By Jeoffry B. Gordon, MD, MPH
Any doctor with a brain and a heart who practices medicine these days has daily experiences with the many disastrous shortcomings of our medical system. As the graph below shows we spend nearly $8000 per person per year on health services involving 18% of our GDP and we have worse out comes. We all know that medical care in the United States is poorly distributed, has less than optimal outcomes, and is hugely expensive.
In the last year we have witnessed a vociferous and prolonged public debate about health care reform – the most vigorous and comprehensive in 50 years. This has had the beneficial effect of bringing knowledge of the failings of our health care system into the daily discussions and awareness of large numbers of Americans. While passage of the resulting legislation seems imminent, the process and the outcome in the public square, while often passionate, have been greatly askew – one could even say deceitful, distorted and ineffective. We all know it is shocking to see the proposed reform revolve around tax subsidized premiums to health insurance companies – which are the source of huge administrative complexity and inefficiencies, thus wasted monies. It is shocking to listen to national experts tell us that more emphasis on information technology and preventive medicine will go a long way to cure our systemic problems. It is shocking not to hear about the excess burden of disease and mortality born by minority citizens. It is shocking not to hear about the expanding deficit of primary doctors, of the shortage of trained nurses, of the huge debt burden of many medical students, or the excessive proliferation of MRI machines and other profit producing technologies. At the same time it is even more shocking, one might say even repulsive, to hear the shrill and distorted rhetoric of the opponents of health reform – focusing on topics like “love of my insurance company,” “insurance required abortions,” “death panels,” “socialism” and government takeover, denial of care due to recommendations of expert panels using evidenced based medicine studies, and the declaration that the United States can be proud of its exemplary health outcomes. For those of us committed to health reform, it is imperative to review and understand the events and the process of the past year in order to formulate a better strategy for accomplishing the reforms which will improve the health of Americans at a reasonable cost.
Any analysis of contemporary national public policy on health reform must be based on the insight that the health insurance companies had successfully structured the process in their interest before it even began. Single payer health reform, the elimination of the private health insurance sector, was firmly and totally “off the table” from the very start. President Obama was so opposed to the idea that none of the 140 luminaries invited to the First White House Conference on Health Reform were single payer proponents – until 2 were invited at the last minute after protests were being organized outside. It is important to get past the statistics of the huge amounts of money spent by the health insurance industry on lobbying and campaign contributions, of the many former Congressional, White House, and government officials who became health reform lobbyists. Insight comes when you realize that the chief health aide to Senator Max Baucus, Chairman of the Senate Finance Committee is Elizabeth J. Fowler, JD, PhD, who after serving many years as Health and Entitlements Counsel to the Committee left to become a Vice President of Wellpoint Health Insurance and then returned to the Senate Committee to literally write Senator Baucus’ bill. It would also be prudent to recognize that Senator (fmr D, Conn) Joe Lieberman’s wife was a former health insurance company lobbyist and Senator (D, Indiana) Evan Bayh’s wife was on the Board of Directors of Wellpoint insurance, and so on. All the activists’ efforts to educate, confront or otherwise influence Washington principals, all the think tanks, academics, and accumulated data had a vanishing little impact on the final legislative proposals. It is important to remember that the so-called “public option” was first introduced as a pro-competitive, cost-cutting government program as a practical compromise short of single payer and preserving the private insurance market. This could have had an improved competition in the system and based on market principles had the potential to be a real cost saver. When a study showed that up to 135 million Americans might be eligible and able to choose it, it was quickly disparaged and the insurance lobby saw to it that it was whittled away to an impotent remnant that might cover 5 to 8 million people, and then eliminated. Now we have “Health Insurance Exchanges” which especially if done on the state level will be impotent as well. A brief enthusiastic compromise effort to expand Medicare to age 55 was snuffed out quietly and quickly by the same insurance lobbyists as soon as it was realized that it could be the first step to universal Medicare.
Toward the fall, the health insurance industry was still anxious about the direction of the legislation and showed its anxiety by conducting and releasing several reports predicting the failure and excessive costs of the then proposed reforms. These reports were so obviously self serving that there was a brief, vociferous backlash. This brought to light the previously neglected, extraordinary fact that the insurance industry, along with baseball, is exempt from federal regulation and anti-trust law. This was due to the McCarran-Ferguson Act (15 U.S.C. 1001) which was passed by Congress in 1945 to nullify a Supreme Court ruling that insurance could be regulated by the federal government via the Commerce Clause of the Constitution and the Sherman Anti-Trust Act as interstate commerce. This law naturally covered developing health insurance products leaving them to state regulation and supervision. This law also forced health care financing to be subjected to the perversities of ERISA law and to intra-state monopolies by health insurance companies. For a brief moment of anger and insight repeal of McCarran-Ferguson was included in the draft health reform legislation. Then it was quickly and quietly removed.
The idea that the problems with medical care outcomes, or even with health care financing, could be solved by the currently proposed legislation falsely follows the Massachusetts model which is currently demonstrating its lack of cost control, lack of restraint on insurance company behavior, and strain on primary care. The politicians have grabbed a model that optimizes the outcomes for the health insurance companies. L. Randall Wray, an economist at the University of Missouri-KC put it best last October 11, 2009:
“Here’s Wall Street’s newest and bestest gamble: there is a huge untapped market of some 50 million people who are not paying insurance premiums—and the number grows every year because employers drop coverage and people can’t afford premiums. Solution? Health insurance “reform” that requires everyone to turn over their pay to Wall Street. Can’t afford the premiums? That is OK—Uncle Sam will kick in a few hundred billion to help out the insurers. Of course, do not expect more health care or better health outcomes because that has nothing to do with “reform”. …They’ll collect the extra premiums and deny the claims. This is just another bailout of the financial system, because the tens of trillions of dollars already committed are not nearly enough.
“You might wonder about the connection between insurance and Wall Street finance. They are two peas in a pod. Indeed, we threw out the Glass-Steagall Act that separated commercial banking from investment banking and insurance with the Gramm-Leach-Bliley Act of 1999 … that let Wall Street form Bank Holding Companies that integrate the full range of “financial services” such as loans and deposits, that sell toxic waste mortgage securities to your pension funds, that create commodity futures indexes for university endowments to drive up the price of your petrol, and that take bets on the deaths [and health] of firms, countries, and your loved ones. “
In fact, it should have been apparent to anyone who was watching that any movement toward real health reform would peter out and fail after there was a wholly inadequate institutional, political, cultural, and media response to the economic debacle in the fall of 2008. The only major public figure who confessed to a failure of ideology was Alan Greenspan. No other main stream political leader or public institution diagnosed the financial collapse as a total failure and repudiation of the government de-regulated, laissez faire, market driven, profit making, financial institutional dominance political philosophy (facilitated by both the Republican and the Democratic Parties)which had sucked our country into a dark hole. Without a clear and strategic, articulate insight into the nature and breadth of the economic crisis and courageous leadership, real financial and health reform and remediation have been impossible. President Obama selected his financial and economic team from the very Wall Street players who were intimately part of the debacle. Then, as the Republicans have properly observed, unconscionable amounts of tax payer money have been thrown into the banking and finance system with astonishingly little targeting, oversight or fiduciary supervision. And even to this day there has been no legislative reform of the regulation of the financial system, nor substantive governmental intervention in its functioning. In this context, the barriers to real health reform are only a side show. White House town halls, brief visits to the Cleveland or Mayo Clinics, noting the cost of medical education, discussions about electronic medical records, or primary care deficiencies, or obesity or touting the medical home or preventive medicine were all media enticing diversions and mere window dressing. As finance capital continues to control all 3 branches of our national government, it was to be expected that public policy about health care reform would end up seeking to maximize profits by the insurance industry. As Michael Moore has said, “There has been a coup d’etat in this country and Goldman Sacks won.”
Due to the dominant importance of the financial interests of the health insurance industry (and our politicians’ subservience to them) all of the hard facts, rational analysis, objective national and international data, and all of the reform planning and policy projects – whether in the clinical realm or in the areas of administration and finance – done by the many government agencies, private foundations, academic institutions, grass roots organizations, and think tanks have been basically impotent and irrelevant. The political movers of public policy and, especially, the opponents of reform have studiously avoided dealing with any of the tragic hard facts about the contemporary provision of medical care and its financing. It was painful to hear Senate Minority Leader (R-Kentucky) Mitch McConnell declare, “We have the best health care system in the world.” Or Senator (R-Iowa) Chuck Grassley complain in August that “(You) should not have a government run plan to decide when to pull the plug on grandma.” Or to hear House Minority Leader, Congressman (R-Ohio) John Boehner tell the press, “I’m still trying to find the first American to talk to who’s in favor of the public option….This is about as unpopular as a garlic milkshake.” The Republicans are clearly handicapped by their one note ideological opposition to government agency to solve any problem short of war or protection of the unborn, even in the face of a total objective failure of their philosophy. And the Democrats have become equally impotent by their refusal to acknowledge the fundamental foundational significance and origins of the economic crisis and by their attempts to accommodate and build bipartisanship with the obstreperous Republicans. The Republicans are patently absurd to propose income tax refunds or health savings accounts as the public policy for optimal funding of health insurance for the working poor or the unemployed. It is tragic to see the political leadership of our country so purposefully turning a blind eye to the hardship and suffering of millions of their constituents. It is certainly demoralizing for involved citizens to see our elected officials, whether in support or in opposition, promote rhetorical name calling, deceitful analyses and avoid honest debate on the issues.
