If I hear “Canadian health care”…
by Clark Newhall, MD, JD
Words matter. The insurance companies (as Wendell Potter will attest) have used that to their advantage and have tried to turn “single-payer” and “Medicare For All” into pejoratives, much as Ronald Reagan did with “socialized medicine” while in the pay of the AMA.
But there are really no other words to use and I find that “Medicare For All” and “single-payer” are labels that best describe what I am talking about.
When I encounter opposition to the words, I find that a small amount of education is in order, and usually works. Here is one example. A common response of the uninformed to the word “single-payer” is to mention Canada.
If I hear “Canadian health care” from my listener (as I did on a radio interview at 0200 this morning) then I tell the following story:
I live in Canada in the summertime. My friend there, Red, had to go to the hospital a year or two ago and was hospitalized for five days. It seems like he got every test and x-ray known to God and man while there, in addition to five days of IV medication.
A few days after he got out of the hospital, I saw him walking around town.
“How are you doing, Red?” I said.
“Pretty good”, he said, “but I’m pissed off at this hospital bill I got.”
I was dumbfounded. “Hospital bill? What are you talking about? You don’t have to pay for hospital care in Canada, I thought.”
He explained. “Yeah, I had a private room. I’m mad. I didn’t know it would cost me 240 bucks. That’s outrageous.”
I had to agree. Outraged is how I felt too.
When I told this story to 3 complete strangers on a plane recently, apropos of nothing, one said, “If they can do it in Canada, why can’t we do it here? The insurance companies are screwing us and have bought off the politicians.” The other two nodded in agreement.
Words matter, but they matter most when they are combined with ideas and stories.
Dr. Newhall is a physician and attorney in Salt Lake City, Utah. His website is health-justice.org.
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.
Need an MRI? Anthem might have a deal for you
By Shari Rudavsky
January 30, 2011
… an Anthem Blue Cross and Blue Shield pilot program made its debut in December. Under the program, an Anthem employee calls policyholders who have been approved for scans and lets them know whether a cheaper, high-quality option exists close to them. If the policyholder agrees, Anthem sets up the appointment.
Anthem officials say they designed the program to steer their patients toward higher-quality facilities that charge less. But some say more emphasis is being placed on costs and not on quality of care and consequences for the patient.
The program is currently limited to Central Indiana policyholders scheduled for imaging such as MRI and CT scans. Still, it could usher in a major change in health care in which insurers work directly with policyholders to keep costs low for a variety of medical services.
“This puts a lot more control in the hands of the individual consumer and allows the consumer to make a decision that is a good one,” said Susan Pisano, a spokeswoman for the Association of Health Insurance Plans. “I think you’re going to see this kind of program more and more in the short term.”
If the program proves successful, the company might explore the idea of similar programs for lab tests or colonoscopies.
WellPoint’s Anthem Blue Cross and Blue Shield subsidiaries have led the health insurance industry in innovation, but these innovations have been designed to improve their business model and profits, not to improve health care. Even though regulatory oversight of the insurers should increase as a result of enactment of the Patient Protection and Affordable Care Act, this new innovation of intercepting and redirecting patient referrals reveals that the private, for-profit insurance industry has every intention expanding the range of self-serving innovations that increase profits as long as the innovations fall below the threshold that would induce a patient backlash.
There are a great many reasons why a physician may select one imaging center over another for the patient’s procedure. The decision may be based on the quality of the equipment or the skills of the radiologist’s team. It may be based on prior positive or negative experiences with the centers. It may be based on integrated eHealth systems. It may be based on specific procedures not utilized in all centers. Regardless, these are clinical decisions that should be made by physicians who have their patients’ health care needs first and foremost in their minds.
(Physicians also may selectively refer to their own imaging centers – a conflict of interest that is another problem, though not covered in today’s message.)
When the insurer intercepts and redirects a referral, it is done to reduce the insurer’s costs. The insurer may claim that the intervention is to direct the patient to higher quality services, but the referring physician should be in a much better position to make that judgement. No, the decision is made on the basis of, “It’s the prices, stupid.”
The problem that the insurers are addressing is very real. Prices do vary tremendously, especially between facilities that are contracted with the insurer and those that are not. This raises the extremely important point that a health care financing system based on multiple private insurers acting independently cannot possibly bring us appropriate, reasonable pricing throughout the entire health care delivery system.
Of course, this is one of the more important advantages of a single payer system. Prices are not based on secret contracts and dysfunctional markets; instead they are based on negotiation with a public administrator, taking into consideration legitimate costs and fair profits. The interests of patients are served by preventing excessively high prices that waste taxpayer funds while providing adequate payment to ensure that the health care professions will remain attractive to well qualified individuals. The private insurance industry will never get this right.
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.
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF FLORIDA PENSACOLA DIVISION
STATE OF FLORIDA, by and through Attorney General Pam Bondi, et al.;
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al.,
ORDER GRANTING SUMMARY JUDGMENT
I. Medicaid Expansion (Count Four)
Accordingly, summary judgment must be granted in favor of the defendants on Count IV.
II. Individual Mandate (Count One)
The individual mandate is outside Congress’ Commerce Clause power, and it cannot be otherwise authorized by an assertion of power under the Necessary and Proper Clause. It is not Constitutional. Accordingly, summary judgment must be granted in favor of the plaintiffs on Count I.
