Employers Face 10.5 Percent Health Care Cost Increases

Posted by on Thursday, Aug 27, 2009

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

Employers Face 10.5 Percent Health Care Cost Increases, Says Aon Consulting

August 25, 2009

Aon Consulting surveyed more than 60 leading health care insurers, representing more than 100 million insured individuals, and found that health care costs are projected to increase by 10.4 percent for HMOs, 10.4 percent for POS plans, 10.7 percent for PPOs and 10.5 percent for CDH plans.

In addition, health care rate increases for retirees over the age of 65 are projected to be 6.6 percent for Medicare Supplement plans and 7.3 percent for Medicare Advantage plans.


Under the management of private insurers health care costs continue to increase at outrageous rates – this year at 10.5 percent. With the decision of Congress to leave private insurers in charge, and with no measures that would have any major impact on slowing health care spending, it can be anticipated that these outrageous increases will continue even after reform is enacted.

The Medicare Supplement (Medigap) and Medicare Advantage plans are also private insurance plans, and so you might expect their increases to be similar. In fact, though technically complex, rate setting of these plans is linked to spending in the traditional fee-for-service Medicare program. The fact that rate increases in these programs are lower is not due to any efficiencies instituted by the private plans, but is due to greater efficiency of the public Medicare program.

In fact, there is much waste in these private Medicare programs.

The Medicare Advantage plans are overpaid deliberately to give the plans an unfair competitive advantage over the traditional Medicare program, with the intent of privatizing Medicare. Most of the extra payment is wasted in administration and profits, and what little benefit there is should be given to all Medicare beneficiaries, not just those enrolled in these plans.

The Medigap plans provide the worst value in the private insurance market. The insurers pay a much lower percentage of the premiums they collect for actual health care than they do in any of their other insurance product lines. Americans would be receiving a much greater value if the benefits of the Medigap plans were rolled into the traditional Medicare program, and these wasteful private supplemental plans were totally eliminated.

This Aon report should lead to two obvious conclusions: 1) get the private health plans out of our Medicare program, and 2) replace the private employer-sponsored plans with an improved Medicare program for all of us.

If you agree, let President Obama and the members of Congress hear your message loud and clear. Immediately.

JHPPL: Exploring the Concept of Single Payer

Posted by on Wednesday, Aug 26, 2009

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.

Today’s message is in honor of Sen. Edward M. Kennedy who told us,

“For all those whose cares have been our concern, the work goes on, the cause endures, the hope still lives, and the dream shall never die.”

Special Issue: Exploring the Concept of Single Payer

Single Payers, Multiple Systems: The Scope and Limits of Subnational Variation under a Federal Health Policy Framework

By Carolyn Hughes Tuohy, University of Toronto
Journal of Health Politics, Policy and Law
August 2009

Neither Obama nor any other major contender for the presidency in 2008 proposed a universal single-payer (“Medicare for All”) model. The Obama proposal for a new public plan, to be offered in parallel with regulated private plans through a National Health Insurance Exchange modeled on the Federal Employees Health Benefits Program (FEHBP), would indeed represent a distinctive American hybrid, but it would not be a single-payer system. By definition, a government plan is not “single payer” if it competes with other insurers in offering comprehensive coverage. This is not merely a definitional issue, however: it has critically important implications for the economic and political dynamics of the system. Economically, competition between public and private insurers raises potentially crippling problems of risk selection requiring a regulatory framework that has so far eluded even those European jurisdictions with much longer experience with the regulation of social and private insurance. Politically, such a competitive framework renders the arena much more pluralistic and volatile — and effective regulation therefore much more difficult — than does a pure single-payer model with its central axis of profession-state accommodation.

In 2009, the colliding waves of hope, generated by the election of Barack Obama, and fear, generated by global financial turmoil, may produce (a paradigm shift in U.S. health care policy and a paradigm shift in the political landscape). At the very least, it seems inevitable that they will yield a larger governmental role in the health care arena. The shape of the resulting hybrid, and whether that hybrid has any room for a single-payer element, is much less clear.


The fact that the entire August issue of the Journal of Health Politics, Policy and Law is devoted to exploring single payer certainly indicates that the concept has not died within the policy community.

Although a majority (but by no means all) of the political community dismisses single payer as not being politically feasible, much of the policy community accepts it as a feasible policy approach that would bring affordable health care to everyone. Even those opposed based on ideology understand clearly the feasibility of single payer from the policy perspective. Otherwise why would the opponents of reform keep insisting that policies that improve our health care financing would inevitably lead to a single payer system?

Europe leads in pharmaceutical research

Posted by on Tuesday, Aug 25, 2009

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.

Global Drug Discovery: Europe Is Ahead

By Donald W. Light
Health Affairs
August 25, 2009

It is widely believed that the United States has eclipsed Europe in pharmaceutical research productivity. Some leading analysts claim that although fewer drugs have been discovered worldwide over the past decade, most are therapeutically important. Yet a comprehensive data set of all new chemical entities approved between 1982 and 2003 shows that the United States never overtook Europe in research productivity, and that Europe in fact is pulling ahead of U.S. productivity. Other large studies show that most new drugs add few if any clinical benefits over previously discovered drugs.

