 2012
The percent of covered workers enrolled in a plan with a general annual deductible has increased significantly over time. In 2006, just over half (52%) of covered workers had a deductible for single coverage, compared with almost three-quarters (72%) in 2012.
Overall, the average general annual deductible is $1,097 for covered workers enrolled in a single coverage plan requiring a deductible; an increase of 88% since 2006.
Deductibles are much higher for workers enrolled in HDHP/SO plans (savings options), with 25% of workers enrolled in a plan with a deductible between $1,000 and $1,400, and 25% of workers in a plan with a deductible greater than $2,500.
Although workers at small firms are no more likely to be enrolled in health coverage that includes a deductible, they typically face much higher deductibles than workers at large firms. The average deductible for covered workers enrolled in single coverage at a small firm is nearly twice as much as the deductible for covered workers at larger firms.
Covered workers enrolled in PPO and POS plans with many higher-wage workers tend to have lower deductibles than their counterparts at firms with fewer higher-wage workers. Covered workers in HMO, PPO and HDHP/SO plans at firms with some unionized workers have lower general annual deductibles than workers at firms without unions.
In addition to contributing more towards premiums, covered workers are increasingly faced with higher cost sharing. A larger proportion of workers are required to meet a deductible prior to utilizing services and these deductibles are increasing in size. It has become commonplace for covered workers to be enrolled in a plan with a deductible of $1,000 or more. While many working families have sufficient savings and coverage in case of a medical emergency, the growth in workers’ contributions and cost sharing may increasingly become a financial strain on some households.
Ever higher deductibles have now become the standard for employer-sponsored plans. The new state exchange plans to be offered to individuals and small businesses will have to have higher deductibles as well because of their comparatively low actuarial values.
The conclusion in this report states that “the growth in workers’ contributions and cost sharing may increasingly become a financial strain on some households.” This is an overly conservative statement since innumerable studies have shown that high deductibles already do cause both financial hardship and impairment of access to appropriate health care.
A single payer system controls costs without the necessity of imposing financial barriers such as high deductibles. Let’s change to policies that take care of patients first rather than policies that shift costs from employer or government budgets to individual patients, especially since ultimately we’re all funding those budgets anyway, whether as consumers or taxpayers.
Accountable Care Organizations May Have Difficulty Avoiding The Failures Of Integrated Delivery Networks Of The 1990s
By Lawton R. Burns and Mark V. Pauly
Health Affairs, November 2012
Accountable care organizations are intended to improve the quality and lower the cost of health care through several mechanisms, such as disease management programs, care coordination, and aligning financial incentives for hospitals and physicians. Providers employed several of these mechanisms in forming the integrated delivery networks of the 1990s. The networks failed, however, because of heavy financial losses stemming from hospitals’ purchase of physician practices and their inability to align incentives, garner capitated contracts, and develop the infrastructure to manage risk. Although the current mechanisms underlying accountable care organizations continue to evolve, whether and how they will have an impact on quality and costs remains open to question. Care coordination and information technology are proving more complicated and expensive to implement than anticipated, providers may lack the ability to implement these mechanisms, and primary care providers are in short supply. As in the 1990s, success depends on targeting specific populations, such as people with multiple chronic conditions who need and may benefit from coordinated care.
What does that imply for the emergence, performance, and success of accountable care organizations? It requires a reconsideration of our earlier conjecture that the organizations will be more likely to improve quality than to lower costs. With intense financial pressure from Medicare generated by lower Medicare payments, the organizations may be forced to limit costs — and, if they cannot do so by ridding their systems of waste, perhaps to do so by achieving fewer quality improvements.
More generally, Medicare may wish to use accountable care organizations to contain costs. In effect, the organizations will be told, “Here is how much money you will get per patient, and you are not allowed to charge any more; do the best you can with that.”
This draconian incentive system will truly constitute a test of how much waste there is in the system.
The Affordable Care Act includes several measures supposedly to control health care spending, but analysis of the health policy literature to date suggests that none of these will have more than a negligible impact. Most hope is held out for accountable care organizations (ACOs), but this report by Burns and Pauly suggests that these new entities include many of the flaws of previous similar efforts, primarily the failed integrated delivery networks of the 1990s.
In reading their full article you will understand better why we cannot expect dramatic results from ACOs and the mechanisms that they would use such as disease management, care coordination, realignment of financial incentives, health information technology, electronic health records, computerized physician order entry, clinical decision support systems, and especially the Medicare shared savings program.
