Originally published in the Berkshire Eagle.
The Institute of Medicine (IOM) has just released recommendations for the “essential benefits” of the health insurance coverage mandated under the Affordable Care Act (the 2010 federal health reform law). The IOM is the health arm of the National Academy of Sciences, described on their website as “an independent, nonprofit organization that works outside of government to provide unbiased and authoritative advice to decision makers and the public.”
“Skimpy coverage” is the best description for the “essential benefits” package the IOM panel has recommended. These bare-bones policies come with unaffordable deductibles and co-payments, as well as uncovered services. Rather than endorsing the more comprehensive coverage plans of large employers, the panel chose coverage similar to that offered by small employers, making these skimpy plans the new standard.
This inadequate coverage will shift costs from corporate and government payers onto families, which will lead to delaying care. Millions of Americans are already underinsured with skimpy insurance policies, and as a result, forego necessary medical care or fail to fill prescriptions they need. Of course, delaying care eventually leads to higher medical costs when patients finally receive treatment, because they are sicker.
Rising deductibles and co-payments over the past two decades have not stopped medical inflation. Costs keep going up, and more and more people suffer financial ruin when they have serious illnesses.
A new study has just been released, by Masscare and Massachusetts Physicians for a National Health Program, about the outcome of our state health reform law four years after its full implementation. This is an important study because the Affordable Care Act is based on the Massachusetts Health Reform Law, which was enacted in 2006. The study finds that the number of uninsured people in Massachusetts decreased by one-half to two thirds. However, most of the gains have come from expansions in publicly subsidized insurance, shifting patients from the previous Free Care Pool, which compensated hospitals directly, to private insurance plans, which are a more expensive way to provide coverage.
In addition, cost-shifting to patients has accelerated due to skimpy coverage in employer-sponsored insurance, especially for policies for small business employees. Since the reform, the use of high-deductible plans more than tripled for Massachusetts residents with private insurance.
Reform has not reduced the burden of medical bills and medical bankruptcy in Massachusetts. The federal Affordable Care Act, like health reform in Massachusetts, will probably have similar mixed outcomes, expanding coverage to the uninsured, but doing this through inadequate insurance policies purchased through private insurance companies, who will reap big profits even as the cost of policies become unaffordable.
As you might suspect, the panel from the IOM who made these recommendations for the federal health reform law is “riddled with conflicts of interest,” according to a protest letter signed by 2,400 doctors, nurses, and health advocates. The IOM panel members include Sam Ho, executive vice president of United Healthcare, and Leonard Schaeffer, a former CEO of Wellpoint, two of the largest health insurance companies.
Last year, a journalist at the Los Angeles Times wrote, “Leaders of Cigna, Humana, UnitedHealth, WellPoint and Aetna received nearly $200 million in compensation in 2009, according to a report, while the companies sought rate increases as high as 39 percent” for insurance premiums. Other members of the IOM panel with conflicts of interest include executives from 3M Health Information Systems, a medical supplier; Milliman, Inc., an actuarial consulting firm with close ties to the insurance industry; and The Blackstone Group, a private equity firm with major health care interests. These health industry ties violate a 2009 recommendation from the IOM itself that those with industry conflicts should be excluded from such panels.
Of course, the IOM panel recommendations were lauded by insurance industry leaders. Health insurance companies, who stand to gain by issuing skimpy insurance policies that patients will avoid using until they are very sick, have attempted to undermine real health reform all along the way. The Lancet, one of the oldest and most respected medical journals has stated: “Corporate influence renders the U.S. government incapable of making policy on the basis of evidence and the public interest.”
No wonder the Occupy Wall Street movement has the support of increasing numbers of American people who are awakening to the effects of corporate influence on our lives. Health insurance policies are just one example.
Single-payer health insurance, an improved and expanded Medicare plan for everyone, would remove corporate influence and greed from our health care insurance system, be cost-effective, and provide comprehensive health care coverage for everyone. Unlike the skimpy coverage suggested by the IOM, a single-payer health care system would actually pay for care when we are sick.
Dr. Susanne King is a Lenox-based practitioner.
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.
A Bipartisan Way Forward on Medicare
By Ron Wyden and Paul Ryan
The Wall Street Journal, December 15, 2011
Our plan would strengthen traditional Medicare by permanently maintaining it as a guaranteed and viable option for all of our nation’s retirees. At the same time, our plan would expand choice for seniors by allowing the private sector to compete with Medicare in an effort to offer seniors better-quality and more affordable health-care choices.
Under our plan, Americans currently over the age of 55 would see no changes to the Medicare system. For future retirees, starting in 2022, our plan would introduce a “premium support” system that would empower Medicare beneficiaries to choose either a traditional Medicare plan or a Medicare-approved private plan. Unlike Medicare Advantage, these private plans would compete head-to-head with traditional, fee-for-service Medicare on a federally regulated Medicare exchange.