I must conclude that the individual mandate and the remaining provisions are all inextricably bound together in purpose and must stand or fall as a single unit. The individual mandate cannot be severed.
Thus, the award of declaratory relief is adequate and separate injunctive relief is not necessary.
For the reasons stated, I must reluctantly conclude that Congress exceeded the bounds of its authority in passing the Act with the individual mandate. That is not to say, of course, that Congress is without power to address the problems and inequities in our health care system. The health care market is more than one sixth of the national economy, and without doubt Congress has the power to reform and regulate this market. That has not been disputed in this case. The principal dispute has been about how Congress chose to exercise that power here.
Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void.
For all the reasons stated above and pursuant to Rule 56 of the Federal Rules of Civil Procedure, the plaintiffs’ motion for summary judgment (doc. 80) is hereby GRANTED as to its request for declaratory relief on Count I of the Second Amended Complaint, and DENIED as to its request for injunctive relief; and the defendants’ motion for summary judgment (doc. 82) is hereby GRANTED on Count IV of the Second Amended Complaint.
In accordance with Rule 57 of the Federal Rules of Civil Procedure and Title 28, United States Code, Section 2201(a), a Declaratory Judgment shall be entered separately, declaring “The Patient Protection and Affordable Care Act” unconstitutional.
DONE and ORDERED this 31st day of January, 2011.
Senior United States District Judge
Judge Roger Vinson has ruled that the individual mandate in the Patent Protection and Affordable Care Act is unconstitutional, as Judge Henry Hudson had ruled earlier. Judge Vinson went further and ruled that the individual mandate cannot be severed from the rest of the Act, and, therefore, the entire Patent Protection and Affordable Care Act is unconstitutional.
He also ruled that “officials of the Executive Branch will adhere to the law as declared by the court. As a result, the declaratory judgment is the functional equivalent of an injunction.”
There are two fundamental decisions in this summary judgement:
1) The individual mandate to purchase private health insurance is unconstitutional. Since he has ruled that the mandate cannot be separated from the rest of the Act, the entire Act is unconstitutional.
2) Medicaid is constitutional. Summary judgement in support of Medicaid expansion was granted on behalf of the United States Department of Health and Human Services.
Forget the Supreme Court. Let’s walk away from the unconstitutional Patient Protection and Affordable Care Act and instead enact the constitutional Expanded and Improved Medicare for All Act. It’s less expensive, works better, and includes all of us.
As Judge Vinson stated, “That is not to say, of course, that Congress is without power to address the problems and inequities in our health care system.”
Minnesota health CEOs taking a whack at Medicaid
A coalition of health CEOs released a plan to reshape spending in state’s huge Medicaid program.
By WARREN WOLFE, StarTribune
January 26, 2011
Concerned that the Legislature and governor might get it wrong, CEOs from seven major health plans and providers have drawn up their own plan to streamline Minnesota’s massive Medicaid program — and carve $1.8 billion from the projected $6.2 billion deficit.
The plan is sure to draw political fire. It suggests up to $170 million in cuts to state-funded services that help keep the elderly and disabled out of institutions, for example, and captures $280 million in higher taxes on tobacco and alcohol.
The proposal would also keep $800 million in federal subsidies by continuing Medicaid expansion, raise $400 million by taxing healthcare providers, push people with disabilities into managed care and establish an “institute” to design further cuts. Warren Wolfe’s report continued:
Some critics said Wednesday they wonder if the health plans are trying to enhance their profits by moving more people into managed care.
Together, the state’s 12 HMOs earned $103.1 million in net income in 2009 from the three Minnesota health care programs. Historically, Medicaid has been profitable for HMOs, with those earnings typically offset by losses from the MinnesotaCare and General Assistance Medical Care.
State government business is often more profitable than earnings from private insurance. In 2009, the average HMO profit margin for state health plans was 4.1 percent, compared with 1.6 percent for commercial business, according to a StarTribune analysis.
If HMOs want in, demand transparency
Not surprisingly, Minnesota’s health plans suggest that the state shift the administration of its public health programs for those with disabilities into a program administered by insurance companies (“Taking a whack at Medicaid,” Jan. 27).
Without evidence, they claim this will save the state up to $300 million annually. Shockingly, we let them get away with it.
Minnesotans hand over $3 billion of taxpayer money each year to Minnesota HMOs to manage most of our public health care programs and demand no auditing in return.
Historically, adding a middleman to “manage” health care delivery has added costs, not lowered them.
DR. LISA NILLES, MINNEAPOLIS
The writer is acting director of the Minnesota Universal Health Care Coalition.
Today the StarTribune’s editors took up the topic again. Their editorial, subtitled “Cost-cutting report didn’t disclose plans’ business interests,” explains and asks:
While the group offered up clear-eyed, if painful, prescriptions in a report last week – namely, benefit cuts and tax increases on tobacco and alcohol – it undermined its hard work by not addressing these important questions:
• How much would the health plans profit from their proposed shift of more Medicaid patients into insurer-run managed-care programs?
• Could the health plans themselves trim operational or administrative costs to provide savings to the state?
