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.
Proposals To Forbid First-Dollar Coverage For Medicare Beneficiaries
By Bruce Vladeck, Ph.D
Kaiser Health News, August 2, 2011
The usual laundry lists of proposals for Medicare savings are already being circulated throughout official Washington. Most of these ideas have been around for years, and have never gotten past the talking stages because of political opposition or because they are simply bad ideas. But one especially pernicious proposal appears to have increasing traction among both politicians and policy analysts: the prohibition of first-dollar coverage in Medicare supplemental insurance, whether purchased in the individual markets or provided as a retiree benefit.
This proposal is based on a simple and seemingly self-evident syllogism. Medicare beneficiaries with supplemental insurance that provides them with first-dollar coverage by paying their deductibles and co-payments use more services than the small minority of beneficiaries without such coverage. Hence, forbidding such coverage would reduce use, thereby saving Medicare a pile of money.
American policymakers, and the health economists who enable them, are obsessed with issues of consumer demand, and the notion that health care is so expensive because Americans are so eager to consume it. In fact, insured Americans already have the highest out-of-pocket liabilities in the developed world, and use fewer services initiated by consumers. In the absence of supplemental coverage Medicare beneficiaries would have still higher out-of-pocket liabilities than other insured Americans, which is why essentially every beneficiary who can afford it seeks extra coverage. But while overuse of some services in some communities is inarguably a part of the Medicare cost problem, there is no compelling evidence that consumer-generated demand is a significant part of the problem. Whatever the political rhetoric, Medicare beneficiaries simply aren’t banging down the doors of physicians’ offices demanding extra MRIs and surgical procedures.
Quite the contrary: during the past decade, Congress has eliminated cost-sharing for most Medicare preventive services in response to concerns about the underuse of such services, and because of evidence that out-of-pocket costs were a significant deterrent, especially for less affluent and minority beneficiaries. More generally, while the evidence has been clear since the RAND experiments of the early 1970s that out-of-pocket costs reduce health care use, it’s also been clear that their effect is inversely related to disposable income: the less income a person has, the greater the effect of copayments and deductibles, not to mention the greater likelihood of poor health.
That’s why Medicaid historically forbade deductibles, and now permits them at only nominal levels. More importantly, the growth in out-of-pocket costs for health care consumers during the last decade or so has provided an abundance of illustrations of the basic fact that consumers deterred from seeking health care for economic reasons are just as likely to forego needed services as “discretionary” ones, and that that phenomenon is further correlated with income. Faced with higher out-of-pocket expenses, consumers may get fewer Botox treatments or buy fewer laxatives, but they also skip visits for management of their heart disease and diabetes, and don’t fill their prescriptions for hypertension medication.
The reason health insurance exists in the first place, after all, is to relieve individuals who are not medical experts of the need to figure out whether they can afford any particular medical service. In a rational world, policymakers worried about unnecessary or inappropriate use of specific services would just refuse to pay for those services. But in the contemporary American political environment, they might be accused of “rationing” or “death panels,” so they stay away. Instead, they appear to be willing, once again, to impose the consequences of their inability to control costs on those least able to bear them.
Unreasonable consumer demand is not a significant source of our high health care spending. Measures that deprive patients of beneficial health care services by imposing penalties designed to suppress consumer demand are not only inappropriate, but are truly heartless.
By Johnathon Ross, M.D., M.P.H.
New England Journal of Medicine, June 16, 2011
Re ‘Managed Competition for Medicare? Sobering Lessons from the Netherlands,’ by Kieke, Okma, Marmor and Oberlander (NEJM, June 15):
The fundamental flaw in much of the market rhetoric we hear is that health care is not an ordinary product and will never be regulated by market forces.
You can’t exit the market when you are very ill – you buy or die. The doctor not the patient orders the tests and treatments.
The search for information about symptoms is why you go to the doctor. Even a good doctor is sometimes unsure of a patient’s diagnosis or what the long-term costs will be until after some very expensive tests are done.
We have all heard about people with chest pain who were cured with five dollars worth of Maalox and those who needed $100,000 worth of open heart surgery. Americans already face high out-of-pocket costs and it has not controlled health care costs or insurance premiums.
If you are in agony from a ruptured appendix are you going to haggle with the surgeon over his fee on the way to the operating room? The most complex and costly services are the least negotiable.
If open heart surgery was on sale would you have two? The most expensive services are necessary but not really desired like a new car or a Rolex.
Most economists recognize that health care is not a normal product and not subject to the usual market forces. When there is market failure (and health care is a classic example), then the second best solution, regulation, is needed.