Low-income seniors who qualify for both Medicare and Medicaid would continue to have Medicaid pay for their out-of-pocket expenses. Other lower-income seniors would receive fully funded savings accounts to help offset any increased out-of-pocket costs, while wealthier seniors would receive less help.
In the event that these efforts did not stem the rising tide of Medicare spending, there would be a cap on the program’s rate of growth. But unlike other proposals, spending that exceeds the cap would neither be addressed through bureaucratic cuts nor passed on to seniors by default as higher premiums.
Instead, Congress would be required to do its job: Determine why the costs exceeded the cap and – when the evidence merits – reduce payments to providers, drug companies, or others who may be responsible for escalating costs.
Our plan would also expand health-care options for working Americans by giving smaller businesses the opportunity to empower their employees to make their own health-care choices. Under this “free choice option,” employees take the amount that their employer was contributing toward their employer-provided health coverage and use it to purchase their own health insurance instead. The cost to the employer – and the tax-free benefit to the worker – would remain the same.
Yes, these are ambitious reforms, and while we are hopeful for the future, we are under no illusions that they will pass tomorrow. Nevertheless, we offer this plan as proof that Democrats and Republicans don’t have to spend next year making Medicare reform more difficult. Instead, our parties can work together on bipartisan reforms to save and strengthen Medicare.
(Mr. Wyden, a Democrat, is a U.S. senator from Oregon. Mr. Ryan, a Republican, is a U.S. representative from Wisconsin.)
White paper (13 pages):
Although Sen. Ron Wyden (D-Oregon) and Rep. Paul Ryan (R-Wisconsin) have released their white paper on a proposal for reforming Medicare, there is no intent on their part to follow it up with legislation during this session of Congress. Their stated intent is to initiate a bipartisan discussion on Medicare reform, but it appears instead that other political considerations prompted this proposal.
Paul Ryan was stung by the response to his original proposal to end the traditional Medicare program and replace it with a premium support (voucher) program of private health plans. The Congressional Budget Office reported that his plan would cause a major shift of costs from the government to Medicare beneficiaries, and his own constituents beat up on him back home. Also, the Republicans in the House of Representatives are now on record as having voted for the Ryan premium support plan, and the Democrats have made it clear that they will make this a major issue in the coming elections.
This white paper gives the Republicans an out. They can now claim that this is better than the original Ryan proposal because it protects Medicare by leaving it as an option while providing more choices of competing private plans. Obviously this takes away the sting of the Democrats’ attack.
Why would Ron Wyden cooperate with Paul Ryan in this effort to defuse the Democrats’ strategy of using the premium support vote against the Republicans? It is because he is more supportive of his own previous proposal for health care reform than he is for the Democrats to prevail in the next election. His Healthy Americans Act that he pushed throughout the reform process called for an individual mandate to purchase private plans, shifting the tax benefit from employers to individuals (a concept included in this white paper). He has said that Democrats want universal coverage, Republicans want choice, and his plan, and now the Ryan-Wyden proposal, would enable both.
The problem for single payer supporters is that this is a digression that shoves the concept of an improved Medicare for all further into the background. The substance of the debate will be over converting the Medicare Advantage plan into a voucherized program competing on price. Single payer supporters will not be welcome participants in that debate, nor should we.
We shouldn’t waste our resources on countering premium support. That’s the wrong debate. We need to continue with a very strong message on countering private, corporate control of health care, while promoting a publicly-financed and publicly-administered Medicare for everyone. That’s the message that America needs to hear.
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.
Waiting Your Turn: Wait Times for Health Care in Canada – 2011 Report
by Bacchus Barua, Mark Rovere and Brett J. Skinner
Fraser Institute, December 2011
This edition of Waiting Your Turn indicates that waiting times for elective medical treatment have increased since last year. Specialist physicians surveyed across 12 specialties and 10 Canadian provinces report a total waiting time of 19.0 weeks between referral from a general practitioner and receipt of elective treatment.
Wait Times in Canada—A Comparison by Province, 2011
Canadian Institute for Health Information (CIHI)
At least 8 out of 10 Canadian patients are receiving priority area procedures, such as hip replacements, cataract surgery and cancer radiation treatment, within medically recommended wait times, according to a new study from the Canadian Institute for Health Information (CIHI). The study provides the first comprehensive national picture of how long Canadians wait for care in priority areas as compared with evidence-based benchmarks of acceptable waits.