As opposed to well established integrated health systems like Kaiser Permanente, these new systems will be formed from the existing health care community. The authors explain that there is no guidebook to develop and implement a coherent system by combing the existing professionals and institutions. Efforts will require considerable money and time. New personnel such as care coordinators and information technology staff will be required. As they state, “We have seen no model of a ‘flat’ accountable care organization — one requiring no increase in numbers or layers of staffing.” And it will be difficult “to ensure that all changes are internally congruent.”
Although most agree that there is a need for reinforcement of our primary care infrastructure, the authors provide evidence that the demands of care coordination under ACOs will cause a reduction in time spent on direct patient care. One study indicated that care coordination would require an additional 3.2 weeks per year of physician time.
The successful Kaiser and Group Health models took many decades to develop. You cannot suddenly take the existing fragmented delivery system and create competing, truly integrated systems in each community. That is what was wrong with Enthoven’s managed competition model, and that is what is wrong with the incipient accountable care organization model.
The greatest risk of ACOs seems to be that Medicare will use them to help meet the political goal of “reducing entitlement spending,” sacrificing the emphasis on quality because of cost considerations, and applying pressure to ratchet down spending. The latter is particularly a problem because private health systems are not very adept at identifying and ferreting out waste, rather they reduce spending primarily by impairing access. Selectively limiting Medicare spending will further compound access problems by a reduction in the numbers of willing providers, likely diminishing public support of Medicare.
In contrast, a single payer system is designed to reduce the abundance of identifiable waste, especially administrative, while improving both quality and access. It would be fine to continue with a demonstration project studying integration of health care to see if such delivery system reform could improve quality, but we don’t want to allow that to displace the much needed financing and health system reforms of single payer. That’s where we would have the greatest return on quality, access and costs.
NOTE: Do not bother reading this article; simply take only three seconds to skim it. Its essence can be elucidated by reading this one sentence gleaned from the article: “Obamacare will prove to be a gold mine for astute traders and investors on the long side and the short side.”
26 ways to profit from ‘Obamacare’
By Nigam Arora
MarketWatch, November 8, 2012
Obama has been re-elected; “Obamacare” is the law of the land. It doesn’t matter if you agree or disagree with Obamacare, you might as well generate big profits from it.
Obamacare has been profitable for us. We bought Amerigroup Corp. at $22.05, and, as of this writing, the stock is at $91.44 — this is a whopping 315% return.
It wasn’t long ago when we aggressively bought Tenet Healthcare at $20.40. Yesterday THC hit a 52-week high of $27.60.
Here are 26 ways to profit from both the long and the short side.
The best way to profit on the long side from Obamacare is to buy hospital stocks as utilization rates will increase and uncollected receivables will go down.
Under Obamacare, the pool of paying patients will increase. It is estimated that currently about 30 million Americans are uninsured. The increase in the number of paying patients will be huge.
By law, hospitals have to serve all patients who show up at their emergency rooms including indigents as well as those with no insurance. Hospitals also have difficulty collecting from low income Americans who may have no insurance or are underinsured. Some hospitals aren’t able to collect as much as 30% of their billings.
The earnings of some hospitals may increase by as much as 25%.
Our favorite stock in this sector is THC. Other hospital stocks on our list buy are Community Health Systems, HCA Holdings, LifePoint Hospitals, and Universal Health Services.
These HMOs focus on Medicaid and other government programs and will be big beneficiaries of Obamacare.
We own AGP but it is not suitable for those not in the stock. AGP is being bought by WellPoint.
Other names on our buy list are Centene Corp., Molina Healthcare, and WellCare Health Plans.
Medicare Part D
Medicare Part D is a private plan which provides prescription drug coverage for those eligible for Medicare. Government payments received by insurance companies for this program are likely to see reductions.
Humana is our top pick to short sell, but we will wait for this stock to meet all of our six screens before acting.
In the long run, branded pharmaceuticals will be hurt. Obama will be under intense pressure to reduce rising health care costs in Medicaid and Medicare. Branded drugs are a sitting duck simply because Big Pharma sells them for far less abroad than in the United States.
Large-cap pharmaceutical stocks are in favor these days. The market participants perceive them as safe. The reasoning goes that people will always be using drugs irrespective of what happens in Europe, China or to the U.S. economy.