It has been even more provocative and threatening to have experienced – as we did this summer – the angry hatred of the so-called Tea Party protesters, the Palin People and their friends. It is crucially important to understand the origin and implications of this phenomenon in order to plan for success in the future. In fact, it is only by understanding their forceful energy and beliefs that we can make any sense of this phenomenon at all. Clearly the issues and fears of these citizens are not based on the facts nor any reality concerning clinical medical care, actual government policies, or its proposed administration and financing. Furthermore it must be recognized that these protests have been mobilized and magnified with hundreds of millions of dollars from the same well documented vast array of very wealthy donors and foundations (Including the health insurance industry) which have undertaken to destroy good government over the past twenty years. In addition, their vehement disruptiveness and distain for civil discourse has been explicitly and eagerly endorsed by and participated in by the Republican Party itself. One can accept the legitimacy of the vehemence of their energies, even if it is impossible to agree with the actual content of what they are saying. The content of their fears, and the source of their opposition, is both emotional and ideological. The emotional issues are serious and very important because they fuel their anger and its threat of violence. Their fervor has two sources: (1) the perceived disruption of personal security and the natural order of things created by the election of a Black President and (2) the huge economic dislocations and economic insecurity our country and each family are experiencing at this time. Only by understanding how threatening and tumultuous these circumstances are to those involved can we make sense of the forceful deceived rhetoric and the mass psychology of this summer’s protests. While the racism of these folks has its origin in their primal immaturity and class culture and cannot be excused, frankly it is important to respect their economic fears – and this is crucial for successful health care reform. As will be demonstrated below, the President, both political parties, major cultural leaders and commentators, and most main stream media as well as most bloggers and critics, both currently and in the past, have been desperately trying to get the country to ignore or minimize the economic and social painful transformation and decline of the United States over the past few decades and the tragic harm-multiplier of last year’s economic collapse and its continuing impact. This neglect of our true economic circumstances is analogous the past President’s attempts to minimize the costs of war by forbidding photographs of returning dead soldiers.
GROUPS 1, 2, AND 3 (the top 10% of all income producers) ADD TO A TOTAL OF 50% 0F TOTAL NATIONAL FAMILY INCOME
We must now delve into the suppressed economic circumstances of the contemporary United States. As you can see from the figures above, from 1943 through 1983 our country had a stable sharing and distribution of incomes – and prosperity – which carried us forward from a recovery after a horrible war through the awakening and the challenges of the civil rights movement and beyond. It was this period which created and supported our cultural self image of a generous, pluralistic, idealistic, humanistic, equitable civil American society. First, note that this graph ends before the additional impact of the current depression. Second, note that the period since 1998 has created a concentration of wealth among the top 1% of families unseen since the years immediately preceding the Great Depression. And third note that this transformation in our society started in 1983 with the Presidential election victory of Ronald Reagan and the ascendency of the deregulating, laissez faire, anti-government economic philosophy of the Republic Party. Yes, the Tea Party and Palin People folks have every right to be angry. The economic evolution of our country has stolen their birthright and the current economic mess has put the nail in the coffin of their hopes. And it is more than their problem: while we have been looking the other way, the economic catastrophe of the last 18 months has been destroying the middle class. Today about 20% of Americans are unemployed, underemployed, or stopped looking for work. In the past decade the United States economy has had zero net job creation. Almost 10% cannot make the minimum payment of their credit cards; 12.5% are on food stamps (over 37 million people). A total of 10,000,000 Americans may lose their homes (6.2% of mortgages are in default). The current economic depression has wiped out $5 trillion in pensions and savings assets and another $13 trillion in housing assts. In 2008 median household income, adjusted for inflation, fell 3.6% to $50,303, the steepest drop in 40 years. The poverty rate in 2008 rose to 13.2%, the highest since 1997. And about 700,000 more Americans did not have health insurance in 2008 than in 2007. It goes without saying that the data for 2009 when it is in will be much worse.
If this shocking description does not motivate you to want to join the outrage of the Tea Party and Palin People, let me introduce you to a statistic called the Gini coefficient. This is a statistical index which can be used to quantify the level of income or wealth inequality in a country. It is compiled by such organizations as the United Nations and the CIA. Sweden captures the “world’s best” title (with an index of 23 (CIA) or 25 (UN). It keeps company with countries like Denmark (24), Austria (26) and Belgium (28). The average EU index is 31; Canada has an index of 32; and Great Britain has an index of 34. Before the current economic turmoil the United Sates had an index of 47 (its highest ever) and it keeps company with countries like Cameroon (44.5), Jamaica (45.5), Mexico (46.1), and the People’s Republic of China (46.9). Yes, while you weren’t looking our country has been turned into a banana republic. The ascendency of Wall Street, the crash of 2008 and the failure of health reform are prime symptoms of a much bigger problem. One way to look at the angst created by the gap between President Obama’s charisma and rhetoric and his performance in office is to see that it reflects our gut feeling that our Country has been taken in the wrong direction into a period of massive decline. We are responding to his abject failure to acknowledge these tragic facts and lead us in a better direction. Even worse – and his paradigm of health care reform proves it – he has chosen to kowtow to the interests of the financial sector.
Because these economic circumstances are so different from the prosperity of the sixties, contemporary political activism must use different strategies and tactics to achieve our aims. It is myopic and fraught with failure to merely pursue health reform in the era of what Kevin Phillips calls the rule of the plutocracy. This country needs a more fundamental transformation. Many Americans do not yet feel the anguish and failure in their gut like the Tea Party and Palin People folks but there is every reason we should. If we look at the Palin People and Tea Party as alien, we can see the seeds of fascism in their alienation and anger, similar to that experienced in Germany, Italy and Argentina before their takeover by the far right. On the other hand, if we identify with their distress – and get past our still relatively comfortable circumstances – we will have allies in taking our country back. We cannot be limited to our rational, professional analyses. Facts and data will not rule the day. There is no rational, beneficent debate going on. It has become clear and evident that all the foundation work, all the macro and micro system modeling, all the vital statistics of health outcomes and service maldistribution, all the shocking case studies, all the bankruptcies, and the morbidity, not to mention, mortality statistics have had little impact on the outcome of last year’s health reform process.
These observations lead to two complimentary paths which will help further the achievement of real health reform. For make no mistake about it, it is highly likely that the currently proposed federal legislation, if it is passed, will not greatly improve medical outcomes, will be an unacceptable financial burden both on individual families and on individual state and federal governments, and will not eliminate the horribly expensive administrative inefficiencies of our current private health insurance based system. Thus it is likely to become highly unpopular and its impact will further erode faith in government agency and the Democratic Party. Our approach to the current circumstances needs to be more strategic, more tightly organized, facilitated by better communication and coordination, and directed toward mobilizing a broader army of reform activists. First, working within the political system, we should focus on the strategy of creating state based initiatives to legislate state single payer systems. The practical fact is that at this time of economic contraction each and every state will be desperate for truly budget saving measures – and because of Medicaid and public employee health costs, real health reform will have major beneficial outcomes. The specific goal should be an amendment to the federal ERISA law to permit states to develop their own single payer systems. This focus will both continue to highlight the fundamental target in the health system debacle – the insurance companies – and energize political action at a level that is more strategically amenable to grass roots impact.
The second path of action lies in dramatically changing the tactics of progressive reform advocates. To put it plainly we must transcend our reliance on facts and data and get out there with an emotional message and captivating activities. As health care providers doctors and other practitioners are taught to maintain a professional demeanor and to maintain an emotional distance from their patients’ suffering and, furthermore, at the core our technical skills are based on analytical knowledge. It is obvious that carrying these habits into the political arena has not been effective. We have to catch up to our opponents – first in the passionate expression of the anguish and suffering that is abroad in the land and secondly in the enthusiastic demand for political attention. It is evident that physicians and nurses alone cannot create the momentum for change. We must actively recruit our own patients who have suffered the shortcomings of the system in large numbers as well as the staffs of institutions serving the underserved, such as municipal hospitals and free and community clinics, and those religious who will stand up for social justice. This outreach must occur in an on-going organized way so that we can create a critical mass. We cannot effectively bring our insights to the public square without a broader coalition at our side. Along with those mentioned above, the Tea Party and Palin People are, in fact, our allies and constituents, for it is they – whether rural plain folk, farmers, manual service workers, employed poor, family shopkeepers, restaurant servers and so on – who are most severely impacted by the expensive, poorly functioning health care system and by our failing national economy. And you can bet they are about to be joined by hordes of former middle class folk. Their conventional wisdom, that government is the problem, just happens to be wrong. We are now in an era of catastrophic decline and disarray generated by 30 years of the dominance of that political philosophy. It has dramatically failed. The alternative conservative or libertarian model of Individual and independent initiative surely will not be enough to solve these problems. We must reach out to fundamentalist churches, talk radio and other conservative media, for example, to respect their anxieties and debate their political paradigm. We need to broadly mobilize as many of these disaffected citizens as we can. We must directly challenge the conservative religious activists morally devoted to protecting the life of an unborn child to see that their morals must encompass and give priority to the duty to relieve the suffering of the living. Collective communal action through an effective democratic government is the major prerequisite for successfully solving our economic problems as well as the expensive dysfunction in health services. The only way forward on health reform is to correctly diagnose the massive economic disaster that has befallen our country and create an integrated, energized broad coalition to implement political change. Those professional groups, those labor unions, those in progressive political organizations must not only unite, but also reach out to enroll and involve the disaffected among us. Then we will be successful.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Obama Urges Excise Tax on High-Cost Insurance
By David M. Herszenhorn
The New York Times
January 6, 2010
President Obama told House Democratic leaders at a meeting on Wednesday that they should include a tax on high-priced insurance policies favored by the Senate in the final version of far-reaching health care legislation, aides said.