The Fraser Institute has released its 21st annual report on wait times for health care in Canada. This report is used widely to condemn Canada’s reliance on their single payer medicare program for the financing of health care. It helps to fulfill the Fraser Institute’s libertarian agenda of advocating for privatization of their health care system. Today’s comment takes a critical look at this report.
The findings in the report are based on the solicited opinions of Canadian physicians. Questionnaires were sent to 10,737 of the 68,000 active Canadian physicians. Of these, 1,696 physicians responded (15.8% response rate). Distributing these responses amongst the 12 specialties and ten provinces results in single digit tallies for 63 percent of the categories, and often only one physician falling into a given category. For instance, only one specialist in internal medicine represented the views of all internists in the province of Prince Edward.
Besides questioning whether these numbers are adequate to represent the views of all Canadian physicians, there are two other factors that may have skewed the results.
As an enticement to return the questionnaires the physicians were given the chance to win $2000. Physicians with an entrepreneurial mentality – those who more likely favor privatization of health care – might be more favorably inclined to try for this reward. More altruistic physicians who really care about the problem of queues might be insulted by this attempt to buy responses with a prize.
A great many Canadian physicians strongly support their medicare program and oppose the current efforts to privatize both the delivery system and the health insurance system. These physicians are acutely aware of the agenda of the Fraser Institute and would be much less likely to cooperate in their biased studies.
Thus it is unlikely that the sampling truly represents the views of mainstream Canadian physicians.
Another important consideration is that this study was heavily weighted toward elective surgeries. Emergency conditions were not included. Patients in Canada have excellent access when a true emergency exists. So this study is not looking at acute, urgent conditions.
Instead, this study was looking more at patients with chronic conditions which are usually managed over a long period of time, sometimes for a lifetime. Yet the authors imply that the disorders for which they are treated began at a single point in time in the generalist’s office.
In reality, when the physician and patient decide that it is time to consider more options for managing a chronic problem, often a decision is made to obtain a specialist’s consultation. These are not emergencies so a routine appointment is scheduled. Except for a few specialties, most of these appointments are within a reasonable time interval.
Once the patient sees the specialist, more time is consumed for appropriate comprehensive evaluation of the problem before a decision is made on definitive management. Again, these time intervals are mostly reasonable.
Once the decision is made to schedule the elective surgery or other procedure, then excessive waiting times can be more objectionable. But how long are these waiting times?
The specialists were asked what a reasonable waiting time was for their given procedures, and how long their patients had to wait. With the exception of plastic surgery and orthopedics, most waiting times were very close to those that the specialists considered to be reasonable. (Internal medicine was also an outlier for endoscopy and non-urgent angiography.)
The Fraser report is very deceptive because they add to the time between scheduling a procedure and completing a procedure the time for the routine request by a generalist for a consultation, and the time for the specialist to complete the full evaluation before deciding on the specific management. If you separate these out, most of the intervals are quite reasonable. The 19 week wait reported by Fraser has little meaning, since it does not represent the time between scheduling a procedure and completing it.
The much more credible study from the Canadian Institute for Health Information confirms that Canada is doing quite well in delivering care within medically recommended wait times.
This does not mean that there are no problems. There is a very major problem, and it is political. Conservative politicians who currently control much of the government would like to privatize the health care system. Their approach is to abandon their role as stewards of the health care system, deliberately allowing longer queues to develop. Then the public is told that the only way to fix these outrageous delays that are killing people is to turn to the private health care markets in order to bypass the queues. As this view gains traction there is greater support for what amounts to a two-tiered system – the best of care for the relatively wealthy, and an under-funded public program for the masses.
Sound familiar? Only we’re far ahead of them in fragmenting our system.
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.
Allowing Insurers to Withhold Data on Enrollees’ Health Status Could Undermine Key Part of Health Reform
By Edwin Park
Center on Budget and Policy Priorities, December 12, 2011
Risk adjustment is one of the critical elements of health reform (i.e., the Affordable Care Act, or ACA) that’s designed to encourage insurers to compete based on price and quality – not on attracting the healthiest enrollees and deterring those in poorer health, as they typically do today in the individual and small-group insurance markets.
Under the ACA’s risk adjustment provision, insurers in the individual and small-group markets with sicker-than-average overall enrollment will receive payments to compensate them for their resulting higher costs. The payments will come from plans that enroll healthier-than-average people who do not cost as much to cover. By compensating insurers that enroll people in poorer health, risk adjustment reduces the incentive for insurers to “cherry pick” the healthy and avoid enrolling people with chronic illnesses and other serious health conditions.
To implement this “risk adjustment” provision, the federal government proposes that the entities administering risk adjustment – states or the U.S. Department of Health and Human Services (HHS) – determine the health status of plan enrollees based on data that insurers submit to them, which is similar to how risk adjustment in Medicare works today. But some insurance companies, as well as some House Republicans, are urging the federal government to allow insurers to measure the health status of their enrollees themselves without submitting any data.