It doesn’t hurt that these stocks also pay high dividends. Buying high dividend stocks is the rage. However Bush tax cuts expire at the end of this year; if there is no compromise in Washington, income-tax rate on dividends will jump and high dividend stocks will give up some of their recent gains.
Secret to making money by short selling is to sell short stocks that are popular and whose fundamentals are likely to deteriorate. We are short Market Vectors Pharmaceutical.
We have recently taken profits on Lilly, but we plan to short it again.
Two other stocks to short on our list are Merck and Pfizer.
In the short run, Obamacare is positive for generic pharmaceutical companies such as Teva, Mylan, and Dr. Reddy’s Labs. In the long run, these companies will suffer as there will be intense pressure on the prices they can charge. There is an opportunity here on the long side in the medium term, but it will become a short opportunity in due course.
Obamacare levies a tax on medical devices. Further pressure on medical device companies such as Medtronic, Stryker, St. Jude Medical, and Zimmer Holdings to reduce prices will increase.
We plan to short sell these companies when they meet our six screens.
There will be more medical tests as more patients are insured. In the short run, implementation of Obamacare is positive for testing companies such as Quest Diagnostics and Laboratory Corp. of America.
In the long run, Obamacare is very negative for these companies because they will come under heavy pressure to reduce rates. These are some of the best ways to profit from the short side in the long-term.
As more pharmaceuticals are used, the ruling is positive for drug distributors such as McKesson, Cardinal Health, and AmerisourceBergen.
Obamacare will prove to be a gold mine for astute traders and investors on the long side and the short side. The key to making money will be the timing of entries and exits using a proven method such as ZYX Change Method. If you cannot short, consider the inverse ETF RXD.
The SEC will affirm that shareholders of health care firms must always have priority over the patients that should benefit from their products and services. The Affordable Care Act has expanded investor ownership within our health care system. As this article states, “Obamacare will prove to be a gold mine for astute traders and investors.”
Is this what our health care system is all about?
It doesn’t have to be this way.
A Single-Payer System Would Reduce U.S. Health Care Costs
By Ed Weisbart, MD, CPE
American Medical Association Journal of Ethics, Virtual Mentor, November 2012
Today’s fragmented system is akin to requiring each household in a community to anticipate their needs for the coming year and negotiate their own fees and scope of services with the local police and fire departments. Imagine instead how much of their budgets these life-saving community services would be obliged to devote to marketing to and negotiating with each household and the rampant disparities in service that would result. That is precisely what is happening today in health care, and it is absurdly wasteful. For police and fire departments, we have recognized that it is significantly less wasteful to give all citizens the same “coverage” for set prices and to administer it with regional coordination. Global budgeting is the only sensible strategy for such unpredictable yet universally needed services.
The ACA has begun the process of much needed change. Now we need to go further in reforming health care finance to enable all Americans to achieve their fundamental human right to comprehensive coverage. The rest of the modern world has run the laboratory studies for us; now is the time for us to adopt this well proven solution.
Health care financing is a fundamental ethical issue, thus it is very appropriate that Ed Weisbart’s article on single payer be published in the AMA’s journal of ethics. Hopefully, the brief excerpt above will entice you to click on the link to read the entire article, and then share it with others to spread the word on the imperative of the single payer model – an improved Medicare for everyone.
Yes, Obama Won a Mandate
By Jonathan Cohn
The New Republic, November 7, 2012
I’ve waited more than two years to write this sentence: The Affordable Care Act is here to stay. It survived the Supreme Court and now it has survived the threat of a unified Republican government determined to repeal it. Implementation of the law will present huge challenges, but, for the first time in a long while, the administration and its allies can focus on those challenges rather than on rearguard political fights to keep the program alive.
The reelection of President Obama and the failure of the Republicans to gain more than filibuster control of the Senate means that the Affordable Care Act (Obamacare, or ACA) will be fully implemented by 2014, as scheduled.
Although such complex legislation inevitably calls for legislative refinements, any significant efforts to expand the effectiveness of ACA would surely be blocked in the Republican-controlled House.
In the meantime, efforts on the state level to improve ACA will continue. Although small incremental steps are possible, it is unlikely that any model close to a true single payer system will be enacted within the states, even if the single payer label is used. The reason is that major enabling federal legislation would be required to construct a true stated-based single payer system, and the House still has its primary tool that it has wielded so effectively for the past two years: gridlock.
Although it seems like this might be a time to kick back and wait until the political climate improves, nothing could be further from the truth. The first step in advancing health care justice is to educate – inform the public on the facts.