The White House has long expressed a preference for the excise tax on high-cost plans, which health economists say could be an important tool in controlling long-term health care spending for the government and for individuals and families.
Taxing Cadillac Health Plans May Produce Chevy Results
By Jon Gabel, Jeremy Pickreign, Roland McDevitt and Thomas Briggs
December 3, 2009 (online)
It’s often assumed that high-cost health insurance plans — sometimes called “Cadillac” plans — provide rich benefits to plan subscribers. Health reform provisions that treat these plans like luxuries may be misguided. Only 3.7 percent of variation in the cost of family coverage can be explained by benefit design (actuarial value). Benefit design plus plan type (HMO, PPO, POS, or high-deductible plans) explains 6.1 percent of this variation. Industry type and medical costs in the region also play a role. Most variation in premiums, however, remains largely unexplained.
Our inquiry suggests, however, that analysts should not equate high-cost plans with Cadillac plans, but that in fact other factors — industry and cost of medical inputs — are as important in predicting whether a plan is a high-cost plan. Without appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities.
Nation’s Largest RN Organization Blasts Bid to Tax Benefits…
National Nurses United
January 6, 2010
The nation’s largest union and professional organization of registered nurses today called on House members to hold the line in opposing a tax on workers’ healthcare benefits.
“It is unconscionable that workers and families with employer-sponsored health plans, who receive virtually no benefits from the proposed legislation, would have their health coverage taxed and seriously eroded,” said Deborah Burger, RN, co-president of the 150,000 member National Nurses United, formed last month through a unification of the California Nurses Association/NNOC, United American Nurses, and the Massachusetts Nurses Association.
“Advocates of the tax have made clear their intent: to force working people into cheaper, high deductible plans that provide less coverage and shift more costs to employees. The inevitable effect will be more people skipping needed medical care, enduring much higher out-of-pocket costs and risking financial ruin due to medical bills,” said NNU Co-president Karen Higgins, RN.
“Enactment of the tax, whose central premise is to control healthcare costs by reducing utilization of needed medical care while failing to control the pricing practices of the healthcare industry, would symbolize a central failing of the proposed legislation, ceding far too much to the insurers and the rest of the healthcare industry,” Burger added.
What is the deal on the excise tax on high-premium “Cadillac” health plans, and why is President Obama pushing this tax so vigorously in the final stages of enacting health care reform?
Well, he is pushing it because his advisers tell him that it would help to achieve his first and foremost goal of slowing the increase in health care spending. The rhetoric being used implies that taxing high-premium plans would reduce the waste of paying for extravagant, non-essential benefits that are of little practical value. We’ll first dismiss this misperception and then follow with an explanation of why this form of cost management results in detrimental health outcomes.
The so-called Cadillac plans are merely plans with high premiums. The Health Affairs article by Jon Gabel and his colleagues demonstrates that only 3.7 percent in the variation in premiums can be explained by the actuarial value inherent in the benefit design. In most instances, the higher premiums are not due to “Cadillac” benefits, but they are due to other factors, such as the type of industry providing the employment and the medical costs in the region. In most instances, the higher premiums cannot even be explained. We can speculate that our reliance on our dysfunctional system of financing care through relatively unregulated private insurer pricing may be the most important culprit in providing Chevy plans at Cadillac prices.
So if the excise tax is going to push premiums down anyway, how could this be detrimental? Employers will not want to pay the excise tax, so they will demand from the insurers premiums that are at or below the tax threshold. Insurers will not simply reduce the premiums and continue to offer the same benefit packages. They will lower their benefits, lowering the actuarial value of the plans. There is absolutely no doubt that high and ever-increasing deductibles will be the norm.
A plethora of studies has demonstrated that individuals with high-deductible plans reduce their use of beneficial health care services. Although the RAND HIE data has been inappropriately misused to suggest that a reduction in beneficial services causes no harm, in fact many other studies have shown that health outcomes are worse when people don’t receive the health care that they should have.
The philosophy of controlling health care spending by shifting the financial burden to individuals and families is the most serious defect in the legislation before Congress. The excise tax on high-premium plans is only an example of this shift. The most glaring example is that the national standard proposed for basic plans has an actuarial value set at the unacceptably low level of 70 percent or even less. Making insured individuals pay money they don’t have to access care that is unaffordable is the worst way to control health care spending, that is, except for designing a program that deliberately leaves tens of millions of individuals with no insurance at all, just to satisfy budget hawks who understand only spending and not revenues.
Instead of enacting cruel policies that negatively impact patients on the demand side of the equation, we need to enact policies on the supply side that would benefit patients – all patients. That is precisely what a single payer national health program would be designed to do.
Isn’t it time that we told the lobbyists for the special interests and our elected leaders who revere them where they can stuff their Cadillacs?
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.
How the World Balances Health Care Risk
By Uwe E. Reinhardt
The New York Times
January 8, 2010
In last week’s post I used a stylized illustration to throw into sharp relief the economic and ethical dimensions of community-rated premiums for health insurance.
I am gratified by the many comments that post drew, and even more so by their quality. (In fact, I have shared these comments with my students in a course on health policy.) The comments show that there is no consensus on the merits of community rating in this country.
Remarkably, in virtually all other industrialized nations, this issue is hardly ever raised. Community rating there has long been widely accepted and is unlikely to be abandoned in the foreseeable future.
The health systems of Switzerland, the Netherlands and Germany are frequently cited as potential models for a reformed American health system. All three countries offer their citizens a wide choice of health insurers — none of which is a government-run health plan. Yet in all three countries full community rating is de rigueur.
Swiss citizens, for example, are required to purchase insurance coverage for a comprehensive health-benefit package from a large menu of private health insurance companies that compete for customers on the basis of the premium they charge for that coverage.
Profits cannot be earned on insurance for the basic package. Premiums do vary among competing insurers, but for a given insurer they can vary only by the deductible and coinsurance rates of the different policies. Neither the individual’s health status nor age affects the premium charged the individual by a given insurer. Health insurers ending up with an older or sicker enrolled risk pool then receive compensation from a risk-equalization fund.
Similarly, Dutch citizens are mandated to purchase insurance coverage for a comprehensive benefit package from a menu of private for-profit or not-for-profit insurers.
Roughly half of the cost of this coverage is financed by a payroll tax — that is, it is based roughly on ability to pay. The other half comes from competitively set premiums collected directly from those enrolled.
The payroll taxes are paid into a national risk-equalization fund that then pays a risk-adjusted amount to the insurance carrier chosen by a particular individual. Among health services researchers, this risk-adjustment mechanism has long been viewed as one of the most sophisticated in the world.
The part of the premium collected by Dutch insurers directly from individuals is fully community-rated. Although these premiums vary among insurers, a given insurer must charge all comers, healthy or not, young or old, the same premium, which is community-rated over that insurer’s pool of those insured.
Germany’s statutory health insurance system, covering about 90 percent of the population, also has a national risk-equalization fund, which is fed by a flat payroll tax on gross income of about 14 percent paid by all employees insured by that system.
The risk-equalization fund makes a risk-adjusted payment to the health insurer (which is a nonprofit “sickness fund”) of the individual’s choice. That payment from the risk-equalization fund, of course, does reflect the individual’s health status and age. But the individual’s payroll-tax payment into the risk-equalization fund is completely independent of the individual’s age and health status. It is based strictly on ability to pay.
I could continue to describe the health insurance systems of other European countries, or Canada, Taiwan, Japan, Korea, Australia or New Zealand. We would find that in none of these health systems does the individual’s or family’s contribution to health insurance reflect that individual’s age or health status.
Community rating is so acceptable in these countries because citizens there view it not only as part of a larger social contract, but also as a vehicle for life-cycle economic planning.
The vast majority of citizens in these countries view health care as a so-called “social good” that is to be shared on the basis of need by all on roughly equal terms and is to be financed largely on the basis of ability to pay.
By contrast, Americans have never agreed on a shared social ethic that should govern their health system, as the current debate over health reform has made visibly and audibly clear.
