Are high premiums due to medical costs or insurer profits?

Posted by on Tuesday, Jun 22, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Insurance Industry Inflates Rates While Falsely Blaming New Health Care Law

Health Care for America Now! (HCAN)
June 2010

The health insurance industry argues that rising medical costs are to blame for runaway premiums, but it’s clear that they are constantly looking for excuses to raise rates and expand their cash flows.

Premium hikes have surpassed the growth of medical costs, wages and overall inflation. From 2000 to 2008, premiums for families enrolled in employer-sponsored health plans increased 97 percent, while rates for individuals in workplace health plans climbed 90 percent. During that same period, private insurers’ payments to health care providers rose only 72 percent, medical inflation increased 39 percent, wages grew 29 percent and overall inflation climbed 21 percent. Health insurers are basing increases on something other than medical inflation, wages or general inflation.

http://hcfan.3cdn.net/d8f62f1fc66d8e0224_q6m6bnff1.pdf

If you look beyond the inflammatory anti-private insurance rhetoric of this report (mostly appropriate, some perhaps not), you can find a few real numbers to help understand rising insurance costs. From 2000 to 2008, overall inflation increased 21 percent, but medical inflation increased 39 percent, while employer-sponsored insurance premiums increased 90 percent for individuals and 97 percent for families.

The fact that medical inflation grew faster than overall inflation supports the position of the private insurers that rising health care costs have necessitated higher premiums, but that isn’t the whole story.

Private insurers’ payments to health care providers increased at 72 percent, considerably higher than the rate of medical inflation. This supports the insurers’ position that failure of government reimbursement rates to keep up with medical inflation, especially in the Medicare and Medicaid programs, has resulted in a cost shift to the private insurers who are paying more to make up the differences. However, some economists have suggested that this merely represents a failure of the private insurance industry to hold down excessive price increases.

Even with medical inflation and public-to-private cost shifting, premiums have increased at a significantly higher rate. This likely represents both higher administrative costs and greater profits. If the insurance industry were efficient, the percent dedicated to administrative costs should actually decline since higher prices would reduce the percentage of premiums absorbed by each unit of administrative service.

Although the insurance industry has been evasive about the portion of premiums that are consumed by administrative services, the for-profit insurers have been required to report their profits and their medical loss ratios. From the 2009 data (included in this report) we know that their administrative costs are outrageously wasteful, and that their profits are at an all time high.

Today President Obama told representatives of the insurance industry to not raise their prices so high. Do you think that they will listen? It seems that he would be much more effective if he were to tell the public stewards of an improved Medicare for all to get the prices right.

The following is to clarify a legitimate concern of one of the qotd subscribers.

From the 6/22/10 message:

21% – general inflation
39% – medical inflation
72% – increase in private insurers’ payments to health care providers
90% & 97% – premium increases for individual and family health plans

General inflation and medical inflation refer to increased prices. Payments to providers and insurance premium increases refer to increased prices modified by increased volume and intensity of services.

Though the numbers should not be compared on a single scale, the principles are still the same as stated earlier. The rate of medical inflation (prices) has continued to increase in excess of the rate of general inflation. Insurance premiums have continued to increase in excess of the payments (prices x services) to providers.

Twenty percent average premium increase

Posted by on Monday, Jun 21, 2010

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.

Recent Premium Increases Imposed by Insurers Averaged 20% for People Who Buy Their Own Health Insurance, Kaiser Survey Finds

Kaiser Family Foundation
June 21, 2010

People who buy their own insurance report that their insurers most recently requested premium increases averaging 20 percent, according to a new Kaiser survey examining the experiences and views of people who buy health coverage in the non-group or individual market.

Most say they paid the increase, but 16 percent of all policyholders say they switched plans, either buying a less expensive policy from their current insurer or switching companies altogether. After these so-called “buy downs” are taken into account, people who faced a premium increase ended up paying 13 percent more than before.

Many people report being in plans with high deductibles, including one in four (26 percent) with an annual deductible of $5,000 or more and 6 percent with a deductible of $10,000 or more.

Overall, the average deductible reported for single coverage is $2,498, almost four times the $634 deductible reported on average for employer-sponsored PPO coverage.  Those with family coverage whose deductibles must be met on a per-person basis report an average deductible of $2,959, while those with a family deductible (the total spending required across the entire family before coverage kicks in) report an average of $5,149.

More than one in five (22 percent) say over the past year they or a family member covered by their plan did not get needed medical care because of the cost, and a similar share (20 percent) say they skipped filling a prescription due to cost.

Nearly four in ten policyholders (38 percent) report at least one problem getting their insurer to pay a bill.

“With people in the individual market being hit with average increases of 20%, the survey shows that the steep increases we have been reading about over the last several months are not just extreme cases,” Kaiser Family Foundation President and CEO Drew Altman said.

http://www.kff.org/kaiserpolls/posr062110nr.cfm

This survey is very important because it shows that outrageous insurance premium increases are not limited to the anecdotes that we have been hearing, but rather are a pervasive problem, inflicting the nation with an average 20 percent premium increase in the individual insurance market. Those who say that the Patient Protection and Affordable Care Act (PPACA) will fix this had better take a closer look.

With these increases, it is not surprising that many looked for less expensive plans, usually opting for higher deductibles. But look at the numbers. The average deductible for a family is now over $5000, and for some, $10,000 or more. In spite of all of the buy-downs to higher deductible plans, people still ended up this year paying an average of 13 percent higher premiums – paying more and getting less.

Will PPACA provide relief from these high deductibles that are impairing access to needed medical care? No. The plans will be required to have an actuarial value of only 60 percent, or 70 percent for the exchange plans eligible for premium credits. When the patients’ share averages 30 to 40 percent of the costs (plus the premium), it is inevitable that the plans will have high deductibles.

