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.
Reinventing Primary Care: Lessons From Canada For The United States
By Barbara Starfield
Canada is, in many respects, culturally and economically similar to the United States, and until relatively recently, the two countries had similar health systems. However, since passage of the Canada Health Act in the 1970s, that nation’s health statistics have become increasingly superior. Although the costs of Canada’s health system are high by international standards, they are much lower than U.S. costs. This paper describes several factors likely to be responsible for Canada’s better health at lower cost: universal financial coverage through a so-called single payer; features conducive to a strong primary care infrastructure; and provincial autonomy under general principles set by national law.
Differences in health — both overall and regarding social disparities — in two countries that are otherwise quite similar are attributed to the important effect of two related phenomena: achievement of important health-system characteristics and a strong clinical primary care infrastructure in Canada. Several international studies have confirmed the importance of three health-system characteristics of countries that achieve better health at lower cost: government attempts to distribute resources, such as personnel and facilities, equitably; universal financial coverage either through a single payer or regulated by the government; and low or no cost sharing for primary care services.
U.S. policy achieves none of the three structural characteristics of good health systems. Canada achieves all three. At the same time, although Canada’s efforts to distribute resources equitably have been more extensive and successful than in the United States, Canada’s are less adequate than in other countries, such as Sweden, Finland, Denmark, the Netherlands, Spain, and the United Kingdom.
The United States also is the only industrialized country to lack a national strategy to address important building blocks of a strong primary care system, including services delivery, workforce, information systems, medical products, vaccines, technology policy, financing, leadership, and governance. International experiences demonstrate that national stewardship, financing, and generation of resources are important for an adequate primary care infrastructure.
Health Affairs theme issue: Reinventing Primary Care
The May 2010 issue of Health Affairs is a theme issue on “Reinventing Primary Care.” As a long time advocate of strengthening our primary care infrastructure, Barbara Starfield’s comments serve as an entry to the concepts and policies discussed in this special issue. We need to enact a single payer financing system, but that would be of little consolation if the health care professionals were not there when we needed them.
Wasichu is the Lakota (Sioux) word for “those who take the fat,” the greedy ones. WellPoint/Anthem, the health insurance behemoth born of Blue Cross, is a wasichu corporation.
As the Blue Cross movement grew in the 30’s, one of the foundational standards established in 1937 was “No private investors should provide money as stockholders or owners.” There was no concept of pre-existing condition. Excluding someone from health insurance because they might be likely to become ill (and need to actually use the policy) was felt to be immoral. Their mission was essentially charitable.
Over the following fifty years the Blues grew dominant, but in late 80’s the marketplace began to change, and many state Blue plans found themselves in trouble. Blue Cross of California established a for-profit subsidiary in 1994 and that summer the national Blue Cross Blue Shield Association changed its policies so that its licensees could convert to for-profit status and distribute their earnings to those who controlled the company. Enter WellPoint, under the guidance of Leonard Schaeffer.
A similar story played out in Indiana where the local Blue Cross began by merging with surrounding state plans and then “de-mutualized” to become a publicly traded company. Their initial stock offering in late 2001 raised $1.7 billion, which only fed the acquisition and for-profit conversion rampage, culminating with the mother of all insurance mergers when WellPoint of California and Anthem of Indiana came together in 2004 to create the largest health insurance company in the country, with 34 million lives covered. Today one American in ten carries their card, and WellPoint is number 32 on the Fortune 500.
Corporate headquarters moved to Indianapolis, under Anthem’s Larry Glasscock, whose bonus was $42.5 million for closing the deal. WellPoint’s Leonard Schaeffer retired with a package valued at $337 million. Wasichu.
In 2005 my wife Karen and I bought five shares of WellPoint stock so we could make the hour’s drive up to Indianapolis for the company’s annual meeting and “speak truth to power.” Last year I warned the WellPoint board that I would be coming back in 2010 with a shareholder resolution to change the direction of the company back toward its Blue Cross, charitable, non-profit roots.
We beat the odds and were successful in placing our resolution on the proxy ballot. The proxy was sent to all shareholders last week, to be voted on at the annual meeting May 18.
People ask me, why should WellPoint shareholders vote for a proposal to radically change the course of the company?
The reasons are being published every day. Going back just 12 weeks:
The Indianapolis Star on January 16 revealed WellPoint to be covertly funding U.S. Chamber of Commerce attack ads against health care reform. WellPoint spent tens of millions on other non-covert lobbying. Keep in mind that the bill recently passed was largely written by former WellPoint Vice President Liz Fowler in her role as Max Baucus’ chief healthcare legislative aide.