Furthermore, younger and healthier people in these countries realize that, but for the grace of God, they might become chronically ill only a few years hence and that, in any event, one day they, too, will be older and sicker. By paying more than their actuarially expected cost for health insurance, young and healthy people in these countries join a club, so to speak, that offers them a valuable call option. That call option allows them to procure at age 55 health insurance at a premium much below their actuarially expected cost.
By contrast, Americans have been taught that health insurance is largely a private consumption item purchased year to year and customized to the individual’s circumstances. Indeed, the private health insurance industry in this country has never been able to offer individual Americans the kind of life-cycle health insurance citizens in virtually all other industrialized nations take for granted. With the exception of Medicare, all health insurance in the United States is basically temporary.
Curiously, however, although Americans often flatter themselves with the image of being self-reliant, rugged individualists, they actually tend to rely more than citizens in many other countries on government-run health insurance and pensions in their old age, or when they fall on hard times. It is what makes the creature called “American” so perplexing in the eyes of foreigners.
Furthermore, many Americans who oppose community-rated insurance in the current health-reform plan are themselves beneficiaries of community rating. I shall have something more to say about this oddity in my next post to this blog.
Posted response of Don McCanne, San Juan Capistrano, CA (response # 2):
Some of us were very disappointed when politicians rejected, up front, the administrative simplification of the single payer model of an improved Medicare for everyone. Nevertheless, in the decision to expand the role of private insurance, Congress still had the opportunity to create a rational system of social insurance which would have included important concepts such as community rating and risk equalization.
The concept of the insurance exchange provided that potential. Yet Congress erected firewalls which will prevent most individuals from purchasing plans within the exchange. They also delayed the initiation of the exchange for a few years, and it will require several more years after that to once again prove that our rejection of the concept of a truly effective social insurance program will perpetuate the inequities, inefficiencies and profound waste in our system.
Worse, in trying to patch together this dysfunctional system, Congress has decided that 20 million or so will be left out, a number destined to increase with continuing increases in health care costs. That’s roughly two-thirds the population of Canada, a country that we criticize merely because of its issues with queues for some elective services.
Proponents of this reform proposal say that we should pass it now, and we can fix it later. Unfortunately, this process almost assures that it will be at least another decade before our nation takes another serious look at the policies required for an equitable and just health care financing system.
It’s too bad that we don’t have visionaries in power who can say that this isn’t going to work, and we have to move on with fixing it now. But then the citizens of the United States are used to living with our over-priced, dysfunctional system that accepts, as a given, financial hardship, physical suffering, and even death.
Further comment: Although my published response acknowledges that social insurance programs that depend on private health plans, such as the European programs that Professor Reinhardt describes, can achieve important policy goals such as community rating and risk equalization, I cannot overemphasize the fact that our goal for reform should remain the golden standard of a single payer national health program – an improved Medicare program that includes everyone.
The single payer model has unique features, not found in an exchange of private plans, that improve efficiency, effectiveness, and equity while insuring that absolutely everyone is included.
Private health plans, especially those in the United States that have evolved throughout the past three-quarters of a century, provide a negative value in administration of our health care funds because of their high costs, inefficiency, inequity, and their inability to improve the resource allocation that is needed for a high-performance health care system. They are not a suitable vehicle for a social insurance program.
Although some who read the letter from PNHP to our Senators fixated on the negative message of rejecting the flawed proposal before Congress, many seemed to miss our positive message which is reframed in my comment above: We need “visionaries in power who can say that this isn’t going to work, and we have to move on with fixing it now.” (The PNHP letter stated, “… immediately move to consider… “)
now: at the present time or moment (Merriam-Webster)
immediately: without interval of time (Merriam-Webster)
“Now” and “immediately” are terms that we used to communicate the fact that we need to avoid the decade or so of inevitable torture that so many will experience as we watch this experiment with reform fail us miserably. We need a bona fide program of social insurance now… immediately!
“Circles of Exclusion: The Politics of Health Care in Israel”
By Dani Filc, M.D., with a foreword by Quentin Young, M.D.
Cornell University Press, 2009
Hardcover, 208 pp., $35
Dr. Quentin Young, national coordinator of Physicians for a National Health Program, has written a foreword to a new book by Dr. Dani Filc of Israel.
Young writes (excerpt):
“As I sat down to read Dani Filc’s ‘Circles of Exclusion,’ I expected to learn a great deal about the Israeli health care system. What I did not expect was to find that this tiny country enmeshed in a seemingly intractable conflict in the Middle East would have so many lessons for the world’s most powerful nation – the United States.
“Several pages into this courageous book, it became clear that the issues Dr. Filc describes hold great relevance for those grappling with America’s ongoing health care crisis. The crisis in Israel and that in the United States are the result of the impact of neoliberal market policies that are currently being imposed on health care throughout the globe.
“In both countries we see a decline in concern and funding for public health and the exclusion of the poor racial and ethnic minorities from increasingly privatized health care systems in which the survival of profit-making enterprises seems to be the paramount concern. …
“For a public health advocate like myself, the message of this book is crystal clear. Obsessive preoccupation with free-market formulas are intensifying social and health care problems in industrialized countries, not resolving them. Of course, Filc shows us how this has happened is Israel, which because of its history puts a very specific spin on the problems of the poor, the old, racial and ethnic minorities, and the new migrant working class that crisscrosses the globe. Nonetheless, in Israel and elsewhere, preoccupations with profit are crowding out concerns for the classical social determinants of health and, as Dr. Filc points out over and over again, are not saving money but actually wasting it.”
The editors at Cornell University Press write:
“In its early years, Israel’s dominant ideology led to public provision of health care for all Jewish citizens-regardless of their age, income, or ability to pay. However, the system has shifted in recent decades, becoming increasingly privatized and market-based. In a familiar paradox, the wealthy, the young, and the healthy have relatively easy access to health care, and the poor, the old, and the very sick confront increasing obstacles to medical treatment.
“In ‘Circles of Exclusion,’ Dani Filc, both a physician and a human rights activist, forcefully argues that in present-day Israel, equal access to health care is constantly and systematically thwarted by a regime that does not extend an equal level of commitment to the well-being of all residents of Israel, whether Jewish, Israeli Palestinians, migrant workers, or Palestinians in the Occupied Territories.
“Filc explores how Israel’s adoption of a neoliberal model has pushed the system in a direction that gives priority to the strongest and richest individuals and groups over the needs of society as a whole, and to profit and competition over care. Filc pays special attention to the repercussions of policies that define citizenship in a way that has serious consequences for the health of groups of Palestinians who are Israeli citizens — particularly the Bedouins in the unrecognized villages — and to the ways in which this structure of citizenship affects the health of migrant workers.
“The health care situation is even more dire in the Occupied Territories, where the Occupation, especially in the last two decades, has negatively affected access to medical care and the health of Palestinians. Filc concludes his book with a discussion of how human rights, public health, and economic imperatives can be combined to produce a truly equal health care system that provides high-quality services to all Israelis.”
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.
Premiums are key issue for health care negotiators
By Ricardo Alonso-Zaldivar
The Washington Post
January 6, 2010
Congressional Democrats and President Barack Obama began work in earnest Tuesday on difficult issues still standing in the way of their national health care overhaul after months of tortuous debate. Topping the list: How to help Americans pay for insurance premiums.
Obama “… stated his intention to work with leaders to strengthen affordability … beyond what is in the Senate bill,” said a House leadership aide, who spoke on condition of anonymity because the meeting was private.
(House Speaker Nancy) Pelosi said she wants the final product “to ensure affordability for the middle class, accountability for the insurance companies, (and) accessibility by lowering costs at every stage.”
From the very beginning of his political campaign President Obama stressed that his highest priority in health care reform was to make health care affordable. He even rejected universal coverage through an individual mandate, insisting that you can’t require individuals to purchase a private insurance plan that they can’t afford.
In his meeting with the Democratic leadership yesterday, during the final stages of the reform process, he stressed again that affordability must be further strengthened.
The question of affordability has often been framed as a balance between what is affordable for employers, for individuals, and for the government. But it is really individuals, collectively, that bear the costs of health care. Individuals pay for insurance premiums and out-of-pocket expenses. Individuals also pay for employer-sponsored health plans through foregone wage increases. Those who dispute that will have to admit that the cost of premiums that are not supported by lower wages would then be passed on to individuals as consumers of the products or services provided by the businesses. And of course the government is financed by individuals though taxes, either paid directly or paid by higher consumer prices for taxes collected from businesses.
Why is it important to acknowledge that the individual is the source of all health care financing? It’s simply because our entire national health expenditures (NHE) represent the financial burden for which individuals bear the collective responsibility, and it is that burden that must be made affordable.
Unfortunately, most attention was directed to making health care affordable for the government. Rather than doing that by controlling our NHE, Congress merely played shell games with the budget, shifting the flow of funds in different directions, creating only the false appearance of affordable reform that was fully paid for. Balancing a government budget on the backs of others has almost nothing in common with the concept of affordability.
What is most unfortunate is that President Obama, right from the very beginning, rejected the model of financing reform that would make health care affordable for everyone. The model he selected is the most expensive model and falls far short on effectiveness, equity, and universality. Where his model saves money is in policies that are designed to place more financial barriers between the patients and the care that they need – policies that are primarily business tools of the private insurance industry, especially the low actuarial values of the plans.