Some insurance companies are mounting strong opposition to the HHS proposal on risk adjustment data submission. Instead, they are pushing HHS to adopt a “distributed” approach to the collection of risk adjustment data.
Under a distributed approach, insurers would standardize their data (according to federal and state specifications), themselves apply the risk adjustment methodology and calculate their own risk scores and then simply submit those scores to the entity administering risk adjustment. Insurance companies would not provide the risk adjustment entity with any of the underlying claims and encounter data needed to determine whether the data are reliable and valid and whether the risk scores have been accurately calculated. (Insurers would be expected to make a sample of that data available after the fact for retrospective audits.)
Risk adjustment is an essential element of the Affordable Care Act. Letting insurers calculate their own risk scores without having to submit the underlying data needed to make sure those calculations are accurate would place the health reform law’s risk adjustment system at substantial risk of error, upcoding, and fraud, threatening the long-term success of the exchanges and the major health insurance market reforms scheduled to take effect in 2014.
Letter to Centers for Medicare & Medicaid Services
Re: Proposed Rule for Standards Related to Reinsurance, Risk Corridors and Risk Adjustment (CMS-9975-P)
BlueCross BlueShield Association
October 31, 2011
We strongly recommend that HHS use a distributed model for accessing risk adjustment data. Our recommended model: 1) alleviates members’ privacy concerns since States will not be collecting confidential, individually identifiable health information; 2) retains issuers’ control of proprietary data that has strategic importance; and 3) allows States/HHS to maintain the same control over the process while alleviating the burden of creating, securing, maintaining and updating a large costly centralized multi-payer database.
National Bureau of Economic Research report on risk adjustment in the Medicare Advantage Program:
Thus the authors conclude that the Medicare Advantage program both increased total Medicare spending and transferred Medicare resources from the relatively sick to the relatively healthy, and that risk-adjustment was not able to address either of these problems.
Insurers that corner the market of healthy individuals have an unfair advantage over insurers that cover a greater number of high cost, sicker patients. To protect those insurers with high costs from failing in the markets, risk adjustment corrects for the market distortions by taking funds from the insurers with low cost patients and transferring them to the insurers with high cost patients.
Risk adjustment may be a great theory, but in practice it doesn’t work very well. As an example, even though prohibited from selectively enrolling healthier patients, Medicare Advantage plans have been very successful at selectively marketing to the healthy. Insurers end up with significantly lower costs, even though they are paid higher amounts than are paid for patients in the traditional Medicare program.
In 2004, Medicare began to adjust for risk, but the Medicare Advantage insurers gamed the system, as was demonstrated in an NBER report (link above), further increasing the unfair differential to about $3000 per patient. The Medicare-supervised risk adjustment was ineffective, not due to the incompetence of Medicare, but rather due to the deviousness of the Medicare Advantage plans in coding patients with just a touch of illness, making them appear as being more seriously ill than they were.
Now the insurers want to do their own “distributed model” of risk adjustment, preventing federal or state bureaucrats from looking over their shoulders as they do their dirty deeds. This applies not only to Medicare Advantage plans but to all plans in and out of the exchanges, except for grandfathered plans. They claim that this secrecy is necessary to maintain patient privacy and to protect the insurers’ proprietary data, but risk adjustment of the Medicare Advantage program has demonstrated that these are not valid concerns.
Risk adjustment does not work, as the insurers will always game the system. The insurers’ solution is to allow them to do it in greater secrecy, with a “trust us” attitude that certainly has not been earned based on their previous behavior.
A solution that would benefit all of us would be to totally eliminate the need for risk adjustment. How do you do that? You simply eliminate multiple risk pools by eliminating the private insurer middlemen, and then establish a single, universal risk pool – an improved Medicare for all. There would never be a need for Medicare to risk adjust itself.
The Bomb Buried In Obamacare Explodes Today-Hallelujah!
By Rick Ungar
Forbes, December 2, 2011
I have long argued that the impact of the Affordable Care Act is not nearly as big of a deal as opponents would have you believe. At the end of the day, the law is – in the main – little more than a successful effort to put an end to some of the more egregious health insurer abuses while creating an environment that should bring more Americans into programs that will give them at least some of the health care coverage they need.
There is, however, one notable exception – and it’s one that should have a long lasting and powerful impact on the future of health care in our country.
That would be the provision of the law, called the medical loss ratio, that requires health insurance companies to spend 80% of the consumers’ premium dollars they collect – 85% for large group insurers – on actual medical care rather than overhead, marketing expenses and profit. Failure on the part of insurers to meet this requirement will result in the insurers having to send their customers a rebate check representing the amount in which they underspend on actual medical care.