McClatchy Newspapers on February 24: ”While Anthem Blue Cross proposed a 39 percent rate increase on thousands of its California customers, its parent company gave 39 of its executives more than $1 million each and spent more than $27 million on 103 lavish executive retreats, congressional investigators said.”
The Los Angeles Times on March 10 updated its readers on the rescission scandal dogging WellPoint in California. “Only a small fraction of eligible Californians have benefited from agreements that Anthem Blue Cross made to settle accusations that they systematically and illegally dropped sick policyholders to avoid paying for their care.” These were people whose insurance coverage was cancelled after they were diagnosed with cancer and other serious conditions.
Consumer Watchdog reported March 31 that WellPoint sent a message to investors describing how it would simply re-label administrative costs as “medical care” in response to the new health reform law. The message follows revelations that WellPoint, also intentionally padded already huge premium increases in California, in case regulators demanded reductions.
I could cite hundreds more, and now this week the news of CEO Angela Braly’s 51% compensation increase, up to $13.1 million. Their arrogance is overwhelming. Why wouldn’t shareholders be concerned about where the company is heading? It’s not like WellPoint even pays any dividends, while it has plenty to spend on its executives and lobbying.
Last Tuesday I heard Allan Hubbard speak on health care reform at Indiana University. Mr. Hubbard, an Indianapolis businessman, served in the GW Bush administration and is a former Director on WellPoint’s Board.
He made no bones about being a Republican and shared a Republican view on where health care reform should go from here. At the end of his talk he concluded with this prediction, “My guess is that in 15 years we will have a single payer health plan, Medicare for All.” He wasn’t saying this gleefully.
He explained that all health insurance companies do is serve as middlemen between patients on one hand and doctors and hospitals on the other. He fears that as health care reform moves forward, Congress and the people will turn on them as a way to cut spending.
They (we) should.
The health insurance industry adds huge administrative costs to our system, not to mention the profits they siphon off. WellPoint is a parasitic middleman that adds no value, but actually increases the cost of healthcare for all of us.
I see the day when socially responsible investors will divest themselves from health insurers’ stocks.
My recommendation is that WellPoint investors support a drastic change in direction for the company, and not wait for the stock price to plummet, for the health insurance bubble to burst.
Check your pension plan and mutual funds. If you own any WellPoint (WLP) stock, vote FOR PROPOSAL NO. 3, SHAREHOLDER PROPOSAL CONCERNING A FEASIBILITY STUDY FOR CONVERTING TO NONPROFIT STATUS. TIAA-CREF is the 12th largest holder of WellPoint stock. If you’re invested with them, tell them what you think. If you have any affiliation with a university, ask them about their endowment holdings. Does your faith tradition have a policy for socially responsible investing?
Polls in 2008 and 2009 consistently showed over 60% of the public favoring a single payer plan. The public option polled over 70% approval well into the Fall. Have those people gone away? No, but they (we) are disappointed, discouraged, and weary. They (we) look back and say, “I wrote letters, made calls, went to rallies, and some of us were even arrested. And what did we get? Tens of millions of Americans forced to buy private insurance with our tax dollars subsidizing the premiums, a huge transfer of wealth from taxpayers to shareholders.”
People ask me what I think about the new healthcare bill. My reply: “Healthcare reform: We’re STILL FOR IT… and we’re not done yet.”
Money talks, like Arianna’s Move Your Money campaign. Let’s speak to the insurance behemoths in language they understand.
[Originally published in the Huffington Post 4/12/2010]
Rob Stone MD practices emergency medicine in a community hospital in the Hoosier Heartland. A gardener, a grandfather, and a teacher, he is the Director of Hoosiers for a Commonsense Health Plan and on the board of Physicians for a National Health Program.
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 Coverage Tax Credit: Participation and Administrative Costs
Government Accountability Office (GAO)
April 30, 2010
This report formally transmits the attached slides (at link below) in response to section 1899L of the American Recovery and Reinvestment Act of 2009. The statute required the Comptroller General to examine issues related to participation in and administrative costs associated with the Health Coverage Tax Credit program administered by the Internal Revenue Service (IRS) in the Department of the Treasury, and to provide the results to Congress by March 1, 2010.
The Health Coverage Tax Credit (HCTC) is a tax credit created by the Trade Adjustment Assistance Reform Act of 2002 that pays a share of health plan premiums for eligible individuals: certain workers who lost their jobs due to foreign competition and are eligible for Trade Adjustment Assistance (TAA) benefits, and certain retirees age 55 and over whose pensions were taken over by the Pension Benefit Guaranty Corporation (PBGC).
