A spectacle of the health care crisis

Posted by on Friday, Dec 17, 2010

By Ed Weisbart, M.D.

I get overwhelmed when I try to think about the facts that there are over 50 million Americans without healthcare insurance and millions more with grossly inadequate insurance. I’m just as devastated to know that this kills 46,000 of us every year. I personally find it almost impossible to fully grasp the scale of these numbers, to fully understand the human impact of this ongoing disaster. Even welcoming uninsured patients into my medical practice and seeing them on a daily basis still masks the enormity of the problem to me.

I recently had the opportunity to get more of a sense of the human scale by volunteering at one-day massive mobile clinics sponsored by the National Association of Free Clinics (NAFC), the non-profit organization that supports the 1,200 brick and mortar free clinics across the country. This is the safety net that catches people who can’t afford even the modest fees  charged in the network of community clinics (FQHCs). About two years ago, NAFC began a campaign to bring greater public awareness to the plight of uninsured Americans by sponsoring these  free clinics across the nation. There have now been nine of these events in cities ranging from New Orleans to Washington DC, serving over 11,000 uninsured patients (well over 1,000 each day!) and connecting them up with local resources. If you are fortunate enough to have one come to your community, please volunteer your time at www.freeclinics.us.

I’ve had the opportunity to volunteer at five of these now and am overwhelmed by seeing the pride and dignity people have despite needless pain and suffering. I’ve seen countless people with the same story:  their employer doesn’t offer an affordable benefit, or they lost their job and COBRA ran out, and now they can’t afford the $130+ their physician must charge them for care, so they’ve run out of their hypertension/diabetes/lipid/migraine/asthma/whatever meds and just desperately want someone to write some refills. “Please, can you help me stay alive?” Unbelievable to see people choosing between their rent and their insulin, but it’s happening every day in our modern society.

Last week I saw a mother with her uninsured 25 year-old son. He’d told her a few days earlier that he had been hearing voices telling him to hurt someone. She’d tried calling local psychiatrists but couldn’t get an appointment given his lack of insurance. She was terrified but didn’t know what to do for him. She saw a notice about our upcoming free clinic, brought him in, and we were able to get him in immediately to see a psychiatrist who was also donating his day’s work. I’m still trying not to  imagine what would have happened if NAFC’s clinic weren’t there that day. Universal healthcare would protect all of us, even those who are “insured” today.

I saw a diabetic terrified about a two centimeter abscess on her foot. We were able to drain it, put her on antibiotics, and get her in for aftercare in 48 hours. She’d had the abscess for several weeks, knew it was a potential disaster, but couldn’t afford to go anywhere for care. Another few days and the outcome could have been much more grave.

This is simply not the America I grew up believing in. Over 80% of the people we see at these clinics are employed, but at jobs that don’t provide affordable healthcare benefits. I saw a woman who works full time at the US Dept of Agriculture as a chef, but has no benefits as they consider her a contract worker. She “works” for the government, but not really.  Congress may mandate that federal employees have benefits, but then they permit this sort of out-sourcing travesty to go on under the radar. She really works for our government, but has no healthcare benefits.

I have one word for this situation: unacceptable.

There’s just no justification to continue our current deplorable linkage between employment and healthcare. This disconnect greatly reduces quality, skyrockets costs, and puts us in a compromised global status. But if ever we needed a clear statement of the dangers of this linkage, the 9.8% rate of unemployment makes this argument far more clearly than ever.

My stomach turns at the political games going on in DC when I realize that each and every day of delay towards universal care, my neighbors are suffering and dying. And frankly, it’s only a matter of time before it’s me and my own family. Or yours.

Every day that we don’t succeed at getting improved Medicare for all, we’re all at risk. Even those of us with “insurance.”

Dr. Weisbart is a family physician located in St. Louis, MO.

Will the exchange plans be subject to adverse selection?

Posted by on Friday, Dec 17, 2010

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

Who Are the Uninsured Eligible for Premium Subsidies in the Health Insurance Exchanges?

By Peter J. Cunningham
Center for Studying Health System Change
December 2010

A key provision of the national health reform law is the creation of state-based exchanges to provide more affordable insurance options for people, especially the uninsured. Despite premium subsidies for people with incomes up to 400 percent of the poverty level, or $88,200 for a family of four in 2010, and an individual requirement to enroll in coverage, no one knows who will enroll in the exchanges and who will not, at least initially. Almost 40 percent of uninsured people eligible to receive subsidies through the exchanges have chronic conditions or report fair or poor health, and another 28 percent report recent problems with access to care or paying medical bills, according to a new national study by the Center for Studying Health System Change (HSC). However, about one-third of uninsured people eligible for subsidies have had no recent problems with their health, access to medical care or paying medical bills. Enrolling these apparently healthy uninsured people is likely to be challenging but essential to avoiding adverse selection, or enrolling sicker-than-average people, in the exchanges. Otherwise, health insurance costs in the exchanges could be higher than expected.