This is the true ‘bomb’ contained in Obamacare and the one item that will have more impact on the future of how medical care is paid for in this country than anything we’ve seen in quite some time. Indeed, it is this aspect of the law that represents the true ‘death panel’ found in Obamacare – but not one that is going to lead to the death of American consumers. Rather, the medical loss ratio will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.
Why? Because there is absolutely no way for-profit health insurers are going to be able to learn how to get by and still make a profit while being forced to spend at least 80 percent of their receipts providing their customers with the coverage for which they paid. If they could, we likely would never have seen the extraordinary efforts made by these companies to avoid paying benefits to their customers at the very moment they need it the most.
Today, that bomb goes off.
Today, the Department of Health & Human Services issues the rules of what insurer expenditures will – and will not – qualify as a medical expense for purposes of meeting the requirement.
As it turns out, HHS isn’t screwing around. They actually mean to see to it that the insurance companies spend what they should taking care of their customers.
Here’s an example: For months, health insurance brokers and salespeople have been lobbying to have the commissions they earn for selling an insurer’s program to consumers be included as a ‘medical expense’ for purposes of the rules. HHS has, today, given them the official thumbs down, as well they should have. Selling me a health insurance policy is simply not the same as providing me with the medical care I am entitled to under the policy. Sales is clearly an overhead cost in any business and had HHS included this as a medical cost, it would have signaled that they are not at all serious about enforcing the concept of the medical loss ratio.
So, can private health insurance companies manage to make a profit when they actually have to spend premium receipts taking care of their customers’ health needs as promised?
Not a chance – and they know it. Indeed, we are already seeing the parent companies who own these insurance operations fleeing into other types of investments. They know what we should all know – we are now on an inescapable path to a single-payer system for most Americans and thank goodness for it.
Ungar responds to criticism of this article:
PNHP co-founders David Himmelstein and Steffie Woolhandler respond to Rick Ungar’s “The Bomb Buried in Obamacare…”:
“Limiting overhead to 15%-20% is far from the stringent regulation that Ungar implies. Private insurers’ overhead currently averages about 14% nationwide, and they will probably be able to reclassify some items currently classified as overhead into the patient care expense category (despite regulations that attempt to stop this). Moreover, some current sales expenses will be offloaded to the insurance exchanges, which are likely to have overhead of 3-4%, and the exchanges’ expenses will not count as part of insurers’ overhead. Finally, ACOs will take over many of insurers’ administrative tasks and expenses, but these ACO overhead expenditures will not count toward the 15%-20% overhead limit. In sum, total insurance overhead (and profit) is likely to grow, not fall in the years ahead.”
Never have we received as many requests to comment on an article as we have on Rick Ungar’s “The Bomb Buried in Obamacare…” He is to be highly commended for his enthusiastic support of single payer, but his analysis that the insurers’ requirement to comply with the statutory medical loss ratios is an Obamacare bomb that will cause so much damage that we’ll be on an inescapable path to single payer might represent… well, perhaps a touch of hyperbole, intended or not.
In the response above, David Himmelstein and Steffie Woolhandler explain how the medical loss ratio will have very little impact on reducing total insurance overhead and profit, although some recategorization will likely take place. Thus it isn’t quite the bomb that will relieve us of their excesses and intrusions, nor relieve the health care providers of the administrative burdens that are placed upon them by the insurers and by the general complexity of our fragmented, dysfunctional health care financing system.
That said, it is political season. We can thank Rick Ungar for providing us with well-meaning hyperbole that that is appropriately provocative and makes people want to look once again at single payer as an answer to our health care mess. As Ungar says, “we are now on an inescapable path to a single-payer system for most Americans and thank goodness for it,” even if the medical loss ratio bomb won’t really budge us in that direction.
Although PNHP will remain meticulous with the facts, upholding our reputation as a highly credible resource on single payer reform, it would be great if Rick Ungar and many others would continue with passionate pro-single payer advocacy, though perhaps fine tuning the hyperbole in order to ensure credibility.
Social Insurance and Individual Freedom
By Uwe E. Reinhardt
The New York Times, December 9, 2011
The continuing debate over the Affordable Care Act and the commentary on this blog have convinced me that nothing can ever unite Americans on their vision of an ideal health system.
We need different health insurance systems for different Americans. I mean by this not Americans who differ by age or ability to pay but Americans with different notions of a just society.
Closing the Door to Statutory Insurance
By law, every German must have coverage for a prescribed benefit package. German employees and pensioners earning less than 49,500 euros ($66,350) per year (in 2011) are compulsorily insured under the statutory system.