It has been proven repeatedly, through simulations and through real-life experiences, that a single payer national health program or a national health service are the only models that would actually slow health care cost increases while truly covering everyone through equitable financing of a universal risk pool. They are truly effective in controlling spending through mechanisms such as reduction in administrative waste, global budgeting for hospitals, negotiation of pricing, and budgeting of capital improvements. These are the least expensive and most effective models of ensuring that everyone receives the health care that they need.
Although Americans remain uncomfortable with the concept of a government owned and operated national health service, they are very receptive of the concept of an improved Medicare that would cover everyone. That would be affordable for businesses, for the government, and, most importantly, for the individuals who really are paying all of the bills anyway.
President Obama needs to sit down with the Democratic leadership and say, “Hey, it’s absolutely imperative that we make health care affordable, so let’s look at this single payer thing again.”
Co-founders of Physicians for a National Health Program say the push for single-payer Medicare for All continues
We recently interviewed Dr. David Himmelstein and Dr. Steffie Woolhandler, co-founders of Physicians for a National Health Program (PNHP), about the health bills emerging in Congress and the status of the movement for single-payer Medicare for All. Both are faculty members at Harvard Medical School and primary care physicians at Cambridge Hospital in Massachusetts. The telephone interview took place on Nov. 30, several weeks before the Senate adopted its version of the bill. On the eve of the Senate vote, PNHP called for the defeat of the bill, saying it would do more harm than good and that it would make genuine reform more difficult in the future.
PNHP: What’s your assessment of the health legislation that is emerging in Congress?
DAVID HIMMELSTEIN: The bills are largely a sideways move. They will have very little impact on resolving or stabilizing the health care system. They improve things for some people and make things worse for some people.
For example, some poor patients or near-poor patients would benefit from federal subsidies for private insurance or by getting Medicaid, which they’re presently not eligible for. That would be an improvement.
However, patients who remain uninsured – and there will be at least 17 million of them – would probably see the resources available to them dwindle, because the bill takes part of its funding out of the hides of safety-net hospitals. Part of the proposed Medicare savings is derived from decreasing the funding for hospitals that care for a lot of poor, uninsured patients. So, for the remaining uninsured, the safety net would be even more threadbare than it is now.
Another example of an adverse impact: young people who have private coverage today would have to pay higher premiums because of the limits on premium differentials on age.
Almost no one would see an improvement before 2013 if the House version is passed, or 2014 if the Senate version passes. One thing is certain: the bills would entrench the insurance industry and pharmaceutical industry even further in their control of the health care system.
STEFFIE WOOLHANDLER: I guess the way I’d summarize it is that some patients would be better off, some would be worse off, but what is completely clear is that this is not a solution.
DH: The private health insurance industry would be very much strengthened with $500 billion in new money coming their way, much of it in the form of public subsidy. And the pharmaceutical industry, similarly, would be getting more money – again, much of it from the public treasury. So those industries would be financially stronger.
PNHP: But aren’t the private insurers and Big Pharma complaining about the bills? Doesn’t that suggest there’s something positive for patients in them?
DH: The pharmaceutical industry hasn’t been complaining much, really – only a little around the edges. In fact they’ve been running television ads in some places supportive of the administration’s proposals. As for the insurance industry, they’ve traditionally taken the tack that they’ll never settle for half the pie. They always want the whole thing. They want the $500 billion in government subsidies without any of the very modest incursions on their business practices that are in the bills today.
PNHP: To what extent does the national legislation follow the Massachusetts model?
SW: I think the national plan is like Massachusetts. If anything, the national plan is a little bit worse, in that in during the first three years of the reform in Massachusetts, the insurance exchange offered only nonprofit subsidized plans. The national bill will mostly offer for-profit plans, maybe exclusively so.
The other thing is that the Massachusetts plan went into effect right away, so whatever benefits it contained were actually there at the beginning – you didn’t have to wait three or four years for them to kick in.
Yet another difference, according to press reports here, is that the subsidies in the national bill are likely to be lower than they are in Massachusetts. I haven’t seen the details on that, but that’s what’s being reported. The subsidies in the national bill will be less than what we presently have in the state.
DH: Keep in mind also that Massachusetts started from the vantage point of having the lowest uninsurance rate in the country. The 2006 reform cut it roughly in half. We also had and still have a tradition of quite generously funding the safety net in the state, although that’s been cut back as part of the state legislation. So the access to care was better in Massachusetts than almost anywhere else in the country before the reform.
We won’t be starting from nearly as good a position nationally, so what we arrive at on the national level is certainly not going to be as good as what we’ve got in Massachusetts.
That said, on the ground in Massachusetts things are not so rosy. We still have more than 300,000 people uninsured in our state and face grave difficulties in getting care for them. In fact, access to care for them is worse now than before the reform was passed, because the institutions that provide care for the uninsured have seen very sharp funding cuts.
We’re now beginning to see cutbacks in coverage because of the very high costs of implementing the plan. Some 30,000 immigrants – these are legal immigrants – have seen their rights to care sharply cut. Co-payments have risen and premiums are continuing to rise quite sharply in the state. A number of patients who were entitled to free care under the old Massachusetts free care system now face quite steep out-of-pocket costs.
The other thing worth saying is that the Massachusetts reform has done nothing for the vast majority of people who had insurance at the outset but were strained financially by the premiums and out-of-pocket costs. They continue to face great difficulty.
So, after an improvement in the first year in access to care in Massachusetts, things have now started to reverse. And the fiscal strains on the state and the program promise to make things even worse in the near future.
PNHP: How much has the Massachusetts reform cost? Is the plan financially solvent?
SW: That’s a very politically contested subject. The actual cost of the state reform is one of those very hot-button numbers. If you include the total cost to everyone in the state, public or private, you’re looking at a figure about $1 billion a year higher than it would have been without the reform. So public and private costs combined have been driven up health spending by more than a billion annually.
DH: The Congressional Budget Office estimates that nationally it costs $4,000 to insure someone, and I think that’s likely true in Massachusetts as well. The reform insured about 300,000 people, so you get a figure like $1.2 billion, but exactly where those costs have fallen is very difficult to track down because the state budget has obfuscated that enormously.
There’s also been a large dollop of federal money coming into the state in partial support for the plan. State officials claim, “We’ve only spent $300 million or $400 million a year on it,” but that excludes the federal funding. And, as part of the stimulus package, there was actually an increase in the federal matching rate for Medicaid – it went from 58 percent to 62 percent of every Medicaid dollar coming in from federal sources – and that wasn’t just for the newly insured, that was for all Medicaid patients.
So there’s been a large infusion of new federal funds that have helped to keep the plan afloat. Exactly how much of that is attributable to the reform is hard to track down. And as to private spending, we won’t have exact figures on that for another year or two, because the state doesn’t really track it and the feds won’t have their numbers out for another year or two.
PNHP: How do you reply to people who say, “Yes, the bill that’s emerging in Congress is flawed, but it’s a start and it can be improved upon later, just like Medicare was”?
DH: Historically, the way we’ve made progress in health reform has not been by incremental steps, but by major steps at propitious moments that often, in the ensuing years, get eaten away.
We haven’t actually been able to enlarge on many improvements in Medicare, and it has really been largely eroded since it was first passed, not pushed forward.
SW: Medicare has certainly been eroded since the late 1970s. After it was passed and the program took form, Congress actually extended Medicare to two additional groups in the 1970s – people with end-stage renal disease and people who have been totally and permanently disabled for more than two years. But in terms of what the program offers, it was never actually improved on, and even in terms of the number of people covered, there have been no improvements since the late ’70s, just an erosion of it.
DH: And whereas Medicare was a fully public program at the outset, the “private option” has been added to Medicare in the last few decades. It’s gone from being a sort-of-single-payer system for the elderly to being a public option program that is unfairly competed against by private insurers who receive extra government subsidies.
PNHP: But some people say that, politically speaking, the Obama administration needs to have a victory on this front, even if it is imperfect. It’s the administration’s momentum that’s important. What do you say to that?
SW: I think there’s two ways for the Obama administration to fail. One way would be to fail to pass any legislation, and the other would be to pass legislation that is worthless, that doesn’t solve the problem.
If you don’t pass legislation, at least you can blame the Republicans the next time around. If you pass something that doesn’t solve the problem, you’ve failed and plus you’re in much worse shape than you would have been otherwise.
DH: It’s like saying if Roosevelt had passed a fake Social Security bill, that that would have sustained the momentum of the Roosevelt administration. In fact, people would have eventually understood that a fake Social Security bill wasn’t real. Similarly, people will understand in 2014, when this bill finally comes into effect, that the Democrats passed a piece of legislation that was nearly worthless. To stake the future of progress on a piece of Potemkin-village-like legislation, a fake front, is a dangerous game to play.
PNHP: What’s your reaction to the Stupak amendment in the House bill restricting insurance coverage for abortion?