Policy Reflections

Congressional leaders and others concerned about high prices of new patented drugs will be heartened by this analysis, because lower European prices seem to be no deterrent to strong research productivity. A previous analysis using industry-based data showed that pharmaceutical companies recover all costs and make a good profit at European prices. Europeans are not “free riders” on American patients–another myth promoted by industry that assumes that countries are separate R&D/market silos that should each pay for themselves.

The real innovation crisis for patients and society is not the recent decline in new molecular entities but the small percentage over many years of new molecular entities that provide clinical advantages to patients over existing medications. This longer pattern stems from defining “effective” as better than placebo and using soft surrogate endpoints, or substitute criteria, instead of hard clinical endpoints. As a result, the vast majority of new drugs that constitute 80 percent of U.S. pharmaceutical costs offer few therapeutic advantages and greater risks than good drugs discovered in prior years. High prices for these new drugs enable companies to spend two and a half times more on marketing than on R&D, to persuade physicians to prescribe them and patients to want them. Thus, current incentives reward better marketing more than better value.

If we want new drugs to be clinically superior to existing ones, we need to reward companies for developing them and not for developing drugs that are merely superior to placebo. Arjun Jayadev and Joseph Stiglitz propose a key strategy: pay in terms of clinical value added, as some large purchasers already do and as Consumer Reports Best Buy Drugs does by comparing value with price. Jayadev and Stiglitz also recommend having clinical trials independently run and paid for by a public body such as the National Institutes of Health so that they can be designed to measure comparative advantages and risks over existing treatments. Publicly funded trials would also reduce cost and risk for pharmaceutical companies and increase competition from smaller firms by lowering the high cost barrier that company-funded trials pose. These are some ways in which incentives can be restructured to foster greater competition for clinically superior drugs and to lower overall spending.


Arjun Jayadev and Joseph Stiglitz, “Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices,” Health Affairs, 28, no. 1 (2009): w165-w168

Our uniquely American health care system is noted for its high prices for relative mediocrity. Some contend that our pharmaceutical industry provides an exception. It doesn’t. We are paying high prices for new chemical entities that over 85 percent of the time are providing us with no real benefit over existing products.

Many contend nevertheless that innovations provided by U.S. pharmaceutical firms are well worth our very high prices. Yet productivity of European pharmaceutical firms remains even higher, and they are able to provide new products at much lower prices.

When reform advocates look at the excessive costs of U.S. health care, two favorite targets are the private insurance industry and the pharmaceutical firms. Policies that would reduce these burdens are no secret. Physicians for a National Health Program has described policies that would eliminate the private insurance burden. Arjun Jayadev and Nobel Laureate Joseph Stiglitz, in the article cited above, provide examples of policies that would increase value in our purchasing of pharmaceuticals.

So what is Congress’s response? They intend to expand the dysfunctional private insurance markets, and use more of our tax money for subsidies. For the biotech industry they are expanding data exclusivity thereby keeping generics off the market for longer periods. Reform is going to bring us more overpriced, inadequate private insurance plans and more overpriced pharmaceuticals/biologics.

Tell Congress that reform is not about enhancing the business models of the insurance and pharmaceutical firms. It’s about making health care affordable and accessible for everyone. Go back and get it right.

T.R. Reid’s “The Healing of America”

Posted by on Monday, Aug 24, 2009

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

The Healing of America

A Global Quest for Better, Cheaper, and Fairer Health Care

By T.R. Reid

My global quest demonstrated that America’s approach to health care is unique in the world for a good reason: No other country would dream of doing things the way we do. So it’s clear that we can’t fix the basic problems by tinkering at the margins of our existing system. Any proposal for “reform” that continues to rely on our fragmented structure of overlapping and often conflicting payment systems for different subsets of the population will not reduce the cost or complexity of American health care. Any proposal that sticks with our current dependence on for-profit private insurers – corporations that pick and choose the people they want to cover and the claims they want to pay – will not be sustainable.

To put it simply, the United States does well when it comes to providing medical care, but has a rotten system for financing that care. We need a health care system that permits the strong facets of American medicine to flourish, makes their benefits accessible to everybody, and does it in a cost-efficient way. As we’ve seen, this is not impossible. All other rich countries have found financing mechanisms that cover everybody and they still spend much less than we do. We’ve ignored those foreign models, partly because of “American exceptionalism” – the notion that the United States has nothing to learn from the rest of the world. In health care, at least, that old mindset is clearly losing its sway. Americans are coming to realize that the other rich countries are getting more and better medicine, for less money, than we do.