Will the cost sharing subsidies of the exchange plans adequately ameliorate the impact of the deductibles? No. Lower income individuals do not have adequate disposable income to meet their portion of the cost sharing, even with the subsidies. For those with incomes over 250 percent of the federal poverty level ($55,125 for a family of four), there are no cost sharing subsidies beyond the equivalent of a 70 percent actuarial value. The portion of the subsidized insurance premium that this family would still have to pay is $4438 (8.05 percent of income), so with a $5000 deductible, they would have to pay over 17 percent of their income before coverage begins (except for limited preventive services), and even then they would still have coinsurance payments plus costs for non-covered or most out-of-network services. By any definition, that is underinsurance, which will become the norm for the United States.

The problem is not the total cost of health care for our nation. We can afford it, though we are nearing our collective tolerance. The problem is the fragmented, dysfunctional financing system that results in tremendous inequities and runaway cost increases. A single payer national health program would fix this.

Sherif Emil – an American physician in Canada

Posted by on Friday, Jun 18, 2010

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.

Commencement Address

Sherif Emil, MD, CM
The University of California, Irvine
School of Medicine
June 5, 2010

It is a profound honor for me to be here today at UCI to partake in the commencement ceremonies of a group of individuals who are destined to become 104 of the best doctors in America. My presence at this podium today is the most significant event in my medical and surgical career spanning two decades. It is so significant because the invitation to join you today came from a very special group of medical students, students whom I admire immensely, students who are my pride and joy, students who give me true hope in the future of medicine in this great country of ours, hope that American medicine’s best days are still ahead, that its most lasting accomplishments are still to be realized, that one day the best health care in the world will be available to all our citizens without regard to financial means, personal circumstances, or status in society.

Although I left UCI in 2008 and moved to a distinctly less pleasant climate (Canada), UCI has never left me.  My career in pediatric surgery began and matured at this university. I had wonderful mentors, and superb colleagues.

****

Finally, please, please stay involved in issues of health care policy. If you think we have passed health care reform, and can now rest easy, think again. We have not passed health care reform. We have only passed some health care expansion. It is too early to judge the effects of what just occurred, but it is not too early to be certain that much work still lies ahead. Make your voice heard in the national debate that started in your senior year, and will almost certainly rage on. It was interesting for me, as an American physician practicing in Canada, to see the recent negative depictions of the Canadian system in TV ads and lay media, depictions that bore absolutely no resemblance to the actual environment in which I practice daily. My reality is very different. I can see any patient and any patient can see me – total freedom of practice. My patients’ parents have peace of mind regarding their children’s health. If they change jobs or lose their job altogether in a bad economy, their children will still get the same care and see the same physicians. Micromanagement of daily practice has become a thing of the past for me. There are no contracts, authorizations, denials, appeals, reviews, forms to complete, IPA’s, HMO’s, or PPO’s. Our Division’s billing overhead is 1 %. My relationship with the hospital administration is defined by professional, not financial, standards. I have no allegiance to any corporate or government entity, nor does one ever get in between me and the patient. This environment, which some denigrate as the ever so scary system of “socialized medicine” allows for more patient autonomy and choice than was available to most of my patients in California. That is not at all to say that I practice in a medical utopia. There is no perfect health care system. The Canadian system has its own set of difficulties, challenges, and shortcomings, and Canadians are also looking to significantly reform their system. But as physicians, we have to enter the debate and we have to enter it objectively, salvaging it from the bias, misrepresentation, and demagoguery that has characterized it. Health care should not be a liberal or conservative issue, for disease, disability, and death do not recognize political affiliations. As a socially conservative Christian myself, my belief that health care is a fundamental human right, and my efforts on behalf of single payer universal health coverage stem from my faith, and not despite it. My faith calls for personal morality, but also for societal morality – how do we treat the sick amongst us, the weak amongst us, the least amongst us?

Sherif Emil, MD, CM
http://www.thechildren.com/documents/medias-emil-bio.pdf

The students know. They brought Sherif Emil back from Canada to give them their commencement address. The future of health care in America is in good hands.

NHIS uninsured report portends underinsurance for most

Posted by on Thursday, Jun 17, 2010

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.

Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2009

By Robin A. Cohen, Ph.D., Michael E. Martinez, M.P.H., M.H.S.A., and Brian W. Ward, Ph.D.
Centers for Disease Control and Prevention (CDC)
National Center for Health Statistics
June 16, 2010

In 2009:

46.3 million (15.4%) were uninsured at the time of the interview

58.5 million (19.4%) had been uninsured for at least part of the year

32.8 million (10.9%) had been uninsured for more than a year

Estimates of enrollment in HDHPs, CDHPs, and FSAs:

Based on data from the 2009 NHIS, 22.4% of persons under age 65 years with private health insurance were enrolled in a HDHP (high deductible health plan), including 6.3% who were enrolled in a CDHP (consumer-directed health plan) and 16.1% who were enrolled in a HDHP without a health savings account (HSA). Enrollment in HDHPs increased from 17.5% in 2007 to 22.4% in 2009. There was a significant increase in enrollment in HDHPs without HSAs and in CDHPs.

Based on data for 2009, among persons under age 65 with private health insurance, 20.2% with employment-based coverage were enrolled in a HDHP, compared with 46.9% of those with a private plan that was directly purchased or obtained through means other than employment. The percentage of persons covered by employment-based private plans that are HDHPs increased from 15.6% in 2007 to 20.2% in 2009. The percentage of persons covered by directly purchased private health plans that are HDHPs increased from 39.2% in 2007 to 46.9% in 2009. For persons under age 65, approximately 8% of private health plans are directly purchased. HDHPs constitute a growing share of both employment-based and directly purchased health plans.

In 2009, among persons under age 65 with private health insurance, 20.4% were in a family that had a FSA for medical expenses. This is an increase from 2007, when 16.7% of persons under age 65 with private insurance were in a family with a FSA.

http://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201006.htm

Although the net loss in insurance coverage for 2009 left another 3 million individuals without coverage, the media response is tempered by the anticipated expansions in health care coverage under the Patient Protection and Affordable Care Act (PPACA). What is being missed in the media reports is a new trend revealed in this survey that will result in an exponential increase in the rates of underinsurance.