Contrary to popular perception, many of these healthy and low-cost uninsured people view themselves as risk-averse, which could motivate them to gain coverage in the absence of health or access problems. Also, most uninsured people believe they need health coverage, although fewer believe that health insurance is currently worth the cost, a situation that could change once premium subsidies are available in 2014.


One concern of the authors of the Patient Protection and Affordable Care Act was that the state insurance exchanges called for in the legislation might be subject to adverse selection. That is, individuals with greater health care needs would buy the government-subsidized plans if they could afford them, whereas healthy individuals might well choose to remain uninsured, feeling that their portion of the premium was too expensive or frankly unaffordable. This would concentrate high-cost patients in the insurance plans, resulting in the death spiral of skyrocketing premiums.

Healthier individuals who tend to be younger – the so-called “young invincibles” – have been perceived to be greater risk takers and thus more willing to go without health care coverage. This study suggests that these healthy individuals are just as risk-averse as uninsured people with health problems. Everyone wants to be insured.

Thus it is not so much the willingness to take risks that causes these individuals to forgo insurance coverage, but rather it is more whether the additional cost of the premium over the penalty provides enough perceived value, or whether they even have enough funds to pay the premium after their other basic needs are met.

In writing the bill, the authors struggled to balance the actuarial values of the plans (what percentage of costs the plans pay), the subsidies for the premiums and out-of-pocket expenses, and the penalties for non-compliance in purchasing the plans. They wanted the premiums to be affordable, so they pushed actuarial values down, shifting more costs to patients in need. They wanted to limit the burden on the federal budget, so they limited the government-provided subsidies for premiums and out-of-pocket expenses. They didn’t want to press too hard on requiring individuals to purchase expensive private plans from an industry in such disfavor, risking public furor, so they kept the non-compliance penalties low.

No matter how much you adjust these variables, you cannot ever get everyone to agree to purchase insurance. The numbers of individuals declining to purchase plans will be significant, and they will be predominantly healthy. It is absolutely inevitable that the exchange plans will experience adverse selection and will need to keep pushing premiums up.

Households with an income of 400 percent of the federal poverty level ($88,200 for a family of four) will feel the full brunt of the premiums inflated by the death spiral. How high? $25,000? $50,000? And should the family need health care, none of their out-of-pocket expenses are subsidized.

Trying to fudge the numbers won’t work in this structurally unsound financing scheme. We should quit playing games simply to keep the middlemen private insurers in play. Instead, let’s go for an improved Medicare for everyone.

Pseudo-market madness: Competitive bidding for medical supplies

Posted by on Thursday, Dec 16, 2010

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.

DMEPOS Competitive Bidding

Centers for Medicare and Medicaid Services

Section 302 of the Medicare Modernization Act of 2003 (MMA) established requirements for a new Competitive Bidding Program for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS). The MMA requires that competitive bid payment amounts be used to replace the current Medicare DMEPOS fee schedule payment amounts for selected items in selected areas. The competitive bid payment amounts are determined by using bids submitted by DMEPOS suppliers. The intent of the Competitive Bidding Program is to set more appropriate payment amounts for DMEPOS items, which will result in reduced beneficiary out-of-pocket expenses and savings to taxpayers and the Medicare program.



Despite Objections, Medicare Competitive Bidding Set to Begin

By Miriam Davidson
Muscular Dystrophy Association
December 3, 2010

Competitive bidding among Medicare providers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) is set to begin January 1 in nine regions of the country, despite sharp criticism of the plan by lawmakers, economists, patient advocates and others.

Under the new procedures, DMEPOS providers must go through a competitive bidding process to win the right to serve Medicare recipients. Medicare pays these providers to serve the medical needs of millions of Americans who use medical supplies at home, including oxygen equipment and power wheelchairs.

Medicare officials argue that competitive bidding is necessary to save money and streamline services. Opponents say that, while saving money and streamlining services are laudable goals, this plan could ultimately backfire. They say a lack of proper services and supports may force many people who are now living comfortably on their own into far more expensive institutional care.

A flawed process

Problems that came to light during the testing phase included Medicare beneficiaries being forced to go to multiple, unfamiliar providers for different items and services; nonlocal providers; inexperienced or unlicensed providers; and greater costs to Medicare from more emergency room visits and/or longer hospital stays as beneficiaries lost access to critical services and equipment.

Moreover, dozens of academics and members of Congress have pointed out two major flaws in the way the competitive bidding auction is being conducted. The first flaw is that bidders are not required to sign contracts that reflect their bid, thus encouraging DMEPOS suppliers to submit unrealistic, “low-ball” bids that competitors — and even they themselves — can’t match. Opponents contend that large companies will submit extremely low bids in order to drive smaller competitors out of business, knowing that ultimately, they won’t be forced to provide equipment and services at such low prices.