Comment by Dr. Lisa Nilles:
In 2005-2006, the Minnesota single-payer community supported legislation to remove the HMOs from the administration of our public programs. We offered testimony, supported by Kip Sullivan’s extensive research, that privatization of our public health care programs almost certainly increased costs, without any corresponding increase in quality of care or access to care. The legislation didn’t move.
Now, 5 years later, with a $6 billion state deficit, and a willing whistleblower, the issue of the lack of accountability and transparency of the HMOs has moved into our mainstream media. David Feinwachs, who for 30 years was legal counsel for the Minnesota Hospital Association, did his own research into this issue, and began making videos about what he found (or rather, couldn’t find). After the first video, he was terminated from his position, apparently because of the influence of the insurance industry on the hospital association. (Dave Feinwach’s videos can be accessed at muhcc.org.)
Today’s StarTribune editorial, the fruit of Dave Feinwach’s courage as well as consistent advocacy by many voices, helps everyone see the folly of privatization of public health programs.
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.
Note: You may want to skip directly to the comment, and only afterwards read the excepts from the HHS release and report, if you wish to review the details.
News Release: Report finds lower insurance premiums, more choices in 2014 for families, businesses under Affordable Care Act
U.S. Department of Health & Human Services
January 28, 2011
Secretary of Health and Human Services Kathleen Sebelius today released a new report showing how much families and businesses can save on health insurance premiums and out-of-pocket costs under the Affordable Care Act in 2014 – each year, a low-income family of four could save up to $14,900 and businesses will benefit from the savings and tax credits in the new law.
The report finds that, compared to what they would have paid without the law:
* Middle-class families purchasing private insurance in the new State-based Health Insurance Exchanges could save as much as $2,300 per year in 2014.
* Tax credits provided by the Affordable Care Act will lead to even greater savings. For example, in 2014, a family of four with an income of $33,525 could save as much as $14,900 per year since they will also qualify for tax credits and reduced cost sharing.
Report: Health Insurance Premiums: Past High Costs Will Become the Present and Future Without Health Reform
U.S. Department of Health & Human Services
January 28, 2011
This report examines the past, present, and future regarding the likely effects of the law on premiums – along with what might happen without it.
Savings for individuals and families:
The Congressional Budget Office (CBO) produced estimates of the impact of the Affordable Care Act on premiums. For people purchasing nongroup coverage through the Exchanges, it estimated savings of 7 to 10 percent resulting from the increase in the size of the insurance pool as well as the nature of the new enrollees, who, in light of the premium tax credits and the individual responsibility provisions, are likely to be healthier than existing enrollees. An additional 7 to 10 percent savings would result from providing the same set of services to the same group of enrollees – primarily because of the new rules in the market such as eliminating insurance underwriting. CBO also credits some of the savings to increased choices and competition. Together, these savings range from 14 to 20 percent. CBO also assumed that individuals and families would have, on average, coverage that is more comprehensive than what they have now, meaning that the savings would offset by higher premiums due to better coverage. It is important to note that this benefit enhancement is a choice, not a requirement.
Assuming 20 percent premium savings, families purchasing insurance through Exchanges could save as much as $2,300 per year and individuals could save up to $800 in 2014 compared to individual market coverage with the same level of benefits without the law. With premium tax credits, the savings from health reform range from $9,900 for a family of four with income of $33,525 to $3,500 for a family with an income of $78,225 (see Figure and Methodology).
Premium savings are only part of picture for low-income individuals and families. They also may qualify for reduced cost sharing under the Affordable Care Act. For the same families with incomes of $33,525 and $78,225, this could add $5,000 and $1,500 respectively to the premium savings (see Table in Methodology).
The table below uses CBO data to illustrate the savings that could be achieved under health reform in 2014. It uses the CBO single premium data for 2016, deflated to 2014 using its last public estimate of private premium growth (6 percent). Family premiums are calculated by multiplying the single premium by 2.7, the standard ratio of family to single premiums (CBO assumes that the composition of a family policy will change under the new law). It then applies the maximum savings for the individual market of 20 percent, assuming that individuals do not decide to purchase better coverage. The tax credits are calculated by applying the maximum premium payment in the law to the 2011 income (using the latest poverty thresholds) inflated by 1.7 percent (CBO’s August 2010 projection for 2012-2014). Premiums vary by age, region and other factors, so these estimates are illustrative.
The cost sharing estimates were calculated by taking the average out-of-pocket spending for a silver plan in 2016 – $1,900 for an individual and $5,000 for a family according to CBO – and deflating to 2014 assuming 6 percent health cost growth (see above). Assuming a linear relationship between the actuarial value of a silver plan (70 percent) and the average out-of-pocket cost sharing, the reduced cost sharing amounts were calculated using the schedule in the law for individuals and families at different income brackets. This was subtracted from the average out-of-pocket costs for a bronze plan to assess the savings.
The potential premium effects in the text and chart are rounded to the nearest $100. Note: the premium effects shown here differ from earlier estimates from HHS due to the January 20, 2011 update of the poverty guidelines.
(The table from which the numbers in the release and the report are derived can be accessed at the link below. Only the footnotes to the table are reproduced here.)
