Jonathan Gruber gives qualified endorsement to premium support

Posted by on Tuesday, Sep 11, 2012

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.

Mixed Message From Obama Advisers on Medicare

By Meghan McCarthy
NationalJournal, September 10, 2012

President Obama has seized on Republican proposals to overhaul Medicare as a top campaign issue, saying that the GOP plan to add a private insurance option would end seniors’ guarantee of government health care. But behind the election-season politics, influential experts who have advised Obama on health care are open to a future for Medicare that includes competition among private insurance plans.

In e-mail exchanges with the staff of the White House-appointed  fiscal commission  that were obtained by National Journal, David Cutler and Jonathan Gruber, who have both advised Obama, gave qualified support to a Medicare voucher plan offered by Ryan and former Clinton budget director Alice Rivlin in talks to reduce the deficit.

Cutler and Gruber are both hot shots of the health economics world. Cutler is a professor at Harvard, Gruber at MIT. Both advised Obama on health care in the 2008 campaign, and both had major roles in helping develop Democrats’ 2010 health care law. When they offer counsel, the White House is listening.

Cutler now says he was only proposing an idea for Medicare if insurance exchanges are “shown to work well for the non-elderly population,” by getting people into good plans and lowering costs.

Gruber also said he approved of the Ryan-Rivlin plan in 2010 e-mails to fiscal-commission staff, as long as the insurance market reforms of the Democrats’ health care law are kept in place.

Gruber now says that economists don’t know enough yet to move the majority of Medicare enrollees into private-insurance plans.  As part of the effort to expand coverage to the uninsured, President Obama’s health care law would establish insurance exchanges for people younger than 65 to buy private health care. Gruber said that this is a better way of testing out new approaches, adding that it would be “stupid” to experiment first on the older and sicker Medicare population.

“We are getting better, but we are not quite there yet,” Gruber said in an interview. “But premium support is ultimately where we need to be.”

There are three key problems that still must be worked out, Gruber said. First, policymakers have to figure out how to keep insurance companies from cherry-picking healthy people and essentially forcing the sickest patients on to traditional Medicare, which would drain the program of money. Second, policymakers must find a way to make sure insurance companies design benefits so they are easy-to-understand for beneficiaries, and don’t trick seniors into buying more expensive plans that aren’t suitable for them. Third, they have to figure out just how quickly government checks for seniors to buy coverage could grow.

Still, Gruber said he could see Medicare becoming a premium-support-style plan within a five-year timetable, after the Affordable Care Act’s health insurance exchanges start enrolling an estimated 30 million people into insurance plans in 2014.–20120910

So Obama advisor, MIT Professor Jonathan Gruber, says, “premium support is ultimately where we need to be.” In other words, we should replace the traditional Medicare program with vouchers that would be used to purchase private plans. Let’s look at the three problems which he says must first be addressed.

He says that policymakers must figure out how to keep insurance companies from insuring the healthy and sending the sick to the traditional government program. Actually that is only one behavior that private insurers engage in to enhance their success as private businesses. They are always going to do everything that they can to maximize revenues and minimize spending, as any reasonable business would do. The drive for profits for passive investors is not in itself inherently evil, except when it is applied to our health care system. Manipulating sick patients for the prime purpose of generating profits is immoral. Investor-owned insurance companies need to be removed from our health care system.

Gruber also says that we have to figure out “just how quickly government checks for seniors to buy coverage could grow” under premium support. This is a problem inherent with government vouchers that cover only a part of the costs. Instead of directing efforts to control total health care costs, government stewards tend to control just the government spending, passively shifting the costs of health care inflation onto the patients. The financial burden on individuals is already too great, and this would make it even worse.

More subtle, but perhaps even more important, Gruber says that the design of insurance products should be easy to understand so that seniors are not tricked into buying “more expensive plans that aren’t suitable for them.” This statement represents one of the great fallacies of private health insurance markets, that somehow there is an insurance product that is just right for you wherein you will not have to pay for benefits that you’ll never use.

There are two problems with this. The obvious one is that future health care needs cannot be predicted. Major acute disorders or the future onset of chronic disease are unknowns. Plans need to be comprehensive to insure against these potential losses, even if you hope that you won’t ever need to use the coverage that is providing you security, though you probably will someday.

The other problem is that an ideal insurance system pools all risks and funds the risk pool equitably. It is less expensive because of the much greater administrative efficiency of a universal risk pool. It also eliminates financial barriers to appropriate health care. Maybe males don’t want maternity benefits. Maybe females don’t want coverage for prostate cancer. Maybe young adults don’t want coverage for cataracts. Maybe the elderly don’t want coverage for organ transplants. Maybe children don’t want coverage for vaccines, even of their parents want them to have it.

The point is that when you start designing plans for different populations – “only the coverage you need” – you break up the universal risk pool and introduce many of the inequities and inefficiencies that characterize our current dysfunctional financing system. The administrative inefficiencies of buying “only what you need” increases costs over the entire system and redistributes those costs inequitably.

There is no substitute for establishing a single universal risk pool, funding the pool equitably based on ability to pay, and using the pool to fund health care based on medical need. And that, in a nutshell, is what a single payer national health program does.

Herding dual eligibles into low quality plans

Posted by on Monday, Sep 10, 2012

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.

Obama More Flexible on Medicare Than Rhetoric Suggests

By Margot Sanger-Katz
NationalJournal, September 8, 2012

In his convention speech in Charlotte, President Obama vowed to block the Republican Medicare reform plan because “no American should ever have to spend their golden years at the mercy of insurance companies.”