The second major flaw in the process, critics say, is that Medicare arrives at the price it will pay for a product or service by averaging all the bids it receives, winners and losers alike. Due to the presence of many unrealistically low bids, the final contract price is often lower than the bid submitted by the winning provider. In fact, during tests of the process, half of the bidders who won contracts were offered lower prices than their winning bids.

Critics say these flaws will result in a skewed system that rewards unscrupulous DMEPOS providers, as well as those who skimp on service and quality.



Invacare Analysis Raises New Doubts about Bid Winners

December 6, 2010

Even as CMS moves resolutely toward the Jan. 1 implementation of DMEPOS competitive bidding, industry stakeholders are uncovering increasingly troubling hard data about some of the project’s contract holders.

Nearly 21 percent — or 73 of the 356 bid winners — have limited ability to purchase products from Invacare Corp., the nation’s largest home medical equipment manufacturer, the company said last week in its final report on the credit-worthiness of suppliers awarded Round 1 contracts.

According to the manufacturer’s analysis:

* 8.5 percent of the contract holders have credit limits with Invacare of less than $10,000 (meaning they can buy very little product from the company);

* 5.4 percent are on credit hold (meaning they cannot purchase any product from the company); and

* 6.7 percent are so far behind on their payments with Invacare that their accounts have been turned over for collection or legal process (meaning they cannot purchase any product from the company).



Analysis of the Economic Impact of Competitive Bidding on the DME Market: A One Year Update

By Brian O’Roark, PhD, Associate Professor of Economics, Robert Morris University


* Competitive bidding reduces the number of sellers and thereby reduces competition.

* Competitive bidding concentrates market power, which creates regional oligopolies and reduces quality of patient care. Primary among economic concerns: by eliminating nine out of ten suppliers in the market for durable medical equipment (DME), the industry would become more concentrated.

* The Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees Medicare, misunderstands the structure of the market.

* The competitive bidding program forces an unsustainable business model on the DME industry. Ninety percent of providers were excluded from participating because they could not meet the bid. Those who qualify are forced to sustain prices for three years — an untenable position for any business.


The concept that competition will always bring the lowest prices for comparable value is so thoroughly ingrained in capitalistic societies such as ours that sometimes even the government will abandon administered pricing in favor of market competition. In this instance, the Centers for Medicare and Medicaid Services (CMS) has begun to use competitive bidding to price medical equipment and supplies. Initially, prices will likely be lower, but for how long and at what cost?

To begin with, for three years the CMS business is going to ten percent of the bidders. What does that do to the other 90 percent of suppliers who are excluded? Many of them will exit the market, concentrating the successful bidders into oligopolies or even monopolies.

What will happen to the manufacturers whose products are not distributed by the successful bidders? If the non-government market is not large enough to sustain them, some also will go under.

What will happen to patients’ access to these essential medical products? Inevitably, successful bidders will not be inclined to cover rural and poverty-ridden urban areas. Also, since each category of equipment and supplies is bid separately, services for patients may end up being highly fragmented.

After three years of market concentration, who will be bidding for the new contracts? Certainly not those entities that have already folded. Those suppliers that low-balled the bids the first time around did so to eliminate the competition. Those remaining will certainly jack up their bids. In an oligopoly, collusion is not essential to get higher prices, though some in this industry are certainly not above colluding if it increases profits.

Public stewards who do their homework can obtain optimal value through negotiated administered pricing – paying legitimate costs plus fair profits. All manufacturers and suppliers should be allowed to compete based on the quality and accessibility of their products and services, but always at a fair, predetermined price.

We should replace our public stewards who are foolish enough to dash our health care system onto the rocks, lured by Lorelei’s song of market competition. Let’s start singing the song of social solidarity – a song that won’t lure anyone onto the shoals – and then maybe we’ll attract public stewards who actually care about the patient.

Financial burden of Medigap and Medicare Part D

Posted by on Wednesday, Dec 15, 2010

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.

Funding Savings Needed for Health Expenses for Persons Eligible for Medicare

By Paul Fronstin, Dallas Salisbury, and Jack VanDerhei
Employee Benefit Research Institute
December 2010

This report provides estimates for savings needed to cover health insurance to supplement Medicare and out-of-pocket expenses for health care services in retirement.

Men who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $100,000 if comfortable with a 50 percent chance of having enough savings; to increase their odds to 90 percent, they would need $187,000.

Women who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $131,000 if comfortable with a 50 percent chance of having enough savings, while those who prefer a 90 percent chance of having enough savings would need $213,000.

Persons currently age 55 will need even greater savings when they turn 65 in 2020. Needed savings for men range from $109,000–$354,000, while needed savings for women range from $147,000–$406,000 depending on their source of health insurance coverage to supplement Medicare, any employer subsidies, prescription drug use, and their savings goal related to their comfort level with having a 50 percent, 75 percent, or 90 percent chance of having enough savings to cover health insurance premiums and out-of-pocket health care expenses in retirement.