1. CBO 11/30/09 estimate of prior law national average individual market single premium ($5,500), deflated to 2014 assuming 6% annual premium growth and adjusted pro-rata for a plan with an actuarial value of 60%. Family premium is the single premium multiplied by a family factor of 2.7
2. CBO 11/30/09 estimate of average cost sharing under reform ($1,900 / $5,200), deflated to 2014 assuming 6% annual health cost growth, pro-rated for a plan with an actuarial value of 60%.
3. Assumes CBO 11/30/09 gross savings of 20%, not counting the premium cost of buying up benefits.
4. Income inflated to 2014 assuming general inflation of 1.7% per year (CBO, August 2010)
Today’s selections from the Department of Health & Human Services (HHS) are not so much for the purpose of reading and studying, but rather are presented to provide documentation to support today’s comment. HHS is touting the savings in insurance premiums that will result from having enacted the Patient Protection and Affordable Care Act. The fine print is important in understanding what this touted savings really is.
HHS is comparing family plans that will be offered in the state insurance exchanges with family plans that are currently offered in the individual insurance market. The current plans are terrible, which is the main point that HHS should have made. To keep premiums down to a level that families can barely afford, the existing plans provide very limited benefits, potentially exposing families to very high out-of-pocket expenses.
So that the savings can be calculated on an apples to apples comparison, HHS has selected the most austere plan to be offered in the exchanges – the bronze plan, which has an actuarial value of 60 percent – a plan that’s about as lousy as those on the individual market today. This leaves the family exposed to 40 percent of their health care costs (though admittedly with inadequate income-indexed subsidies, which is important but not covered here further).
The family has the option to buy up to a silver plan, but then the touted savings goes away. Furthermore, the silver plan is also an under-insurance product since its actuarial value is still only 70 percent, leaving the family responsible for 30 percent of the costs. Although still a lousy plan, as HHS says, “this benefit enhancement is a choice, not a requirement.” What a choice.
Gold and platinum plans with actuarial values of 80 percent and 90 percent will be offered in the exchanges, but very few families will move up to those plans since they must pay the full additional premium. Only the wealthiest families will be able to afford the difference.
The title of HHS’s release says “lower insurance premiums” and “more choices.” But what they bury in their report is that you get lower premiums only if you choose a crappy plan similar to those currently available in the individual market.
We can do far better than that. We can enact an improved Medicare for all. Then you wouldn’t have to worry about unaffordable premiums and out-of-pocket expenses since they would be replaced with equitable taxes which would be affordable for all.
By Jonathan Starr
The article “Funding for health care law next big battle” by professor Robert Reich makes the case that funding universal health insurance through taxes is likely to be better accepted than funding it through mandating individual policy purchases. But the article does not make the case that using FICA-style payroll taxes (i.e. like Social Security and Medicare taxes) would be preferable to using progressive income taxes to fund single-payer health insurance. And there are many reasons why the latter would be much better.
For entitlement programs like Social Security and Medicare, there may be some psychological advantage in designating a specific tax that appears separately on paycheck stubs and W-2 statements. This is because people, during their working years, tend to see these as programs for which they pay now in order to receive specific benefits in the future. Making the mental connection across time between the payments now for benefits later may be enhanced by having a designated associated tax, visible in writing.
But this would not be necessary for universal single-payer health insurance. Upon implementation, universal health insurance coverage would be part of the panoply of government services and benefits that everyone would receive at all times. As such, there would be no need for some written artifice to calm the public psyche.
After all, no one now needs to see on their paystub what portion of their income taxes goes to fire and police protection, water quality, food inspection, national defense, etc. That is because people can see every day that they are deriving the same benefits as everyone else; they do not need written proof that they are entitled to them. The same would be true of universal single-payer health insurance. It would be another such benefit to which citizens would know they have access every day, without anything about it needing to appear on their tax-related documents.
Meanwhile, progressive income taxes, scaled by ability to pay, would be a far more fair and equitable way to fund single-payer health insurance than FICA-style payroll taxes. That is why countries with single-payer systems now, like Canada, have chosen to fund them with progressive income taxes.
The Social Security payroll tax in particular is very regressive, since it applies only to earned income (i.e. wages and salaries), and only up to a certain cap level. Unearned income (e.g. capital gains, dividends, interest), which accrues overwhelmingly to wealthy people, is entirely exempt from both Social Security and Medicare taxes.
And the employer portion of FICA payroll taxes is very inequitably distributed as well, and in a way that discourages hiring and employment, and even threatens business viability. In accordance with the principle of taxing by ability to pay, business taxes should be based on level of profits. But instead, employer FICA taxes are applied by number of employees, regardless of the level of profitability of the business. So, for example, a barely surviving company that employs many people will pay much higher FICA payroll taxes than a highly profitable business with few employees. Essentially, these are substantial taxes on hiring, strongly encouraging businesses to make do with as few employees as possible, and making it much harder for labor-intensive businesses to survive at all.
In FDR’s famous “Four Freedoms” speech, he said, “The principle of tax payments in accordance with ability to pay should be constantly before our eyes to guide our legislation.” Progressive income taxes, scaled by ability to pay, comply with FDR’s principle, while regressive and inequitable FICA-style payroll taxes do not. The implementation of universal single-payer health insurance, available to everyone immediately and at all times, would eliminate the perceived need to document eligibility for benefits later based on payments made now. As such, equitably applied progressive income taxes are the better way to fund single-payer health insurance.