Employees and pensioners above that threshold are free to opt out of the statutory system and purchase private, commercial coverage, but if they do, they cannot ever return to the statutory system unless they are paupers. The intent is to minimize gaming of the insurance system by individuals.
It is this feature that intrigues me, as it has my colleague Paul Starr, in his proposed alternative to an individual mandate to be insured.
What if Americans at, say, age 26 (beyond which they can no longer be included on their parents’ insurance policy) or even as late as age 30 were offered the choice of:
1. joining the community-rated health insurance offered through the insurance exchanges called for in the Affordable Care Act;
2. remaining in a private insurance system that is free to charge in any year “actuarially fair” premiums, that is, premiums that reflect the applicant’s projected health status and spending for that year and is free to refuse issuing a policy altogether;
3. simply self-insuring, by remaining uninsured?
For want of better terms, we might call the exchange system the “social insurance track” (because it leans heavily toward social insurance) and the second and third options the “rugged individualist tracks,” because they cater to Americans with individualist preferences.
For people choosing the rugged individualist tracks, Professor Starr proposes to shut the door to the social insurance track for only five years.
I believe his stricture is too weak and propose instead to follow the German example by shutting the door permanently to social insurance to any individual who chose one of the two rugged individualist tracks, unless such individuals were truly pauperized. A return then would have to be allowed, because, for better or for worse, our civic sentiments preclude letting anyone – even a myopic rugged individualist — die for want of critically needed health care.
Admittedly, this approach would confront young Americans with a serious life-cycle choice. But life-cycle choices are made all the time, and choices do have consequences that people in their mid-20s should be mature enough to think about. Adults must realize that individual freedom has its price.
The American health insurance system now is structured as a paradise for clever adolescents, inviting gaming of many sorts that makes sensible health policy almost impossible. It is time to move away from such a system.
Those of us who have great admiration for Paul Starr were disappointed by his recommendation to require anyone who opted out of coverage to be prohibited from having coverage for the next five years.
Under this policy, many of these very healthy young people will decide to take the chance that they will not need expensive care, and most will win that bet.
There are two problems with this. Some will have major trauma, some will develop serious disorders such as cancer, and some will develop severe chronic problems such as type I diabetes. These people should receive the care that they need regardless of the fact that they made the unwise decision to decline insurance. Who pays for that care?
The other problem is that we do need the many who are healthy to pay into the risk pools to cover the fewer with greater health care needs. Otherwise those pools end up with a death spiral of ever higher premiums.
Just as our nation does not allow me, a pacifist, to not pay through my taxes the costs of our ill-considered wars, our nation should also prohibit the rugged individualists from not paying their share of our collective national health expenditures.
The nation will continue to disagree on this, which is precisely Professor Reinhardt’s point. But that won’t stop some of us from continuing to advocate for what is right.
Comment originally published on the NYTimes Blog: http://economix.blogs.nytimes.com/2011/12/09/social-insurance-and-individual-freedom/?comments#permid=1
Health Reform Devolves Into ‘Unaffordable Under-Insurance’
By Roger Bybee
In These Times, December 7, 2011
Healthcare reform in the shape of the 2010 Affordable Care Act (aka “Obamacare”) was supposed to relieve working Americans of the burdens of rising healthcare costs as they struggle to survive the jobless recovery.
Instead, working Americans are being confronted with the emergence of a new stage in America’s downward slide on healthcare. “‘Unaffordable under-insurance’ is rapidly becoming the new standard in the United States,” Dr. Don McCanne, senior health policy fellow for Physicians for a National Health Program (PNHP), told In These Times.
For McCanne and fellow health professionals in PNHP, the downward spiral in healthcare will finally end only with the United States installing a Canadian-style “Medicare for all” single-payer system that puts a halt to the machinations of for-profit insurers.
This brief article from In These Times, available at the link above, explains how the Affordable Care Act is bringing us a new national standard of “unaffordable under-insurance.” It’s not simply that we can do better, we have to do better.
Orszag: Defined Contributions Define Health-Care Future
By Peter Orszag
Bloomberg, December 6, 2011
Over the next decade, we are likely to see a shift in health insurance in the U.S.: So-called defined-contribution plans will gradually take over the market, shifting the residual risk of incurring high health-care costs from employers to workers.
The market today is dominated by “defined-benefit” plans, under which companies determine a set of health-insurance benefits that are provided for employees. These will gradually be replaced by defined-contribution plans, under which companies pay a fixed amount, and employees use the money to buy or help pay for insurance they choose themselves.
The fundamental driver of this shift is the effort by American businesses to reduce their exposure to health-care costs. But the recent health-care-reform law may accelerate the shift.