The health care systems wit the best outcomes for the least cost are all highly regulated or socialized. (See the Commonwealth Fund data on this fact.) Even here in the U.S. the best quality at reasonably low cost is being turned out by the VA, a completely socialized system.
We already have a national health insurance system that works for the sick elderly and disabled called Medicare. Medicare spends only 3 percent on insurance overhead vs. private insurance which regularly spends 20 percent or more. We should improve and expand Medicare to all. Multiple studies by solid health economists suggest that we could save over $400 billion by the simplicity of this system. This is enough to cover all the uninsured and improve coverage for all the rest of us.
As noted by the authors of this paper, an unanticipated outcome of the Dutch competition was increased cost due to complexity.
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.
Florida submits Medicaid plan based on managed care to feds for approval
By John Kennedy
The Palm Beach Post, August 1, 2011
Florida officials sent a wide-ranging application Monday to the federal government for steering almost 3 million Medicaid patients into managed care, a major shift that has sparked heavy lobbying from critics who demand the Obama administration deny the move.
But Republican Gov. Rick Scott said he was confident the Centers for Medicare and Medicaid Services (CMS) would approve the request, which supporters say could save the state more than $1 billion when fully in place.
“I think that what we passed is going to be a model for Medicaid,” said Scott, a former health care executive. “A Medicaid recipient ought to have choice, just like all of us have choice for what insurance we want to buy. I think that’s positive.”
But he added, “We’ve got to make sure it’s a program we can afford as taxpayers. I think what we did will do those two things.”
State to limit HMOs in state employee insurance program
August 2, 2011
Florida is changing part of its state-employee health insurance program to offer only one HMO in each county. The state Department of Management Services, which oversees employee insurance, said changes in the program would save an estimated $400 million over two years. The changes also would require thousands of state employees to switch to different HMOs, a process that would begin in late September.
Insurers UnitedHealthcare of Florida and Coventry Health Care of Florida filed formal protests Monday against the changes. United argued, for example, that the changes could actually increase costs. That is because United — which would be shut out of the program in much of the state — says it can negotiate better discounts than other HMOs.
But Gov. Rick Scott and DMS Secretary Jack Miles touted the savings from the plan.
“Saving taxpayer dollars wasn’t just a campaign gimmick,” Scott said in a news release. “I meant what I said when I ran for office, and I urge Secretary Miles and his team to keep pushing hard every day to deliver more savings and better results.”
Although Rick Scott was certainly tarnished when his company, Columbia/HCA paid the largest fraud settlement in U.S. history, he has nevertheless been chosen by Florida Republicans to serve as their governor. One of his messages was to achieve savings in health care by promoting choice. Is he touting a fundamental economic principle, or is he using this rhetoric to masquerade his conservative ideology?
Look at what he is trying to do with Medicaid in his state. He wants to force Medicaid patients into managed care organizations claiming that giving them the right to choose insurers will reduce costs. If so, then why isn’t taking away from them their right to choose their health care professionals and institutions going to increase costs?
What about the state employee health insurance program? He is going to save money by taking away the employees’ choice of HMOs, limiting each county to only one HMO for government employees.
His use of the term “choice” is another fraud, but it is no worse than the fraud that progressives perpetrated when they campaigned for health reform using the slogan of “CHOICE.” Their proposal offered only choice of restrictive private health plans while preventing true choice of health care professionals and institutions that people could have had through a Medicare-like national health program.
Today’s final passage of the Budget Control Act doesn’t bode well for the future of placing policy above political rhetoric. In the name of “saving the economy,” the Democrats cooperated with the Republicans in slashing public programs while failing to tap important revenue sources in our nation that happens to have one of the lowest tax burdens of all industrialized nations.
Will we ever have the choice of truly responsible political leaders? It seems unlikely as long as Americans rely on billionaire disinformation campaigns for their understanding of public policy options.
TEXT OF BUDGET CONTROL ACT AMENDMENT
House of Representatives
Rules Committee, August 1, 2011
(a) SHORT TITLE.—This Act may be cited as the “Budget Control Act of 2011”
SEC. 302. ENFORCEMENT OF BUDGET GOAL
(8) IMPLEMENTING DIRECT SPENDING REDUCTIONS. — On the date specified in paragraph (4) during each applicable year, OMB shall prepare and the President shall order a sequestration, effective upon issuance, of nonexempt direct spending to achieve the direct spending reduction calculated pursuant to paragraphs (5) and (6). When implementing the sequestration of direct spending pursuant to this paragraph, OMB shall follow the procedures specified in section 6 of the Statutory Pay-As-You-Go Act of 2010, the exemptions specified in section 255, and the special rules specified in section 256, except that the percentage reduction for the Medicare programs specified in section 256(d) shall not be more than 2 percent for a fiscal year.