Participation: fewer than 30,000 of the hundreds of thousands of potentially eligible individuals each year have participated
From 2003 through 2008, total annual HCTC participation averaged about 26,000 individuals, with declining participation since 2005.
HCTC participation increased after key Recovery Act changes took effect: The average number of advance participants per month increased by 36 percent. This was higher than the increase in the average number of potentially eligible individuals per month — 23 percent.
Prior to the Recovery Act temporary increase, the HCTC covered 65 percent of health plan premiums.
Recovery Act changes to the HCTC in 2009 increased the credit from 65 percent to 80 percent of premiums.
The HCTC administrative costs to IRS averaged 17 percent of total HCTC-related costs, and most health plans reported that any additional administrative costs were minimal.
The Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 includes a tax credit to help individuals pay for health coverage. Like the HCTC, it will be administered by the IRS and available in advance as a payment directly to health plans or as a credit on participants’ end-of-year taxes. A key difference between the administration of the new credit and the HCTC is that, under the new credit, participants will pay their share of the health plans’ premiums directly to the health plans and IRS will only process the governments’ share of the payment.
HCTC Administrative Costs:
• From 2003 through 2008, HCTC administrative costs to IRS averaged 17 percent of total HCTC-related costs, with variation related to start up costs in early years.
• Most HCTC health plan and TPA officials that provided information reported that any additional administrative costs for HCTC participants compared to the typical costs incurred for non-HCTC participants were minimal.
• A share of the $793 million in health plan premiums paid from 2003 through 2008 covers the health plans’ administrative costs.
• Industry estimates of health plans’ typical administrative costs for all enrollees vary greatly, from 5 to 26 percent for group plans, such as employer-sponsored plans, and 25 to 40 percent for individual, nongroup plans.
An important feature of the Patient Protection and Affordable Care Act (PPACA) is the provision of a tax credit to help individuals purchase private health plans. A similar tax credit is already available for eligible displaced workers and certain retirees. This report from the Government Accountability Office (GAO) provides insight to anticipated participation levels, and to the administrative burden placed on the IRS which has administered the current tax credit program and will be administering the tax credits under PPACA.
Regarding participation levels, only tens of thousands, out of hundreds of thousands eligible, participated in the HCTC (Health Coverage Tax Credit) program, even though the tax credit was increased to 80 percent of premiums. Under the PPACA, tax credits are much more modest for average-income individuals and families (35 to 44 percent at 300 to 400 percent of the federal poverty level). Although PPACA differs because there is a mandate to purchase insurance with penalties for non-compliance, the poor response to a much more generous program should raise concerns about the inadequacy of the PPACA premium subsidies, which will likely result in lower than anticipated levels of participation. We will still be seeing far too many individuals who will remain uninsured.
Regarding the administrative costs, the burden of HCTC on the IRS has been quite high, adding 17 percent in administrative costs to the already high administrative costs of the private insurers (5 to 26 percent for group plans and 25 to 40 percent for individual plans). Although greater participation would spread the IRS’s fixed costs more broadly, any program that requires continuing reassessment of eligibility determination for each individual is bound to perpetuate administrative complexity.
What a waste. It would be so much simpler and much less costly to automatically include everyone in a single health care program, and fund it separately through equitable tax policies. The extra burden for the IRS would be essentially nil, not to mention that we would eliminate the profound administrative excesses of the private insurance industry.
We can still do it right.
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.
Washington Journal, C-SPAN
Edward Luce, Financial Times, Washington Bureau Chief
April 30, 2010
I think I would, controversially, and these are my personal opinions, not the opinions of the Financial Times, necessarily; but you mentioned single payer. I think if we could transcend the political realities for a moment… in terms purely alone of American competitiveness, forget the moral argument, forget the social justice case for universal access to public health care, but just in terms of putting a lid on the galloping costs in the American economy, the disincentive to creating a new manufacturing job here for example, as opposed to in China, or Canada for that matter, I would have a single payer system. A single payer system would be able to negotiate like a monopsony, which is the buyer side of a monopoly, and to reduce drug prices which is one of the biggest contributors to health care inflation in America. It would be able to do all sorts of things to drive health care costs down, and that would help begin to solve America’s fiscal problem.