Jonathan Starr resides in California.
Why Don’t Americans Live Longer?
By David Leonhardt
The New York Times
January 25, 2011
The National Academy of Sciences has just released a fascinating report on life expectancy in rich countries around the world. The researchers who wrote the report — public-health experts, demographers, economists and others, from around the world — have tried to figure out why Americans don’t live as long as people in many other countries.
From a summary of the report:
“Over the last 25 years, life expectancy at age 50 in the U.S. has been rising, but at a slower pace than in many other high-income countries, such as Japan and Australia. This difference is particularly notable given that the U.S. spends more on health care than any other nation….
“Three to five decades ago, smoking was much more widespread in the U.S. than in Europe or Japan, and the health consequences are still playing out in today’s mortality rates, the report says. Smoking appears to be responsible for a good deal of the differences in life expectancy, especially for women….
“Obesity’s contribution to lagging life expectancies in the U.S. also appears to be significant, the report says. While there is still uncertainty in the literature about the magnitude of the relationship between obesity and mortality, it may account for a fifth to a third of the shortfall in longevity in the U.S. compared to other nations, the report says….
“Lack of universal access to health care in the U.S. also has increased mortality and reduced life expectancy, the report says, though this is a less significant factor for those over age 65 because of Medicare access….”
And from the report itself:
“With respect to income inequality, it is widely believed that such inequalities are higher in the United States than in other high-income countries, in part because the United States does less to redistribute wealth among its citizens…. Poverty rates also appear to be higher in the United States than in most of the other countries….
“This combination of factors could result in higher mortality rates among people in the lower socioeconomic brackets in the United States than in other countries, pulling down U.S. life expectancy levels in general…. In particular, there is a clear pattern among U.S. white males that fits the hypothesis….On the other hand, the pattern for U.S. women is somewhat different: mortality rates are higher than in most Northern and Western European countries among those who are highly educated as well as among the least educated….
“It is difficult to draw a precise conclusion as to the size of the role of inequality in relative levels and trends in U.S. mortality above age 50.”
This country has made a lot of progress against smoking. Obesity remains a major problem, though there are some signs it’s leveling off. And as the report notes, the link between obesity and mortality isn’t yet clear. Inequality’s role also seems unclear.
So beyond reducing smoking further, the single best strategy for extending American lives would appear to be extending universal health-insurance coverage below the age of 65.
National Research Council of the National Academies:
“Explaining Divergent Levels of Longevity in High-Income Countries”
We frequently look at the lower life expectancy in the United States, in comparison to other wealthy nations, as a sign of the relatively poor performance of the U.S. health care system. We conclude that we would benefit if we established a reasonably comprehensive national health program that included everyone. Opponents contend that our system is outstanding and that reform is not necessary; individuals need only to take better care of themselves.
This new report by the National Research Council does not provide all of the answers, but it does provide very useful information. Two detrimental factors in which individuals do play some role are smoking and obesity.
On smoking, there is good news. Our high incidence of deaths from lung cancer and chronic pulmonary disease are related to the very high rates of smoking from a few decades ago. In the recent couple of decades, smoking cessation programs have been very successful, so much so that we can predict a significant increase in life expectancy as the non-smoking generation ages. Score one for those who blame individuals for our higher death rates, but also score ten for those who support the multitude of public health programs that have been so effective in reducing smoking behavior.
Obesity is a more difficult problem. Certainly a sedentary life style and poor eating habits contribute, so individuals can bear some blame, but other complex factors play even more important roles. Genetic factors, which are very important, we have no control over. Computers, televisions, work-at-home arrangements all reduce physical exertion. Community design and transportation have reduced self-propelled locomotion (i.e., walking). The food industry has not been particularly helpful, marketing excesses of nutritionally unbalanced foods, though there are signs that an awareness has set in and that product selection should improve. It’s easy to say that everyone should exercise more and eat less, but it is going to require intensive public policy and public health measures – more intensive than with the smoking cessation programs – to alter the obesity-inducing milieu.
Socioeconomic inequality in the United States certainly plays a role in our shorter life expectancy statistics. Considerable heated debate takes place over whether that is a cause or a symptom of factors leading to premature deaths. That debate is misdirected since socioeconomic inequality is deplorable for far more reasons than just our health outcomes. We do need national policies to raise the lot of those who are falling hopelessly behind. Although there is much to do, we can begin by reversing the income transfer that has been taking place from the productive workforce (hard-earned income) to the very wealthy (largely unearned income). Simple progressive tax policies can ensure that everyone has a living income, without impacting in the least the life styles of the wealthy.
You really need to read the 200 page report to understand what is known and what is not known about why we have lower life expectancies than should be expected for a wealthy nation. Regardless of those who would distract us by blaming personal failure for increased mortality, one conclusion of the report really stands out:
“The lack of universal access to health care in the United States undoubtedly increases mortality and reduces life expectancy. It is a smaller factor above age 65 than at younger ages because of Medicare.”
We know how to fix that.
