Over 2.2 million Californians have medical debt

Posted by on Tuesday, Sep 1, 2009

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

Insured and in debt: Even with coverage Californians struggle to pay medical bills

UCLA Center for Health Policy Research
August 31, 2009

More than 2.2 million California adults report having medical debt.

1.4 million have medical debt despite having insurance.

Individuals with medical debt are twice as likely as those without debt to delay or forgo needed health care.

“That even insured people are forced to take on medical debt to pay for their health care is another glaring inadequacy in our current system of health insurance,” said E. Richard Brown, director of the UCLA Center for Health Policy Research and lead author of the report, “The State of Health Insurance in California.”


Full report (102 pages):

Most individuals who are following health care reform are already aware of the fact that medical debt often contributes to personal bankruptcy, even for those who had been insured. This report adds to that data by demonstrating that medical debt is much more common than is reflected in the bankruptcy data, and is serious enough to have adverse consequences since it often results in individuals delaying or forgoing needed health care.

Two-thirds of Californians with medical debt were insured. The current proposal before Congress calls for a mandate to purchase private plans with very high premiums, with inadequate subsidies, and with an inadequate actuarial value which results in excessive out-of-pocket expenses. This flawed proposal would be a guarantee that medical debt and its adverse consequences shall remain a problem for far too many of us.

Members of Congress may feel that they have too much time and effort already invested in the current proposal to change course now. But that personal investment for a few hundred legislators is absolutely nothing compared to the impact that the legislation will have on the health care of over 307,000,000 of us. They need to start over – now – and do it right.


Posted by on Monday, Aug 31, 2009

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

Rules rein in Medicare Advantage marketing

By Tom Murphy
Associated Press

Regulators clamped down last fall on shady sales practices for privately run Medicare health insurance for the elderly.

But customers and advocate groups say the plans’ confusing nature still leaves room for pitches bordering on the deceptive, and abuses still crop up.

Medicare Advantage plans are privately run versions of the government’s Medicare program, which provides health coverage for the elderly and disabled. The government subsidizes these plans, and the industry has developed what can be a mind-numbing array of them.

Seniors report being pressured with unsolicited phone calls or home visits that are clearly prohibited. Some have signed up for plans that didn’t include their longtime doctors or hit them with unexpected costs, things they learn weeks later.

CMS learns every year about areas that need more vigilance, said Timothy Hill, deputy director for the Center for Drug and Health Plan Choice.



Some question private Medicare plans’ advantage

By Matt Sedensky
Associated Press

Seniors have flocked by the millions to Medicare Advantage, privately run plans offered as an alternative to traditional, government-run Medicare.

In the debate on overhauling the U.S. health care system, Advantage has been criticized as an example of a broken system that costs too much, confuses enrollees and suffers from a lack of oversight.

But even many backers acknowledge one of its toughest problems is few seniors understand the essential difference in private plans: Even services covered by traditional Medicare that doctors deem medically necessary routinely need the insurers’ advance approval and are sometimes denied.

Participants have been denied visits to specialists, rehabilitation to help them walk again and countless other services they’d be entitled to under traditional Medicare.

“Every decision is based on not what’s right for the patient, but what’s right for the bottom line,” said Dr. Michael Sedrish, who coordinates HMO payments for Medisys Health Network, which runs three New York City hospitals.

With basic Medicare, seniors generally know what sort of coverage they’re getting. That’s not the case with the roughly 7,000 Medicare Advantage plans, where one person’s coverage could be completely different from a next door neighbor’s.

A 2008 Government Accountability Office report found wide differences in enrollee costs depending on the plan, including home health service costs that could be up to 84 percent more than traditional Medicare.

“The plans tell them they have the same coverage,” said Delores Bowman, who handles calls to the Medicare Rights Center, “and they don’t.”


What’s beautiful about the Medicare Advantage program is that it has provided us with a real-life laboratory experiment which allows us to compare the functioning of highly-regulated private insurance plans as contrasted with the functioning of a public insurance program: traditional Medicare. The results are in, though that would be tough to ascertain if you simply observe the response of Congress.

What have we learned? The private plans take away the choice of health care providers that the traditional public program offers. The private plans insert intrusive interventions between the patient and the physician – interventions that are not found in the public plans. Private plans divert more resources to excessive, wasteful administrative services while increasing the administrative burden on the health care providers and on the public stewards who must provide oversight of our tax dollars that are diverted to this industry. Private plans also provide more entry points for the criminal element to cheat the taxpayers, patients, and providers. And for this we are paying far more of our tax dollars than we do in the traditional Medicare program for comparable levels of care. The obvious lesson is that we should dump the private plans.