Another reason Americans tend to ignore the valuable lessons we could take from the rest of the world is that we have been in thrall to conventional wisdom about health care overseas. Thus we conclude that the foreign approaches would never work here. In fact, as I found on my global quest, much of this conventional wisdom is wrong. A lot of what we “know” about other nations’ approach to health care is simply myth.

The Healing of America:


5 Myths About Health Care Around the World

By T.R. Reid
The Washington Post
August 23, 2009

1. It’s all socialized medicine out there. (Not so.)

2. Overseas, care is rationed through limited choices or long lines. (Generally, no.)

3. Foreign health-care systems are inefficient, bloated bureaucracies. (Much less so than here.)

4. Cost controls stifle innovation. (False.)

5. Health insurance has to be cruel. (Not really. The key difference is that foreign health insurance plans exist only to pay people’s medical bills, not to make a profit.)

All the other developed countries have settled on one model for health-care delivery and finance; we’ve blended them all into a costly, confusing bureaucratic mess.

(T.R. Reid, a former Washington Post reporter, is the author of “The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care,” to be published August 24.)


In “The Healing of America” and in last year’s PBS Frontline presentation, “Sick Around the World,” T.R. Reid has demonstrated how other nations have higher performance health care systems that take care of everyone and at a much lower cost than in the United States.

Other nations have adopted one of a few rational models of health care financing, though with variations. The basic models are Bismarck (Germany, France, Belgium, Switzerland, Japan), Beveridge (Great Britain, Italy, Spain, most of Scandinavia), and national health insurance (Canada, Taiwan, South Korea).

The United States has combined these models into our patched-together system of financing health care. Our components are Bismarck (employer-sponsored plans), Beveridge (VA, Indian Health Service), and national health insurance (Medicare). But we’ve added one more model that Reid discusses: out-of-pocket for the uninsured (Cambodia, Burkina Faso, rural India, rural China). Reid makes a strong case that this dysfunctional, fragmented financing system is in a large part responsible for our very expensive mediocrity.

Which model for the United States?

The out-of-pocket model is certainly not suitable, and the Beveridge model would have very little support only because Americans are uncomfortable with the concept of government ownership of the health care delivery system.

National health insurance, based on an improved model of Medicare, would be very popular once established, and would enable us to reach our goal of affordable, high-quality care for everyone. It is the least expensive, most equitable, most efficient, and most effective model of reform.

T.R. Reid and others such as Uwe Reinhardt believe that Americans are more likely to support the Bismarck model based on private health plans. But they emphasize that our U.S. plans with a business mission would have to be transformed into European-style plans with a service mission. The superficial similarities between the U.S. and European private insurers belie the stark differences in their missions. Just imagine the probability of the highly-compensated U.S. insurance executives and the institutional investors that own their companies stepping up to lead this essential transformation. Fat chance. It is difficult to share the faith that T.R. Reid and Uwe Reinhardt have in the insurers doing the right thing.

But the biggest problem is not with the private insurers; it’s with Congress. They have decided to move forward with our patched-together system, primarily by expanding the use of U.S.-style, business-model private plans. We will be forced to use inadequate subsidies to purchase private plans that are too expensive and that provide inadequate protection in the face of medical need. This is a program that will expand expensive mediocrity – hardly the solution we seek.

An improved Medicare for all is what America would really want, if only the people were better versed in policy science. It’s our job to see that they become so.

(T.R. Reid will be a featured speaker at the PNHP Annual Meeting in Cambridge, MA on Saturday, October 24. Meeting information is available on the PNHP website at www.pnhp.org).

In June, 2009, Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry’s trade group, followed up on its offer to help finance expanded health coverage within health care reform. PhRMA’s CEO, Billy Tauzin, was very familiar with politics and the drug industry. The former Republican turned Democrat Congressman from Louisiana had played a leading role as chairman of a House committee in design and passage of the Medicare Prescription Drug, Improvement and Modernization (MMA) Act of 2003. That bill turned the new prescription drug benefit over to the private sector and prohibited the government from negotiating drug prices as the Veterans Administration does so effectively. Tauzin then used the revolving door between government, industry and K Street to become CEO of PhRMA and a top lobbyist in Washington, D.C. with a reported salary in the range of $2 million a year. He continued to lobby against price controls of drugs or importation of drugs from Canada or other countries.

In an agreement with President Obama and Senator Max Baucus, Chairman of the Senate Finance Committee, PhRMA pledged $80 billion toward the costs of health care reform. Though some of the details of this agreement have since become a matter of controversy, two parts of the pledge are widely known — (1) drug companies would give a 50 percent discount to Medicare beneficiaries for the costs of their drugs in the “doughnut hole” (annual costs between $2700 and $6,100); and (2) drug companies would give higher rebates on the drug costs of people on Medicare and Medicaid. It has been estimated that about $30 billion would be expended for these two purposes over the next 10 years, with the other $50 billion being directed to non-specified costs of reform.