We have two messages: 1) no matter how many tweaks are applied, ACA will not achieve health care justice – 30 million will remain uninsured, tens of millions underinsured, and health care costs will not be contained, and 2) there is a model that will cover absolutely everyone, provide access to high quality care, reduce financial barriers to care, and slow the increase in health care spending which would benefit us all – a single payer, improved Medicare for everyone.
We need to intensify our efforts to spread the word so that the people of our nation will be ready to support reform enthusiastically when the political climate becomes more favorable.
Health-Care Law Spurs a Shift to Part-Time Workers
By Julie Jargon, Louise Radnofsky and Alexandra Berzon
The Wall Street Journal, November 4, 2012
Some low-wage employers are moving toward hiring part-time workers instead of full-time ones to mitigate the health-care overhaul’s requirement that large companies provide health insurance for full-time workers or pay a fee.
Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week. That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.
If a company offers health insurance but the coverage is deemed sparse or unaffordable, the company must pay $3,000 for every worker who gets a federal tax subsidy to purchase coverage as an individual.
Pillar Hotels & Resorts this summer began to focus more on hiring part-time workers among its 5,500 employees. The company has 210 franchise hotels, under the Sheraton, Fairfield Inns, Hampton Inns and Holiday Inns brands.
CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s burger chains, began two months ago to hire part-time workers to replace full-time employees who left.
Home retailer Anna’s Linens Inc. is considering cutting hours for some full-time employees to avoid the insurance mandate if the health-care law isn’t repealed.
Darden Restaurants Inc. was among the first companies to say it was changing hiring in response to the health-care law. The Orlando, Fla., parent of Red Lobster and Olive Garden in February began testing hiring part-time workers in four markets to replace some full-time employees who had left, a spokesman said.
Jobs Without Benefits: The Health Insurance Crisis Faced by Small Businesses and Their Workers
By Ruth Robertson, Kristof Stremikis, Sara R. Collins, Michelle M. Doty, and Karen Davis
The Commonwealth Fund, November 2012
The share of U.S. workers in small firms who were offered, eligible for, and covered by health insurance through their jobs has declined over the past decade. Less than half of workers in companies with fewer than 50 employees were both offered and eligible for health insurance through their jobs in 2010, down from 58 percent in 2003.
Employers Expected To Keep Some Of Health Law’s Popular Provisions, Even If Obama Loses
By Julie Appleby
Kaiser Health News, November 5, 2012
No matter who wins the presidential election…
Employers will continue looking for ways to cap expenses, moving toward higher deductible policies, or placing limits on how much they pay toward their workers’ premiums — both trends that predate the federal health law, analysts say.
As we have stated several times before, the Affordable Care Act (ACA) was designed to encourage the perpetuation of employer-sponsored health plans which currently provide the majority of the population with coverage. Current trends do not look favorable. More than half of workers in small companies do not even receive health care coverage, and some larger employers are beginning to shift to part-time employment in order to escape the insurance requirements of ACA. Those that continue coverage are shifting more costs to employees through higher deductibles and through a shift to defined contribution programs.
A health care financing system should provide full coverage for everyone automatically. Obviously, ACA does not do that. The CBO predicts that 30 million will remain without coverage, but based on the fact that employers are beginning to bail out, it is likely that the numbers of uninsured will be even greater. We have to do something different.
How could we achieve automatic enrollment for everyone? Simple. Just as with Medicare Part A, enroll every qualified individual automatically. In a properly designed single payer system, absolutely everyone would be qualified, and therefore everyone would be enrolled.
Conflict-of-interest concerns raised as Obama races to implement health reform
By Alexander Bolton
The Hill, November 3, 2012
The Obama administration is relying heavily on outside contractors to implement a core component of healthcare reform as it races to set up a federal health insurance marketplace before 2014.
The fast-approaching deadline gives the administration little time to scrutinize private-sector partners for conflicts of interest.
The purchase of one of these contractors, Quality Software Services, Inc. (QSSI), by UnitedHealth Group, a major healthcare conglomerate, has sparked concerns about a potentially uneven playing field.
QSSI, a Maryland-based contractor, in January won a large contract to build a federal data services hub to help run the complex federal health insurance exchange.
It will be working with several other contractors, including CGI Federal, Inc., to create the technological architecture for the exchange.
The quiet nature of the transaction, which was not disclosed to the Securities and Exchange Commission (SEC), has fueled suspicion among industry insiders that UnitedHealth Group may be gaining an advantage for its subsidiary, UnitedHealthcare.