What has Congress learned? They have decided that we should provide more subsidies to the private plans so that they can expand their markets!? And they have apparently decided that we will not even have a genuine public plan because it would provide unfair competition to the private plans because of Medicare’s greater efficiency and lower costs!?

It is true that a fragmented, multi-payer system is much more expensive and much less equitable, leaving too many exposed to suffering and financial hardship. But our Medicare Advantage experiment has demonstrated that it is the private plans that must be jettisoned, and it is Medicare that must be granted to everyone after modest, appropriate reengineering so that it works even better than it does now.

We need to send this urgent message to Congress and the administration, immediately:


Former Jasper County Republican Chairman on Single Payer

Posted by on Friday, Aug 28, 2009

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

Beware health-industrial complex

By Jack Bernard
August 23, 2009

I am a Republican, former chairman of the Republican Party in Jasper County, Ga., and chair of that county commission. Under our two-party system, it is easy to see why we Republicans oppose Democratic Party reform proposals. We are the opposition party and do not want them to get the political credit for solving a nasty problem.

Since the Democrats are in the driver’s seat, it is up to them to lead and bring their stragglers in line. However, the Democrats are fighting internally, failing to articulate a straightforward vision of the future or even one bill (Obamacare, if you will).

Republican pundits are sitting back and chuckling, as they always do when reform is mentioned, and repeating the same self-serving platitudes.

What amazes me is that no one is calling these individuals to account. In my view, it is unpatriotic to continue to lie to the American public about the situation facing us. Over the last 10 years, wages have gone up by about one-fourth. Health insurance premiums have gone up well over 100 percent. We cannot continue along this path to fiscal destruction. Inaction is not an option.

It is also against American values to mislead the public into believing that everyone can get good care even if they do not have insurance. The mark of a great nation is not how well it treats its privileged, but rather how well it treats its downtrodden. On this measure, we fail miserably; strange for a nation that prides itself on being the most religious democracy in the world.

Very few health or insurance professionals advocate for a single-payer system, the best way to control costs and ensure access. I hear all sorts of reasons: rationing (really, like HMOs do not do that now), paperwork (apparently insurance company bureaucracy does not count), socialism (come on — practitioners will still be independent and we all know it) and so forth. It is rare that we hear the underlying cause openly stated: greed. It will cut my income.

The members of Physicians for a National Health Plan are an exception to this rule. If you take a look at their Web site, www.pnhp.org, the rationale for a single-payer system is clearly articulated.

Universal Medicare will both control costs and achieve universal access to high quality care. Congressmen would get the same insurance as you and I. You better believe your coverage would be just as good as or better than what you are getting now.

The problem is not technical; it is political. It is high time we put the country ahead of ourselves and establish a single-payer system.

(Jack Bernard is CEO of Monticello (Ga.) Health Care Solutions and a former chairman of the Jasper County Commission and the Jasper County Republican Party.)


If you set politics aside and look at proposed policies for reform, the logic of a single-payer, improved Medicare for all should unite those with views as diverse as a Democrat fighting for health care justice and a Republican demanding common sense business principles that would provide all of us with much greater value in health care.

The Republicans would do well to listen to former Jasper County Republican Party chairman Jack Bernard. But it’s also the Democrats who must lay down their swords and health insurer lobby money, and listen to this gentleman. The price of maintaining a partisan barrier is too high.

Faced with increasing political momentum toward some kind of health care reform, the hospital industry, together with other major stakeholders, wanted to retain a place at the negotiating table and protect its interests in whatever legislation resulted. Urgency increased after the drug and insurance industries offered up their pledges to help with financing reform. Then the stakes increased further when the Obama Administration put out a proposal to cut payments to hospitals by $224 billion over the next ten years to help fund reform.

So a voluntary “preliminary agreement” was struck between the hospital industry, the White House and the Senate Finance Committee pledging that the industry would cut Medicare and Medicaid payments by $155 billion over ten years. Three organizations got together on this pledge: the Federation of American Hospitals (FAH) (the trade group representing investor-owned hospitals), the Catholic Health Association (not-for-profit hospitals), and the American Hospital Association (AHA, representing all types of hospitals). The $155 billion pledge included projections to cut annual Medicare payments to hospitals ($103 billion), reducing re-admissions of patients to hospitals ($2 billion), and lowering federal Medicare and Medicaid payments to “disproportionate share” hospitals that provide care to uninsured and poor patients ($50 billion). The hospital organizations also expressed their cooperation with efforts to improve efficiencies and quality of care as well as testing says to better integrate care, including the possibility of bundled payments.