This pledge was hailed as an “historic agreement” by the White House and praised by the AARP, but it soon became clear that much of this pledge will not result in savings to the federal government. Further, as pointed out by Charles Butler, a pharmaceutical analyst at Barclays Capital, those discounts won’t cost the drug companies much — “Because of the discounts, Medicare beneficiaries are likely to continue filling prescriptions in the doughnut hole, whereas in the past many stopped taking their medications because the drugs were unaffordable to them.”

The main point of contention in weeks after this agreement was whether the quid pro quo for the drug industry is assurance that the government will not pursue negotiation of drug prices. In August, an internal memo obtained by the Huffington Post confirmed that the White House and the drug industry lobby secretly agreed to protection of drug companies from price controls. (Grim, R. Internal memo confirms big giveaways in White House deal with big PhRMA. Huffington Post, August 13, 2009) Both sides subsequently issued conflicting reports in an effort to backtrack from the controversy. But many progressives in Congress felt betrayed. In response, Speaker of the House Nancy Pelosi declared that the House was not a party this agreement. The House E & C Committee, chaired by Henry Waxman (D-CA) soon passed an amendment to the House bill (H. R. 3200) calling for negotiation of drug prices by the government, and many Democratic leaders would like the drug industry to make a bigger commitment to health care reform.

Despite the lack of transparency in whatever deal was made between PhRMA, the President and Senator Baucus, the drug industry’s agenda is crystal-clear — expand its markets through wider insurance coverage and government subsidies, avoid price controls and competition from importation of drugs from other countries, and gain maximal patent protection from generic drug-makers of biotech drugs.

Much as the insurance industry feels more secure in the more conservative Senate, the drug industry has also counted on the Senate Finance Committee to roll back provisions in any House bill counter to its interests. PhRMA therefore became an active supporter of a bipartisan approach to health care reform. While not lobbying specifically against the public option, it expressed serious concern over any erosion of employer-sponsored health insurance. It also arrayed its forces in these directions:

• Joining with Families USA, a not-for-profit advocacy group for affordable health care, in a $150 million ad campaign supporting health care reform. This campaign includes a re-appearance of Harry and Louise, the fictional couple now on Medicare who played a large part in defeating the Clinton Health Plan in1993-1994. They now tell us on major national TV channels, some network news and Sunday talk shows that “a little more cooperation, a little less politics, and we can get the job done this time.”

• Teaming up with Families USA to lobby for expanded Medicaid coverage for
Americans making up to 133 percent of the federal poverty level ($14,000 a year for individuals). As Tauzin said: “When Families USA and PhRMA can get together, I hope that’s a sign to everybody in the House and Senate that we can find common ground, and that the president’s call to put party aside and to put ideologies aside and try to find what works is a good call.”

• Lobbying against proposals that would prohibit brand-name drug makers from paying generic drug makers to delay marketing of lower-cost generic drugs.

• In the first six months of 2009, PhRMA and Pfizer spent $13.1 and $11.7 million in lobbying, respectively.

It was soon apparent that the initiatives taken by the drug industry to appear to support reform was bound to please its CEOs and stockholders. These early returns were gained:

• Passage by the Senate HELP Committee (by a 16-7 vote) of a provision giving manufacturers of branded biotechnology drugs at least 12 years of patent protection before generic manufacturers can bring such drugs to market (the White House had proposed seven years while Henry Waxman had wanted five).

• Strong projected annual increases on prescription drug spending

In sum, in the same way that the insurance industry had already won preferential treatment from legislators even as developing health care reform legislation was in a fluid state, the drug industry had also achieved many of its important goals, especially assurance of strong future markets for its products for years to come. In our next post, we will see how the hospital industry has fared during this critical period of potential system change.

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com

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In May, 2009, President Obama held a high-profile event in the White House, convening leaders from the health care industry to a meeting to discuss reform of the U. S. health care system. Participants included representatives from the insurance, drug, medical device, and hospital industries as well as business, labor and organized medicine. This “alliance” for health care reform produced a voluntary, unenforceable “commitment” to reduce the costs of health care by 1.5 percent, which would amount to some $2 trillion over the next 10 years. Promises were vague, such as promising to “cut both overuse and underuse of health care by aligning quality and efficiency initiatives”. The White House was quick to call the meeting “an historic day, a watershed event, because these savings will help to achieve comprehensive health care reform.”

Subsequent weeks and months, however, soon showed the “charm offensive” by major stakeholders in our medical industrial complex to be a sham alliance as their real agendas and differences among each other became more obvious. In this and the following posts, we will revisit each major group’s pledges, agendas, tactics and likely rewards as the national debate over health care reform intensified in Congress and across the country.

The pledge by the insurance industry was simple — if all Americans are required to buy health insurance, the industry would be willing to charge sick people more for coverage than for healthy people. The industry would abandon pre-existing conditions as an underwriting principle, accept all applicants for insurance, and stop charging women higher premiums than men. As the CEO of the industry’s trade group, America’s Health Insurance Plans (AHIP), Karen Ignagni said that insurance companies “accept the premise that the system is not working today and needs to be reformed.”