Although we cannot just forget the moral argument – the social justice case for single payer – those who worry more about the American economy should be just as concerned as we are. As Financial Times Washington Bureau Chief Edward Luce states, single payer “would help begin to solve America’s fiscal problem.” The nation should be unified, socially and politically, in support of single payer reform.
Saving Billions Of Dollars — And Physicians’ Time — By Streamlining Billing Practices
By Bonnie B. Blanchfield, James L. Heffernan, Bradford Osgood, Rosemary R. Sheehan and Gregg S. Meyer
April 29, 2010
The U.S. system of billing third parties for health care services is complex, expensive, and inefficient. Physicians end up using nearly 12 percent of their net patient service revenue to cover the costs of excessive administrative complexity. A single transparent set of payment rules for multiple payers, a single claim form, and standard rules of submission, among other innovations, would reduce the burden on the billing offices of physician organizations. On a national scale, our hypothetical modeling of these changes would translate into $7 billion of savings annually for physician and clinical services. Four hours of professional time per physician and five hours of practice support staff time could be saved each week.
Opportunity For Reform
The growth in administrative complexity has been largely overlooked as an opportunity for health care reform, with administrative expenses being viewed as a relatively mild influence on the growth in health spending. The Patient Protection and Affordable Care Act of 2010 does not contain major provisions to limit excessive administrative complexity. However, it does require that health plans begin to standardize the transfer of electronic data, which will cut down some of the duplicative information technology costs. The law does not specifically address the need for comprehensive uniformity of all data and information requirements.
The results of this study enumerate the inefficiencies engendered by excessive administrative complexity. We also hope that they will provide detail to enable understanding of the magnitude of these costs, and to inspire multistakeholder discussions around proposals of incremental reforms that standardize payment processing rules across payers. The current cost of excessive complexity would not be tolerated by employers from any other type of vendor. We believe that once fully explained, the current administrative burden will be recognized as intolerable by patients, purchasers, and policy makers.
Thus far, health reform has not resulted in a single-payer mandate that replaces the U.S. health insurance industry and nationalizes billing and payment processes. But the evidence of the system costs from excessive complexity in our case study indicates that imposing a standard set of payment requirements, increased payment-rule transparency, standardized forms, and a standard set of data exchange requirements remains an important and high-value target for future policy reform efforts.
An incremental move to one set of payment rules would yield significant dollar savings as well as work-life and productivity opportunities for physicians and their office staffs. Done carefully, administrative simplification could still leave room for a diversity of insurance products and could promote innovation without relying on blunt and opaque administrative processes as a tool.
The savings from reducing administrative complexity could be translated into decreased costs in general. These decreased costs would be of greater magnitude than estimated here. Many of the changes under the single-rule-set scenario would result in decreased costs for payers as well, and would provide resources that could be passed on as savings to purchasers and patients or could be used to provide additional needed health services.
Achieving these savings would not require restructuring the basic market-system tenets of our complex health care system through, for example, mandating a single-payer approach. Rather, mandating a single set of rules, a single claim form, standard rules of submission, and transparent payment adjudication — with corresponding savings to both providers and payers — could provide systemwide savings that could translate into better care for Americans.
This study confirms the previously well documented administrative waste that occurs in physicians’ practices due to the complexity of complying with the various requirements of multiple payers in our fragmented system of health care financing. However, the authors do a disservice by perpetuating the myth that all we need is a single billing form and a single set of rules, thereby obviating the need to switch to a single payer model of health care financing.
The authors estimate that a single claim form and simplified rules would save about $7 billion yearly. Yet the single payer model has been projected to save about $400 billion yearly. What are these authors overlooking?
First is the profound administrative waste intrinsic to the private insurance industry. It is so great that our legislators up front granted them the right to retain 15 to 20 percent of insurance premiums just to pay these costs (plus profits).
Although this article indicates that the administrative burden on the physicians is great, the authors still would not salvage all of the waste that is recoverable since they contend that the insurers could still continue to provide a diversity of innovative insurance products, perpetuating the inevitable administrative complexity.
Anyone who has looked at a hospital bill understands the great administrative complexity of hospital payment systems under our multi-payer system. Under a single payer system, hospital financing would be provided by global budgets based on legitimate costs, much like our fire and police departments. The labor-intensive, complex hospital chargemaster disappears.
Bulk purchasing would be used for pharmaceuticals and medical supplies, again greatly reducing the administrative waste.
More waste is generated when payers and providers try to work the system to their own advantages – an understandable response in a complex and opaque system. A single payer system provides much greater precision and transparency in payment processes.