It is difficult to know QSSI’s precise role because its contract is not publicly available and the department of health and human services did not provide a copy. A draft statement of work issued by HHS and used for the bidding process offers a glimpse of what the contract requires.
It reveals QSSI will finalize technical and systems requirements to develop and deliver plan management services, which includes the certifying and decertifying of health plans offered on the exchange. Plan management services also entails monitoring agreements with health plans to ensure compliance.
The technology will wield massive flows of socio-economic and health information for populations around the country that an insurance company, if privy to, could use as valuable business intelligence to determine what markets to play in.
If an insurance company had influence over the information technology architecture used to run the exchange, it could interpret federal standards in a way to exclude competitors or make it more difficult for them to win approval, say some insurance experts. Or it could have an inside track on knowing how to design plans that meet the standards.
The contractors working on the exchange will also have responsibility over payment calculation for risk adjustment.
This program is intended to redistribute funding from plans that attract younger and healthier participants, and thus have lower costs, to plans that attract people with more chronic diseases.
The draft statement of work for the contract shows QSSI will also work on technical requirements to deliver financial management services, such as payment calculation for risk adjustment.
The prospect that a subsidiary of UnitedHealth Group could have a role in calculating the reallocation of federal funds among rival health plans has unnerved some industry insiders.
“Financial management services include the services necessary to spread risk among issuers and to accomplish financial interactions with issuers,” the document states. “The risk spreading services include but are not limited to: payment calculation for reinsurance, risk adjustment and risk corridors, along with required data collection to support these services.”
The contract, which underwent a full and open competition, was initially awarded to QSSI in September of 2011 and finalized in January.
A senior executive with Optum, the subsidiary of UnitedHealth Group which bought QSSI at the end of September, said his firm and UnitedHealthcare are entirely separate businesses despite belonging to the same parent company.
“UnitedHealthcare is a client of Optum, an arms-length client, separately reported financially and separately managed,” said Andy Slavitt, group executive vice president at Optum.
“Optum has a very simple mission and that is to engage in activities to make sure the healthcare system works better for all participants,” he said, citing services such as helping an employer or union manage pharmacy benefits or helping a health company implement technologies.”
One of the many reasons that we don’t want private health insurers to manage our health care funds is that they have mastered gaming health care risks.
In the Medicare program, private insurers have selectively marketed their Medicare Advantage products to healthier individuals, yet have been paid at higher rates based on the average health care needs of this older and sicker population. The Medicare administration attempted to correct for this by risk adjustment. That is, they increased payments for patients diagnosed with more significant disorders, while reducing payments for patients with minimal disorders. The insurers responded by coding not very sick patients as if they had more serious disorders – not frank fraud, but taking liberties with diagnoses. Instead of correcting the overpayment problem this actually further increased the amount of overpayments to the private insurers.
With the Affordable Care Act, do you believe that the private insurers have had an epiphany and now want to give patients and taxpayers the best health care value possible? If you think so, you don’t understand this industry.
Follow this timetable:
* The Obama administration decided to use outside contractors to build a federal data services hub to help run the federal health insurance exchange.
* One of the more important functions of that hub is to have responsibility over payment calculation for risk adjustment. “This program is intended to redistribute funding from plans that attract younger and healthier participants, and thus have lower costs, to plans that attract people with more chronic diseases.”
* Under a competitive process, the contract was awarded to Quality Software Services, Inc. (QSSI) in September 2011, and finalized in January 2012.
* Steve Larsen, a senior official at HHS “left the Center for Consumer Information and Insurance Oversight, the office tasked with crafting rules for the national exchange, in July to take a job with Optum.”
* In September 2012, QSSI was purchased by Optum, a subsidiary of UnitedHealth Group, the parent company of UnitedHealthcare, the largest insurer in the nation.
Lest anyone might suggest that Steve Larsen may have been involved in a nefarious plot to benefit UnitedHealth, former Rep. Earl Pomeroy, a registered lobbyist with Alston & Bird, which represents Aetna, “dismissed the notion that Larsen may have given Optum an unfair advantage.”
UnitedHeathcare’s stealth takeover of the administrative entity that will allow their subsidiary to supervise risk adjustment for the plans in the federal health insurance exchange should have us all concerned. Considering their prior bad behavior, should we trust them now that they have even greater control over risk adjustment? Think not.