But back in Washington, his Health and Human Services Department is launching a pilot program that would shift up to 2 million of the poorest and most-vulnerable seniors out of the federal Medicare program and into private health insurance plans overseen by the states.

The administration has accepted applications from 18 states to participate in the program, which would give states money to purchase managed-care plans for people who are either disabled or poor enough to qualify for both Medicare and Medicaid.

Obama’s 2010 health reform law allows experimentation in delivering health care at lower cost through demonstration projects. Many states would like permission to shift their entire population of so-called dual-eligible beneficiaries into the new plans. HHS has indicated that it will enroll about 2 million beneficiaries, out of about 7 million who qualify for full benefits from both government health programs.

California is already counting on more than $500 million in budget savings from its own program this year.

Potential cost savings are a big incentive for states. Patients who qualify for both federal health programs are a costly population and include many who need nursing-home care or other expensive services. About 40 percent of Medicaid’s costs go toward patients who are also eligible for Medicare. Advocates of the pilot program also say it could lead to better coordination of care for patients who often struggle to navigate the two different programs.

To get approval, states must guarantee that both Medicare and Medicaid would save money. They must also agree to accept a fixed payment to cover all care for each patient. While rules say the private plans must cover all standard Medicare benefits, they also waive many Medicare rules and leave insurer selection to the states.

Still, there is powerful opposition to the pilots among doctors, hospitals, nursing homes, patient groups, and key lawmakers, including Sen. Jay Rockefeller, D-W.Va., who wrote the provision in the health law that created the office in charge of the pilot program.

“I urge you to take immediate steps to halt this initiative as currently structured and to take the time necessary to develop a well-designed and thoroughly evaluated care coordination model for dual eligibles that meets the standards outlined in the law,” Rockefeller wrote in a letter to HHS.

The Medicare Payment Advisory Commission, a group of experts who advise Congress on Medicare policy, has also weighed in with an 11-page letter to HHS, warning that the speed and scope of the program raised questions about whether patients would receive the care they need.

The managed-care industry is gearing up for the expansion. Three large insurers have purchased companies that insure Medicaid beneficiaries. For years, states have been moving Medicaid patients into managed-care plans, with mixed results. But this pilot represents a new market: It is the first large program that would pool Medicare and Medicaid benefits in a single, state-administered plan.

“The problem with this population is that all the strategies that the health plans have been used to using historically are going to backfire,” said Chris Duff, executive director of the Disability Practice Institute, an umbrella organization for small programs that provide coordinated care to dual-eligibles. He warned that slashing provider rates, limiting visits, and using other conventional cost-control measures could lead to expensive hospitalizations for frail dual-eligible patients.

But the states are enthusiastic about the pilot programs and believe they will be able to provide better care at lower cost.


Assessing the Quality of California Dual Eligible Demonstration Health Plans

National Senior Citizens Law Center
May 2012

California has proposed a three-year demonstration project to enroll individuals dually eligible for Medicare and Medi-Cal (dual eligibles) into managed care. An analysis of both Medicare and Medi-Cal quality ratings for the eight health plans selected by the California Department of Health Care Services (DHCS) for the first phase of the project raises cause for concern.

Approved health plans in participating counties would be responsible for providing enrolled dual eligibles with all Medicare and Medi-Cal benefits and services, including all needed medical care, long-term services and supports, and behavioral health care, beginning in January 2013.

According to a DHCS report assessing the quality of health plans in the Medi-Cal Managed Care (MCMC) Program, seven of the eight plans received a global health plan rating of 1 out of 5 stars.

Looking at Medicare evaluations, two of the plans selected have received a notice of non-compliance from the Medicare program. One of those has been marked as a low-performing plan for three consecutive years and is at risk for termination of its Medicare contract. Another plan was recently sanctioned by Medicare as a result of beneficiary access problems. Medicare continues to restrict enrollment of dual eligibles into that plan. All eight proposed demonstration plans were found to be low-performing on a least one composite Medicare quality measure.

President Obama is currently campaigning against the Republican proposal to privatize Medicare through a voucher program that would move Medicare patients into private plans. Yet, based on provisions in the Affordable Care Act, the administration is moving Medicare patients whose coverage also is supplemented with Medicaid (dual eligibles) into private managed care plans.

California has been a leader in health care financing innovations. Look at the head start that they have on this program. Seven of the eight plans they have selected to initiate the program have a global health plan rating of only 1 star out of 5!

These plans greatly limit patients’ choices of their providers and will undoubtedly impair access by eliminating choices of most other health care providers within the state. Having to transfer buses three times when you are very ill can make you question whether you have the access that the state has promised to you. And quality ratings? Forget it.

These low-income patients, under the law, have more coverage than do traditional Medicare patients… more, but worse. We can do far better. We can improve Medicare so that it includes the additional benefits provided by Medicaid. Then you wouldn’t need a special “dual eligible” program.

If the improved Medicare program included everyone, then you wouldn’t have to herd patients into inferior managed care programs just to save money (precisely what this new dual eligible program is designed to do). As a beneficent public monopsony, the improved Medicare program would save us all money while being in a position to demand quality throughout the health care delivery system. We couldn’t ask for more – for all of us!

Institute of Medicine’s “Best Care at Lower Cost”

Posted by on Friday, Sep 7, 2012

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.