It is not as if the authors didn’t understand these differences. They cite the landmark paper of Woolhandler, Campbell and Himmelstein showing the dramatic reduction in administrative waste in Canada compared to the United states, after Canada changed to a single payer system of financing. But they seem to sweep the conclusions under the carpet while insisting that all we need is a simple form (which we already have – CMS 1500) and simple rules (which we will never have with the diversity of insurance products and insurer innovation that they support).
Perhaps the most outrageous comments in this paper are the following:
“Prior studies of this problem have examined the relative overall administrative costs of health care in the United States, particularly in comparison to those in Canada. However, these studies have been able to provide only an overall view of the costs and do not provide specific direction to foster improvements. As a result, these findings have done little to move stakeholders in the U.S. health care system — including patients, providers, payers, purchasers, and policy makers — to confront excessive administrative complexity as a target for reform.”
No specific direction!? The single payer advocates have been vociferous in showing the direction in which we must head! Google “health care administrative costs.” There are over 45 million results, and the first one is the landmark NEJM article by Woolhandler, Campbell and Himmelstein. People who deny that there is adequate evidence that a single payer system would provide us the savings that we need to provide health care to everyone are simply liars!
Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended
By Richard S. Foster, Chief Actuary
Centers for Medicare and Medicaid Services
Office of the Actuary
April 22, 2010
The estimated effects of the PPACA (Patient Protection and Affordable Care Act) on overall national health expenditures (NHE) are shown in table 5 (at link below). In aggregate, we estimate that for calendar years 2010 through 2019, NHE would increase by $311 billion, or 0.9 percent, over the updated baseline projection that was released on June 29, 2009. The NHE share of GDP is projected to be 21.0 percent in 2019, compared to 20.8 percent under prior law.
Although much attention was given to the CBO (Congressional Budget Office) estimates of the financial impact of the PPACA (Patient Protection and Affordable Care Act), CBO’s report was concerned primarily with the impact of the reform on the federal budget, taking into consideration the net costs of the program enacted and the offset of new revenues. The report from the Office of the Actuary of CMS (Centers for Medicare and Medicaid Services) is of much more practical importance for most of us since it describes the impact on our national health expenditures (NHE) – what we will be paying collectively for health care in the future.
To no surprise, we will be paying more than we would have had there been no reform enacted. More people will have coverage through an expansion of Medicaid/CHIP and through subsidized plans to be offered in the new state insurance exchanges. Expanding coverage improves access and thus increases spending. Some are impressed by the fact that the increase in NHE will be only 0.9 percent more than the projected NHE would be without reform.
Keep in mind that without reform, our NHE would have increased from 17.8 percent of GDP (Gross Domestic Product) in 2010 to 20.8 percent in 2019. When it was decided to make health care reform a priority, one of the major reasons was that this increase was considered to be nearly intolerable. The PPACA will increase this even more – to 21.0 percent of GDP – an even less tolerable number. That amounts to a staggering $4,670 billion NHE in 2019 alone.
What should be even more alarming are some of the measures in the bill that kept these numbers from being even higher:
* A major portion of the expansion is in Medicaid, a welfare program that reduces health expenditures by simply paying much lower rates. A continued lack of willing providers is inevitable, especially after the temporary reinforcement of primary care rates expires. If they are not allowed to expire, NHE will be even higher assuming that rates for specialized services will not be reduced further as an offset.
* Another major portion of the newly insured will receive their coverage through the state insurance exchanges. This report projects less increase in health expenditures because of “significant discounts negotiated by private health insurance plans.” Why would these “discounts” be any greater in the exchanges that they are now in the existing private insurance markets? Looking for a reduction in NHE through the magic of the marketplace within government established exchanges is not realistic.
* The excise tax on employer-sponsored plans with higher premiums is expected to “increase rapidly” after 2019, per this report. Employers will respond by reducing benefits, thereby increasing out-of-pocket costs for the employees and their families. This may also slow growth in health expenditures, but by the perverse policy of erecting financial barriers to beneficial health care services. Not paying for care that people should have obviously is not a rational way to slow the growth of our NHE.
* The $5 billion authorized for the national high-risk insurance pool is expected to be depleted very soon, resulting in substantial premium increases to sustain the program, in turn resulting in lower participation rates. Not spending money on high-risk pools will limit expenditures, but at what cost?
* Scheduled “productivity adjustments” to Medicare payment updates will further slow the growth in Medicare payments at a time when providers are already very concerned about current rates. The report states, “the Medicare productivity adjustments could become unsustainable even within the next 10 years.” Slowing growth in NHE through an “unsustainable” process certainly can’t be relied upon.