(9) ADJUSTMENT FOR MEDICARE. — If the percentage reduction for the Medicare programs would exceed 2 percent for a fiscal year in the absence of paragraph (8), OMB shall increase the reduction for all other discretionary appropriations and direct spending under paragraph (6) by a uniform percentage to a level sufficient to achieve the reduction required by paragraph (6) in the non-defense function.
The deficit reduction agreement will likely result in an automatic two percent reduction in Medicare payments. The only way that can be prevented is by an agreement of a special twelve member bipartisan Joint Select Committee on Deficit Reduction to find alternative methods of reducing the deficit, and then to have their recommendations approved by an up-or-down vote of both current houses of Congress.
The probability of reaching a complex and controversial agreement that leaves Medicare totally unscathed is almost zero in this dysfunctional Congress. President Obama has already demonstrated that he is quite willing to capitulate to the demands of the right-wing obstructionists in Congress. This next time it will be much easier since the terms of the extortion have already been included in this legislation. Since Medicare remains a prime target for the reactionaries, it is very unlikely that it can clear this hurdle without further reductions.
Medicare payment rates have not been increasing at the same level as private insurance rates, understandably creating considerable uneasiness amongst the providers of health care. The Affordable Care Act will further reduce some Medicare payments, and now the Budget Control Act of 2011 will reduce them even further.
These trends will motivate the wealthy owners of Congress to seek private options such as Paul Ryan’s premium support (voucher) proposal, while diminishing their support of Medicare as an egalitarian system of social insurance. With reductions in funding and departure of the healthy and wealthy, Medicare would inevitably transition into a welfare program.
Happy Birthday Medicare! (Oh, that wasn’t nice.)
Whether the debt ceiling is raised or not in the days ahead, Minnesotans and the nation have reason to celebrate this weekend. Saturday marked Medicare’s 46th birthday.
While we have a long way to go before our health care system works well for all patients, this anniversary gives us an opportunity to reflect on what we’ve done right.
Surprisingly, Medicare was born out of bitter controversy in 1965. It was condemned by some as “socialized medicine,” a threat to basic freedoms. As a physician, I’m embarrassed to say organized medicine was among its key opponents. It all seems silly today.
Since its inception, Medicare has afforded hundreds of millions of Americans access to high-quality health care. It has reduced poverty among seniors and improved the financial security of their families. It has become one of the most popular government programs in history.
Current political discourse is centered on spending cuts, including Medicare. But covering Americans via Medicare saves money. No, that is not a typo.
Medicare boasts far lower administrative costs than the leanest private insurance company. While it is true that Medicare spending has risen dramatically over time, its growth is far less than that of the private sector.
And remember that Medicare pays for the care of our sickest and oldest, while private insurers foot the bill for the young and healthier.
In fact, uninsured Americans in their late 50s and early 60s routinely delay needed care, only to become expensive Medicare recipients once they reach 65.
Medicare is not the cause of health care inflation; rather, it is a victim of our country’s sky-rocketing health care costs. Cuts to Medicare will not control these costs.
Rather, they will reduce access to care by the nation’s elderly, worsen their health status, and increase financial hardship among already-struggling Americans.
Not only is Medicare less expensive than private insurance, it provides superior service. An example is the free choice of doctor granted to patients under Medicare — a basic freedom many privately insured Americans are currently denied.
As a practicing internist, I can attest to the lower “hassle factor” doctors incur when dealing with Medicare rather than interacting with multiple private payers, each requiring different rules and regulations. Expecting us to treat patients differently because they have different or no insurance contradicts our professional responsibility.
Medicare is far from perfect, and it has some serious limitations. But for this weekend, let’s celebrate a government program that actually works incredibly well. Americans are proud of Medicare. It should be strengthened, expanded and improved to include all of us. A sustainable Medicare-for-all system is the reform our nation needs.
Ann Settgast is a primary care doctor practicing in the Twin Cities. She co-chairs the Minnesota chapter of Physicians for a National Health Program. This essay first appeared in the Twin Cities StarTribune.
Follow this link to 7 minutes of video + 3 cheers for Pittsburgh!
Happy Birthday, Medicare! I should send you one of those gag cards that teases you about getting older—but at 46, you’re a year younger than I am, so I won’t go there. On your special day, a little reminiscing about your life…
You sure did have a hard time in the womb. Many times, your enemies—the ones we always have with us, those who believe man is an island entire of himself—tried to abort you. Even the doctors in the AMA worked like the dickens to get rid of you. They didn’t kill you, thank goodness, but they did succeed in maiming you. You were conceived as a public insurance for us all, but by the time you were born you had lost the limbs to care for those under age 65. And you were hobbled so that you could only cover limited services, leaving deductibles and co-pays.