Transformation of Health System Needed to Improve Care and Reduce Costs

Institute of Medicine
The National Academies, September 6, 2012

America’s health care system has become too complex and costly to continue business as usual, says a new report from the Institute of Medicine (Best Care at Lower Cost: The Path to Continuously Learning Health Care in America).

The costs of the system’s current inefficiency underscore the urgent need for a systemwide transformation. The committee calculated that about 30 percent of health spending in 2009 — roughly $750 billion — was wasted on unnecessary services, excessive administrative costs, fraud, and other problems. Moreover, inefficiencies cause needless suffering.  By one estimate, roughly 75,000 deaths might have been averted in 2005 if every state had delivered care at the quality level of the best performing state.

“The threats to Americans’ health and economic security are clear and compelling, and it’s time to get all hands on deck,” said committee chair Mark D. Smith, president and CEO, California HealthCare Foundation, Oakland. “Our health care system lags in its ability to adapt, affordably meet patients’ needs, and consistently achieve better outcomes. But we have the know-how and technology to make substantial improvement on costs and quality. Our report offers the vision and road map to create a learning health care system that will provide higher quality and greater value.”


Best Care at Lower Cost: The Path to Continuously Learning Health Care in America

Institute of Medicine


Recommendation 1: The Digital Infrastructure
Improve the capacity to capture clinical, care delivery process, and financial data for better care, system improvement, and the generation of new knowledge.

Recommendation 2: The Data Utility
Streamline and revise research regulations to improve care, promote the capture of clinical data, and generate knowledge.

Recommendation 3: Clinical Decision Support
Accelerate integration of the best clinical knowledge into care decisions.

Recommendation 4: Patient-Centered Care
Involve patients and families in decisions regarding health and health care, tailored to fit their preferences.

Recommendation 5: Community Links
Promote community-clinical partnerships and services aimed at managing and improving health at the community level.

Recommendation 6: Care Continuity
Improve coordination and communication within and across organizations.

Recommendation 7: Optimized Operations
Continuously improve health care operations to reduce waste, streamline care delivery, and focus on activities that improve patient health.

Recommendation 8: Financial Incentives
Structure payment to reward continuous learning and improvement in the provision of best care at lower cost.

Recommendation 9: Performance Transparency
Increase transparency on health care system performance.

Recommendation 10: Broad Leadership
Expand commitment to the goals of a continuously learning health care system.

Best Care at Lower Cost: The Path to Continuously Learning Health Care in America (Full report – 360 pages):

On release yesterday of the Institute of Medicine’s new report, “Best Care at Lower Cost: The Path to Continuously Learning Health Care in America,” headlines throughout the nation proclaimed that the U.S. health system wastes about $765 billion a year. The articles reported that the Institute of Medicine has recommended an overhaul to recover this waste. So what is it that they recommend?

When you read their ten recommendations listed above, it is difficult to come to any other conclusion than that the efforts to produce this 360 page report have resulted in not much more than, well… platitudes.

The report does list strategies for each of the ten recommendations, but, perhaps oversimplified, much of it depends on information technology and really offers little hope that most of this waste could be recovered.

Instead of stumbling along towards trying to achieve a “learning health care system,” we should first adopt a single payer national health program. We would then have an efficient infrastructure to which the recommended strategies that are potentially beneficial could be applied.

McCanne on free markets in health care

Posted by on Thursday, Sep 6, 2012

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.

First, do no harm; second, nationalize

By Teryl Zarnow
The Orange County Register, August 19, 2012

(Dr. Don) McCanne, now 74, volunteers as a policy fellow for Physicians for a National Health Program, where he was a past president. His group favors a single-payer national health program often called “Improved Medicare for All.”

It’s not socialized medicine, just socialized insurance.

I can’t decide if the doctor is out of touch with reality or a prophet in blue jeans.

Link for full article:–.html


Health care cure is an Rx for economic ruin

The Orange County Register
August 25, 2012


Columnist Teryl Zarnow failed to do her homework. “First, do no harm; second, nationalize” [Aug. 19] would be better titled, “No choice for patients.” What was presented as a “news” article was a one-sided promotional piece for socialized medicine.

Perusing the online mission statement of “Physicians for a National Health Care Program,” one notes that “the program should be financed by truly progressive taxation,” and “views this campaign as part of the campaign for social justice in the United States.” Among its allied groups are All Unions Committee for Single Payer Healthcare, Progressive Democrats of America, and Healthcare-NOW!

The leadership, membership and network are particularly illustrative of those wishing to “change” America, including Kim Gandy and Terry O’Neill, past and present presidents of NOW, respectively; Medea Benjamin of Code Pink San Francisco. The California Nurses Association participates to “provide leadership in winning organized labor support for HR676,” which is the single-payer bill sponsored by John Conyers, D-Mich., in the House of Representatives.

The smiling Dr. Don McCanne and his cadre of liberal progressives speciously suggest that the “cure” for health care in America is another entitlement to be paid for through the income tax system, as if this country is not already $16 trillion in debt (not counting unfunded liabilities.) The state of our entitlement system is completely ignored: Social Security is operating in the red with more funds flowing out than in for the first time in our nation’s history, propped up by a “trust fund” consisting of IOU’s from the Treasury. Medicare will follow that scenario sooner, rather than later, now that Obamacare has siphoned $716 billion in funding from Medicare over the next 10 years. All of this while Dr. McCanne proposes to place yet another burden on the barely 50 percent of Americans who pay taxes, mostly to be borne on the backs of the middle class, for that is where one finds the real wealth of this country. McCanne’s “cure” for health care is a prescription for the financial collapse of this country.