The change in health insurance is already well under way in coverage for retirees. In the early 1990s, in response to accounting changes and rising costs, companies began to re- evaluate retiree health plans, and some capped the amount they were willing to pay at a multiple of existing costs. Over time, as those limits were reached, most companies declined to raise them, thereby effectively creating defined-contribution retiree health-insurance plans, with the company’s contribution set by the cap. Exchanges have been created to allow retirees to use these employer contributions to purchase their own health insurance.
For current workers, the precursor to a defined- contribution approach is the “consumer-driven” health plan. This typically has higher deductibles and co-payments than a traditional plan has, and it is often tied to a health savings account. It typically still provides generous insurance for catastrophic cases.
Some insurers are already anticipating the shift. Bloom Health Corp. will begin offering defined-contribution exchanges in 2012. Bloom, based in Minneapolis describes itself as “a leader in the defined-contribution health benefits marketplace,” and says it is “committed to assisting employers of all sizes move toward an employer-sponsored system that has effective cost predictability for employers and increased choice and personalization for employees.” In September, the company announced that Health Care Service Corp., Blue Cross Blue Shield of Michigan and WellPoint (WLP) Inc. had purchased a majority of its equity.
The inevitable transition to defined-contribution health insurance may get a little push from the new health-care-reform law. Indeed, the legislation may have a larger impact on the type of health-insurance plan that employers offer than on their decision about whether to drop health-care benefits altogether.
If most employers do retain their health plans, the state insurance exchanges created under the new federal health-care law will make the basic idea of a defined-contribution health plan more prevalent, and thus may speed its adoption. The regulations written to carry out the new law will determine how things play out. If defined-contribution plans that are sufficiently generous count as employer-based coverage – as is generally expected – the trend toward such plans will probably accelerate.
In any case, the bottom line is that a shift toward defined-contribution plans seems likely. I’d be willing to bet $1 that most large U.S. employer health-care offerings in 2020 will be defined-contribution plans. Any takers?
(Peter Orszag is vice chairman of global banking at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.)
One of the more important tools to enable the transfer wealth up the income ladder is to shift from defined benefit programs to defined contributions. With a defined contribution, a set dollar amount is contributed to the program regardless of what the future benefits may cost, whereas with a defined benefit program, the projected costs of the program must be fully funded so the benefits will always be there when needed.
In the case of pension plans, a defined contribution allows the employer to shift the risk of wage inflation and the risk of living longer from the employer to the employee. The latter is particularly a problem since many individuals will outlive the funds accumulated in their defined contribution pension plan. It is true that they could use those funds to buy an annuity, but fewer funds would be available because it is not a defined benefit plan, and converting to an annuity burns up even more of the retirement funds to pay for sales and administrative costs plus the costs of insuring against the risk of living longer.
How does this move wealth up the income ladder? Defined benefit pension plans were considered to be a standard part of the well-earned employee benefit package. These defined benefit plans were actually paid for by foregone wage increases. In the last couple of decades, contributions to the pension plans were limited by changing to defined contribution, yet wages remained flat. The foregone wages never came back. Workers suffered a net loss, while employer/owners kept the difference, thus an upward transfer of wealth.
Now we are seeing this same inequitable concept being applied to employer-sponsored health plans. Traditional health plans provided generous benefits and often had an actuarial value of 90 percent (the plan paid 90 percent of health care costs and the worker paid 10 percent). We are now seeing a decline in actuarial value. The most obvious contributing factor is the relatively abrupt increase in the adoption of high-deductibles for employer-sponsored plans, but also benefits covered are diminishing, often through less transparent, innovative changes to the plans. Once again, benefits are being reduced but without a commensurate return of forgone wages.
Particularly alarming in Peter Orszag’s article is the investment of WellPoint and Blue Cross Blue Shield of Michigan in Bloom Health Corporation. Bloom Health is “a leader in the defined-contribution health benefits marketplace.” They are committed to a system that has “effective cost predictability for employers,” but exposes employees to the ever higher costs and risks of health care.
This ongoing shift to defined contribution in health care is not limited to businesses. In a recent message, we reported that the Institute of Medicine is recommending that the essential health benefits for the state insurance exchanges under the Affordable Care Act “should be defined as a package that will fall under a predefined cost target rather than building a package and then finding out what it would cost.” “Predefined cost target” is a defined contribution.
Even Medicare is vulnerable. The New York Times, in a recent editorial, stated that for Medicare, “serious analysis and testing of premium support are clearly worth pursuing.” Premium support is a defined contribution that would be used to purchase a private Medicare plan. Medicare beneficiaries would be responsible for paying for the balance of the premium for whatever coverage they could get. Further, with tight control of the defined contribution, an increasing percentage of health care costs would be shifted to Medicare patients in the form of higher out-of-pocket spending.