Okay, it’s clear that the problem is that we have turned control of health care financing over to an industry that must place its own interests over those of patients. So what is the solution? Do we further increase regulatory oversight? History has shown that they will always meet their fundamental business obligations by finding other ways to skirt regulatory interventions, just as they found a way improve their return when risk adjustment was applied as a solution to their practice of favorable selection (selectively marketing the healthy).
No, it is not that they need more government oversight, because that clearly is an inadequate solution. Rather, the solution is that this industry needs to be replaced with a public program owned by the people of this nation. We need a public service model instead of a private business model of health care financing. We need a single payer national health program – an improved Medicare that covers everyone.
It’s Time for Single-Payer
By James C. Mitchiner, MD, MPH, American College of Emergency Physicians
ACEP News, August 7, 2012
“You can always trust the Americans to do the right thing, once they’ve tried everything else.”
Winston Churchill’s iconic remark, reportedly issued at the dawn of America’s entry into World War II, is equally applicable to the present American health care debate and the crisis that spawned it. Regardless of whether you are elated or disappointed with June’s historic Supreme Court decision upholding the constitutionality of the Affordable Care Act, it is certainly no panacea for the problems facing U.S. health care. Even with the law intact, and despite its best intentions, it will still leave some 25 million uninsured, underinsure millions more, expand the corporatization of health care, and do little to control the escalating costs of care over the long term. So it’s clear we need to do the right thing: the creation of a national, universal, publicly funded health care system, free of the corrupting power of profit-oriented health insurance, and at the same time capable of passing constitutional muster. In short, the right thing is an expanded and improved Medicare-for-All program, otherwise known as single-payer.
Don’t be so shocked. For the last 30 years, we have tried all the alternatives, and none of them have worked. We have experimented with HMOs, PPOs, high-deductible health plans, health savings accounts, pay-for-performance, capitation, and disease management. These ideas have been promoted in various iterations, often with great fanfare, by public and private payers alike, yet none of them have shown long-term success at bending the cost curve. And the promise of the latest reforms du jour, such as Accountable Care Organizations and Patient-Centered Medical Homes, is speculative at best. American health care is unique among the world’s democracies in that it was never planned in terms of enabling legislation or explicit constitutional authority. As others have stated, our employer-based insurance system, which now covers about 160 million Americans, was an accident of history. Its lineage can be traced to FDR’s wage and price control policies during World War II, where employers were permitted to offer workers health insurance in lieu of higher wages as a job inducement. This benefit has evolved piecemeal into the Rube Goldberg complexity that is contemporary employer-sponsored health insurance, with some 1,200 private plans each doing the same things – medical underwriting, coordination of benefits, claims adjudication and denial, marketing, public relations, lobbying, litigating, and paying shareholder dividends and inflated CEO salaries while forcing individuals to pay a higher share of premiums, increased deductibles, expanded copays, or a combination of all three. Taken as a whole, private insurers’ activities are duplicative, inefficient, wasteful of scarce health care resources, conducive of job lock, and completely misdirected in supporting the 21st-century health care agenda that America needs and deserves.
The objective of the ACA’s individual mandate was to remedy a flaw in the market for health insurance: the expectation by the uninsured that the costs of their inevitable illnesses would be benignly transferred to those fortunate to have coverage. If you believe that guaranteed issue and community-rating requires 100% participation in the health insurance market to sustain financial viability, clearly the most efficient mechanism to achieve this is not through an individual mandate, in which the heavy hand of government coerces people to do what they otherwise would not. If the federal government has a professed welfare interest in controlling health care costs, it can – and should – accomplish that goal through a more economically efficient single-payer mechanism.
Given that the primary business objective of a for-profit insurer is to make a profit, the fundamental question we should be asking is this: What is the marginal value of private health insurance? That is, what advantage vis-à-vis a single-payer model like Medicare does our system of private, profit-oriented health insurance convey to patients, providers, and employers? What exactly do private insurers do, above and beyond what Medicare does, that is deserving of their inflated premiums? To my knowledge, there is no evidence that commercial insurance provides easier access or less hassle-free care, is more cost effective, produces care of higher quality, or has better consumer satisfaction ratings than Medicare (if anyone has evidence to the contrary, from the peer-reviewed health policy literature, please advise). And according to a recent poll, most Americans prefer to keep Medicare as it is, rather than switching to a premium-support financing mechanism as advocated by Rep. Paul Ryan (R-Wis.). Whatever bad things you can say about our government, at least the Feds are not required to make a profit but are required to answer to all taxpayers, rather than private shareholders who are concerned only with the bottom line.