As the second largest private insurer, UnitedHealth Group even offered up 15 recommendations that could save $540 billion in federal health care costs over 10 years, including such steps as “providing patients with incentives for going to high-quality, efficient physicians, granting physicians incentives for providing comprehensive and preventive care, and reducing unnecessary care”. UnitedHealth’s Center for Health Reform and Modernization also attached speculative cost savings in these areas: “providing nurse practitioners at nursing homes to manage illness and reduce avoidable hospitalizations ($166 billion), using evidence-based care management with preventive care to reduce avoidable hospitalizations ($102 billion), and analyzing claims before they are paid to prevent duplicate billing and other administrative errors ($57 billion).

The industry’s agenda — gain enormous markets for new enrollees in both private and public plans, many enabled by government subsidies extended to those unable to pay the premiums; as many as 50 million new enrollees were in play.

That its agenda was more self-serving than supportive of real reform came clear as the industry took to the battlefield on these fronts:

• Vigorously oppose any public option as an effort to bring competition to the market, claiming that it could not be a level playing field and would put them out of business.
• Oppose any controls or caps on premium rates.
• Fight against any cuts in overpayments to Medicare Advantage plans or attempts to set medical-loss ratios too high (the lower they are, the more income insurers profit).
• Lobby in favor of setting the lowest possible minimal standards for insurance coverage.
• Launch ad campaigns to tell the public how the industry is doing its part to support health care reform.
• Increase its campaign contributions as shown in Table 1. (Terhune, C, Epstein, K. Why health insurers are winning. BusinessWeek. August 17, 2009: 036.)

Table 1
Campaign Contributions by Major Insurers
Insurer                                       2005-2006            2007-2008
Blue Cross/Blue Shield          $2,451,716             $3,125,921
AFLAK                                       $1,924,335            $2,211,030
UnitedHealth Group               $1,045,877            $1,568,634
Aetna                                          $674,950               $721,957
AHIP                                          $510,561                $591,750

Source: Center for Responsive Politics

The insurance industry has continued to realize high profits despite the recession. Profits for the major insurers in 2007 are shown in Table 2:

Table 2
Profits of Five Major Insurers in 2007

UnitedHealth Group        $4.65 billion
WellPoint                           $3.34 billion
Aetna Inc.                           $1.83 billion
Cigna Corp.                        $1..11 billion
Humana Inc.                      $834 million
Even as many people lose their jobs and health insurance, some insurers continue to post large profits. Despite a continued fall in commercial enrollees, UnitedHealth Group, for example, reported a 155 percent increase in second-quarter earnings for 2009 compared to 2008, largely as a result of strong growth in its Medicare and Medicaid business.

During the August 2009 recess of Congress, lucrative future rewards were being projected for the insurance industry. An in-depth article in BusinessWeek (Ibid) had this to say:

“As the health reform fight shifts this month from a vacationing Washington to congressional districts and local airwaves around the country, much more of the battle than most people realize is already over. The likely victors are insurance giants such as UnitedHealth Group, Aetna, and WellPoint. The carriers have succeeded in redefining the terms of the reform debate to such a degree that no  matter what specifics emerge in the voluminous bill Congress may send to  President Obama this fall, the insurance industry will emerge more profitable.  Health reform could come with a $1 trillion price tag over the next decade, and it may complicate matters for some large employers. But insurance CEOs ought to be smiling.”

Wall Street, of course, has followed the health care debate with intense interest, since the health care industry accounts for one-sixth of our economy. Within hours after the Obama Administration signaled its willingness to consider alternatives to a public plan, trading in UnitedHealth and WellPoint jumped about three-fold as investors placed new calls and puts. Health insurance stocks were pushed higher despite a triple-digit loss in the broader markets.

Even as partisan and internecine battles among stakeholders reached new levels as members of Congress went home to hear impassioned protest from many constituents, President Obama was still seemingly pleased with the level of stakeholder support for health care reform. In a Rose Garden press briefing: “And the fact that we have made so much progress where we’ve got doctors, nurses, hospitals, even the pharmaceutical industry, AARP, saying that this makes sense to do, I think means that the stars are aligned and we need to take advantage of that.”

Noting the political gulf between House and Senate bills over health care reform, especially the Senate Finance Committee’s strong opposition to a public option, AHIP naturally continued to campaign for a bipartisan health reform bill, trusting that the Senate would defend its interests

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com

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Uwe Reinhardt on the public option

Posted by on Friday, Aug 21, 2009

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.

Who Needs the Public Option?

By Uwe Reinhardt
The New York Times
August 21, 2009

Nothing has been quite as riveting in recent media reports as the question of what President Obama and his staff really think…

How did the brouhaha over the choice of a public health plan come about in the first place, when the real issue before us has been helping the millions of currently uninsured, low-income American families gain access to adequate and reliable health insurance?