What do all of these have in common? They are all methods of perpetuating the private insurance industry, while shifting risks from the insurers to the insured individuals. They reduce the financial commitment of employers and the government, but increase the financial burden for workers, their families, and retirees – most of us. However, it is a jobs program – for personal bankruptcy attorneys, as if our health care system didn’t give them enough work already.
Defined contribution is a nefarious conspiracy directed at the masses to benefit the well off. We can counter by demanding an end to a system dominated by private insurers and replacing it with a single, publicly-financed and publicly-administered national health program – an improved Medicare for everyone.
(After we fix Medicare, we may want to think about greatly reinforcing our publicly-financed, publicly-administered, defined benefit Social Security program so we wouldn’t have to put up with the abuses of our private, defined contribution pension plans. Really.)
State Trends in Premiums and Deductibles, 2003–2010: The Need for Action to Address Rising Costs
By Cathy Schoen, M.S., Ashley-Kay Fryer, Sara R. Collins, Ph.D., and David C. Radley, Ph.D., M.P.H.
The Commonwealth Fund, November 17, 2011
INCREASE IN PREMIUMS
You will see an interactive map of “Employer Premiums as Percentage of Median Household Income for Under-65 Population, 2003 and 2010”
Near the top of the page, slowly drag the slider from 2003 to 2010.
In dark blue you now see the states in which employer health insurance premiums average over 20% of median household income. Over 20%! In 2010, 62% of the population lived in states where total premiums amounted to 20% or more of middle incomes!
A static slide of this change, showing the U.S. side by side in 2003 and 2010, can be downloaded at this link (slide number 2):
INCREASE IN DEDUCTIBLES
In slide 4 at the same link, you will see that, in 2010, average deductibles for employer sponsored plans are $1,025 for a single-person plan and $1,975 for a family plan, nearly double that of 2003.
For the full Commonwealth Fund report, “State Trends in Premiums and Deductibles, 2003–2010: The Need for Action to Address Rising Costs”:
More people receive their health insurance through their work than from any other source. The costs of employer-sponsored plans have been skyrocketing, as demonstrated by the increase in premiums. The coverage has eroded, as demonstrated by the increase in deductibles. The Office of the Actuary has predicted that “private insurance spending per person will increase faster than public programs over the next decade.” Yet the Affordable Care Act failed to provide measures which would have any significant impact on these trends in employer-sponsored plans.
Let’s restart the reform process, but this time let’s do it right. Let’s have only single payer at the table.
Michael Dukakis on ACOs: “We tried that, folks. It didn’t work.”
By Chelsea Conaboy
The Boston Globe, November 28, 2011
The creation of accountable care organizations or a global payment structure won’t fix the health care system in Massachusetts and make it more affordable, former governor Michael Dukakis told an audience at Harvard last week.
Speaking during the Harvard School of Public Health Voices from the Field series, Dukakis said urging the health care market to fix itself is “a colossal waste of time.”
Here’s an excerpt from the event:
“If we paid a little attention, it might be a good idea, to the experience of other countries around the world who are doing this and who, for some reason, seem to be able to provide rather good health care to their people at half the cost we do — whatever the siltstone, whether it’s Australian medicare or a multi-payer system in Germany or an essentially privatized system in Switzerland — every one of them regulates cost, without exception.
“What do we do? Come up with this ACO, global payment thing… We’ve done it. ACOs and global payments. What did we used to call them? HMOs and capitation. We tried that, folks. It didn’t work. Why are we doing it again?
“Now don’t get me wrong. Nobody loves having to regulate. We had something called the rate-setting commission when I was governor… We treated hospitals as public utilities. They couldn’t raise their rates a nickel unless they went to the rate-setting commission. We certainly didn’t have these huge disparities between what Partners gets and what the BI gets. Wouldn’t allow it. So, we’ve got to get on with the business of regulating costs. And I think the least bureaucratic way to do it, rather than getting into setting elaborate fee schedules and so forth, is essentially to use the authority we have in this state under the state insurance statutes to regulate the rate of increase and the cost of premiums… You’ve got to involve the key players – providers, consumers, legislators, and so forth – in the process of developing how we’re going to regulate and then carefully monitoring it so that, in point of fact, it works and works effectively and at the same time make sure that we provide people with excellent health care, which we do in this state.
“What I’m worried about is that we’re futzing around with new institutional arrangements, accountable care organizations.”
Michael Dukakis certainly recognizes accountable care organizations as being merely a new variant of HMOs with capitation. He worries about us “futzing around” with ACOS, but we need to go him one better. Let’s quit “futzing around” with private insurers and establish an improved Medicare for everyone.
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