Nearly 90 percent of Medicare beneficiaries have some form of insurance coverage to supplement Medicare Parts A and B. As employers continue to move away from providing retiree health benefits, more of the retirees who have had subsidized employment-based coverage in the past will have to assume for themselves the financial risk associated with longevity.


Medicare is not a complete program. Individuals turning 65 in 2020 will find that, to have a 90 percent chance of having enough savings to pay Medigap and Part D drug premiums and out-of-pocket health care expenses, they will have to have up to $350,000 (men) or $400,000 (women) in reserves in addition to their basic living expenses and any other expenses they might face in retirement. This does not even cover potential long-term care expenses.

Medicare cost sharing, private Medigap plans, and private Part D drug plans all increase administrative complexities and waste in the Medicare program. Since most seniors do not have enough reserves to meet these potential costs, these programs also create further financial barriers to care (keeping in mind that Medigap and Part D premiums are in themselves financial barriers since they are not prepaid before age 65, but are paid out of retirement funds).

Medicare would be a much better program if we were to 1) eliminate the middleman Medigap plans and roll these benefits into Medicare, 2) eliminate the middlemen Part D pharmacy benefit managers and roll drug benefits into Medicare, and 3) eliminate deductibles, coinsurance and copayments.

This would reverse the current trend of shifting health care costs from large risk pools to individuals who have health care needs, a trend bound to increase in Medicare if the deficit hawks claiming that Medicare is bankrupt have their way.

Yes, that would require more funds for the Medicare risk pool, but there are valid reasons why that would be a much better approach. First, an effective health care financing system should be designed to eliminate financial barriers to care, not create them. So the financing of the system should not be linked to access. Second, it is much easier to finance health care equitably if a single large risk pool is established and funded through equitable (progressive) tax policies. Third, it is not the size of the Medicare budget that matters, but rather it is the total health care spending on the Medicare beneficiaries that is important. The efficiencies of a streamlined Medicare program frees up funds that can be used for beneficial health care that becomes more readily accessible with the removal of the financial barriers. Single payer advocates understand that the savings from streamlining the existing Medicare program would be quite modest compared to the tremendous savings we could attain by replacing our entire health care financing system with a single improved Medicare for all program.

An additional potential benefit is that the administratively complex program for those eligible for both Medicare and Medicaid could be eliminated if long-term care were also folded into Medicare. For those who claim that we can’t afford to do that, we already do once we deplete the reserves of those who need nursing home care.

Some contend that wealthier individuals should pay more in Medicare premiums and cost sharing. That is already beginning to take place. But that unnecessarily increases the administrative complexity of Medicare, and it increases the risk of a two-tiered system as the wealthy turn to private options. Once again, the financing of Medicare should be totally separated from the Medicare benefits program. Higher income individuals can increase their contributions through equitable taxes without disrupting the efficient delivery of Medicare benefits.

These are just some of the more important reasons why we refer to an improved Medicare when we advocate for Medicare as a model for a single payer national health program. Medicare alone, as it is, won’t get us to where we need to be, at least not without $400,000 subsidies.

Ezra Klein on the constitutional single payer path

Posted by on Tuesday, Dec 14, 2010

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.

Health reform advocates have little to fear from judge’s ruling

By Washington Post Staff Writer (Ezra Klein, per Wonkbook)
The Washington Post
December 14, 2010

U.S. District Judge Henry E. Hudson, a George W. Bush appointee (and part-owner of a Republican campaign-consulting firm that fought the health-care overhaul legislation), has, as expected, ruled the individual mandate unconstitutional. So why are reform advocates so unexpectedly pleased?

The individual mandate began life as a Republican idea. Its earliest appearances in legislation were in the Republican alternatives to the Clinton health-care bill, where it was co-sponsored by such GOP stalwarts as Bob Dole, Orrin G. Hatch and Charles E. Grassley. Later on, it was the centerpiece of then-Gov. Mitt Romney’s health-reform plan in Massachusetts, and then it was included in the Wyden-Bennett bill, which many Republicans signed on to.

It was only when the individual mandate appeared in President Obama’s legislation that it became so polarizing on the right. The political logic was clear enough: The individual mandate was the most unpopular piece of the bill (you might remember that Obama’s 2008 campaign plan omitted it, and he frequently attacked Hillary Clinton for endorsing it in her proposal). But as a policy choice, it might prove disastrous.

The individual mandate was created by conservatives who realized that it was the only way to get universal coverage into the private market. Otherwise, insurers turn away the sick, public anger rises, and, eventually, you get some kind of government-run, single-payer system, much as they did in Europe, and much as we have with Medicare.

If Republicans succeed in taking it off the table, they may sign the death warrant for private insurers in America: Eventually, rising cost pressures will force more aggressive reforms than even Obama has proposed, and if conservative judges have made the private market unfixable by removing the most effective way to deal with adverse selection problems, the only alternative will be the very constitutional, but decidedly non-conservative, single-payer path.