The Case for Health Insurance
By John Goodman
John Goodman’s Health Policy Blog
January 26, 2011
I’m one of the very few health policy wonks you know (maybe the only one) who believes everyone should have access to health insurance the same way they currently have access to life, disability and homeowner’s insurance. In fact, I often refer to my blog as about the only health policy blog on the Internet that believes real health insurance is a legitimate business.
Wait a minute, Goodman. How can you say that? What about the Commonwealth Fund and Families USA? Don’t they believe everyone should have health insurance? What about everyone in Congress who supported ObamaCare? What about the president himself? Aren’t they all promoting the business of health insurance?
The short answer to all those questions is “no.” Real insurance involves a pooling of risks. The insurer must make sure each new entrant to the pool pays a premium that reflects the expected costs that entrant brings to the pool. Otherwise, the insurer won’t be able to pay claims. The business of insurance is the business of pricing and managing risk.
The organizations and people noted above don’t believe that “pricing and managing risk” is a legitimate activity. In fact, they went a long way toward completely outlawing the practice in the health reform bill. The only legitimate purpose of insurance, in their view, is to collect money and pay bills. For public insurance, this means collecting taxes and paying expenses. Their view of acceptable private insurance is to copy government insurance — a sort of private sector socialism.
Okay, Goodman, let’s accept that distinction for the moment. Doesn’t pricing risk mean charging me a premium that reflects my health status? The less healthy I am, the more I have to pay. Why should I want to buy insurance from a company that does that?
Because if your insurer doesn’t do that, a lot of bad things will happen.
Remember the phrase, “You’re in good hands with Allstate”? It was the voiceover at the scene of an auto accident where there has been catastrophic damage. The ad speaks volumes about what happens in real insurance markets. Basically, insurance is unimportant to you until things go very wrong. It’s at that point that you want good service.
Contrast Allstate’s ad with the kind of ads federal employees are subjected to during the fall open season for choosing a health insurance plan. What you never see in Washington are ads saying, “You are in good hands with [Aetna, Cigna, UnitedHealth, etc.] if you get [AIDS, cancer, heart disease, etc.].” Instead, the typical open season ad pictures young families with healthy children and no apparent health problems. The not-so-subtle message is: “You’ll be in good hands with us if you look like the people in these photos.”
Why is the health insurance market so different from auto insurance? Answer: health insurers are not allowed to charge federal employees premiums that reflect their health status.
Since the health overhaul legislation plans to make the federal employee health benefit system the model for health insurance exchanges nationwide, it’s instructive to stop and consider the incentives the health plans in these systems have. As explained in a previous analysis, if insurers have to take all applicants for the same premium, they will obviously try to attract the healthy (on whom they will make profits) and avoid the sick (on whom they will incur losses). After enrollment, their incentive is to overprovide to the healthy (to keep the ones they have and attract more of them) and to underprovide to the sick (to encourage them to leave and discourage enrollment by others just like them). If a TV ad could summarize how this health insurance market works, it would say, “You’re in good hands with us, unless you really need us — then we hope you will go somewhere else.”
And the reason this works is because people really can go somewhere else if they get sick — paying no extra premium.
So the incentives of the healthy employees are: Find plans that have lots of services for healthy people — knowing that if they get sick, they can always enroll in some other plan. The incentives for employees with a serious health problem (or more likely, a family member with a health problem) are to seek out plans that are the best at treating costly illness. But, as in a game of musical chairs, no insurer wants to be chosen.
In such a world, comparative effectiveness research, FDA rulings on drugs, end-of-life counseling and so many other controversial issues of late become very relevant. Insurance companies can’t just dump their sickest patients out on the street. They need cover. They need reasons not to pay for the latest cancer drug or the latest expensive test. Given the slightest encouragement, denial is in their self-interest.
Okay, Goodman. This is all very persuasive. But if my premium reflects my health status, what happens to people who are too poor or too sick to be able to afford those premiums? And what happens if a healthy person gets really sick (high medical costs) and wants to switch insurers?
These are good questions. I will answer them in a future Health Alert.
In pooling risk, the decision to assign premiums based on an individual’s risk is purely arbitrary, albeit it is convenient for those marketing the traditional business model of insurance – “real” health insurance, as John Goodman calls it.
The ultimate pooling of risk would be one national pool that includes everyone. Yet average medical costs for a worker’s family of four is now over $18,000 (Milliman), when median household income is $50,000. A middle-income family can no longer afford an equally-allocated premium plus out-of-pocket costs for that risk pool, much less a premium that is adjusted upward for higher risk.
Many of of us who do believe that everyone should have access to health care free of significant financial barriers understand that the traditional concept of “real” insurance no longer works. If individuals with health problems are priced out of risk pools, then how can they possibly pay premiums for the pools that concentrate high-risk individuals? And don’t say that you merely have to set up state-run high-risk pools. Not only have they already been proven to be ineffective in seriously addressing this problem, they would still have to be funded by us anyway, through the tax system. If we moved most high-risk individuals into these pools, that would consume a major portion of our national health expenditures (i.e., much of the 20 percent of people who consume 80 percent of health care).
In fact, think of our largest risk pool – the collective pools of employer-sponsored plans. These are largely composed of the healthy workforce and their young healthy families (the 80 percent of people who use only 20 percent of health care). Yet these low-cost pools that benefit from favorable selection (opposite of adverse selection) are already straining the budgets of employers and their employees. Isn’t it kind of silly to pool together these massive numbers of healthy people, while leaving out most of those with greater needs, and pretend that somehow we have provided the nation with “real” insurance? That serves the insurance industry well, but not the people.