Using Nobel Laureate Milton Friedman’s logic, a medical system that provides the best quality to the most must necessarily embrace free-market principles, but the free market is absent in our health care industry today. In 1945 Congress passed the McCarran-Ferguson Act, which exempted the business of medical insurance from federal antitrust laws.

Thus insurance companies may freely conspire to price-fix without legal repercussion, and consumers cannot readily compare prices for products and services. Coupled with expensive and unnecessary tests defensively prescribed to ward off meritless malpractice suits, our system is certainly sick, but it is not incurable. Just as the computer evolved from a slow, clunky but pricey desktop to a sleek, fast laptop at less than one-fourth the price of the original 30 years ago, competition and innovation can bring down the cost of health care, improve quality and enhance affordability. A free-market prescription begins with the embrace of free-market principles: repealing McCarran-Ferguson, posting prices for services and products, competition across state lines, tort reform and empowering the consumer.

The inevitable result of McCanne’s alternative is all too evident in the United Kingdom’s single-payer system, where months-long waits for simple surgeries are commonplace, and breast cancer patients were denied the use of life-saving Tamoxifen until public outrage became so loud that the government caved. How many lives were lost before this concession? There was no choice for patients under this plan. There will be none under Dr. McCanne’s.


How the U.S. should fix health care

The Orange County Register
September 5, 2012

SAN JUAN CAPISTRANO, Don McCanne, M.D., Senior Health Policy Fellow, Physicians for a National Health Program:

Letter-writer Anita Boyd [“Health care cure is an Rx for economic ruin,” Aug, 23], in responding to Teryl Zarnow’s column on me and my advocacy for single-payer reform [“First, do no harm; second, nationalize,” Aug. 19], stated, “Using Nobel Laureate Milton Friedman’s logic, a medical system that provides the best quality to the most must necessarily embrace free-market principles, but the free market is absent in our health-care industry today.”

She then proposes a “free-market prescription.” In doing so, she ignores Nobel Laureate Kenneth Arrow’s seminal work of a half century ago demonstrating that health care fails competitive market preconditions, and “when the market fails to achieve an optimal state, society will, to some extent at least, recognize the gap and nonmarket social institutions will arise attempting to bridge it.”

In 2004, I was on a panel debate with Milton Friedman discussing prescription drugs. In that debate he said, regarding the government’s defense of patents, “My initial reaction was to say, of course we want to let the market completely work, and instead of having the government defend the patent, let the patent owner defend it. But the more you look at it, the more you see that’s inconsistent.” He also acknowledged the importance of government in drug research. Even in Friedman’s view, pure free markets are an illusion.

Further, the oracle of free markets, Noble Laureate Friedrich A. Hayek, in “The Road to Serfdom,” wrote, “There is no reason why, in a society which has reached the general level of wealth ours has, (the certainty of a given minimum of sustenance) should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”

Every other wealthy nation provides comprehensive health care to virtually everyone, and they do it at a per person cost that averages close to half of what we spend. The secret is that they all use some form of social insurance, acknowledging the fact that health care markets inevitably fail for far too many with significant health care needs.

The Affordable Care Act of President Barack Obama supposedly relies on market principles by expanding competition of private health plans. Under the act, 30 million people will remain uninsured, inadequate health plans with low actuarial values will become the new standard and costs will continue to increase out of control. This is the most expensive of all possible models of health care reform, and yet falls miserably short of achieving a high-performance system. It is a mistake to pretend that markets will work since free markets do not and cannot possibly ever exist in health care, as the current reform effort once again demonstrates.

As Herbert Stein would say, the current status cannot continue. It is absolutely inevitable that eventually we will enact some form of social insurance. Although there are several possible models, the most likely for the United States will be our popular Medicare program, in an improved version. It would cover everyone. It would rely on progressive taxes to make it affordable based on ability to pay. It would improve efficiency, especially by eliminating the profound administrative waste that characterizes our current, fragmented, dysfunctional financing system. It would remove private insurer intrusions, returning choice in actual health care to the patient. Though a public social insurance program, it would perpetuate our private health care delivery system (i.e., it is not socialized medicine). Especially important is that it would exercise its purchasing power as a public monopsony, finally bending the cost curve to sustainable levels.

Much of the debate today includes distortions and exaggerations, driven by ideology. In this information age, the true facts are readily available. Instead of chasing after the ever-elusive fantasy of free markets in health care, we should join together in supporting the crafting of a bona fide social insurance program that works for all of us, based on solid health policy science.

Comment by Quote of the Day reader Richard Krasner:


When I was in college studying political science, I learned that Orange County, CA was ground-zero for every extreme, right-wing organization tied to the right flank of the Republican Party, to wit, the John Birch Society, the Liberty Lobby, etc. It is was also the home of Richard Nixon, Ronald Reagan, the American Nazis, Robert Schuller (founder of Crystal Cathedral, a monument to rich, white Protestants like the Vatican in Rome), so it is no surprise that the hometown newspaper of the Republican Right in CA should denounce you and PNHP.

Take it as a badge of honor that such individuals who would let sick people die at the hands of corporate medicine and the insurance companies, who would kick poor people and the elderly off of Medicaid and Medicare, tell women what they could do with their bodies and their health care, and were in the forefront of the opposition to spending any money on AIDS research, have targeted you and the PNHP as just another “cadre of liberal progressives”.