Ezra Klein’s Wonkbook:

It would be gratifying poetic irony if conservative legislators and conservative judges pushed us into single payer reform by either repealing or ruling unconstitutional the individual mandate.

As I said on KPFA/KPFK yesterday, “Nobody is going to argue that Medicare is unconstitutional..  We should fix it so it works better and then provide it to everyone.”

Court ruling against the individual mandate

Posted by on Monday, Dec 13, 2010

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.





On careful review, this court must conclude that Section 1501 of the Patient Protection and Affordable Care Act – specifically the Minimum Essential Coverage Provision – exceeds the constitutional boundaries of congressional power.


Accordingly, the court will sever only Section 1501 and directly-dependent provisions which make specific reference to Section 1501.


The Commonwealth appears to concede that if the Secretary is duty-bound to honor this Court’s declaratory judgement, there is no need for injunctive relief. In this Court’s view, the award of declaratory judgement is sufficient to stay the hand of the Executive branch pending appellate review.


In the final analysis, the Court will grant Plaintiff’s Motion for Summary Judgement and deny Defendant’s similar motion. The Court will sever Section 1501 from the balance of the ACA and deny Plaintiff’s request for injunctive relief.

Henry E. Hudson, United States District Judge
December 13, 2010
Richmond, VA


Although this is only the beginning of a protracted legal process, Judge Hudson’s decision defines the nature of the constitutional challenge to the Patient Protection and Affordable Care Act (PPACA). The challenge is limited to Section 1501 which is the mandate for individuals to purchase health insurance. The remainder of the Act remains intact.

This is a serious challenge. Without the requirement that everyone be included, the risk pools are subject to adverse selection (only those with greater health care needs enroll) which cause them to become unstable as premiums skyrocket. Even if Section 1501 survives this challenge, there are so many other flaws in the PPACA scheme that we can never hope to achieve universality and affordability – the two reasons that prompted the reform process in the first place.

Instead of a protracted battle in the courts, our government should pursue an approach that remains within the constitutional boundaries of congressional power and would actually work to provide everyone with affordable health care – an improved Medicare for all. After almost half a century of success, only a fool would challenge the constitutionality of Medicare.

Germany’s lesson on in-house disease management

Posted by on Friday, Dec 10, 2010

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.

German Diabetes Management Programs Improve Quality Of Care And Curb Costs

By Stephanie Stock, Anna Drabik, Guido Büscher, Christian Graf, Walter Ullrich, Andreas Gerber, Karl W. Lauterbach and Markus Lüngen
Health Affairs
December 2010


This paper reports the results of a large-scale analysis of a nationwide disease management program in Germany for patients with diabetes mellitus. The German program differs markedly from “classic” disease management in the United States. Although it combines important hallmarks of vendor-based disease management and the Chronic Care Model, the German program is based in primary care practices and carried out by physicians, and it draws on their personal relationships with patients to promote adherence to treatment goals and self-management. After four years of follow-up, overall mortality for patients and drug and hospital costs were all significantly lower for patients who participated in the program compared to other insured patients with similar health profiles who were not in the program. These results suggest that the German disease management program is a successful strategy for improving chronic illness care.

From the Discussion

The quest to reorganize care for chronically ill beneficiaries has led to different approaches in the United States and Germany. While US Medicare invested in regional pilots that differ in their structure of care delivery and may use disease management vendors, German health plans decided on an approach with a heavy emphasis on quality assurance and the primary care physician as the program manager. The emphasis is on educating both the patient and the care provider. Characteristics of care considered desirable in a patient-centered medical home, such as coordination, integration, timeliness, efficiency, and effectiveness as well as the patient-centeredness of care, improved markedly.


The Germans have demonstrated what disease management should be all about. Using primary care medical homes as a base, the physicians and their in-house teams provided coordinated and integrated care for their diabetic patients with the result that physician-patient relationships were enhanced, costs were lower, major complications were fewer, and mortality was reduced in half compared to the control group.

The phenomenal success was no doubt in a large part due to placement of the disease management process precisely where it belongs – within the team at the patient’s own primary care medical home. This is a model based on patient service.

In contrast, the U.S. uses a business model, often with intrusive, fragmented interventions by outside vendors and private insurers. The U.S. model compounds our administrative excesses, fails to recover the additional costs of these outside, for-profit business entities, and yet has not demonstrated the dramatic benefit that this German approach has.

What is our problem here in the United States? Why do we keep insisting that “the market can do it better,” whatever that means? It is blatantly obvious that diseases are best managed by the patient’s own medical team – a team that is, gee, trained to manage diseases, and a team who knows the patient’s medical and cultural background. Yet we passively accept an expensive, intrusive, ineffectual insurance industry and their vendors because, somehow, we are mesmerized by the meme that the market can do it better, as if private practices weren’t the health care market that actually matters.