One would have hoped that the overarching goal of health reform would have been to put in place a reformed health insurance system that can offer Americans the same reliable, permanent, portable and life-cycle health insurance enjoyed by, say, Germans or Canadians or the people of Japan and Taiwan.

As I have argued in earlier posts to this blog, the choice of a public, government-run standard health insurance plan would certainly go a long way toward reaching that, but it is not a necessary condition for doing so. Germany, the Netherlands and Switzerland all do offer their citizens permanent, portable and stable financial security in health care without the inclusion of a government-run health plan in the mix. That achievement, however, requires fairly heavy regulation of the industry.

If I had to guess what features really make a public plan so attractive to many Americans, they would probably be the stability, permanence, portability and simplicity that such a public plan could offer. It is these features that make traditional, government-run Medicare so popular with the public.

Herein lies the main challenge facing the private health insurance industry. It must convince the public and the legislators who do not trust it that with the help of government — including a wide set of new government regulations — the industry can transform itself into a structure that can offer Americans the same permanent, reliable, easy-to-understand life-cycle financial security that citizens in other nations take for granted and Americans crave.

Thus, instead of the cliche that a public health plan would lead to a “government takeover of American health care” and thus its demise, the industry would be better advised to put before the public a fully worked out purely private-sector model that truly will offer individuals reliable, life-cycle health insurance with relatively stable premiums, and at premiums that are defensible.


Posted comment by Don McCanne, MD:

The brouhaha over the public option is more than just symbolic. The accusation is correct: the public option was perceived as a means to move us toward single payer, while respecting the right of others to continue with their current coverage if they so preferred. The progressive camp was divided over this strategy since some of us believed that jettisoning single payer in favor of the public option would result in a bargaining position in which the public option would have to be traded away in exchange for some insurance market reforms. Those single payer advocates who agreed to support the public option now feel betrayed.

But the much more important goal is to establish a system that prevents financial hardship for anyone who needs health care – a system of social insurance, whether that is based on single payer or on a system of highly regulated private plans, as some European nations have.

Congress is trying to patch together a model based on private plans, but they have run up against a uniquely American problem – our very high health care costs. The average health care cost far a healthy family of four (the healthy workforce and their young healthy families) is now $16,771. With a typical family income of $60,000, generous subsidies will be mandatory for middle-income individuals and families.

We already have hit the wall on costs. Congress is proposing basic coverage (tier one) that has an actuarial value of 65 to 70 percent, leaving those with significant health care needs exposed to the balance of the costs (which is often higher than the stop loss because of the failure of our private insurance model to protect individuals from unanticipated out-of-network charges). Average-income individuals who need care will not be able to afford the out-of-pocket costs.

Even for those who remain healthy, our costs are now so high that a plan with reasonable benefits that would provide adequate financial protection in the event of need must charge premiums that are so high that a generous public subsidy is essential. The wall again – Congress is unwilling to use aggressive, progressive tax policies to pay for subsidies that are large enough to keep premiums affordable for average-income individuals.

There is an out. Congress will waive the fine for the criminal act of being uninsured merely because the premium is unaffordable. The standard “coverage” for the middle-income sector will then be “hardship waivers” (assuming a transition away from employer-sponsored coverage – the intent of many members of Congress). The only other option besides aggressive tax policies would be to make the basic plan so Spartan that it won’t provide adequate financial protection anyway. (Don’t say high deductible plans, because if the deductible is high enough to make the premium affordable, the plans do not provide adequate protection for middle-income individuals and families.)

The real problem with the public option concept is that it automatically leaves in place the most expensive and least efficient method of financing health care. A single payer or improved Medicare for all would provide us with more than simply an equitable and efficient method of financing care for everyone, it would also create our own public monopsony so that we can demand greater value from our health care system.

Concerns about reform efforts

Posted by on Thursday, Aug 20, 2009

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.

NBC News Health Care Survey

August 15-17, 2009

8. Thinking about efforts to reform the health care system, which would concern you more?

41% – Not doing enough to make the health care system better than it is now by lowering costs and covering the uninsured.

54% – Going too far and making the health care system worse than it is now in terms of quality of care and choice of doctor.

5% – Not sure


A PhD thesis could be written over just what this survey tells us, but we’re certainly not going to do that here.

Give this some thought. Think about what this might mean. Then think about what we should be doing in response. And then do it!

We are told by supporters of health care reform bills in the Democrat-controlled Congress that they will save us money in the long run and contain skyrocketing health care costs. But the CBO has projected that the most comprehensive proposal yet, America’s Affordable Health Choices Act of 2009 (H.R.3200 in the House), will add to the federal deficit by $239 billion over 10 years. So the Administration and most Democrats find themselves on the defensive over these costs as Republicans have a field day in proclaiming the risks of even higher deficits than we already are facing. As Rep. John Boehner (R-OH and Republican leader in the House of Representatives) says:

“Americans want a better plan to lower costs and improve the quality of health  care. —It’s not just about health care, it’s also about out-of-control government spending that’s piling debt on our kids and grandkids” (Boehner, J. Americans aren’t going to buy health care spin, Mr. President. Op-Ed. USA Today. August 13, 2009: 11A).