Anita Boyd and those who like her, are infected with the vMeme of the “free market” can never except the fact as you so well point out, that there is no such thing as a pure free market, and as American history has shown, a mixed economy works best to provide the most beneficial outcomes for any solution to problems caused by the free market, and such opposition is usually the result of listening to the “rhetoric of intransigence” or to outright resentment that some people are getting “something for nothing”, or that her tax money is going to people she does approve of, but not to her.

They even yell “keep your hands off of my Medicare”, not realizing that is a government program that actually works. They also have an aversion to the word, “social”. It goes against the vMeme of “Rugged individualism” they have been infected by, and thus view the rest of society as not worthy of assistance when they cannot take care of themselves. Thus, as they did during the GOP primaries, they cheer when Ron Paul said that a person should die if they can’t afford health care, or failed to plan.

One day they will learn, but then again, some many never learn.

Swiss lessons on cost sharing

Posted by on Wednesday, Sep 5, 2012

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.

High  prevalence of forgoing healthcare for economic reasons in Switzerland: A population-based study in a region with universal health insurance coverage

By I. Guessous, J.M. Gaspoz, J.M. Theler, H. Wolff
Preventive Medicine
In press – Draft published online August 23, 2012

Health insurance is compulsory for all citizens in Switzerland and insurance premiums are paid independently of income. Health insurance covers the costs of medical treatment and hospitalization for the insured. The insured person pays part of the cost of treatment: an annual flat deductible, called the franchise, chosen by the insured person (with premiums adjusted accordingly) and a 10% co-pay of the costs up to a stop-loss annual amount of CHF 700 (1CHF≈1$). Between 1099 and 2010, health insurance premiums increased by 77%, coupled with increasing out-of-pocket payments. Increasing out-of-pocket spending may, at least in some settings, reduce the use of clinically important services and drugs to prevent the onset and progression of chronic disease (Paez et al., 2009).

We aimed to determine the characteristics of participants who report forging healthcare and to describe the past 4-year trend for forgoing healthcare for economic reasons.



To investigate the determinants and the 4-year evolution of the forgoing of healthcare for economic reasons in Switzerland.


Population-based survey (2007–2010) of a representative sample aged 35–74 years in the Canton of Geneva, Switzerland. Healthcare forgone, socioeconomic and insurance status, marital status, and presence of dependent children were assessed using standardized methods.


A total of 2601 subjects were included in the analyses. Of the subjects, 13.8% (358/2601) reported having forgone healthcare for economic reasons, with the percentage varying from 3.7% in the group with a monthly income ≥ 13,000CHF (1CHF ≈ 1$) to 30.9% in the group with a monthly income < 3000CHF. In subjects with a monthly income < 3000CHF, the percentage who had forgone healthcare increased from 22.5% in 2007/8 to 34.7% in 2010 (P trend = 0.2). Forgoing healthcare for economic reasons was associated with lower income, female gender, smoking status, lower job position, having dependent children, being divorced and single, paying a higher deductible, and receiving a premium subsidy.


In a Swiss region with universal health insurance coverage, the reported prevalence of forgoing healthcare for economic reasons was high and greatly dependent on socioeconomic factors. Our data suggested an increasing trend among participants with the lowest income.

– Forgoing healthcare for economic reasons is frequent in a region of Switzerland.
– This prevalence varies with reported monthly household income category from 3.7% to 30.9%.
– Data suggest an increasing 2007–2010 trend among participants with the lowest income.
– Risk factors include gender, smoking, occupation, children, being divorced, and insurance status.
– Forgoing healthcare is associated with worse self-rated health status.

Conservatives in the United States often praise the Swiss health care financing system largely because it is composed of a choice of private health plans (although they may not like the facts that it is compulsory, that it is heavily regulated, and that it is one of the most expensive financing systems in the world). So what is the policy lesson from this study of the Swiss system?

The out-of-pocket deductibles and coinsurance result in a high prevalence of forgoing health care for economic reasons. The prevalence is inversely related to household income, but even at the highest income levels, some do forgo health care for economic reasons. Forgoing health care is associated with worse self-rated health status, and reduces the use of clinically important services and drugs.

Other nations have shown that you do not have to have deductibles, co-payments, and coinsurance to control health care spending. Since these cost sharing measures do have the detrimental effect of reducing the use of clinically important services and drugs, they should be rejected as bad policy. The other measures inherent in a well designed single payer system obviate the necessity of patient cost sharing.

Covering part time and seasonal employees

Posted by on Tuesday, Sep 4, 2012

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.

Implementing Health Reform: A Summer Lull

By Timothy Jost
Health Affairs Blog, August 31, 2012

Employment Status And Waiting Periods

On August 31, 2012, the IRS released Notice 2012-58 addressing the question of how full-time employment status is to be determined for deciding whether an employer owes a tax penalty for under section 4980H for failing to provide health insurance (or adequate or affordable health insurance) to full-time employees who consequently receive premium tax credits.  On the same day, the IRS, Department of Labor, and Department of Health and Human Services jointly released notice 2012-59 addressing the question of how the ninety-day waiting period limit for employment-based health insurance enacted by the Affordable Care Act as section 2708 of the Public Health Services Act would be applied.

The application of both the penalty and waiting period is quite straightforward for employees hired on a full-time basis.  An employer that offers health insurance must cover a new full-time employee no later than 90 days after employment.  A large employer (with more than 50 full-time-equivalent employees) must offer adequate and affordable coverage to employees hired as full-time employees or risk owing a tax penalty if an employee goes to the exchange to obtain a premium tax credit.