A few facts:

* 20.2% of individuals with employer-sponsored plans have high deductible health plans (HDHP)

* 46.9% of individuals with private plans purchased outside of employment have HDHPs

* 72% of those with HDHPs do not have health savings accounts

* PPACA will require plans to have an actuarial value of only 60 percent

Much has been written about how high deductible health plans (HDHPs) result in underinsurance for the majority of Americans, so little will be said here other than to point out that those with medical needs do not receive all of the care that they should have when faced with the financial barrier of a high deductible before they can access the benefits of their health plan. Insurance should improve access to necessary care rather than impair it.

Although the right-wingers in the policy community tout health savings accounts (HSAs) as the solution for making deductibles affordable, there are several flaws. First, close to three-fourths of HDHPs don’t even have an HSA component. For those that do, excess expensive and burdensome administration is being wasted on managing the HSAs which are really no different from the patient paying the expenses out of personal savings, except for the very modest tax advantage of the HSA. Whether in an HSA or in a personal savings account, it is still the patient’s own money that is being spent. If the HSA or the personal savings account were empty, as might be expected for individuals with medical problems, then the high deductible remains as a barrier to care.

Another approach is to set up a flexible spending account (FSA) instead of an HSA. One-fifth of individuals are in families that already have FSAs through their employment. These are even less rational than HSAs since it is the employee’s own pre-tax money that is deposited into the FSA, yet any funds remaining at the end of the year are forfeited. How smart is that?

There is a coalescence of trends that makes it likely that HDHPs will become the standard for most of us with private coverage. To slow the increase in insurance premiums, employers are starting to convert to HDHPs, and one-fifth of them have already done so. Plans in the individual market are much less affordable except for HDHPs. Almost half of those purchasing plans in the individual market have now switched to HDHPs. Because of concerns about high insurance premiums, the drafters of PPACA decided on an actuarial value of only 60 percent for private insurance plans (the patient pays 40 percent of the costs of care). Large deductibles and high coinsurance are used to keep the actuarial value down. Adverse selection of plans will low deductibles will cause a premium spiral that will make those plans unaffordable, forcing even more individuals to choose HDHPs. With these trends it seems that the future will hold little option for most of us not eligible for government programs, other than to enroll in HDHPs.

Since PPACA provides subsidies for both the premiums and out-of-pocket spending, does it even matter if the plans have high deductibles? Since the alleged purpose of high deductibles is to decrease the use of health care by making patients sensitive to health care prices, then it makes no sense to add the administrative excesses and expenses of removing a benefit in the form of the deductible and adding it back in in the form of administered subsidies if the patient ends up bearing only a negligible portion of the costs, thereby jettisoning price sensitivity. As the means- tested subsidies diminish, the deductibles may have more significance, but not for those who are responsible for most of our health care costs – the 20 percent who use 80 percent of our health care.

Will the insurance exchanges obviate the need for HDHPs? When they crafted the PPACA model, it was clear that premiums for comprehensive plans were already too high. That is why they decided on reducing the actuarial values of the plans – 60 percent for the least coverage, though premium subsidies will apply to silver plans with a 70 percent actuarial value. Silver plans will still require high deductibles since they fall short of the typical employer-sponsored plan with an actuarial value of 80 percent or more.

Since the cost sharing would still be excessive for most individuals and families, PPACA provides for cost sharing credits that would have the effect of increasing the actuarial value on a sliding scale based on income – 70 percent for those at 250-400% of the federal poverty level (FPL) and up to 94 percent for those with incomes at 100-150% FPL.

There is concern that the combined premium plus the cost sharing for the exchange plans is still too high for most families, but these are the levels that Congress decided would be necessary because of their arbitrary decision to limit how much of the costs would pass through the federal budget.

But what is really ridiculous is that merely to avoid an efficient system with a single, publicly financed universal risk pool, they designed an administratively complex system of variable actuarial values, with variable premium subsidies, with variable cost sharing credits, which will drive the plans to introduce high deductibles as the national standard, when high deductibles have already been demonstrated to be a perverse policy for controlling costs.

Remember, by continuing on our current PPACA course, we are going to see an explosion in high deductible health plans, to the detriment of people who need health care. Of course, we could change course and enact an improved Medicare for all without any deductibles. We wouldn’t need price sensitivity if we had our own public health care monopsony.

League of Women Voters calls for ‘Medicare for all’

Posted by on Wednesday, Jun 16, 2010

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.

League of Women Voters calls for ‘Medicare for all’

Physicians for a National Health Program
June 16, 2010

Noting the Obama administration’s new health law falls short of providing affordable care to all U.S. residents, the national convention of the League of Women Voters passed a resolution Monday calling on the group’s board to “advocate strongly” for “an improved Medicare for all.”

Although many other groups, including labor unions, religious denominations and medical associations, have gone on record in recent years in support of a single-payer health program, or an improved Medicare for all, the League’s action is believed to be the first national endorsement of its type since Congress passed the Patient Protection and Affordable Care Act in March.

The resolution was introduced at the Atlanta meeting by Karen Green Stone of Bloomington, Ind., who argued that the new law lacks effective cost controls and does nothing to eliminate wasteful paperwork and bureaucracy in the U.S. health system.

Green Stone commented after the vote, “The delegates at the meeting understood that it has never been more important to push for a single-payer plan, an improved Medicare for all. They loved our new slogan in Indiana: ‘Health care reform: We’re still for it … and we’re not done yet!’”

http://www.pnhp.org/news/2010/june/league-of-women-voters-calls-for-medicare-for-all

And…

2010 Convention

League of Women Voters
Atlanta, Georgia
June 11-15, 2010

Motion #549-473, submitted by LWV of Bloomington-Monroe, IN.