That gives the fiscally conservative Blue Dog Democrats, in the middle of the battle over health care reform, powerful clout in cutting costs of the various bills working their way through Congress.

Increasing red ink haunts future projections for federal and state budgets for years to come, whether we are considering Medicare, Medicare, or the public’s capacity to afford rising health care costs. The proposals currently in Congressional committees all call for expansion of Medicaid, which beleaguered states are already pushing back on. In past years, states have shared the costs of Medicaid with the federal government about equally. Now, 48 of the 50 states are having such budget shortfalls that the federal share of Medicaid’s expansion is likely to be 93 percent. (Nichols, J. Dire states. The Nation. 289:5, August 17-24, 2009:3-4) The annual costs of Medicaid are now $340 billion, and the CBO projects them to increase to $430 over the next ten years. (Krauss, C. Trickle-down costs: states fear the bills in health care overhaul. New York Times. August 7, 2009: B1)

So how is the political battle actually playing out? If fiscal conservatism were the dominant factor in the debate, we should have a bill coming out of Congress that will be deficit-neutral at worse, and actually save money at best. But none of the bills we are yet hearing about will accomplish either of those goals. H.R. 3200 will cost about $1 trillion more over ten years. And as we saw in the last post (link to blog # 26), it won’t result in containment of either insurance or health care costs. The only proposal in Congress that could meet goals of fiscal conservatives (of either party) is the Conyers bill in the House (H.R. 676), a single-payer Medicare-for-All bill. But so far it has been kept off the table by supposedly fiscal conservatives in both the Senate and House, even including the Obama Administration.

So why this incredible disconnect among our elected representatives shaping the future of one-sixth of our economy and future health care of all 310 million of us? The answer, of course, is all about money, corporate power and influence. For industrial stakeholders in our for-profit health care system, our costs are their income, CEO compensation and returns to investors. It really does come down to Wall Street vs. Main Street. More than 3,000 lobbyists (a 6:1 ratio to members of Congress) have descended on Washington, D.C. to lobby for stakeholder interests among industry and providers. They range from the insurance, drug, medical device, and medical equipment industries to hospitals, nursing homes and professional groups within organized medicine. In each case their agenda is to preserve and grow their revenues under the cloak of “reform”.

Absent from the negotiating table is the public interest. Instead of long-term containment of health care costs for patients and their families, employers and taxpayers, the battle is being fought to extend future profits of the medical-industrial complex. Corporate money and lobbying clout ($1.4 million a day) is focused on limiting the interference of government in the health care market and avoiding price controls while calling for increased government subsidies (of private insurance through employer and individual mandates and of public programs such as Medicare and Medicaid). And at the same time, supposed fiscal conservatives are distorting the debate through their disinformation campaign against a “government takeover”, “socialized medicine” and threats to “choice” — a blatantly cynical and dishonest approach.

If the public interest is to be served by any health care reform to be enacted this year, we need an informed public to rise up and force our legislators to do the right things to actually rein in the costs of health insurance and care. A weak and small public option won’t do the job. Here are some of the things that will:

• force a favorable vote on the floor of the House this Fall on H.R. 676, the  United States National Health Insurance Act, a single-payer bill for all Americans; an amendment to H.R. 3200 will be introduced by Rep. Anthony Weiner (D-N.Y.) in September that would replace the private insurance industry  with such a program.
• Require Congress to enact an independent federal agency for Comparative  Effectiveness Research, with authority to guide coverage and reimbursement policies.
• If a single-payer program is not possible this year (as it will inevitably be!), hold members of Congress accountable for their votes on efforts to eliminate
overpayments to private Medicare plans (not over years, but now); require that all insurance plans cover a high percentage of benefit costs; allow a public option to vigorously compete with private insurers, including setting its premiums well  below private premiums and capping premium increases; and allow the  government to negotiate the prices of drugs and medical devices.

When the Congress re-convenes this Fall, we the public will have an opportunity to force our legislators to be accountable to us. We need to get H.R. 676 on the table, scored by the CBO on its merits, and brought to votes in Congress on the basis of its real provisions, not the disinformation and scare tactics of self-serving stakeholders in the open market of health care.

Fiscal conservatism could and should bring together a landslide vote by
Republicans and Democrats, including the Blue Dogs, to pass H.R. 676, the only fiscally conservative option before us. The battle IS over money, but it’s OUR money, including that of future generations of Americans, that should take priority over the special interests that profit from our higher costs.

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008. With permission of the publisher, Common Courage Press.

Buy John Geyman’s Books at: http://www.commoncouragepress.com

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Policies to address out-of-network charges

Posted by on Wednesday, Aug 19, 2009

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.