The problem is how to handle employees who work variable hours and seasonal employees.   Full-time employment is defined as 30 hours a week (or 130 hours a month), but many employees work 20 hours one week and 45 hours the next, or may work 40 hours a week but only for two months a year during the growing or holiday seasons.  The notices address how this situation should be handled.

Notice 2012-58  defines three time periods—measurement periods, stability periods, and administrative periods.  New employees who are not expected to work full time (variable hour or seasonal employees) can be employed without health insurance for an “initial measurement period” of between 3 and 12 months, as determined by the employer, during which the employees hours are tracked.  If at the end of that period it becomes clear that the employee has been working an average of 30 hours a week or more, the employer must offer health insurance to the employee for a “stability period” of at least 6 months or for the length of the initial measurement period, whichever is longer.

Alternatively, if the employee worked on average less than 30 hours a week, the employer can treat the employee as a part-time employee for a subsequent stability period and not offer insurance. The employer can take up to 90 days for an “administrative period” before the stability period begins during which the employer can determine eligibility and add the employee to its health insurance program.  In no event, however, can the combined measurement period and administrative period extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date.

Ongoing employees with variable hours can also be made subject to measurement periods and stability periods, with the measurement periods lasting 3 to 12 months and the stability periods lasting for the same period of time but in no event less than 6 months. If an ongoing employee is determined to be part-time during any measurement period, the employer can deny coverage to that employee without risking a penalty for the next stability period.  If the employee is determined to be full-time during the measurement period, the employer must insure the employee for the following stability period or risk paying a tax penalty.

In sum, variable-hour employees may be insured one year, not insured the next, depending on their hours of work during the prior “measurement period.”  An employer can take up to 90 days following the measurement period for an administrative period before coverage begins, but if an employee is already covered under a stability period, the employer must make the continuing eligibility determination before the stability period ends to avoid gaps in coverage.

Under notice 2012-59, new employees reasonably expected to work full-time cannot be required to wait more than 90 days to be enrolled in coverage offered by an employer.  An employer may, however, impose a measurement period on variable-hour employees of up to 12 months, consistent with the scheme described in Notice 2012-58, before determining that an employee is in fact a full-time employee.  An employer may also impose other conditions before enrolling the employee, such as requiring an employee to complete enrollment forms or work a reasonable number of hours (not exceeding 1200) before coverage begins, as long as the condition is not designed to avoid compliance with the 90 day waiting period.

Finally, Notice 2012-58 continues the expressed IRS policy of allowing an employer to avoid penalties as long as the employee’s contribution for premiums does not exceed 9.5 percent of the employee’s W-2 wages, regardless of the employee’s actual household income.  The Notice does not address the important question, currently open, of whether affordability is to be calculated based on the employee’s premium share for self-only or family coverage.  Employers can rely on the safe harbors provided by both notices through 2014.

Some method is necessary for determining when employees who are hired without an expectation that they will be full-time employees in fact become full-time employees.  But giving employers more than a year to figure out whether an employee is working full-time seems excessive.  Under previous proposed guidance, a maximum of 6 months was allowed for this determination.  This approach will end up increasing the number of the uninsured, or at least those insured through the exchanges without employer assistance, and is to that extent a disappointment to consumers.

The administrative nightmare created by the Affordable Care Act not only adds to the expensive public and private bureaucratic waste that characterizes our health care system, it also fails to adequately address fundamental issues such as equity and universality. This brief summary of the rules establishing whether or not an employer must provide coverage for employees based on a variable number of hours worked and on seasonal variations in employment, and how soon the coverage must be offered, demonstrates not only the complexity of just this one issue, but also demonstrates how easy it is for an individual to fall through the cracks.

Under a single payer system, everyone is covered. There would be no need to be concerned about part time and seasonal work in determinations of eligibility. And there would be no need for all of the rest of the administrative complexity that this law creates – complexity that shoves patients in and out of different programs and will leave 30 million with no coverage at all. Insane.

Future of large-employer health benefit programs

Posted by on Friday, Aug 31, 2012

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.

17th Annual Towers Watson/National Business Group on Health

Employer Survey on Purchasing Value in Health Care
Towers Watson, 2012 

Performance in an Era of Uncertainty

** Affordability issues are a growing challenge

Trends remain double the rate of inflation. Employees’ share of premium costs increased 9.3% between 2011 and 2012, with the dollar burden rising from $2,529 to $2,764. In fact, employees contribute nearly 40% more for health care than they did five years ago, compared with 34% for employers. Likewise, out-of-pocket expenses increased over the last year from 16% to 18%. That increase is partly due to subsidy shifts for dependents, as nearly half of companies increased employee contributions in tiers with dependent coverage. About a quarter of companies (24%) are using spousal surcharges, with another 13% planning to do so next year.

• The total employee cost share, including premiums and out-of-pocket costs, has climbed from 33.2% in 2011 to 34.4% in 2012.

** Employers confirm their commitment to providing health care benefits for active employees, but long-term confidence declines sharply

Many employers are steadfast in their commitment to their active health care benefits as a central component of their employee value proposition. Through 2015, most employers will remain focused on optimally managing the design and delivery of their programs, with a select number tailoring their designs to facilitate the availability of federal subsidies in the Exchanges for a portion of their workforce. Looking to the end of the coming decade, employers are much less confident that health care benefits will be offered at their organization.