DH: It’s completely unacceptable as part of the bill and it signals several things. One is that the right has been perfectly willing to hold people hostage to its ideology, whereas progressives by and large have not. But the second is that, under any health reform, we’re going to have a huge fight to preserve the right to choose. That’s going to be true under single payer as well: we’re going to have to defend the right to choose over and over again and keep pushing on.
PNHP: Some people say we should embrace a highly regulated system like Switzerland or Germany has instead of adopting single payer. Others suggest gradually lowering the eligibility age for Medicare as a stepping stone to single payer.
DH: These proposals are based on the presumption that politically it’s easier to do lesser measures than single payer. I think the behavior of the insurance industry in the current round of debate suggests that’s actually a false precept. Even the most minor regulations have evoked enormous opposition from the insurance industry.
So, for example, the view that we can completely change the nature of the insurance industry but leave them in the health care system and that that’s going to mollify them – that we’re going to turn them into extraordinarily tightly regulated, not-for-profit organizations whose executives can’t be paid extraordinary sums, whose shareholders receive no compensation, whose behavior is really completely different than their behavior today and that somehow that will attenuate their political opposition – I mean even the most minor regulations in the current bill have been enough for them to come out and oppose it, despite getting an extra $500 billion from it.
I think the view that, politically, we head off their opposition in this way is demonstrably incorrect. This gives rise to two additional questions. First, if the opposition from the insurance industry to these lesser measures is every bit as strong as it is to single payer, are we likely to enlist a much larger number of people to win that sort of reform? I think answer to that is, probably not. There’s not a strong principled group of people saying, “We want a German-style system rather than national health insurance.”
The second question is: Does it work better as policy? That is, which system ultimately works better once you get it in place? There I think the answer is demonstrably clear that in a single-payer system you get more and better care for people than any given amount of money you spend than under one of these regulated systems like what T.R. Reid has been speaking about, for example the German system or the Swiss or Dutch systems.
The political compromise that some people suggest doesn’t get you very far politically, and the policy compromise gets you a worse health care system.
On reducing the Medicare eligibility age to 55, where it’s done automatically for everyone in that group (as opposed to a so-called buy-in, which would create very big problems), in some ways it’s a similar calculus. Do you really substantially reduce the political opposition? I would say probably not. The policy is a little different, because it’s a better policy than going to a regulated system, but the problem there is that until you get everybody in, you don’t get many of the financial advantages of a single-payer system. And as you phase it in, you’re adding money in order to keep the system afloat and only at the end of that process do you get the savings that make it financially viable. So the phase-in is really a big problem.
PNHP: What should supporters of single-payer health reform be doing during this period?
DH: One very important task for single-payer people is to make it clear to others that this bill is not ours, and that this reform is not real health reform. Then, when it’s passed and fails, we need to make it clear that Congress and the administration never did health reform, not that health reform didn’t work.
Until the bill is finished being debated, the one piece of salvage that would be worthwhile at this point would be for Congress to adopt an amendment allowing individual states to experiment with their own single-payer systems should they choose to do so. Rep. Dennis Kucinich is trying to get his state single-payer amendment back into the bill; Sen. Bernie Sanders has something similar on the Senate side. The message to our lawmakers would be something like, “We think this is a horrible bill. Can’t you at least get the option for our state to do better?”
PNHP: Are you worried that the single-payer movement will turn away from national legislative efforts and instead focus on state-based campaigns?
SW: I don’t worry about that because the state work and national work are complementary. I think we do need a national single-payer bill, so I hope people don’t think we should abandon the idea of national reform. But working at the state level can help build the knowledge and movement that can get us to single payer nationally.
DH: Steffie is from Louisiana and, as she’s fond of reminding me, if Louisiana is ever going to have decent health care program, we can’t do it state by state.
PNHP: How would you assess PNHP’s and the single-payer movement’s efforts in this round of reform? What has been most effective in advancing cause – lobbying, testimony before Congress, civil disobedience, rallies? What lessons do you draw?
DH: All of those things have been effective, except for the testimony, to be honest. The testimony is the result, not the cause, of such activity. When Congress asks people to come testify, that’s a signal that they’ve been getting pressure from below.
The mobilization in communities around the country, particularly some of the dramatic activities like civil disobedience and the Mad as Hell Doctors’ caravan – especially when they attracted media attention – have been quite effective.
But I think that the lesson is that we haven’t built nearly a big and strong enough movement. And it’s not just in health care, frankly – we need a movement that takes back the country in many respects and that goes beyond health care. Health care is going to be an important part of it, but I think having organizations throughout the nation that are pressuring our political leaders in a much more serious way than we’ve even been able to do in this round of pushing for single payer is clearly going to be essential. That’s the message for us now, and if the next debate about health reform is five or seven years from now, that’s how long we have to really build a movement five times as large as what we have.
SW: It will take a much bigger movement to take back power from the corporations, who are now actually running the country.
DH: The nation’s political process needs to be responsive not just to corporate power. And at some level single-payer forces should unite with folks who say we need much more regulation of the financial sector, for example, and of many other aspects of life.
PNHP: Has PNHP been growing and if so, why?
DH: PNHP has been growing. Doctors have a different perspective on this than politicians. We’re in this for our whole careers, and the fact that the health reform debate may die down for a couple of years doesn’t actually mean we go on to another issue.
We’re in this issue for life, and if the health care system would let us do our work and accomplish with our patients what we want to accomplish then the need for PNHP would evaporate and we would close down. But unfortunately that need continues to mount. That means that doctors – more and more of us – feel the need to be active. And that’s not going to go away when the Congress stops debating this issue actively.
Yes, there will be some disappointment if a bad bill is passed, and a feeling of regret that the issue is not being debated as actively as one would want, but I think within the medical profession it’s clear that the urge for reform is going to continue and likely strengthen through time because the situation is continuing to get worse for our patients and our work.
PNHP: What’s behind PNHP’s tenacity for these 20-odd years?
SW: I think the health system’s problems have continued and in some ways mounted, but our members are people who actually work every day in health care, so it’s not like people move on to some issue like world peace, however valuable that might be. These are people whose lives are in the health care system, trying to take care of patients.
DH: We actually don’t have alternatives. One can work on world peace and on issues we face in our everyday work, but unless you’re going to say, “Well, I spend 55 hours a week in a terrible health care system and I’m going to ignore that,” I think doctors of conscience increasingly feel driven to do something about the distortion and corrosion of their work.
PNHP: You’ve been extremely prolific in your research this year, publishing seven or eight studies, including one showing that 62 percent of personal bankruptcies are linked to medical bills or illness, and another showing that 45,000 deaths annually are linked to lack of health insurance. How do you evaluate the impact of this work?
DH: The research is the product of a research team that includes several colleagues — Andy Wilper, David Bor, Danny McCormick and (for the bankruptcy study) Deborah Thorne and Elizabeth Warren. Obviously the circumstance of the nation being very actively focused on health reform is part of the reason why the research has received so much media attention.
But while we’re gratified that the work has been useful in helping to open debate, the actual use of the findings by politicians – the arguments that they’ve made with the data – have often been very disappointing.
I think Steffie has remarked that the work has helped push the wagon of health reform forward, but someone else has been steering the wagon in a very different direction than we would want it to go.
We’ve tried to highlight the major problems in the health care system and some of the reasons why the alternatives to single payer won’t work. The pieces that highlight the irrationality and the problems of the health care system have gained attention, but the pieces that speak to why the alternatives won’t work have been selectively ignored.
SW: Some politicians love to bring in the left or the left-liberals to create research and create a movement and create some energy, but that’s pretty different from then putting you in charge of things and letting you make decisions.
PNHP: Are there any final comments you’d like to make?
DH: One thing that has been striking in this year’s push for single payer has been the tremendous degree of cohesion and the sense of camaraderie within PNHP. That’s somewhat different than the feeling during the 1993 round of health policy debate, where there was more controversy within PNHP and, frankly, within the single-payer movement. At that time, some colleagues were saying we had to stop pushing for single payer and hop on board the Clinton health plan.
There’s been a very clear-eyed sense and consensus within the organization that our role is to say what’s right in this debate and to bring forward a principled stance and not to play political games that end up with disastrous consequences.
It’s also gratifying to see how PNHP has helped create a platform for people to speak in their communities and speak in public and really use their creative energies in a progressive way on health policy, as has been amply demonstrated in this round of debate. There’s no way we could have raised enough money to do the work that PNHP members have done on a volunteer basis. The organization is there to provide resources and opportunities to work, and our members have taken advantage of those opportunities in extraordinary ways.
Health Spending Growth At A Historic Low In 2008
By Micah Hartman, Anne Martin, Olivia Nuccio, Aaron Catlin and the National Health Expenditure Accounts Team
In 2008, U.S. health care spending growth slowed to 4.4 percent—the slowest rate of growth over the past forty-eight years. The deceleration was broadly based for nearly all payers and health care goods and services, as growth in both price and nonprice factors slowed amid the recession. Despite the slowdown, national health spending reached $2.3 trillion, or $7,681 per person, and the health care portion of gross domestic product (GDP) grew from 15.9 percent in 2007 to 16.2 percent in 2008. These developments reflect the general pattern that larger increases in the health spending share of GDP generally occur during or just after periods of economic recession. Despite the overall slowdown in national health spending growth, increases in this spending continue to outpace growth in the resources available to pay for it.