Code Blue: Out-of-Network Charges Can Spur Financial Emergency

By Paul Raeburn
Kaiser Health News
August 19, 2009

On the evening of March 1, 2008, Gary Diego was relaxing with his wife, Ellen, when she abruptly lost her hearing, began repeating herself, and seemed to be losing her grip.

Alarmed, Diego rushed her to his insurance company’s in-network hospital, near his home in Truckee, Calif. Unable to handle what was determined to be bleeding in the brain, the hospital quickly transferred her to Renown Regional Medical Center in Reno, Nev., where she spent 17 days in intensive care. While recovering, she caught pneumonia and died.

A few weeks later, a still-grieving Diego learned from his insurer, Health Net, that he owed the Reno hospital $75,462.77. The reason? The hospital was not in his approved network.

(Later Mr. Diego paid a medical billing consultant $7,500 to negotiate a settlement.)



Tackling the Mystery of How Much It Costs

By Gina Kolata
The New York Times
August 18, 2009

But the health care legislation under discussion does not directly address the out-of-network fee issue. And that is intentional, says Dr. Mark McClellan of the Brookings Institution. Dr. McClellan, a former head of Medicare who works closely with policy makers, says the goal of the House and Senate bills is to encourage people to stay in their networks. He added that the result should be networks that provide better care “so that people don’t have so much need to go outside of them.”

Mark A. Hall, a professor of law and public health at Wake Forest University, for example, advocates restricting out-of-network fees to a fixed amount, perhaps 150 percent of the amount Medicare would pay.

That is how the system works in Germany, says Uwe Reinhardt, a health economist at Princeton University. Professor Reinhardt advocates a national law that caps the maximum doctors can charge when they are out of a patient’s network.

America’s Health Insurance Plans, which represents health insurers, is also trying to draw attention to out-of-network doctors’ fees. Last Tuesday, the group released results of its own survey to show how high such fees can go.

Jonathan Gruber, a health economist at M.I.T., says, however, that it makes more sense to encourage people to stay in networks.

Some may want to pay anyway for an out-of-network doctor, and that is fine, he said. “If you want to go outside your network, God bless you,” he said. “It’s the American way.”

But the only way to fix the system, Dr. Gruber said, is to make the networks better so that people will stay in them and then, most patients, knowing what it will cost them to leave their networks, will decide not to.


qotd on AHIP’s report referenced above:

What are private insurers selling us? Their primary product is a network of health care providers that have contracted to accept the insurers’ rates. The benefit of that is that it has helped to slow the rate of increase in health insurance premiums. One major problem with that is individuals frequently obtain care from out-of-network providers – usually not by choice, but by medical circumstances not really under the control of the patient. Under most insurance plans, the individual then becomes responsible for payment of most or all of the out-of-network charges.

With higher premiums, larger deductibles, greater coinsurance, more benefit exclusions, patients are already facing financial hardship without the addition of the out-of-network charges. These unanticipated charges are contributing to our growing epidemic of underinsurance. What to do?

Mark McClellan (think of Medicare privatization) and Jonathan Gruber (think of Massachusetts’ flawed policy of getting more people covered and then pretending that we can figure out later on how to make it work) both believe the answer is to penalize individuals who obtain out-of-network care in an effort to establish incentives for insurers to create perfect networks so that out-of-network care will never have to happen. Of course, “it’s the American way” to choose care outside of your network, and “God bless you” when you can’t pay your bills.

It’s also the American way for Mr. Diego to receive a $75,000 out-of-network bill for his wife’s life-threatening and life-ending care. Haven’t we had enough of our uniquely American system?

There is another way of protecting patients from out-of-network charges. The government can require that out-of-network fees be close to insurer-authorized payments within networks. Yes, that would be the imposition of government fee controls, but fees that are designed to match fees already imposed by the private insurer bureaucracies. That would help, but it does bring up an important question. If the government is going to impose fee controls anyway, then why should we continue to pay the costs of the outrageous administrative waste of the private insurers?

Some might say that they do provide us with the function of pooling risk. But one of the goals of reform is to pool risk across insurers, relieving them of the burden of bearing risk. If we achieve risk equalization then it would be much more efficient and equitable to establish a single universal risk pool administered by the government. Again, the private insurers would be superfluous.

How much risk are the insurers exposed to now under our current system? Half of employer-sponsored benefits are already self-insured. The employer pays the benefits with absolutely no risk exposure to the insurers. So what do the insurers provide the employer? Claims processing for one. But the other service should really give us pause. The private insurers rent their network provider lists to the self-insured employers. How many physicians do you think might be offended if they knew that rent was being paid for use of contracts they signed with the insurers that require the physicians to provide a large discount, and that rent is not going to the physicians but is being kept by the private insurers!?

Tell Congress and the President that we’ve had it with private insurers! Urge them to support the single-payer amendment to the House bill by Rep. Anthony Weiner which Speaker Pelosi has promised will receive an up or down vote on the House floor this year.

Use the following link to access resources on the Weiner amendment:

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