• Only 3% of employers are somewhat or very likely to discontinue health care plans for active employees with no financial subsidy in 2014 or 2015.

• 45% are somewhat to very likely to offer an employer-sponsored health plan to only a portion of their population and direct ineligible employees to the Exchanges.

• Today, 23% of companies are very confident that they will continue to offer health care benefits for the next 10 years, down from a peak of 73% in 2007.

** Use of ABHPs is surging but must be part of a broader strategy to be effective

Account-based health plans (health savings accounts and health reimbursement arrangements) can be an important element in an organization’s health benefit management if the right incentives and employee education are attached. Today, 59% of companies have an ABHP in place, with another 11% expecting to add one by 2013. But ABHPs will not necessarily result in lower costs without significant enrollment. Our results show that employers that take a comprehensive approach to ABHPs (e.g., increasing employee and provider accountability while at the same time helping to cultivate smarter health care consumers) are the ones that have gained the greatest advantage. Using a health savings account (HSA) can also effectively align with an employer’s retirement strategy by providing employees with a tax-advantaged vehicle to pay for current costs while accumulating wealth for retirement.

• Total replacement ABHPs are also on the rise, representing nearly 12% of companies with an ABHP — up from to 7.6% in 2010.

• ABHP enrollment has nearly doubled in the last two years — surging from 15% in 2010 to 27% in 2012, and the move toward total replacement ABHPs is continuing.

• About 10% of respondents say employees and dependents enrolled in an ABHP are better at reducing lifestyle risks than those enrolled in non-ABHPs.

• Nearly four out of 10 companies currently consider their HSA for actives part of their retiree medical strategy, and another 20% are planning or considering such a strategy over the next three years.

Regardless of the future of health care reform, providing a cost-effective health benefit plan will remain a differentiator for many companies when it comes to attracting and retaining top talent.

Health benefit programs of large employers have been the mainstay of health care coverage for working families. The Affordable Care Act relies heavily on the stability of these programs. However, only 23 percent of these employers are very confident that they will continue to offer health care benefits ten years from now.

Although this report discusses many observations and strategies for the future, one trend that is of concern is the greater reliance on high-deductible health plans with health savings accounts or health reimbursement arrangements (aka account-based health plans or ABHPs). Although these plans seem to be satisfactory for the healthy workforce and their young healthy families who really don’t need much care, there remains the serious concern that such accounts deter patients with significant needs from receiving the care that they should have.

Quoting from this report, “An important question is whether ABHPs are having a positive or negative effect on employees’ utilization of health care services and ultimately on improving health outcomes. There are significant information gaps about health behaviors and outcomes for employees and dependents enrolled in an ABHP, compared with non-ABHPs.”

The prevailing attitude seems to be that conditions in health care financing are so bad that we have to do something, no matter what. It doesn’t seem to matter whether or not the changes are known to be beneficial, just so long as we don’t enact a single payer system.

Everyone understands that a single payer system would work, but it’s just not feasible. Not feasible? That’s nonsense. We know that single payer would be highly beneficial, creating much greater value in health care spending. Enacting single payer is the only feasible approach we have.

Theodore Marmor on why turning Medicare into vouchers won’t work

Posted by on Thursday, Aug 30, 2012

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.

Turning Medicare into vouchers won’t work

By Theodore R. Marmor
Tampa Bay Online, August 18, 2012

Before Medicare began in 1965, many American senior citizens — and their children — struggled to pay for their doctor bills. Ever since, Medicare’s been an American success story.

Why, then, do so many Beltway pundits and members of Congress — including Mitt Romney’s new running mate, Rep. Paul Ryan, R-Wis. — go after it?

Some of its critics claim that slashing Medicare is the only way to control the deficit. Like most attacks on Medicare, this one is based on ideology, not evidence. Medicare’s critics often claim that rising federal health care spending is America’s biggest fiscal challenge. In fact, the federal deficit is bloated today primarily due to the Bush administration’s irresponsible tax cuts, economic mismanagement, costly wars and increased defense spending.

Of course large numbers of retiring boomers mean Medicare will need more revenue. But Medicare costs won’t need to spiral out of control. The new Affordable Care Act includes steps to limit per-person health care price hikes. It’s already saving Medicare money. Yet Romney and Ryan promise they would work to repeal it.

What’s their alternative? The Ryan Budget Plan calls for extremely deep cuts to Medicare, while promising more and longer-lasting tax cuts for a few very wealthy Americans. Most House Republicans have already voted for that. It would end Medicare as we know it, and instead force seniors to buy private insurance with vouchers that would cover less of their healthcare costs each year.

These vouchers would reduce seniors’ choices, not their costs. Why? Republican voucher plans assume that if government ends Medicare, private insurance companies will start to deliver cheaper, more efficient plans. But what’s their evidence?

When the nonpartisan Congressional Budget Office analyzed vouchers, it found that even a slight dip in future federal spending on health care for older Americans would drive costs up. Vouchers with slowly rising buying power would simply leave seniors and their loved ones to pay more out of pocket for bigger medical bills.

In fact, Uncle Sam’s already lost money on Medicare contracts with competing private health insurance plans. Although they spent more per patient, those private plans didn’t improve coverage or quality of care. Meanwhile, Medicare has shown it bargains more effectively for better prices than most private insurers say that they can afford to do.

How are frail older people — one in three with cognitive impairments — supposed to wade through pages of fine print to understand new, complicated and often confusing “choices”? Is that what seniors really want? Surveys show most people care much more about being free to choose their doctors than to do complex comparison shopping.