Of course, now the insurers claim that disease management should not be counted as an administrative service, but should be classified as a health care service so that it provides them with a more favorable medical loss ratio. Thus the insurers are claiming, in effect, that they are partially usurping the role of the health care team in providing health care services themselves, and they are even being paid for it with fees that they explicitly classify as health care expenses under the medical loss ratio.

Haven’t we had enough? Let’s throw them out and establish our own public national health program that will redirect our funds toward reinforcing our primary care infrastructure so that our physicians and their teams will be there to manage our diseases when we need them managed.

Waiving Away Affordability of Health Care

Posted by on Thursday, Dec 9, 2010

It was clear from the beginning of the health care “reform” charade that the insurance industry, the drug industry and other parts of the corporate medical industrial complex were working to assure that any legislation that passed would add to their financial bottom lines. They largely succeeded in this. The following examples illustrate how well some of these industries made out with the final result, the Patient Protection and Affordable Care Act of 2010 (PPACA), which passed in March:

• By way of the individual mandate, insurers will gain 32 million new enrollees,most requiring government subsidies to either patients or employers.

• The drug industry avoided importation of drugs from other countries and again fended off any role of the government to negotiate drug prices, as the Veterans Administration does so well in getting prices down to about 58 percent of usual costs.

• Existing specialty hospitals, physician-owned facilities that allow physicians to “triple dip” their incomes as providers, owners and investors, were grandfathered in.
But that was only the start of a continuing series of compromises by the Obama Administration that further weaken the bill and add fuel to the accelerating rate of health care inflation. When any of the corporate stakeholders raised objections to one or another part of the “reform” package, their objections were generally met with industry-friendly concessions.

The government had little room to negotiate. Having falsely assured the public from the beginning that they could keep their insurance if they liked it, the government had put itself into a corner where it has to cater to the insurance industry. Otherwise, the market would be “disrupted”, resulting in many people losing their coverage.

Waivers have become the instrument whereby to further coddle the insurance industry, rendering less effective any “teeth” that are in the bill. In the last few months, there have dozens of waivers granted, watering down a number of provisions of the PPACA. Here are some examples:

• When insurers complained that they may have to exit the market if forced to offer coverage of sick children on their parents’ policies, the government obliged by allowing brief open-enrollment periods whereby such coverage would be unavailable for much of the year; insurers were also granted permission to raise premiums for sick children until 2014, to the extent that state laws allow. (1)

• Insurers are still free to set their own premium rates, with little effective restraint by a government which can mostly just protest large increases; most rate-
setting “controls” are at the state level, where regulators tend to be industry-friendly. Thus premiums may be hiked up to 40 percent in the individual market.(2)

• The industry has strongly resisted the law’s requirements to set their medical loss ratios (MLRs) at 85 and 80 percent, respectively, for large employer and small employer/individual plans. That would force them to pay out at least 80 or 85 percent of their premium revenue on medical care. But what counts as “medical care”? The industry lobbied hard for a broad interpretation of that question, to include a number of non-medical expenses, even extending to commissions of insurance brokers. The latest rules, as recommended by the National Association of Insurance Commissioners and adopted by the Department of Health and Human Services (HHS), affect about 75 million people (11 million with individual policies, 24 million with small group coverage, and 40 million with large employer coverage). The insurance lobby won a number of concessions, including counting expenses of quality assurance as medical costs, allowance to deduct many of their taxes from their total premiums before calculating their MLR, and the ability to appeal for a lower MLR standard for up to three years in states where “there is a reasonable likelihood that market destabilization could harm consumers”. Four states have already sought such adjustments—Georgia, Iowa, Maine, and South Carolina. (3)

• Many insurance plans, including most large employers, are already exempt from the PPACA’s provisions. These plans have been “grandfathered in” without PPACA requirements, and have even been given other ways (eg. switching carriers) to keep that status.

• A recent ruling by HHS allows more than 100 employers and other insurers to retain very low annual limits of coverage (eg. only $2,000 a year, hardly qualifying as insurance). Employers such as McDonald’s Corp., after warning regulators that it might have to drop coverage for 30,000 hourly workers, handily won this concession for their “mini-med” policies. (4)

According to economists at the Centers for Medicare and Medicaid (CMS), health care spending will not be cut by the PPACA. By 2019 they expect that U. S. health spending will reach $4.6 trillion, accounting for almost 20 percent of GDP. By then spending on private health insurance will exceed $600 billion a year (32 percent of all health care spending). (5)

As health care inflation proceeds apace, employers are passing on more costs to their employees. Prices continue to soar throughout the system, even accelerating as hospitals and physician groups gain consolidated market clout. This leaves insurers and employers in a weaker negotiating position. Health insurance and care get less affordable every day for much of our population. And federal subsidies under PPACA are more than three years off in 2014, as is Medicaid expansion.