Whereas the League of Women Voters of the United States believes quality health care at an affordable cost should be available to all U.S. residents; and

Whereas the current and proposed systems do not achieve the League goals of affordability and access to everyone; and

Whereas an improved Medicare for all, a publicly funded and privately delivered national health care plan, is consistent with this goal;

Therefore, be it resolved that we, the representatives of local and state Leagues assembled at the 2010 LWLVUS Convention, call upon the LWVUS Board to advocate strongly for bills that legislate for improved Medicare for all.

Motion APPROVED.

http://www.lwv.org/AM/Template.cfm?Section=Council_and_Convention&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=15476

And…

LWV Address by Health and Human Services Secretary Kathleen Sebelius

Closing remarks:

So I want to thank you for all your hard work on behalf of the Affordable Care Act.  It’s a tremendous accomplishment.

But I’m also here to tell you that our work isn’t over.  You understand this.  The League of Women Voters was created right before the passage of the 19th amendment.  Some people might have said it was a strange time to start a group focusing on women and democracy.  After all, women were already poised to get the right to vote.

But you knew that passing the amendment was just the first step.  There was still hard work to be done to fulfill its promise.  That’s also true for the Affordable Act.

We’re on the right track.  But we’ve still got a long way to go.  And we’ll need your help to get there.

http://www.lwv.org/AM/Template.cfm?Template=/CM/ContentDisplay.cfm&ContentID=15477

Once again, the League of Women Voters leads the way. Although they supported the Patient Protection and Affordable Care Act (PPACA), they realize that it falls far short of the League goals of affordability and access for everyone. Even HHS Secretary Kathleen Sebelius concedes that we still have a long way to go.

There are several beneficial measures in PPACA that we should continue to support. But the greatest deficiency in the act is that the PPACA financing model can never get us to an affordable system that includes everyone. The delegates at the LWV convention recognized this when they passed the resolution calling for the national LWV Board (LWVUS) to “advocate strongly for bills that legislate for improved Medicare for all,” since it would provide the financing infrastructure that we desperately need.

The individuals and organizations, who in the name of compromise abandoned support for a national health program, have achieved their lesser goal of passing something – anything – as long as the act provided some benefit. Now that it is clear that tweaks to PPACA will still leave us with only compromised “something – anything” policies, it’s time to remount the unified effort to enact an improved Medicare program that includes everyone. We need to give Kathleen Sebelius the tools that she needs to get us there, and that didn’t happen with PPACA.

The League of Women Voters has picked up the torch. Let’s join them. After all, as they say in Indiana, “Health care reform: We’re still for it … and we’re not done yet!”

By Margaret Flowers, M.D.

There is a lot of discussion about the Medicare buy-in. Since the federal legislation does not include a public option and the single-payer movement talks about expanding Medicare, people wonder if the bill introduced by Rep. Alan Grayson, D-Fla., is a step forward.

The answer, however, is no. Unfortunately, the Grayson proposal does not advance us towards single payer and serves as a distraction, much like the public option was, that takes energy away from working for single payer at a time when we need focus and a clear demand.

When single-payer advocates talk about “Improved Medicare for All,” we are not actually saying that we would simply expand the current Medicare to everybody. We are talking about creating a national health program that is similar to Medicare in that it is publicly funded and accountable, guaranteed, provides choice of provider and removes the insurance middlemen from making decisions about treatment.

The system would be universal; have proven cost controls such as global budgeting, simplified administration and negotiation for physician fees and the bulk purchasing of drugs and medical devices; and would create a framework for a health system so that we can address the many other areas that need to be addressed such as having enough providers, getting resources more evenly distributed, looking at how we deliver care and improve the health of our population. Simply allowing people to buy into Medicare will not place us on the path to creating this system.

The biggest obstacle to the success of a Medicare buy-in is that it keeps the private insurance companies, and so the fragmentation of our risk pools, in place. The only way that we as a nation can afford to pay for the health needs of everybody is by creating a single risk pool.

It is by doing this that we eliminate the waste of the hundreds of millions of dollars that are required to market and administer these hundreds of different plans. Not only are these dollars required by the insurers to process their claims, but they are spent by businesses, individuals, doctors, hospitals and health providers to submit and track claims to the many insurers. It is the expense of dealing with the many different insurers that is driving some medical practices, especially primary care, out of business. This would not change with a Medicare buy-in.

Most likely all that a Medicare buy-in would do is attract the sickest patients as usually happens in this situation in this country. The reason this happens is that the majority of people who are healthy are able to work and so get their insurance through their employer. Those who are not able to work or who do not have insurance offered at work must buy through the individual market. Health insurers don’t really want to insure those that have health needs because they are too expensive to treat, so they offer policies with high premiums to those who need care. This forces that part of the population to look elsewhere, which means they would probably be the ones buying Medicare.

This would relieve the private insurers of having to cover the sicker population (which they would like) and would place further financial strain on Medicare (caring for the sickest without the healthy contributing). And a simple Medicare buy-in would not create the improved Medicare that we need which would cover all medically necessary care including dental, mental, vision and prescriptions without co-pays.

It is possible to get a national improved Medicare-for-All health system, but the first and smallest increment of change that we must have in order to do this is to create a single public health fund. There is much more to do after that but this will be the step that will provide sufficient funds and a framework in which to take the next steps.

There will be many distractions and temptations to look for an easier way to get to single payer, but each of these takes us off the path to single payer. It is important that we stay together and focused on our goal. To paraphrase Gandhi, you cannot compromise on fundamentals, and single payer is the fundamental step that will end health care as a commodity and place us on the path of health care as a human right.

Dr. Flowers is congressional fellow for Physicians for a National Health Program.

Adapted from original post on Backbone Campaign.

AMA health insurer report card

Posted by on Tuesday, Jun 15, 2010

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.

New AMA Health Insurer Report Card Finds Need For More Accuracy

AMA
June 14, 2010

The American Medical Association (AMA) today announced that one in five medical claims are processed inaccurately by health insurers, according to the AMA’s third annual check-up of the nation’s commercial health insurers and the systems they use to manage and pay claims. This was the key finding of the AMA’s 2010 National Health Insurer Report Card.