* The Independent Payment Advisory Board for Medicare is tasked with recommending further reductions in Medicare spending, without reducing benefits. Such recommendations could further stress an “unsustainable” process.
* Some of the reduction in health expenditures would occur because of a decline in the numbers covered by employer-sponsored plans which traditionally have had relatively generous benefits. Again, reducing benefits for services that people need is an inappropriate method of reducing total health expenditures.
We do need to control the excess growth in our national health expenditures, but not by methods that impair access to beneficial services, such as those in the PPACA.
If we adopted a single payer national health program, we could slow spending by eliminating the profound administrative excesses, by improving pricing though negotiation with health care professionals, by global budgeting of hospitals, by negotiated bulk purchasing of drugs and health care supplies, by evidence-based decisions on covering appropriate services but not ineffective and deleterious services, and by separate budgeting of capital improvements, thereby slowing the over-utilization that is characteristic of systems with excess capacity.
For the physical and financial health of all of us, let’s replace PPACA with an improved Medicare that takes care of everyone.
By Claudia Chaufan
Oh yeah! The progressive, single payer community did look forward to the screening of the Public Broadcasting Service (PBS) Frontline production “Obama’s deal”, frustrated as we were by our voice having been buried in a misleading, media-backed “debate” that portrayed all opponents of the “Patient Protection and Affordable Care Act” as right-wing lunatics “against reform” – yes, the usual trick “you’re with us or with the terrorists”.
And to their credit, Frontline did a terrific job of documenting the countless back-room deals struck by the White House and Congress with Big Pharma and Big Insurance. As the production illustrated, these deals chipped away whatever progressive features the Act may have initially had, and turned it into a weapon of mass destruction of the pockets of ordinary folks who already barely make ends meet, and into an extraordinary sweet deal that will substantially increase the political and economic power of for-profit insurers for years to come. Unsurprisingly of course, given that the Act was almost literally dictated by WellPoint Inc., as the Frontline production pointed out.
Disappointingly, however, Frontline did not live up to its promise. While it did reveal some of the “realities of American politics, the power of special interest groups and the role of money in policy making”, it omitted showing viewers just what “Obama’s deal” had sacrificed, and what single payer advocates were being dragged to jail for, as they entered the meetings of the Senate Finance Committee chaired by health care czar Max Baucus. Rather, it merely portrayed them as yet another disaffected group within “President Obama’s liberal base”, which had to be appeased so that our president could move on with the serious stuff — “reforming” healthcare.
But it is precisely what the deal sacrificed that matters. Because single payer advocates, including many doctors such as Margaret Flowers, risked arrest, and were arrested, for standing up for a right to health care, through a publicly-financed and publicly delivered single payer system, that was being sacrificed at the altar of special interests, even as President Obama asserted, with a straight face, that “all options (for health care reform) are on the table”.
Now, could the reason for sacrificing a right to health care be that our charismatic president received at least ten times the money that his designated health care czar, Max Baucus, received from the very industries they were supposed to rein in? We don’t know, but the hypothesis is not implausible, and Frontline producers would have done their viewers a service had they explored this or any other plausible and alternative to the mainstream hypothesis further. In so doing they would have spoken truth to power, the least we can expect from progressive mass media.
Americans have by now gotten used to having the best Congress (and Presidency) “that money can buy”. Let us not be forced to put the progressive media into an equivalent category — “it’s the best media money can buy”.
Originally posted on Social Medicine Portal.
Democrats seek greater control over health insurance rates
By Noam Levey
Los Angeles Times
April 21, 2010
Congressional Democrats have begun pushing legislation giving government regulators greater authority to block big increases in health insurance premiums.
The move, which comes less than a month after President Obama signed the healthcare legislation, is aimed at giving all states the power to stop premium hikes deemed excessive and allowing the federal government to step in if the states don’t act.
“There is no need for federal involvement in states with insurance commissioners who are protecting consumers,” (Sen. Dianne) Feinstein said Tuesday.
“Health plan premiums are a symptom, not a cause of the problem,” said Karen Ignagni, who heads America’s Health Insurance Plans, the industry’s Washington-based lobbying arm.
The cause of high health insurance premiums is high health care costs. State insurance regulators have no control over that, nor over the administrative costs of the insurers. If insurance company profits are abusive, then regulators can pare back profits to a reasonable level.