Under a single-payer system, every American would receive a basic package that would include inpatient and outpatient care, primary care and specialty physician services, emergency care, preventive and restorative care, mental health and substance abuse services, dental care, prescription drugs, home health care, and long-term care. Doctors and other providers would be paid based on a fee-for-service schedule, as negotiated with state governments, with funding coming from progressive payroll taxes paid by both individuals and employers. Quality would be monitored and publicly reported, with financial incentives awarded to providers who followed clinical guidelines endorsed by their medical specialty societies. All services provided would be publicly accountable. Medical decision making at the bedside would be left to the physician.
Conceptually, single-payer is imbued with many myths and misconceptions.
Myth #1: Single-Payer Is One-Size-Fits-All
The No. 1 myth – the alpha myth – is that single-payer represents a choiceless, one-size-fits-all, government-run health care monopsony. This is a blatant falsehood. Single-payer is simply a more efficient and more equitable way of financing health care – and nothing more. By consolidating the administrative functions of insurance, it eliminates bureaucratic duplication and reduces administrative waste, saving time and money for employers, providers, state governments, and consumers alike. It would remove the profit motive from financing care, but not from delivering it. Single-payer would efficiently provide for all Americans – regardless of age, health condition, income, or employment status – universal health care that is portable, affordable, equitable, nonterminating, publicly accountable, and funded through progressive taxation, which for the average family would imply a small additional payroll tax that is much less than its current outlay for insurance premiums. A single-payer system would not supplant the private practice of medicine; you could go to a primary care doctor, specialist, hospital, pharmacist, and lab of your choice.
Myth #2: Canadian Health Care Would Be Bad for America
Americans love to repeat anecdotes about the supposedly lousy medical care our northern neighbors receive from their single-payer system, by demoralized and overworked doctors who work at ill-equipped hospitals with out-of-date technology. This is rubbish. Do Canadians often wait for weeks to see a specialist? Yes. Do Americans also wait? Yes. There is no evidence that Canadians are dropping dead in the streets while waiting for their emergency bypasses or appendectomies, nor is there any evidence that Canadian physicians are emigrating to the U.S. or other countries en masse. Further, there is no evidence that the quality of care in Canada, across the board, is inferior to that practiced in the U.S. Despite comparable rates of smoking and alcoholism, Canadians on average live longer than Americans by more than 2 years, and their infant mortality rate is less than ours. Finally, consider this: Canadians spend much less than we do for health care, both in per-capita dollars and as a percent of GDP, so I have no doubt that if we were to adopt a Canadian-style system and fund it to the tune of $2.6 trillion annually, we would not have 9-month waits for MRIs, even if every one of them was clinically indicated.
Myth #3: Market-Based Medicine Trumps Single-Payer
Some argue that our private, market-based system is fundamentally sound, that it should be freed of government regulation and tweaked to promote greater competition based on price, and thus choice of health insurance plans. Really? Does anyone seriously believe that purchasing health care services is fundamentally no different from buying a new car or a flat-screen TV? (If so, I suggest he or she take a course in health economics.) And would anyone seriously believe that Americans want a choice of health insurance, when what they really desire is a choice of doctors and hospitals? What could be more American, more consumer-friendly, and more constitutional than the ability to choose your health care provider based on whatever criteria you deem important? So why not cut out the middleman and let doctors, hospitals, and other providers compete on such things as quality, service, reputation, convenience, and other personal preferences, rather than having private insurers make these choices for us?
Just consider what “The Market” has done for health care in the last 30 years: a steady increase in the number of uninsured; a decrease in the choice of providers; diversion of resources into more profitable hospitals and services; consolidation of HMOs into health care oligopolies; underfunding of less profitable endeavors, such as public health, trauma centers, and mental health services; unaffordable prescription drugs; dissatisfied patients; frustrated physicians; and of course, an inexorably increasing trajectory of health care costs.
Myth #4: Single-Payer Would Stop Medical Innovation
To my knowledge, there is no correlation between innovation and a country’s method of health care financing. Many technologies and medical advances we now take for granted originated in nations with national health insurance, for example, CT scans and MRIs (Great Britain), laparoscopic cholecystectomy (Canada), percutaneous coronary angioplasty (Germany), and H. pylori treatment (Australia). The largest single source of funding for medical research in the U.S. is a government agency – the National Institutes of Health – which provided almost $31 billion in funding for medical research in fiscal year 2012. And in terms of per-capita drug R&D costs, the U.S. lags behind Britain and Sweden.