The AMA estimates that $777.6 million in unnecessary administrative cost could be saved if the health insurance industry improves claims processing accuracy by one percent. Increasing the health insurance industry’s accuracy rating to 100 percent would save up to $15.5 billion annually that could be better used to enhance patient care and help reduce overall health care costs.

http://www.ama-assn.org/ama/pub/news/news/2010-report-card.shtml

National Health Insurer Report Card
http://www.ama-assn.org/ama1/pub/upload/mm/368/2010-nhirc-results.pdf

The private insurance industry is selling us administrative services at an outrageously high price. This report card confirms that we certainly are not receiving value. Not only are we paying them too much, but they also continue to do a lousy job at their most important function – claims processing. Their error rate results in an additional $15 billion annually in administrative waste that could be used for patient care, according to this AMA report.

This year the AMA did not report Medicare’s error rate, but, in the 2008 report card, Medicare’s compliance rate was vastly superior to all of the private insurers – over 98 Percent.

But the greatest argument for changing to an improved Medicare program that covers everyone is not the reduction in waste caused by private insurer claims processing errors which would save about $15 billion, rather it is the replacement of our dysfunctional, fragmented, private/public financing system with a single payer system which would save us about $400 billion annually.

Even if the private insurers could match the claims performance of Medicare, that wouldn’t fix our problems. It’s the financing model that needs to be changed. The $4 trillion that we could recover over the next decade would pay for the needed care for the uninsured and the growing numbers of underinsured. We would have solved our health care financing problems, and that would allow us to direct more of our attention and effort to much needed health system reform.

Insurers wipe out small business credits

Posted by on Monday, Jun 14, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Insurance premium hikes hit small business hard

By John Gonzales
San Francisco Chronicle
June 12, 2010

California small-business owners expected to be early beneficiaries of health care reform, with billions of dollars in federal tax relief becoming available this month to help them purchase medical coverage for their employees.

The credit is worth up to 35 percent of a small business’ premium costs.

But many said the tax credits granted under the legislation have run up against a new hurdle: a spate of rate increases by insurance companies, including 58 to 75 percent hikes levied recently by Blue Shield of California.

The company offered other coverage without the high rate increase, but included similar deductibles and added co-pays of about 20 percent. The Blue Shield hikes are in line with increases from all major insurers on small business health savings plans, said (Tom Epstein, vice president of Public Affairs for Blue Shield of California).

“Anthem Blue Cross offered this first,” he said. “Health Net followed us. Aetna and United offered products like this. Every one of these insurers had very substantial rate increases.”

“That money is going right back to the insurance companies,” said Brad Wing, co-owner of the San Francisco Advertiser, who received notice of his 58.3 percent increase in April.

“Normally, rates go up 10 to 15 percent and you can swallow it,” he said. “But at 58 percent, there’s just no way.”

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/06/12/BUGG1DONP4.DTL

The Patient Protection and Affordable Care Act (PPACA) is supposed to make health care affordable, primarily by subsidizing private insurance plans. It begins immediately by offering small businesses a credit worth up to 35 percent of premium costs. With Blue Shield of California increasing rates by as much as 58 to 75 percent, how is the small business owner going to find relief when the insurer takes the full subsidy and charges what amounts to another 23 to 40 percent surcharge?

Several individuals who no longer want to hear our single payer message tell us that PPACA is now the law of the land, that private plans are here to stay, and that we need to quit attacking the private insurers and get on with making PPACA work.

When non-profit Blue Shield of California is the best the industry has to offer, how can we possibly ever make that work? We can’t. We need to quit supporting PPACA and get on with making an improved Medicare for all work!

States seek to lead the way on single payer

Posted by on Friday, Jun 11, 2010

By Chris Gray

If President Obama and the Democrats in Congress won’t get behind single payer, perhaps there’s a different, more Canadian-style approach to getting universal health care: get a system designed, passed, signed into law and set up in just one state, and the rest will follow. The health care savings for employers in one state could force the other states to fall like dominoes and make the switch.

“I think you always like to push at the national level; that’s where our heart is,” said Dr. Walter Tsou, a PNHP leader in Philadelphia. “[But] We saw at the last debate how hard it is to even get considered. That’s led us to consider a less encompassing approach, and that’s a state-by-state approach.”

Canada’s single-payer system began in a single province, Saskatchewan, and then went national as the other provinces soon saw the fiscal benefit that this approach had to health care delivery. In the United States, California has passed single-payer bills twice, only to have Gov. Arnold Schwarzenegger veto the bills both times.

Minnesota has a strong grassroots campaign that has won the support of that state’s leading Democratic candidates for governor, and other states such as Vermont and Hawaii are moving through economic studies that could crystallize the superiority of a single-payer health care system in the eyes of the American public.

Tsou said the current reforms that passed through Congress will fail in a few short years as the plan proves unaffordable. “It behooves us to find a viable state single-payer system when this system collapses,” he said.

Insurance industry campaigns attack health reform as taking away patients’ choice — of health insurance companies. But Tsou’s associate on the Health Care for All Pennsylvania campaign, executive director Chuck Pennacchio, said single payer can be pitched as the system that is truly “consumer-driven,” in that it opens up the system for health care consumers to have a real choice of doctors and medical care. Under the current system, of course, patients often only have a choice of health insurance companies, if they have any choice or any health care access at all.

Pennsylvania

A single-payer health care bill has gotten traction in Pennsylvania in a way that other states have not, Pennacchio said: Not only does single payer have unanimous support of the Democrats, but at least eight Republicans like it, too.

“What sets Pennsylvania apart from other states is that we’ve been able to get Republican buy-in,” Pennacchio said. “Republican participation is important.”

Pennsylvania House Bill 1660 currently has the support of seven Republicans and all 104 Democrats, while its counterpart in the upper house, Senate Bill 400, has won over one Republican and 20 Democrats. Grassroots activists pushed a state single-payer resolution at a meeting of the Pennsylvania Democratic State Committee, where it received the Dems’ unanimous support.