So the health care crisis continues unabated as proponents of PPACA and a defensive Administration posture how much it is helping us. The urgency and stakes for real reform just notch up with each passing month and year. Despite the losses of progressive policies in the recent midterm elections, there is one bright ray of hope in three states—Vermont, California and Hawaii—where the new leadership is supportive of real health insurance reform—single-payer universal coverage without exploitive profiteering by a dying insurance industry kept alive only by government subsidies of one kind or another.

1. Pear, R. U. S. to let insurers raise fees for sick children. New York Times, October 13, 2010.
2. Ostrom, CM. Steep rate hikes on way for individual health insurance. Seattle Times, September 6, 2010.
3. Pear, R. New rules tell insurers: spend more on care. New York Times, November 23, 2010: A22.
4. Adamy, J, Johnson, A. Rules eased for some health plans. Wall Street Journal, November 23, 2010: B1.
5. Adamy, J. Health outlays still seen rising. Wall Street Journal, September 9, 2010: A7.

Adapted in part from Hijacked! The Road to Single Payer in the Aftermath of Stolen Health Care Reform, 2010, with permission of the publisher Common Courage Press.

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Insurers selling more insurance to cover their deductibles

Posted by on Thursday, Dec 9, 2010

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.

Insurers sell products to fill the gap

By L. M. Sixel
The Houston Chronicle, Dec. 8, 2010

As employees face higher co-pays, deductibles and health care premiums, a relatively new insurance product has become increasingly popular.

It’s known as “gap” or “bridge” insurance, and it covers some of the out-of-pocket health care costs that are becoming more difficult for employees to shoulder, such as annual deductibles that are rising to $1,000, $2,500 or even $5,000.

Families that live paycheck to paycheck can’t absorb the increase in costs, said Brad Peak, vice president of products and marketing with the insurance carrier Assurant Employee Benefits in Kansas City, Mo.

The trend is moving toward the $2,500 deductible, Peak said. Assurant views that as the “sweet spot” that makes gap insurance attractive to employees on a budget.

Some employee benefits experts, however, question the value of gap insurance. It can be expensive for what it offers. Some limitations on coverage for pre-existing conditions can make it useless for someone with a chronic medical problem. And the rules may be prohibitively restrictive, such as limiting reimbursement to patients whose conditions require hospitalization.

(Brett Haugh, a partner with Employee Benefit Solutions in Houston) said the policies can be pricey, with about 50 cents of every dollar going toward the broker’s commission.


It was inevitable. First in the individual market and then in the employer-sponsored insurance market relief from skyrocketing insurance premiums was gained by switching to high-deductible plans. Although this slowed the acceleration of premium increases, actual health care access was impaired for many because of the often-inappropriate financial disincentives of the  deductibles and other cost sharing. This financial barrier opened the doors for the insurance industry to sell protection against the deductibles by offering an additional insurance product to fill the gap in the primary insurance product – an insurance policy to insure against the adverse effects of another insurance policy.

If it sounds familiar, it is. Medigap policies are purchased by the majority of individuals covered by the traditional fee-for-service Medicare program. Medigap plans are private insurance products that cover the gap for deductibles and other out-of-pocket expenses that Medicare beneficiaries would otherwise face when they have health care needs.

We already know how lousy these products are. Medigap plans offer the worst value of commonly available insurance products. They impose a second wasteful administrative layer on top of the primary Medicare coverage. They typically have medical loss ratios of about 65 percent, meaning that they consume 35 percent of the Medigap premiums for their own intrinsic purposes. Yet seniors buy these plans because of fear of facing financial hardship just when health care needs are greatest.

In a bit of irony, the Patient Protection and Affordable Care Act requires that the Medigap plans be revised to “include nominal cost sharing requirements that encourage the use of appropriate Part B physician services.” Thus Congress, in its wisdom, wants Medicare beneficiaries to experience price sensitivity by establishing deductibles for the supplemental Medigap plans that pay the deductibles for the traditional Medicare program. What?

Now we have a market of similar private gap plans that cover private insurance plans, with all of the same inefficiencies and excesses as Medigap plans, except that they’ve added the market innovation of using half of the premiums just for the insurance brokers’ commissions (if you believe Brett Haugh, quoted in the Houston Chronicle article above).

This is so unnecessary. Deductibles have been proven to result in harm by causing patients to forgo appropriate care, yet they have very little impact in reducing our total national health expenditures. The administrative waste of gap plans can be avoided by simply eliminating the deductibles and other cost sharing. Then you wouldn’t need the gap plans at all.

In a recent response to a New York Times blog on how higher deductibles cause families to delay or forgo medical care I explained why the cost of eliminating deductibles is not that great. It is response # 23 at this link:

Disastrous results of higher premiums and cost sharing for Oregon Health Plan

Posted by on Wednesday, Dec 8, 2010

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.