Since average-income individuals can no longer afford their equally-allocated portion of our national health expenditures, funding will have to be progressive, based on income. The least administratively complex and a less expensive method of doing that would be to establish a single risk pool, and fund it through progressive tax policies.
If our goal is seeing that everyone gets the care they need, then we really do need to discard the antiquated business model of “real insurance” and adopt a single payer system – an improved Medicare that covers everyone.
2 big health plans may merge
By Robert Weisman and Kay Lazar
The Boston Globe
January 25, 2011
Harvard Pilgrim Health Care and Tufts Health Plan are close to signing a memorandum of understanding that would combine their operations in four New England states and make them a stronger competitor to the market leader, Blue Cross Blue Shield of Massachusetts, in their home state. (Update: the memorandum of understanding was signed today.)
Consumer advocates said it is unclear how the insurers’ subscribers might be affected by the union, which would leave Massachusetts with only two major health companies.
“There has been tremendous value in having three strong locally based health plans in terms of choices for consumers,” said Nancy C. Turnbull, associate dean at the Harvard School of Public Health and a former deputy insurance commissioner. “But on the other hand, this could create a consolidated plan that could create a stronger competitor to Blue Cross and it could create a plan that has stronger leverage than either of them individually in negotiating with providers.”
Partly in reaction to the pressure to switch from fee-for-service to global payments, several Massachusetts hospitals have combined operations, while others say they are seeking buyers.
Choice. Wasn’t that the clarion call during the campaign for health care reform? We could have our choice of keeping the health plan we have, or choosing from a market of plans in the health insurance exchanges. Since Massachusetts had a head start in establishing the model of reform selected for the nation, let’s see what choice has meant to them.
Has health plan competition in the marketplace kept Massachusetts’ health care costs under control? No. They have the highest health care costs in the nation, and costs continue to rise.
Well that didn’t work. So now Massachusetts has begun the process of reducing the competition to two major health plans. That creates an oligopoly, which suppresses competition. Out with the market theory that competition reduces prices. In with the market theory that concentration provides the health plans with leverage to extract greater price concessions from the providers of health care. Of course, choice is a casualty of concentrated markets.
How do the providers fight back? Hospitals are already merging, in an effort to establish market dominance. Physicians are evaluating the concept of accountable care organizations (ACOs) as called for in the Patient Protection and Affordable care Act. Although the intent of the law is that ACOs would control costs (after all, they’re supposed to be accountable), physicians and their health provider partners will certainly use them to leverage their end of price negotiations (i.e., fight for higher prices, not lower).
Fundamental to competition is that when you have winners, you must have losers. That might be appropriate in sporting events, but it is an ethical breach to establish a health care financing system that automatically moves a significant portion of our health care providers into the column of losers. We need a financing system that makes patients winners by providing them access to a health care delivery system that strives for optimal care through cooperation, rather than competition.
That is partly what a single payer system is all about. Using global budgeting and negotiation, the public administrator works with the providers – all providers – to pay legitimate costs and provide fair margins.
Under such a system, competition becomes moot. Eliminating private health plans obviously eliminates health plan competition. If consolidation of health providers improves efficiency, quality and access, then there is no reason to be concerned about a lack of competition there either. Even without consolidation, appropriately compensated providers still can fully engage themselves in serving their patients, unencumbered with the distraction of having to compete.
Originally posted on the DailyKos
Throughout 2009 and into early 2010, while the health reform we got nationally was being watered down by the corporate conservadems in the Senate, the Vermont legislature was moving forward. An important step was back in June 2010 when they decided upon the Harvard-MIT analytic group led by Prof. William S. Hsiao (who had done some of the modeling for Taiwan’s transition from private insurance to single payer) and Jonathan Gruber (who did some of the modeling for the Obama-Baucus reform we got nationally).
They were charged with providing detailed policy and economic analysis of three possible proposals, two of which was to be variations of single payer. In Vermont, the least progressive proposal was the equivalent of the most progressive that the U.S. House of Representatives considered, being a relatively strong public option while leaving private insurance in place to compete. That was the charge from Vermont legislature, suggesting strong and real support for single payer.
In November, Democrat Peter Shumlin won election for Governor running explicitely on a single payer platform.
What IT IS:
Act 128 calls upon our team to develop three options. The Legislature requires that we evaluate a state government-administered and publicly-financed single-payer health benefits system. This system, which we refer to as Option 1, would provide all Vermonters with a uniform benefits package. Within those parameters, we looked at costs of both a “comprehensive” benefits package and a leaner, “essential” benefits package, which I will define and discuss later. The second option is a state government-administered, public option that would allow Vermonters to choose between public and private insurance coverage. Option 2 is designed to allow for and promote competition between the public and private plans, while keeping in place the current multiple payer system.
Act 128 allows our team to develop a third option that we design after analyzing all aspects of Vermont’s health care and assessing the positions of key stakeholders across the State of Vermont. We call Option 3 a public/private single-payer system. It provides an “essential” benefits package, is administered by an independent board with diverse representation, and it employs a competitively-selected third party to manage provider relations and claims adjudication and processing.