If the bill passes the Legislature, term-limited Gov. Ed Rendell, a Democrat, has promised to sign the Pennsylvania single-payer measure into law.

Health Care for All Pennsylvania has even more support for an economic impact study. A bipartisan resolution supported by 17 Republicans and 20 Democrats would authorize health care researchers at the Lewin Group to outline the costs, savings and economic benefits of single payer. The study needs to pass just one of two houses of the Legislature and would take about five or six weeks to complete.

But even with such strong support for the study, Pennacchio only puts its chance of passage at 50-50. The Legislature still is working hard to get a budget past for the next biennium, and in election year, he’s not willing to count his chickens before they’re hatched.

Vermont

The chief proponent of single payer in the U.S. Senate is Vermont’s independent Sen. Bernie Sanders. He successfully amended the new federal health insurance law to allow for states to experiment with single-payer systems, but that part of the health bill won’t take effect until 2017.

This could pose a serious obstacle for state single-payer bills. Even if a state is successful at establishing single-payer system, the state law could prove null and void. Such states would need to seek a waiver or the law would have to be changed for the amendment to take effect in say, 2014, when the bulk of the federal legislation is enacted. Sanders has said he is working on a solution to this problem, along with Sen. Ron Wyden, D-Ore.

On the House side, longtime single-payer supporter Dennis Kucinich, D-Ohio, is also working to change this amendment to let states pursue single payer sooner. Activists in several states have been trying to coordinate with his office.

“States will pass this thing — then they’ll go for the waiver,” said Don Bechler, an activist with Single Payer Now, a California group. Bechler said it would be easier to change the law or get the waiver if a state had already made it law. This could convince cautious politicians in Washington to give it support.

Vermont pressed ahead with health care reform, passing a bill on May 12 that will study three health system proposals for the state, including single payer. The bill does not require that any of the three systems actually get implemented, but the Legislature will be given a recommendation.

Former PNHP president Dr. Deb Richter said her current goal is to make sure that the single-payer study is conducted by someone who understands the cost savings of single payer and can give the system a fair shake.

Richter wants the state to hire William Hsiao, the Harvard economist who designed the highly effective single-payer system in Taiwan. The odds are in her favor: Hsiao has testified before the Vermont legislative committees, and he was brought in by Senate Pro Tempore Peter Shulman, who is a leading candidate for governor.

Minnesota

Some of the loudest rhetoric about single payer this fall may come out of Minnesota. The governor’s race is marked by contrast.

On one side, the Minnesota Universal Health Care Coalition has gotten the two leading DFL candidates for governor to endorse the Minnesota Health Act, which provides for a health care system that will cover all Minnesotans.

On the other side, he current governor, Tim Pawlenty, a Republican, is vocally anti-single-payer. In a speech at the state Republican convention that nominated his possible replacement, Pawlenty said the Democratic-Farmer-Labor Party’s noted support of a government-managed universal health care system would ensure its defeat in the fall.

The Republican nominee, Tom Emmer, a state representative, has introduced the Minnesota Health Care Freedom Act, which would ban single-payer health care and perpetuate the for-profit private insurance system. Emmer is a member of the American Legislative Exchange Council, the right-wing, industry-financed national legislative group that has proposed state constitutional amendments that would prohibit single-payer systems in states such as Arizona.

Emmer has even gone so far as to speak out in support of the freedom to stick with private health insurance on the news commentary show “Fox & Friends.”

But PNHP activist Dr. Susan Hasti thinks any attempt for politicians to try to make a campaign issue out of single payer support will backfire.

“I don’t think it’s going to be a negative,” Hasti said. “We can’t tinker with the system; we have to change it.”

Hasti said factors such as the fear of losing health care and the ever-escalating rise in health care premiums have built strong grassroots support for the universal coverage bill.

The sponsors of their legislation have gone up from 62 in 2008 to 74 this year. The bill must pass through a number of committees, and Hasti said it could probably not become law until at least 2012, even with a favorable governor.

Minnesota activists have worked to build the movement, keeping the bill alive until it might be signed into law. As it passed through each committee, this Minnesota coalition has rallied constituents in committee member districts.

“We know we have an uphill battle, but we have made progress,” Hasti said.

California

The Minnesota legislation was initially modeled after a bill that has passed California’s Legislature twice: The California Universal Health Care Act, now referred to as Senate Bill 810.

The proposal by state Sen. Mark Leno, D-San Francisco, authorizes $1 million to establish a commission that would decide how to pay for the system. Voters would then have to approve funding for it through a state ballot initiative.
The San Francisco Chronicle reports, “The proposal, which is estimated to cost $200 billion, would eliminate private health insurance in California and replace it with a state-run system, which would be provided to every California resident. That system would be overseen by a new state agency that also would ultimately decide what services the coverage would entail.”

But activist Don Bechler said the proposal would save $30 billion compared to what Californians currently spend on health care. From the savings, California would spend $22 billion to cover the uninsured and offer more comprehensive care. In the end, the California economy would spend $8 billion less on health care while providing a higher quality and more equitable level of care.

Single payer has passed twice in California; The current version, SB 810, passed through the state senate in January and the bill awaits a third vote from the General Assembly. Gov. Schwarzenegger vetoed both of the first two versions of the bill.

“He’ll probably veto it again,” said activist Don Bechler. “We keep coming back and keep building the movement. Next year, we’ll get a governor who can sign it.”

That governor is likely to be Jerry Brown, a former governor, mayor of Oakland and the current attorney general. Brown has wholeheartedly endorsed single payer in the past, but Bechler said he was now on the fence, citing cost concerns.

The costs of single payer have risen in California since the legislation was first estimated several years ago, but so has all health care. Bechler said his state, like others, needs a fresh economic analysis of single payer to give more weight to the argument that a government-managed system would save money by cutting administrative costs.