Once again, as we have seen with the insurance and drug industries, the hospital industry is sharply focused on preservation and growth of future revenue streams. While supporting expansion of insurance through the reform proposals, the industry expressed serious reservations about the public option and an independent commission with authority over Medicare spending.

One especially contentious issue, both within the hospital industry itself and in health policy circles, is the future role of so-called specialty hospitals. These are physician-owned, for-profit facilities that usually specialize in the care of insured patients needing procedures in cardiovascular disease, orthopedic surgery and neurosurgery. They have been criticized for cherry picking the market, not carrying their share of emergency care (they usually do not have emergency rooms), overutilization of procedures, and “triple-dipping” by physicians who self-refer to their own facilities, then receive income from doing the procedure, sharing in the facility’s profit and gaining in the value of their investment.

The political battle over the future of specialty hospitals will be interesting to watch, and will reveal how effective reform can be in reducing perverse incentives and cutting costs in our market-based system. The interests of specialty hospitals are being promoted by the San Diego-based American Surgical Hospital Association, but are being opposed by both the AHA and the FAH, which together represent most of the hospitals in the country.

Tracking Study carried out by the Center for Studying Health System Change has concluded that “ specialty hospitals are contributing to a medical arms race that is driving up costs without demonstrating clear quality advantages”.

As of late August 2009, the House bill would prevent the opening of new specialty hospitals by disqualifying them from receiving payments from Medicare, but would grandfather in existing specialty hospitals. Physician ownership would be restricted to 40 percent. In reaction, specialty hospitals have been lobbying Congress heavily to restrict limits on specialty hospitals. As one example, Doctors Hospital at Renaissasnce in Edinburg, Texas, a 530 bed specialty hospital with physician ownership at the 82 percent level and with much higher levels of costs and utilization than peer hospitals, has raised at least $500,000 in a single fund-raising event for the Democratic Senatorial Campaign Committee as well as more than $800,000 for the Democratic Congressional Campaign Committee.

Other tactics conducted by the hospital industry are generally in favor of health care reform as it is developing, based on its expectation that the large increase in the insured population will lead to increased financial returns for hospitals. Not surprisingly, the Federation of American Hospitals joined in a $12 million advertising campaign to support the goals of the Obama Administration, a new group called Americans for Stable Quality Care, which includes such diverse coalition partners as the AMA, Families USA, PhRMA and SEIU, the service employees’ union.

So what can we say about likely rewards to the hospital industry from health care reform? If events track along as they are heading, hospitals will thrive, better than ever, with more insured people and generous accommodations from government. This statement by Chip Kahn, leader of the FAH for investor-owned hospitals, reflects his confidence in the future: “The hospitals have been for reform all along, so I see the potential for hospitals and our patients to be big winners in this process.”

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

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

  • Comments Off

Employers Face 10.5 Percent Health Care Cost Increases

Posted by on Thursday, Aug 27, 2009

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

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

August 25, 2009

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

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


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

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

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

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

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

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

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

JHPPL: Exploring the Concept of Single Payer

Posted by on Wednesday, Aug 26, 2009

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

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

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

Special Issue: Exploring the Concept of Single Payer

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

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

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

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


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

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

Europe leads in pharmaceutical research

Posted by on Tuesday, Aug 25, 2009

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

Global Drug Discovery: Europe Is Ahead

By Donald W. Light
Health Affairs
August 25, 2009

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

Policy Reflections

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

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

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


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

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

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

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

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

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

T.R. Reid’s “The Healing of America”

Posted by on Monday, Aug 24, 2009

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

The Healing of America

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

By T.R. Reid

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

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

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

The Healing of America:


5 Myths About Health Care Around the World

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

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

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

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

4. Cost controls stifle innovation. (False.)

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

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

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


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

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

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

Which model for the United States?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Strong projected annual increases on prescription drug spending

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

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

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

  • Comments Off

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

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

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

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

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

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

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

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

Source: Center for Responsive Politics

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

Table 2
Profits of Five Major Insurers in 2007

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

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

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

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

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

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

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

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

  • Comments Off

About this blog

Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

News from activists

PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.