In analyzing the three options, we determined that all will yield significant savings. However, our research and analysis indicate that the single-payer options will have a more dramatic impact on reducing cost than the public option because they incorporate a uniform benefits package and reduce much of the administrative structure needed to compensate multiple payers. Therefore, we estimate that Option 1 will produce savings of 24.3% of total health expenditure between 2015 and 2024. Option 2 will produce savings of 16.1% of total health expenditure between 2015 and 2024. Finally, Option 3 will produce savings of 25.3% of total health expenditure between 2015 and 2024. Option 3 produces additional savings as compared to Option 1 because it incorporates a public/private partnership in governance and administration.
In 2015, the first full year of implementation, PPACA would reduce the number of uninsured by 18,000 people; however 32,000 Vermont residents will remain uninsured. Ultimately in 2019, PPACA will reduce the number of uninsured by 22,000 in 2019. PPACA will likely add an additional $240 million of federal funds in 2015 to the State of Vermont, which will eventually rise to $420 million in 2019. All of these dollar values are expressed in 2010 dollars.
In comparison with option 1 and 3, Option 2 would still leave approximately 30,000 Vermonters uninsured. Option 2 would not expand the current benefits to cover some dental and vision care nor bring up the benefits for those who are currently under-insured.
The comprehensive benefit package under option 1 covers all health services with minimum cost sharing. As a result, it costs more and requires more funds to finance it. Under a payroll contribution scheme of financing, employers and workers will have to pay more than what they would pay if no reform takes place. This comprehensive benefit option would also increase the total health spending in Vermont which would make this option less feasible.
The essential benefit package under option 1 and 3 have leaner benefits and they can be financed through payroll contributions without increasing the amount that most employers and workers would have to pay as compared to if no reform takes place. It would reduce the total health spending in Vermont slightly in 2015 when the proposed reforms are implemented.
The quick summary is much more bang for the buck with single payer. Everybody covered, better benefit package, and saves most money.
Option 2, is similar to the original national liberal Democrat’s plan of a strong public option but leaving in place private insurance to “compete” results in leaving resuidual uninsured and underinsured, less benefits and more costs, then either of single payer options.
As my colleague Don McCanne of PNHP says:
Although advocates of the pure single payer model will find some problems with this report on a reform proposal for Vermont, there is very good news in this analysis. The report emphatically confirms the superiority of the single payer model in ensuring that everyone is included while containing health care costs.
In an analysis of the impact of the Patient Protection and Affordable Care Act (PPACA), the authors demonstrated that far too many would still be left without insurance, and it would have a negligible impact in controlling health care costs. As we have said all along, the financing system in PPACA is grossly inadequate and needs to be replaced.
The authors’ Option 2 is essentially PPACA with a “public option” added – a public insurance plan that competes with the private plans. Their analysis shows that it would have only a very modest impact on reducing costs, and an almost negligible impact on reducing the numbers of uninsured. Thus the bluster in support of the public option was misdirected. That energy should have been redirected to supporting single payer instead.
Options 1B and 3 are almost identical. They are both single payer models that totally replace the private insurance plans. They have an “Essential Benefits Package” with an actuarial value of about 87 percent which is close to the typical employer-sponsored plans before they began introducing high deductibles. Their analyses shows that these plans would cover everyone without any increase in spending since the single payer efficiencies would be enough to pay for those currently uninsured or under-insured. So this is the really good news – single payer works (though read on).
The primary difference in 1B and 3 is that 1B is publicly administered whereas 3 is administered by an independent board that contracts with a competitively-selected third party to manage provider relations and claims adjudication and processing. The authors state a preference for Option 3 claiming that it saves a little bit more money by requiring potential managers to compete for the contract. That is highly dubious and more likely was inserted to appease the market ideology of a sector of the twenty some odd contributors to this study. Considering this, I think that we can extrapolate the fact that the authors would also endorse Option 1B, since it is otherwise identical.
Option 1A is like 1B except that it provides a “Comprehensive Benefits Package” – virtually all health care services and products – achieving approximately an actuarial ratio of 97% for medical and mental health services, 90% for drugs and vision care, and 85% for dental, nursing homes and home care. It would cost more than Option 1B, but not that much more. It was not selected by the authors since one of the goals of study was to cover everyone without increasing spending over current levels. In a single payer system the benefits should be comprehensive.
One very serious deficiency is that they decided to leave in place Medicare and Medicaid, primarily because of existing barriers to move them into a single payer system. Thus their proposal is not a single payer system. Leaving these programs in place sacrifices some of the important single payer efficiencies.
They also tout accountable care organizations (ACO), suggesting that capitation should apply to primary care and salaries should apply to specialists. Yet by questions that they pose, they recognize that ACOs are not well defined. For instance, how can they effectively manage the care of a patient that PPACA grants the right to move in and out of the ACO at any and all times?
Within the next couple of days, we’ll have a clearer concept of where the single payer community should be on this report. Tentatively, it seems that it deserves our support, but support that is qualified by strong advocacy to make it right by such measures as including comprehensive benefits, and rolling in and eliminating Medicare and Medicaid.
Needless to say, the health insurance industry is not happy.
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