Bechler said the grassroots movement has grown, anticipating Brown’s eventual approval of single payer for all Californians. The movement is strongest in the Bay Area of Northern California, so Single Payer Now recently added a new director in Los Angeles. PNHP has also recently hired an executive director for its California chapter.

In some ways, the bill has been easy to pass, since legislators assume Schwarzenegger will just veto it. If bill gets passed next year, California legislators will have to stick behind something that may actually become law. Bechler said this concerns him, but he is not too worried.

“A majority of the Democrats are co-authors of the bill,” he said. “It’s on the Democratic state platform.”

Hawaii

Meanwhile, far off in the middle of the Pacific Ocean, America’s 50th state, Hawaii, could quietly become the first state to have single payer. Hawaii has been at the forefront of progressive health care for decades. Its one-of-a-kind law, the Prepaid Health Care Act, requires that all employers offer health care benefits to employees working more than 20 hours a week.

Thanks to that law, Hawaii already has one of the lowest uninsured rates in the country, but it still doesn’t cover everyone. Not everyone works 20 hours, for instance. And the increased cost of private health insurance has strained employers in Hawaii just like everywhere else.

Last July, the Hawaii Legislature created the Hawaii Health Authority, which has been ordered to study and implement a system that will provide health care to all Hawaiians. The Legislature had to override the veto of Gov. Linda Lingle, who has continued her defiance of the legislation by refusing to nominate members for the authority.

Dr. Stephen Kemble said that supporters will just wait until she leaves office. Her successor is likely to be a Democrat, and at least one of the candidates, former U.S. Rep. Neil Abercrombie, is an ardent single-payer supporter.

HB 1504, which created the Hawaii Health Authority, makes no mention of the term “single payer” anywhere, but Kemble said that’s what he expects to come out of it.

“My best guess for a politically feasible scenario would be that Hawaii would create a single-payer plan” with a nonprofit administrator, wrote Kemble in an e-mail. “That is my dream anyhow.”


Several other states also have single payer bills pending before their Legislatures:

Colorado
House Bill 1273, sponsored by Rep. John Kefalas, was withdrawn in April 2009. Kefalas pulled the measure after it was made apparent that it lacked the support of Democratic Gov. Bill Ritter. Bill had 18 co-sponsors as of February 2009 and passage was hoped by 2011.

The bill was unfortunately derailed after fierce opposition from Golden, Colo.-based Independence Institute and their stealth blog, “Patient Power Now.”

The legislation would have created a 23-member authority charged with making recommendations about how to implement a single-payer health care system to the Legislature and the governor.

Read more: Move toward ‘single payer’ health plan for Colorado dies in Legislature – Denver Business Journal

Delaware

SB 120 which would have provided Delaware citizens and out-of-state residents working at least 20 hours a week a government-run single payer health care system, sadly did not pass.” (Progressive States Network)

Illinois
The Health Care for All Illinois Act passed favorably out of committee 8-4 in 2008. Rep. Mary Flowers, D-Chicago, has introduced it again, but the bill didn’t make it out of committee this session. Flowers has promised to re-introduce the bill in 2011, naming it in honor of the late PNHP senior research associate Nicholas Skala.

Maryland

“We have bills in both the Maryland Senate (SB-682) and House of Delegates (HB-767),” Dr. Eric Naumburg of PNHP told Op-Ed News. “The Senate Bill has 12 co-sponsors and the House Bill 38; that’s approximately 1/4 of each chamber. So far we have only Democrats on board. The leadership has not taken serious notice yet but there are some good signs and we are really just getting started. Also, between the state’s budget problems, the upcoming election and the health insurance reform mess in Washington, we hear lots of excuses for why not this year.

“The reality is that our bill, which is modeled after the one that has passed twice in California, has only general language about funding. We are raising money for an economic impact study on the effects of single payer. Key areas would include the effect on the state budget and economic growth within Maryland. This will help us with the best ways to fund the system. We continue to build our grassroots movement. This summer we are planning a concerted effort to talk to as many legislators as possible.”

Massachusetts

“Mass-Care was launched in 1995 as a coalition of organizations sharing a deep concern about the inequities of our health care system. We now act as the grassroots organizing umbrella for more than 100 groups in Massachusetts, representing over 500,000 residents in the state fighting to make health care a right. Massachusetts HB 2127 has active opposition from the Massachusetts Medical Society, but HB 2127 does have 11 Senate sponsors, 38 sponsors in state House.” (from the Mass-Care, The Massachusetts Campaign for Single-Payer Health Care, website).

Missouri

Missouri Universal Health Assurance Act or SB 18:
“The Missouri universal health assurance program is hereby created for the purpose of providing a single, publicly financed statewide program to provide comprehensive necessary health care services, including preventive screening, for all residents of this state. This program shall have as its goals: (1) Timely access to health services of the highest quality for every resident of the state so that all may benefit; (2) The provision of adequate funding for health care; (3) Lower health care spending through streamlined administration, a single bill, and uniform payments.”

SB 18 only orders a study and has only one sponsor, Joan Bray D-St. Louis.

New Hampshire

N.H. house passed HCR 2, which endorsed HR 676, the national single-payer bill. HCR 2 died in the state Senate.

New Mexico

The New Mexico Health Security Act, HB 339 & SB 281, has been introduced. Current Gov. Bill Richardson (D) does not support single-payer, but State Senator Jerry Ortiz y Pino, a longtime supporter of single-payer health care, is running for Lieutenant Governor. The Health Security Plan is a staged, three-year plan that begins with financing studies and completes with actual implementation of universal coverage.

New York

New York has a state single payer bill in each house, A2356 and S2370. A study ordered by former Gov. Eliot Spitzer was conducted by the Urban Institute and showed significant cost advantages in a single-payer system. Gov. David Paterson has supported single-payer health care but not campaigned for it. The bills also have 76 sponsors, and in the General Assembly, A2356 has had more sponsors than votes needed to pass the legislation. The Senate, until recently dominated by Republicans, has been cooler to its proposal. A resolution passed the lower house, in 2008 which endorsed the federal single-payer bill, HR 676. The Senate, now in the hands of Democrats, similarly endorsed HR 676 in 2009.