Myth #5: Single-Payer Is Impossible to Enact Politically
Perhaps this is true – for now. But if social change depended solely on what was politically pragmatic, women would not have achieved the right to vote in 1920, civil rights legislation would not have been enacted in 1964, and Medicare would have failed in 1965. We should always be careful to distinguish between what’s desirable and what’s doable. The fact that tort reform is certainly desirable, but not politically doable at the present time, has not stopped ACEP from investing significant time and financial resources to advocate for change. Public opinion polls have consistently shown that the level of public support for single-payer is 60% plus. A survey of physicians published 4 years ago showed that single-payer garnered 59% support among the 2,193 physicians polled (support among emergency physicians was even higher, at 69%). Despite this, there is no question that moving to a single-payer system will face enormous obstacles. What is needed, as columnist David Lazarus of the Los Angeles Times pointed out, is a “massive infusion of political courage and the willingness to forsake political purity.”
Myth #6: We Can’t Afford Single-Payer
Given our current system, perhaps the better statement would be “we can’t afford not to have single-payer.” The most recent financial projections portend no overall decrease in the cost trajectory for health care over the next 8 years, even if the ACA remains intact. Under a single-payer model, a modest increase in taxes would be overshadowed by savings from elimination of insurance premiums, offsets from economies of scale, decreased out-of-pocket payments, and the disappearance of cost-shifting. The annual savings from transforming to a single-payer system are estimated to be $400 billion. If you look at the cost curves for U.S. and Canadian health care, they were identical until the mid-1970s, when Canada’s health system was fully implemented. From then on, the curves diverged, with America’s climbing much faster than Canada’s. When Taiwan converted to single-payer in 1995, the costs went up in the first year, as expected, and then leveled off to a reasonable increase of about 3% per year.
What Does This Mean for Emergency Medicine?
Well, consider the ED as a de facto single-payer environment. Patients come to us by choice without needing to first check with their health plan (assuming they have one) to see if their ED visit is covered. We see them without asking them to pay in advance for their ED services, and their care is not predicated on their job, income, or insurance coverage. As emergency physicians, we have more autonomy than our primary care colleagues in terms of making diagnostic and therapeutic decisions without the nonsense of “pre-authorization” or other interference from an insurer who is interested only in the bottom line. While it’s nice to be able to make medical decisions without checking on insurance status, it would be even nicer if we actually got paid for every ED patient treated. Private insurance companies simply have no incentive – in fact, it’s not at all consistent with their business model – to pay for EMTALA-mandated services provided by out-of-network emergency physicians.
Looking again to Medicare as a single-payer model, consider how we emergency physicians interact with Medicare vs. private insurers. In 29 years of practice, I have never had to seek permission from a CMS official to admit a fee-for-service Medicare patient, have never had a consultant refuse a referral for a Medicare beneficiary, and have never had a pharmacist call me to say the prescription for my Medicare patient was not covered by the formulary. This is not true for some of my patients in managed care plans, including those who were sick enough to be admitted but had to be transferred because my hospital (which the patients self-selected) did not participate in their plan.
Single-payer is the only remaining option to simultaneously and synergistically expand access, control costs, preserve choice, and reduce disparities. There is simply no other efficient and constitutionally safe way to do this. Any other proposals are nothing more than tinkering around the edges and based on blind faith that some kind of future financial salvation will somehow save us from the impending health care meltdown. A single-payer, improved Medicare-for-All program would overhaul our dysfunctional health care financing system so that it works best for patients – and for physicians.
Dr. Mitchiner is an emergency physician in Ann Arbor, Mich., a former president of the Washtenaw County (Mich.) Medical Society, and a member of Physicians for a National Health Program.
Single payer is not on the table in next week’s presidential election. It should be. This article explains why.
Dr. Mitchiner’s explanation of single payer, addressed to his emergency medicine colleagues, is so clear, concise and compelling that it should be widely distributed so others can understand the imperative of a single payer system – an improved Medicare for all.
It should be downloaded from the ACEP link above, or from the PNHP link below. Both can be converted into printer friendly formats by clicking “Printer friendly” (ACEP) or “Print page” (PNHP). Then be sure that as many people as possible read it and then share it with others. And on the Internet, this needs to go viral!
Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.
PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.