Even with your birth injuries, you’ve managed to do a lot of good in your 46 years. I’m grateful for the service you’ve given to my grandparents, my father, and my in-laws. Without your help, my husband and I would have been bankrupt long ago trying to help pay for their medical care. Folks who worry about being in the “sandwich generation” now probably don’t realize how bad it would be with medical bills piled on top of that sandwich. Our finances would be panini, or maybe toast.
Your enemies have tried to poison you over the years. They force you to donate blood to something they call “Medicare Advantage”, private corporations who divert your precious transfusions toward their own profit instead of caring for patients. These same enemies put a gag over your mouth so you couldn’t negotiate with drug companies for fair prices. Even today, some are working to drain all your blood and give it to private corporate vampires.
These actions have weakened you, but there’s a way to restore you to health. We’ve got the technology to reattach the limbs you lost at birth, so you can become what you were always meant to be—Medicare for All. Not only that, but we can improve you—make you cheaper and stronger—by removing your burdensome co-pays and deductibles.
Some worry you’d be slower with all your limbs. We can plan ahead to solve that problem by training more doctors and other health workers. Once we remove all those bloodsucking insurance companies from you and the rest of us, you can get your strength back. Our healthcare system as a whole has had to operate on 2/3 power for decades, while private insurers and the associated administrative costs have siphoned off a third of our medical funds. Imagine what we can do when fully powered!
Happy Birthday, Medicare! I’ll quit talking about your enemies—after all, this is a day to celebrate. You also have friends. Friends who love you are working tirelessly to help you fulfill your dreams. Physicians for a National Health Program, Healthcare-Now!, and many other organizations, including labor unions and churches, continue to gain new members working for your cause. There’s great hope in the next generation of doctors—the largest medical student group, the American Medical Student Association, officially endorses Medicare for All. Even smart conservatives support you, because you are the most financially responsible way to address our health insurance needs.
So today, it’s all about you! We’re having parties and singing your song, all over the country. Happy Birthday, Dear Medicare. May you have many, many more.
Dr. Pippa Abston, a general pediatrician, sees patients and teaches medical students and residents in Huntsville, Alabama. She posted the essay above at Pippa Abston’s Blog: A Pediatrician’s Perspective on Healthcare Reform.
The U.S. Health System in Perspective: A Comparison of Twelve Industrialized Nations
By David A. Squires
The Commonwealth Fund, July 2011
This analysis concentrated on 2010 OECD health data for Australia, Canada, Denmark, France, Germany, Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States.
What is driving higher health care spending in the U.S.?
Spending on health care in the U.S. in 2008 far exceeded that seen in other countries. In both dollar figures and as a percentage of GDP, no country came within 70 percent of U.S. spending ($7,538 per capita, 16% GDP). This higher spending does not seem to simply reflect higher income.
There are many forces driving health care spending. An annual series of Commonwealth Fund-sponsored analyses of OECD health data dating back to 1999 has explored a number of potential factors, including: administrative complexity, the aging of the population, the practice of “defensive medicine” under threat of malpractice litigation, chronic disease burden, health care supply and utilization rates, access to care, resource allocation, and the use of technologically advanced equipment and procedures. These and other studies have found, contrary to often-cited explanations, the U.S. has a relatively young population, average or below-average rates of chronic conditions, and comparatively few doctor visits and hospitalizations compared with other industrialized countries. Instead, these studies suggest major reasons for higher spending include substantially higher prices and more fragmented care delivery that leads to duplication of resources and extensive use of poorly coordinated specialists.
A 2010 cross-national study conducted by The Commonwealth Fund ranked the U.S. sixth of seven countries in terms of quality, with average performance on effectiveness and patient-centeredness and low performance on safety and coordination.
These findings suggest that the U.S. health system is not delivering superior results despite being more expensive, indicating opportunities for cross-national learning to improve health system performance.
With chronic disease on the rise amidst an aging demographic and accounting for ever more health care spending, more effective treatment and management in primary care settings may have the potential to simultaneously improve patient care while preventing the unnecessary use of scarce and expensive resources.
This Commonwealth Fund report confirms, once again, that we spend far more than other nations for health care while receiving only mediocrity from a fragmented system. There is much that we can do to improve quality and value, but it needs to begin with a rational system of financing health care.
We don’t have such a system now and will not have it under the provisions of the Patient Protection and Affordable Care Act – a model of reform that is the most expensive and falls far short on goals of reform. We already have learned much from the other eleven nations discussed in this report, but we have failed to act on what we know. Clearly, a single payer national health program with reinforcement of our primary care infrastructure is the redirection that we need.