North Carolina

Candidate plans to introduce single-payer legislation if elected.

Ohio
Health Care for All Ohioans Act — HB 159, with 17 co-sponsors.

Wisconsin

SB 51 “Healthy Wisconsin” passed in 2007 by Democratic state Senate; failed in general assembly. Governor only openly supported expansion of Medicaid system. Attacked by outside groups such as arch-conservative Wall Street PAC “Club for Growth” and WSJ editorial page. No mention of reintroduced bill in 2009-10 term.

Washington

Washington Health Security Trust Bill was first introduced in the 2007 session, with 23 co-sponsors. The legislation never made it out of committee. The bill was apparently re-introduced in 2009 session, with fewer sponsors, but there was very little action as state maneuvers severe budget crisis.

Castlight casts light on sick U.S. health system

Posted by on Friday, Jun 11, 2010

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.

Bringing Comparison Shopping to the Doctor’s Office

By Claire Cain Miller
The New York Times
June 10, 2010

The lack of price information in health care has been a big driver of ballooning health care costs, analysts say, because costs are opaque to patients and heavily subsidized by employers. The patient has no incentive or responsibility to keep costs down. But many employers are switching to health plans that require patients to pay more out of their own pockets.

A start-up financed by prominent venture capitalists and the Cleveland Clinic, Castlight Health, aims to change that by building a search engine for health care prices. Patients using Castlight could search for doctors that offer a service nearby and find out how much they will charge, depending on their insurance coverage.

Castlight has received money from investment firms including Venrock, Maverick Capital, Oak Investment Partners and from an unlikely source, the Cleveland Clinic.

Ideally, transparency in health care pricing could lead to higher-quality, lower-cost health care, and more patient involvement in buying health care, said Delos Cosgrove, chief executive of the Cleveland Clinic. “Because they begin to realize that a trip to the doctor is not free, they might stay home and take the aspirin instead of getting the neurologic work-up.”

Castlight sells its service to employers and charges by employee per month.

Safeway, the grocery chain, with 200,000 employees, has signed on as its first customer.

Safeway has been experimenting with ways to cut health costs, including by using Castlight. “I’m a big believer in trying to create market forces wherever you can and then let personal accountability really drive the result,” said Steven A. Burd, the chief executive of Safeway.

Castlight is working on a mobile version of the service to introduce next year so people can access the information from the exam table.

Price transparency could significantly change the way health care is bought in the United States. The notion “seems ridiculously simple and obvious, and in any other industry, you would say, ‘Duh, we already have that.’ But in health care, it’s revolutionary,” said Alan M. Garber, a professor of medicine and the director of the center for health policy at Stanford, as well as an investor in Castlight.

http://www.nytimes.com/2010/06/11/technology/11cost.html

Our highly dysfunctional, fragmented health care financing system has opened innumerable opportunities for entrepreneurs to glom onto funds that should be going for health care, especially by diverting them to profoundly wasteful administrative services. One of the latest iterations is Castlight, an entity that is capitalizing on the perverse notion, promoted by the right-wing element in the policy community, that we can control health care costs by making patients more sensitive to prices.

The fact that there is much more money to be made in wasteful administrative services is supported by the faith that the venture capitalists have expressed in Castlight. They have put up the financing because they believe that creating a price shoppers portal can suck up more funds out of our health care system. Our entrepreneurs are there to be sure that the United States remains the world’s leader in blowing up health care budgets through administrative waste.

Castlight’s model begins with the flawed theory that price sensitivity will control health care costs. About four-fifths of health care is provided to the one-fifth of individuals who have the greatest health care needs. Price awareness by these individuals does not influence spending much since most of their care is provided after their deductibles and maximums are met. For the other one-fifth of individuals, only a small portion of their care would be amenable to price shopping, and the discounts that they would receive would have a negligible impact on our total national health expenditures.

Of more concern, requiring out-of-pocket spending as a consequence of accessing health care has been proven to cause individuals to forgo beneficial health care services. A policy that disincentivizes beneficial care should be rejected, especially when it is a policy that wouldn’t help much in our efforts to control spending anyway.

Prices are important. The two most significant reasons that we spend much more on health care in the United States than do other nations are our profound administrative waste, and our prices that are much higher than in all other countries. Did other nations price their health care more appropriately by exposing patients to prices? Of course not. They did it by using the monopsonistic power of their governments in setting prices that were fair for patients and yet adequate to ensure that the health care delivery system receives the funds it needs to function. For controlling administrative costs, they simply adopted sane methods of financing health care.

Perhaps the greatest concern over the Castlight start-up involves ethical issues. Let’s look at Delos Cosgrove, Steven Burd, and Alan Garber.

Although Cleveland Clinic is often touted as an efficient health delivery model, it seems appropriate to criticize it for investing in an entity that is going to profit by providing more excessive administrative services that would expand application of the flawed policy of shifting more costs to patients in need. Of particular concern is the position of their chief executive, Delos Cosgrove, who glibly suggests that price sensitivity could cause a patient to decline a neurological work-up and to go home and take an aspirin instead. Such an important decision should hardly be made on the basis of price shopping.

Steven Burd, chief executive of Safeway, has a track record of touting savings through “personal accountability.” He glosses over the fact that his savings resulted from switching his employees to high-deductible health plans. Now he is becoming a customer of Castlight thereby solidifying the policy that his employees may not receive care that they should have because they have a price barrier between them and health care.

But what about the ethics of Alan Garber, a professor of medicine and the director of the center for health policy at Stanford? Although very knowledgeable about the impacts of health policy, he is personally investing in a company that wastes more resources on excess administration and that he says is “revolutionary” in bringing transparency in support of the inappropriate price barriers that are being erected on the path to health care. Is that an ethical compromise for a health policy expert? As he says, “Duh.”

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