Raising Premiums And Other Costs For Oregon Health Plan Enrollees Drove Many To Drop Out

By Bill J. Wright, Matthew J. Carlson, Heidi Allen, Alyssa L. Holmgren and D. Leif Rustvold
Health Affairs
December 2010

The Oregon Health Plan was created to be a sustainable program that could weather budgetary storms without having to cut enrollees from Medicaid. A 2003 redesign of the program increased premiums, raised cost sharing, and imposed rigid premium payment deadlines for members in the “Standard” version of the program but not for members of the “Plus” version. This paper adds two years of longitudinal data to a previous study on the impacts of these changes. It shows that the redesign was a key factor driving a 77 percent disenrollment rate in the Standard program, from a high of 104,000 enrollees in February 2003 to just 24,000 by the end of the study period, November 2005. Those who were in the Standard plan when the reduced benefits and higher member costs went into effect were also nearly twice as likely to have unmet health care needs compared to those in the Plus plan.

Impact In Oregon

The 2003 Medicaid redesign had profound effects on the Oregon Health Plan Standard population. In the months immediately after the redesign, many of those enrolled in the Standard plan left the program entirely. These people, as well as those who remained in the program, subsequently experienced greater unmet health care needs, reduced use of care, more medical debt, and greater household financial strain than members of the Plus plan, to whom the redesign did not apply.

Changes to the cost-sharing structure, which consisted of mandatory copays, increased monthly premiums for some members, and tightened administrative rules including a loss of coverage for nonpayment of premiums, affected Standard plan members in two main ways. First, the changes in premium rules led to heavy disenrollment initially, and those who left often experienced periods of uninsurance throughout the study time frame along with the other changes, such as higher rates of unmet need.

Second, even after gaps in coverage and other known differences between the populations were controlled for, members of the Standard plan experienced poorer outcomes than members of the Plus plan. This suggests that even for those who managed to stay enrolled in spite of higher premiums, increased cost sharing in the form of mandatory copays may have limited members’ access to and use of care, in addition to having a direct financial impact.

Implications For Other States

These findings contain lessons for other states, particularly as they implement Medicaid expansions under the Affordable Care Act. Some states already provide Medicaid coverage to nonelderly adults with incomes up to 133 percent of the federal poverty level, but the act is expected to result in more than seventeen million Americans’ becoming eligible for Medicaid by 2014.

Cost Sharing:

The first lesson is that although strict cost-sharing rules might be an appealing way to offset the costs associated with increased Medicaid enrollment, they create barriers for people to get and keep insurance.

Our data show that Medicaid members are sensitive to even small cost-sharing increases. Coupling those increases with stricter payment policies can create widespread coverage loss. In fact, previously published analyses of this study’s data suggest that the most vulnerable Standard plan members were the most likely to leave in response to changes in cost-sharing rules.

This fact is particularly important because recent analyses of census data suggest that nearly half of those who will become eligible for Medicaid under the new federal eligibility guidelines have incomes below 50 percent of the federal poverty level. In this newly eligible, very-low-income population, offering payment flexibility and exemptions might help ensure that the neediest benefit from coverage expansion.

Coverage Gaps:

Second, those who leave Medicaid in response to changes in cost-sharing rules are very likely to experience major coverage gaps. Over time, they have more difficulty meeting their health care needs, accumulate more medical debt, and experience greater financial strain than those who stay insured.

Unmet Need:

Third, even among those who remain enrolled, increased cost sharing in the form of copayments may result in greater unmet need for health care, along with increased household financial strain and medical debt. It may also greatly depress health care use. Although reducing unnecessary use is one of the goals of cost sharing, when reduced use is paired with an increase in unmet need, the question arises, does the reduction represent care that is needed or that would help prevent costly complications in the future?


Currently there is a fixation in the health policy community on designing plans that require a significant financial contribution from the beneficiary on the theory that high health care costs can be moderated by making patients more sensitive to those costs.

Many studies have now confirmed that these plan designs impair access to health care because of affordability issues, and result in impaired health outcomes. Although this is certainly true for those with moderate incomes, this new study confirms once again that it is particularly disastrous for low-income individuals.

As a result of the Patient Protection and Affordable Care Act (PPACA), in 2014 an estimated 17 million individuals will be added to state Medicaid programs. Because of tight budgets, states are already seeking federal waivers that would relax the PPACA requirements.

It is likely that most states will soon seek waivers for their Medicaid programs to allow flexibility in innovation. The innovations will not be for the purpose of assisting patients in getting the care that they need, but rather they will be for the purpose of reducing the Medicaid component of the state budgets.

PPACA has already enshrined high cost-sharing by establishing low-actuarial value plans (high deductibles, etc.) as the standard within the state insurance exchanges. The temptation for states to expand this concept to Medicaid will be great.

The Oregon Health Plan may have provided an important lesson for other states, but that won’t prevent them from doing the same. After all, making price-sensitive shoppers out of people who have no money is effective in reducing health care spending, even if it does result in further financial hardship, physical suffering, and even death, and dead patients are the least expensive of all.

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