Health care spending by households grew 4.3 percent in 2008, a deceleration from 5.9 percent growth in 2007. Despite the slowdown, households’ health spending growth in 2008 still outpaced adjusted personal income growth of 2.7 percent.
Although some members of the media are celebrating the lowest rate of health care spending growth in almost half of a century, a full reading of this report is sobering.
While Congress has been desperately searching for policies to slow the rate of health care spending, not even one of the worst mechanisms for reducing spending – clobbering our economy with a recession – was capable of preventing a further encroachment of our national health expenditures (NHE) on our total gross domestic product (GDP), increasing from 15.9 percent to 16.2 percent of the GDP.
It is difficult to imagine a more effective mechanism of controlling spending than to wallop our paychecks, even if not a first choice of the policy makers. Median household income fell 3.6 percent between 2007 and 2008. Yet household health care spending in 2008 still grew by 4.3 percent, even more than the 3.8 percent inflation rate for that year (which declined to 1.8 percent in 2009).
If a major hit to the economy is not going to bring our NHE under control, then how can we expect the pilot programs and the other weak cost-containment measures in the bills currently in conference to have any real impact?
The only provision that could have a major impact is the proposed Independent Medicare Advisory Board (Sec. 3402 of the Senate bill), but only if its provisions were to apply to our entire NHE. But they won’t. It’s purpose is to “reduce the per capita rate of growth in Medicare spending.” Its independent power to set the rules for Medicare spending is not extended to control over the private insurance plans.
Physicians and hospital administrators are already concerned about Medicare reimbursement rates. With spending growth in the private sector continuing to outpace the growth of the economy, it might be expected that many health care providers would walk away from the close-to-frozen prices established by the public programs, in a quest for the more lucrative rates in the private sector.
The problem of intolerable increases in our health care spending must be addressed, not just for the government, but for all of us – individuals and businesses. The current legislation feeds the rapacious appetite of the private insurance industry while threatening the stability of our most prized public health program – Medicare.
What if we had an improved Medicare program that covered everyone? An independent Medicare advisory board would certainly put the skids on spending, but not to the extent of threatening the stability of the program. Besides, don’t we want our representatives to stand up for us to be sure that our health care is not priced out of our reach? It already is for many of us, and will still be for all too many under the bills before Congress. It wouldn’t be under a single payer Medicare for all program.
Is ‘Community Rating’ in Health Insurance Fair?
By Uwe E. Reinhardt
The New York Times, Economix
January 1, 2010
One controversial feature of the health reform bill winding its way through Congress is “community rating.” The term has a mellow ring but is apt to be divisive.
“Community rating” refers to the practice of charging a common premium to all members of a heterogeneous risk pool who may have widely varied health spending for the year. It inevitably makes chronically healthy individuals subsidize with their insurance premiums (rather than through overt taxes and transfers) the health care used by chronically sicker individuals.
The purpose of any insurance, of course, is to do precisely that: redistribute the financial burden from the unlucky to the lucky members of a risk pool.
(Professor Reinhardt then provides calculations for an example of two cohorts, A and B, representing populations segregated into two pools with different risks, as is characteristic of our price-competitive market for individually sold health insurance.)
Would it be “fair” that the healthy individuals of cohort A pay a pure insurance premium of only $2,450 a year, while the sicker citizens in cohort B must pay $6,600? This is, after all, how health insurance now is priced in most states for individuals.
Or does “fairness” require that the two groups be merged into one large national risk pool A & B, whose risk profile is shown in the right-most column of the table. If each member of this merged pool is to pay the same pure premium, then the latter will have to be $4,525 to break even. Such a premium would be said to be “community rated” over these two distinct risk pools.
Relative to their premium in a perfectly risk-segregated market, the community-rated premium of $4,525 will cost members of low-risk cohort A $2,075 more and the sicker members of cohort B $2,075 less than they would have paid in a risk-segregated market. Is that “fair”?
So what should the political leaders of this imaginary country do? It would be interesting to have your reaction. It is, after all, the very question our political leaders are tackling this moment.
Should you choose to respond, would you indicate your age?
(You can post a response by clicking on “Post a Comment” at the end of the full article at the following link. You can also recommend specific responses.)
Posted response of Don McCanne, San Juan Capistrano, CA (response # 9):
One of the more obvious examples of this dilemma is the disagreement as to the premiums that should be charged for the healthier population in their twenties as opposed to the less healthy population, on average, in their fifties and early sixties. Congress has already decided that strict community rating through a single premium for everyone will not apply to age differences, but they remain conflicted as to how much of a transfer will occur from the younger healthier individuals to the older less healthy individuals. They seem to believe that the concept of such a transfer is “fair,” but they are not in agreement as to what level of transfer exceeds their concept of fairness.
My wife and I are in our seventies and benefit from Medicare, a program in which there is a transfer to us from those in their twenties, many of whom are uninsured. Is that fair?
Of course the issue is further complicated by our nation’s very high health care costs since there is a need to transfer from the wealthy to lower income individuals, if, in fact, we agree that we should have a financing system that allows everyone to have the essential health care that they need. The many other complexities introduced by our fragmented health financing system, using public and private sources, complicates the process of finding the right premium for the right coverage, for the right amount of cost sharing, with the right amount of subsidies to support the premiums and the cost sharing.
With our unique health financing system already overburdened with profound administrative waste, it doesn’t seem rational to try to expand coverage by assigning inevitably inequitable premiums to benefit packages within fragmented private plan risk pools. That just adds to the complexities, inequities and administrative waste.
It would be much more efficient and equitable to remove the risk bearing function from the private insurers, thereby eliminating premiums, and replace our dysfunctional health care financing system with a single universal risk pool covering everyone. Each person would pay into the pool their fair share, based on ability to pay, by funding it through progressive taxes.
This could easily be accomplished through an improved Medicare for all. But some may not consider this fair either if they reject the concept of social solidarity, the concept on which community rating is based.
This editorial from today’s edition of The New York Times makes their case for supporting the current health reform legislation before Congress. The responses of Don McCanne, MD are in red and bracketed with ***.
The Case for Reform
The New York Times
December 29, 2009
Reforming this country’s broken health care system is an urgent and essential task.
*** Absolutely! ***
Given all of the fabrications and distortions from Republican critics, and the squabbling among Democratic supporters, it is no surprise that many Americans still have doubts.
*** Unfortunately, the Republicans are handicapped by their ideological opposition to government solutions for social problems. Their proposal for a free market of cheap underinsurance products sold across state lines would only make problems worse by further impairing the effectiveness of our current inadequate and inequitable risk pools. The squabbling of the Democrats is based on a disagreement over whether to take the bold step of providing a truly effective universal public insurance program, such as an improved Medicare for everyone, or to take what some believe to be the politically expedient step of trying to modify our current dysfunctional system, even though it means falling far short of the goals of universality and affordability. ***
President Obama and Democratic leaders have a strong case. They need to make it now.
*** They have a very weak case. President Obama and the Democratic leadership chose to try to modify our current dysfunctional system, leaving tens of millions without insurance and perpetuating the financial hardships faced by many who need health care. ***
Here are compelling reasons for all Americans to root for the reform effort to succeed and urge Congress to complete the job:
THE HEALTH OF MILLIONS OF AMERICANS
The fact that 46 million people in this country have no health insurance should be intolerable. Every other major industrial country guarantees health coverage to its citizens, yet the United States, the richest of them all, does not.
*** The current proposal would leave close to 20 million people without insurance, a number that is destined to increase as health care costs continue to rise. Supporting a policy that ensures that so many will continue to be without health insurance is what should not be tolerated. A public insurance program is designed to automatically cover everyone. ***
Claims that the uninsured can always go to an emergency room for charity care ignore the fact that American taxpayers pay a high price for that care. And it ignores the abundant evidence that people who lack insurance don’t get necessary preventive care or screening tests, and suffer gravely when they finally do seek treatment because their diseases have become critical.
*** The modest marginal cost of providing care for additional patients in the emergency room is not a major issue. The crucial problem is the deterioration of our primary care infrastructure that is required to provide individuals with a source of seamless continuing care. The proposed legislation does take some important steps toward addressing this serious deficiency, but they would be much more effective with a single, unified financing system integrated with our health care delivery system. ***
The American Cancer Society now says the greatest obstacle to reducing cancer deaths is lack of health insurance. It is so persuaded of that fact that two years ago, instead of promoting its antismoking campaign or publicizing the need for cancer screening, it devoted its entire advertising budget to the problem of inadequate health insurance coverage.
*** We previously commended the American Cancer Society for taking this forward-thinking position. ***
We consider it a moral obligation and sound policy to provide health insurance to as many people as possible. While the pending bills would fall short of complete coverage, by 2019, the Senate bill would cover 31 million people and the House bill 36 million who would otherwise be uninsured under current trends.