The problem is that insurance company profits are an almost undetectable portion of our $2.5 trillion national health expenditures (NHE). Dramatically reducing insurer profits will not even appear as a footnote in the report of our NHE. The terrible waste is not in insurer profits but in the profound administrative inefficiencies of a fragmented system based on a multitude of private and public plans.
Karen Ignagni of America’s Health Insurance Plans is correct when she says that insurance premiums are a symptom and not a cause of the problem. High health care costs are. Unfortunately, her industry has been and will continue to be ineffective in controlling rising costs. Throughout the reform process she had stated repeatedly, in effect, that the government must provide the solutions to rising costs.
Under the reform model approved by Congress and the President, there are no effective solutions. Merely experimenting with meager health policy proposals holds little promise for effective cost containment at the level that we need. (Those who contend that the independent Medicare advisory board would be effective should keep in mind that it would ratchet down Medicare while allowing the private insurers free run. That could be a disaster for Medicare.)
Of course, the government solution that Karen Ignagni doesn’t want, but one that would be truly effective, would be an improved Medicare that covers everyone. (Is there an echo in here?)
Health insurers weighing options to get ahead of reform
By David S. Hilzenrath
The Washington Post
April 18, 2010
The idea was simple enough: Make sure that health insurers spend the vast majority of their revenue on patient care, instead of using it for things such as advertising, profits and executive pay.
To that end, the new health-care law says an insurer must give money back to consumers if it devotes less than 80 percent of premiums to paying medical claims and improving care. For insurers serving large groups, the target is 85 percent.
But even before the health-care overhaul was signed into law last month, one of the nation’s largest insurance companies reclassified certain expenses in a way that increased its so-called medical-loss ratio. In January, WellPoint began including under medical benefits such costs as nurse hotlines, “medical management,” and “clinical health policy,” a WellPoint executive said in a March briefing for investors.
Redefining medical spending to make the requirement more attainable is just one way insurers might adapt to the new legislation.
Similarly, the requirement that insurers devote 80 or 85 percent of premiums to medical claims and related expenses creates conflicting incentives. At its simplest, it encourages insurers to cut overhead expenses. In addition, it might give insurers pause before raising copayments and deductibles, turning away applicants with preexisting conditions, or squeezing payments to doctors and hospitals, because each of those steps would reduce medical spending and make it harder for insurers to meet the required ratios.
On the other hand, the target ratios might give them added incentive to raise premiums. By doing so, they could keep overhead and profit fixed, even as those items decline as a percentage of the premium dollar.
Implementing Health Insurance Reform: New Medical Loss Ratio Information for Policymakers and Consumers
Committee on Commerce, Science, and Transportation, Staff Report for Chairman Rockefeller
United States Senate
April 15, 2010
The goal of the medical loss ratio provision of the new health care law is to make sure that consumers get the full benefit of the health care premiums they pay insurers. As this report discusses, the insurance industry is beginning to consider the financial impact of the new minimum medical loss ratio requirements. At least one company, WellPoint, has already “reclassified” more than half a billion dollars of administrative expenses as medical expenses, and a leading industry analyst recently released a report explaining how the new law gives for-profit insurers a powerful new incentive to “MLR shift” their previously identified administrative expenses.
As the National Association of Insurance Commissioners (NAIC) and the Department of Health and Human Services (HHS) work to implement the new statutorily required medical loss ratios, they need to make sure that insurers are spending consumers’ premium dollars on delivering health care and improving the quality of this care. Boosting medical loss ratios through creative accounting will not fulfill the new law’s goal of helping consumers realize the full value of their health insurance payments.
American National Exec: Company to Stop Selling Individual Health Plans
April 20, 2010
Two subsidiaries of American National Insurance Co. will stop selling individual medical expense health insurance plans due to the minimum medical loss ratio requirements contained in the new U.S. health reform law, an executive with the multiline insurer said.
The individual health plans are mostly high-deductible, major medical products that are a small part of the corporation’s overall business, he said. They comprise about one-third of American National’s total health sales a year.
The decision to stop new sales was made “after careful consideration of the recent health care legislation and based on the knowledge that the companies’ individual medical expense plans will not meet the requirements” of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, the company said.
Although this concept has been touched upon in previous qotd messages, it is important that we clearly understand that the newly enacted medical loss ratio (MLR) requirements provide insurers with an incentive to further drive up health care costs.
How could that be? The intent of placing minimum limits on the medical loss ratio (the percentage of premiums spent on actual health care) was to limit the maximum percentage of premium dollars spent on administrative costs and profits. When the administrative costs exceed the permissible limits, the insurers, it was suggested, would find administrative efficiencies in their own operations, thereby helping to control overall spending. But since administrative services are the product that they are selling us, why would they want to pare back their own business?