National Health Spending Projections Through 2020: Economic Recovery And Reform Drive Faster Spending Growth
From the Office of the Actuary, Centers for Medicare and Medicaid Services
Health Affairs, July 28, 2011
National Health Expenditures, billions:
2011 – $2,708.4
2020 – $4,638.4
National Health Expenditures, per capita:
2011 – $8,648.5
2020 – $13,708.8
National Health Expenditures, as percent of GDP:
2011 – 17.7%
2020 – 19.8%
This year we are spending $2.7 trillion on health care, or about $8,650 per person. What can we expect after the Patient Protection and Affordable Care Act is fully implemented? In 2020, we will be spending over $4.6 trillion, or about $13,700 per person. As a percent of GDP, our health care spending will increase from the current 17.7 percent to almost 20 percent.
Is the Affordable Care Act really affordable? A single payer national health program would be effective in controlling costs, but, much more importantly, it would ensure that all of us – no exceptions – would receive the health care that we need. The Affordable Care Act will cost us more while leaving far too many broke and without health care.
We can still have the health care system that we need, but we’ll have to replace our dysfunctional representatives in Congress. Can we do that?
Rep. Stark, Sen. Kerry Introduce Bill to Provide Medicare Beneficiaries Better Value for Their Medigap Premium Dollars
Congressman Pete Stark
Press Release, July 26, 2011
Today, Rep. Pete Stark (D-CA) and Sen. John Kerry (D-MA) introduced the Medigap Medical Loss Ratio Improvement Act. The legislation improves consumer protections in the Medigap marketplace by raising the minimum percentage of premium dollars that must go toward medical care, not executive compensation or administrative costs. This percentage is called the medical loss ratio (MLR).
Under current law, Medigap insurers are required to meet an MLR of only 65 percent in the individual marketplace and 75 percent in the group market. The Medigap Medical Loss Ratio Improvement Act would require Medigap insurance plans to spend at least 85 percent of every premium dollar on medical care in the group market and 80 percent in the individual market.
July 26, 2011
The insurance industry opposes Kerry and Stark’s bill.
The healthcare law’s MLR requirements didn’t extend to Medigap because it’s a form of supplemental coverage, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.
As supplements, Medigap plans collect lower premiums than comprehensive policies, but the administrative costs aren’t necessarily lower. Extending the 80 to 85 percent MLR standards to Medigap would disrupt coverage with which seniors are satisfied, Zirkelbach said.
Medigap policies are private plans that supplement Medicare coverage. They are quite popular because of the exposure that Medicare beneficiaries have to relatively high out-of-pocket expenses. They also represent one of the worst values in private insurance because of their very low medical loss ratios (a low percentage of of the premiums collected is spent on actual health care).
Rep. Pete Stark and Sen. John Kerry have introduced the Medigap Medical Loss Ratio Improvement Act (HR 2645 and S 1416) to bring the Medigap medical loss ratios up to the same level as other private plans under the Patient Protection and Affordable Care Act. Individual Medigap plans will have to spend at least 80 percent of the premium on health care, and group Medigap plans at least 85 percent.
To no surprise, the insurance industry is opposed, and understandably so. In order to calculate the supplemental benefits to be paid under the Medigap plans, the insurers must still process all services, most of which are paid by Medicare, thereby involving the same administrative effort as comprehensive plans. Also, their marketing costs are similar to their comprehensive private plans. Thus their administrative costs and profits are proportionately much higher considering the small amount paid out in supplemental benefits.
The insurers are really in a bind. They can’t reduce their administrative services, yet, because the plans are only supplements, they can’t pay out much more in benefits. Requiring the same medical loss ratios as apply to comprehensive plans would likely destroy the Medigap model, and insurers would have to withdraw these plans.
That would be good since these plans are such a terrible value no matter how you cut it. But we have to keep in mind why these plans exist. Medicare benefits are inadequate, leaving beneficiaries exposed to excessive costs. To eliminate this wasteful private industry of Medigap plans, the appropriate solution would be to reduce or preferably eliminate the out-of-pocket cost sharing of Medicare.
Although that reintroduces the “moral hazard” issue of “free” health care, other nations have shown that comprehensive “free” health care can be provided at much lower costs than ours. If we’re going to talk about morality, then we should ask, what is moral about injecting an expensive, superfluous, worthless industry into our health care?
This legislation is important because it identifies the problem of excessive administrative waste, which adds even more to our very high health care costs. But rather than this bill, we really do need an improved Medicare for all.
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