*** It is both a moral obligation and sound policy to provide health insurance for everyone, which a universal public insurance program would do. The design of the current proposal is both immoral and unsound because it leaves an intolerable number of individuals uninsured – a number close to two-thirds of the population of Canada. We may criticize Canada’s queues, but we would be outraged if they prohibited two-thirds of their population from even having a place in the queues. Why is there no outrage here when we would leave a similar number without coverage? ***
MORE SECURITY FOR ALL
Horror stories abound of people — mainly those who buy individual policies — who were charged exorbitant premiums or rejected because of pre-existing conditions or paid out for years and then had their policies rescinded when they got sick.
Such practices would be prohibited completely in three or four years under the reform bills. Before that, insurers would be barred from rescinding policies retroactively and the bills would establish temporary high-risk pools to cover people with pre-existing conditions.
*** Although private insurers have been appropriately condemned for using trivial reasons to rescind policies, many rescissions were for the legitimate reason (legitimate in a business sense) that individuals who were uninsured and then developed serious problems purchased coverage without reporting their newly acquired problem – a form of fraud. That defeats the insurance function of pooling all of the healthy in with the sick. The proposal before Congress still permits rescissions for fraud. This problem would totally disappear in a public financing system in which enrollment for life is automatic. Also, the experience with high-risk pools to date has been very dismal. The need for high-risk pools would be eliminated by a single public universal risk pool. ***
The legislation would also allow unmarried dependent children to remain on their parents’ policies until age 26 (the Senate version) or age 27 (the House version).
*** What do they do at 26 or 27? Would everyone at that age have a great job with generous employer-sponsored benefits? If not, would they be eligible for plans in the exchange, and could they afford their portion of premiums and out-of-pocket expenses that is estimated to be about 20 percent of their income? Again, this problem would disappear in an equitably-financed public program in which everyone is automatically enrolled for life. ***
If reform legislation is approved, employees enrolled in group coverage at work would also be more secure. If workers are laid off — an all too common occurrence these days — and need to buy policies on their own, insurers would be barred from denying them coverage or charging exorbitant premiums for health reasons.
*** Just like COBRA, laid-off employees who no longer have a paycheck must then pay the full insurance premium that was formerly heavily subsidized by their employers. Partial subsidies are not adequate for a person with no paycheck. Even if eligible for the backup of Medicaid, shifting in and out of programs is disruptive to care. ***
Americans are justifiably concerned about the rising cost of health insurance and of the medical care it covers. The reform bills won’t solve these problems quickly, but they would make a good start.
*** The reform bills do not solve the problem of rising costs, and they don’t even make a good start. The proposals for accountable care organizations and bundling of payments create nightmare logistical problems that are dismissed as something we can figure out later. The excise tax on higher-premium plans will result in diminished benefits, shifting more of the financial responsibility to those individuals who need care and are already burdened with excessive out-of-pocket expenses. As health care costs continue to increase, more plans will be pared of benefits in order to avoid the excise tax. Making essential health care less affordable is a perverse policy proposal. Strengthening the power of an independent MedPAC-like board to reduce spending only within the Medicare program threatens to diminish the support of those in the health care delivery system who already feel threatened by what they perceive to be already low reimbursement rates. Price discrimination is a major problem in our dysfunctional financing system, but it cannot be adequately addressed by a payment advisory board limited to Medicare. Although the current proposal would look at the private sector, it would have no power nor even the ability to slow cost increases in the private sector. Under a universal public financing program, the board would be able to recommend measures to improve resource allocation for our entire health care delivery system, while balancing the demands of patients, health care providers and taxpayers. ***
Despite overheated Republican claims that the reforms would drive up premiums, the Congressional Budget Office projected that under the Senate bill the vast majority of Americans (those covered by employer policies) would see little or no change in their average premiums or even a slight decline. Those who buy their own policies would pay somewhat more — but for greatly improved coverage.
*** Except for a few regulatory requirements for the insurance industry, most Americans will see no improvement. They will continue to be burdened with ever higher health care costs, reflected in higher premiums and greater out-of-pocket cost sharing. Being guaranteed the right to buy insurance is of little consolation for those who can’t pay for it. Those in the individual market are often uninsured because they can’t afford the stripped-down plans currently available. Requiring greater benefits makes these plans even less affordable. The inadequacy of the proposed subsidies which are limited to plans purchased through the exchange will provide little consolation for those who are not eligible for or who cannot afford the plans in the exchange. A universal public system equitably financed based on ability to pay would eliminate the need for individual or employer-sponsored private plans. ***
Most people who would be buying their own policies would qualify for tax subsidies to help pay their premiums, which could reduce their costs by thousands of dollars a year. And small businesses would qualify for tax credits to defray the cost of covering their workers.
*** The primary reason to propose tax subsidies is to keep the insurance industry alive. It is much less efficient than establishing a single universal risk pool financed by equitable taxes. Furthermore, the proposed subsidies would leave all but the wealthiest of us exposed to a potential obligation to pay about 20 percent of our incomes for health care. That is a burden that most would find very difficult to bear. ***
The inexorably rising cost of hospital and medical care is the underlying factor that drives up premiums, deductibles and co-payments. No one yet has an answer to the problem.
*** Balderdash! All sane economists agree that a single payer monopsony would solve the problem. Conservative economists might not like a government solution, but they agree that it would actually work. It’s time for the practitioners of the dismal science of economics to engage in normative economics. These are not only numbers we’re dealing with; they are about the lives and well being of people. ***
But the bills would launch an array of pilot projects to test new payment and health care delivery systems within Medicare. These include, for example, incentives to coordinate hospital and post-hospital care to head off needless readmissions, better coordination of care for the chronically ill, and incentives for doctors to provide a patient’s total care for a flat fee instead of charging for each test or service provided.
*** Continual improvement in health care delivery is an important goal, but it is in no way unique to the current legislative proposal. A single payer monopsony would have a greater capability of realigning incentives for optimal care. ***
The Senate bill would set up an independent board to spur the use of programs that save money or improve care — subject to Congressional veto. Optimists believe the savings might come quickly but this could still take many years. Without passing a reform bill, there is little chance of success.
*** See the first comment under “cutting costs.” ***
THE TIME HAS COME
For decades, presidents from both parties have tried in vain to reform the health care system and cover the uninsured. Still many Americans wonder, given the deep recession, whether it makes sense to do it now. The first thing to keep in mind is that the C.B.O. says that the reform bills are paid for over the next 10 years and would actually reduce future deficits.
The need is clear and the political timing is right with the Democrats controlling the White House, the Senate and the House. If this chance is squandered and Republicans gain seats, as expected, in the midterm elections, it could be a decade or more before reformers have another opportunity. Americans shouldn’t have to wait any longer.
*** Most of the major features of this legislation are not scheduled to begin for years, yet we are told that it is urgent that we pass this bill within the next several weeks. The urgency is not based on sound health policy but is based on the political goal of proving President Obama and the Democrats with a political victory well in advance of the next elections. That might be good politics, but it is an unforgivable neglect of duty that is being committed by our public stewards. The policies of a single payer Medicare for all program are much less complex than the dysfunctional model being foisted off on us with the misnomer of reform. Because of the toll of financial hardship, physical suffering and even death, there is urgency in the need to act. But we can act now and have the program fully up and running long before the dates proposed in the current legislation. The New York Times says that we are squabbling, by definition arguing about trivial matters. Racking up a political victory on the scorecard is trivial. Doing that while glibly accepting a system that will leave so many broke and uninsured is unconscionable. ***
NYT editorial, The Case for Reform: http://www.nytimes.com/2009/12/30/opinion/30wed2.html
by James Surowiecki
The New Yorker
January 4, 2010
The wayward, patchwork plan that we seem likely to end up with is probably a good reflection of the wayward, patchwork opinions that most legislators have on the subject.
So where’s the contradiction? Well, Congress’s support for community rating and universal access doesn’t fit well with its insistence that health-care reform must rely on private insurance companies. After all, measuring risk, and setting prices accordingly, is the raison d’être of a health-insurance company. The way individual insurance works now, risk and price are linked.
This kind of risk evaluation — what’s called “medical underwriting” — is fundamental to the insurance business. But it is precisely what all the new reform plans will ban. Congress is effectively making private insurers unnecessary, yet continuing to insist that we can’t do without them.
The truth is that we could do just fine without them: an insurance system with community rating and universal access has no need of private insurers. In fact, the U.S. already has such a system: it’s known as Medicare. In most areas, it’s true, private companies do a better job of managing costs and providing services than the government does. But not when it comes to health care: over the past decade, Medicare’s spending has risen more slowly than that of private insurers. A single-payer system also has the advantage of spreading risk across the biggest patient pool possible. So if you want to make health insurance available to everyone, regardless of risk, the most sensible solution would be to expand Medicare to everyone.
That’s not going to happen. The fear of government-run health care, the power of vested interests, and the difficulty of completely overhauling the system have made the single-payer solution a bridge too far for Washington.
So James Surowiecki joins the chorus of those of us who say that we have no need for private insurers and their unwanted service of segregating risk and setting prices accordingly, and that the most sensible solution would be to expand Medicare to everyone.
Yet he echoes the words of our progressive legislators when they first commend and then dismiss the Medicare for all model with the non sequitur, “That’s not going to happen.”
Time for our activism to reach a crescendo. We need to make it happen!
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