Rather than achieving compliance with the medical loss ratio by reducing their own product, doesn’t it make much more sense from a business perspective to increase the amount of medical services being paid for, thereby achieving compliance with the ratio without any reduction in their own product? Of course it does.
One way to do that is to reclassify as health care as much as possible of the administrative services that they provide. As the Senate report indicates, WellPoint has already reclassified more than half a billion dollars of administrative expenses as medical expenses. This has a double accounting advantage on the ratio since it both reduces the administrative component while increasing the health care component.
What should concern us even more is the potential impact on health care spending. The more health care that the insurers authorize, the greater the health care component of the medical loss ratio. If they can hold their administrative costs at about the same level, increasing the health care component of the ratio allows them to increase… guess what… profits!
There are two ways to increase health care spending. The insurers can approve more medical services, increasing both the frequency and intensity of services authorized. More scary is that they are also motivated to increase health care spending by simply paying higher prices!
Let’s look at an example using an $80 billion insurance fund. Once the state sets up the insurance exchanges, they will be dominated by individuals and small employers. For this market, the law will require that the insurers maintain a medical loss ratio of at least 80 percent ($64 billion must be spent on health care). If they have fixed administrative costs of 15 percent ($12 billion), they can keep 5 percent as profits ($4 billion). If they can hold their administrative costs steady (at $12 billion) while increasing health care spending by 25 percent over a couple of years (to $80 billion), and increasing their premiums by 25 percent ($80 billion insurance fund increases to $100 billion) their administrative costs decrease to 12 percent (still $12 billion). That leaves 8 percent for profits ($8 billion, up from $4 billion). Thus they DOUBLE their profits merely by being certain that health care costs continue to spiral upwards.
For those who insist that all we need is incremental fixes to the legislation that passed, tell us how you’re going to fix this one. Private market forces will always place profits before all else. Change the rules, and they will always find another way.
Imagine instead a health care financing system with about 3 percent administrative costs, zero profits, and incentives to control excessive prices and limit the excessive growth in the frequency and intensity of non-beneficial, high-tech services and products. That’s what we would have if we enacted an improved Medicare system that covered everyone.
Some health networks drop elite hospitals
By Liz Kowalczyk
The Boston Globe
April 17, 2010
Health insurers are starting to sell policies that largely bar consumers from receiving medical care at popular but expensive hospitals such as Massachusetts General and Brigham and Women’s — a once radical idea that is gaining traction as a way to control soaring health care costs.
Amid intense scrutiny into why health care costs in Massachusetts are climbing 7.5 percent a year, limited networks have emerged as the most immediate way to control costs.
The Group Insurance Commission (the agency that oversees health insurance for state employees) required its two largest providers — Harvard Pilgrim and Tufts Health Plan — to develop restrictive networks this spring.
(Dolores Mitchell, executive director of Group Insurance Commission) acknowledged that restricted plans could lead to problems in the market, if healthy employees migrate to cheaper plans and those with serious illness remain in more expensive open networks because they need broad access to the advanced care provided at teaching hospitals. That outcome could raise costs for individuals in the open plans, since costs would be spread among fewer employees.
Massachusetts intends to expand the use of limited provider networks in order to slow the rise in costs. The Patient Protection and Affordable Care Act also specifically allows the use of limited provider networks for the private plans that are to be established within the state insurance exchanges. The campaign rhetoric was that patients should have choice, yet the legislation limits patient choice of hospitals and health care professionals.
Losing choice is a big price to pay for allowing each private insurer to assemble provider lists based on lowest prices, especially when that doesn’t control total costs but only shifts costs. Contrast that with a single payer that negotiates appropriate prices with every provider on behalf of all patients. Appropriate prices would be based on legitimate costs plus fair profits throughout the health care delivery system. An expanded and improved primary care system would provide a portal for access to appropriate specialized services in any appropriate institution.
How would that work for expensive academic medical centers? Institutions would negotiate global budgets with consideration of patient care, teaching, and research services, and separate budgeting for capital improvements. The patient care component should not be any more expensive than similar care provided at the community level, except for high-tech services provided exclusively by the academic center. Even those services should be priced appropriately and accessed only when clinical screening indicates that they are warranted. Patients need guidance in order to prevent inappropriate choices of non-beneficial, high-tech services.
Restrictive provider networks are simply one more perversity that we don’t need in our health care financing system.
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