Consumer choice, it turns out, is just a fig leaf that Medicare’s critics use to try to hide what would truly be in store for seniors if Medicare were to be gutted over time: fewer benefits, higher costs and the loss of Medicare’s guarantee of access to a wide range of doctors and hospitals. What’s more, its supporters aim to mask their true aim by grandfathering in those over 55, keeping them from having to face a transformed Medicare program.

The Ryan Budget Plan wouldn’t really control Medicare’s costs. It would simply shift them to future senior citizens and make Medicare less efficient.

There’s no good reason to weaken and eventually dump a program that’s met the needs of America’s seniors and disabled citizens so well for decades. Instead of wasting time and money pushing snake oil schemes to replace Medicare, let’s tackle the real problem of rising health care costs with sensible cost controls, paid for by taxing — not cutting taxes for — those who can best afford it. That way, Medicare can survive and succeed for a long time to come.

(Theodore R. Marmor is professor emeritus of public policy and political science at Yale University and has testified before Congress about Medicare reform. He is a member of the Scholars Strategy Network, a new national organization that brings together many of America’s leading scholars to address pressing public challenges at the national, state and local levels.)

Medicare is under political attack. In this article, Professor Theodore Marmor, one of the nation’s leading experts on Medicare, explains concisely the issues and the potential consequences. It can serve as a valuable resource for explaining to others just what is at stake. For single payer advocates, educating the public on this debate is a must if we are to continue to advocate for an “improved Medicare for all.”

Insurance industry insider on Medicare vouchers

Posted by on Wednesday, Aug 29, 2012

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.

Medicare Voucher Costs

Letter, The New York Times, August 28, 2012

To the Editor:

Re “Truth and Lies About Medicare” (editorial, Aug. 19):

As a former chief executive and actuary of an insurance company that once sold both individual and group health insurance, I am particularly mystified by the effort to push Medicare participants into the individual health insurance market.

I thought that we wanted to reduce — or at least control — the cost of health insurance, but individual health insurance is by far the most expensive alternative.

Depending on the size of the vouchers, the government itself may save money, but the entire system will pay more. Someone has to pay for the costs of individual underwriting, marketing and so on, and those expenses will fall on the elderly themselves.

You are also correct in assuming that there is likely to be anti-selection, with the healthier people going to the insurance companies, leaving the sickest and most expensive people in the Medicare plan.

It is certainly true that health insurance needs reform and that President Obama is far from having all the answers, but the Romney-Ryan plan will increase the country’s health care bill with little or any of the increase going to more or better health care.

Stephen Brown
Brewster, Mass.

Today’s message is important because it comes from an insider in the health insurance industry. Not only does he indicate that it is a terrible idea for Medicare beneficiaries to use vouchers to purchase private, individual plans, but, of even greater significance, is “that health insurance needs reform and that President Obama is far from having all the answers.”

For private insurance reform, nobody has all the answers. The nature of the beast is that when you try to fix one defect, others open up. Instead of moving Medicare beneficiaries into private insurance plans, we need to move private insurance victims into Medicare.

Shareholders urge WellPoint to oust CEO Angela Braly

Posted by on Tuesday, Aug 28, 2012

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.

Shareholders urge WellPoint to oust CEO Angela Braly

By Chad Terhune
Los Angeles Times, August 28, 2012

Investors in health insurance giant WellPoint Inc., which runs Anthem Blue Cross in California, are pressing for a change in top management as criticism intensifies about the company’s lagging stock, managerial missteps and disappointing earnings.

Shareholder complaints about WellPoint’s chairwoman and chief executive, Angela Braly, have grown louder since last month, when the Indianapolis company posted another anemic quarter and cut its full-year profit outlook as its enrollment fell again.

The investor unrest follows years of consumer fury that beset WellPoint as it repeatedly raised premiums on many families and small businesses by 10% or more.

A New York hedge fund, Royal Capital Management, sent a letter to WellPoint’s board last week saying that Braly has “failed miserably” as CEO and that “it is incumbent upon the board of directors to fulfill its fiduciary responsibility to shareholders by changing leadership.”

Other influential WellPoint shareholders, such as Leon Cooperman’s Omega Advisors hedge fund in New York, have expressed similar concerns about the company’s lackluster performance, particularly compared with its chief competitors’, and they have urged the board to replace Braly.

Thus far, WellPoint’s board has voiced strong support for Braly. “The board has been fully involved in the strategy WellPoint is pursuing and is supportive of the strategy and our management team,” Jacquelyn Ward, the company’s lead outside director, said in a statement last month after analysts began questioning management’s performance.

“Braly has presided over the most arbitrary and capricious health insurance rate hikes of our time,” said Jamie Court, president of Consumer Watchdog, an advocacy group in Santa Monica. “Now she is learning the rules of Wall Street: Cross policyholders all you want, but don’t step on the wallets of shareholders.”,0,4090962.story

Our politicians have left the private insurance industry in charge of our health care, but what is this industry really all about? As Jamie Court says, “Cross policyholders all you want, but don’t step on the wallets of shareholders.”

Addendum to today’s Quote of the Day on Angela Braly:

Angela Braly resigned today as president and CEO of WellPoint.

It would be a mistake to celebrate this action as some sort of elimination of an evil-doer. She will be replaced. From the perspective of patients, nothing changed.

The action that we need is from the President and Congress. They need to eliminate the private insurers and replace them with an improved Medicare for all. Hold the celebration until we can accomplish that goal.

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