This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
How much are you worth to HMOs?
By Carol Gentry
Health News Florida, October 28, 2011
Medicare health plan members are worth more than any other category of enrollee in a merger or acquisition deal, Wall Street analysts say.
In fact, they’re worth four times as much as members of employer-based plans and five times as much as members of Medicaid plans, according to a report from Goldman Sachs researchers Matthew Borsch and Samuel Wass.
By their calculations, Medicare Advantage (HMO or similar managed-care plan) enrollees have a “value per member” of $6,000 in a merger or acquisition.
That compares with $1,500 for commercial plans – the ones that employers offer but in which the insurer takes the financial risks – and $1,200 per member for Medicaid plans.
The researchers prepared the analysis in the wake of Monday’s announcement that Cigna will buy HealthSpring, a holding company that includes Medicare plans in 11 states and Washington, D.C. that encompass 340,000 members.
Other analysts have also noted the mega-insurers’ growing desire to acquire Medicare customers. As Carl McDonald of CitiGroup wrote today in a note about Universal American: “It’s hard to overstate how much the attitude of the largest plans …has changed toward the Medicare business in just the last six months.”
United Health Group was first to discover the pot of gold Medicare plans offered and bought PacifiCare in 2005, as McDonald notes, but now WellPoint, Cigna and Aetna are waking up.
Bet you didn’t realize that by signing up with a taxpayer-financed, private Medicare Advantage plan you can command a price of $6000 for the sale of yourself when your plan is acquired by another plan. Well, actually you don’t get the $6000. Neither does it revert to Medicare and the taxpayers. No, it goes to the top 1 percent, while leaving the 99 percent of us once again dumbfounded.
What price does a person in the traditional Medicare program command? What a ridiculous question. Medicare doesn’t buy and sell patients. That happens only when Medicare patients are privatized. Selling patients is a function limited to private plans, not public social insurance programs.
When are we finally going to say that we are not for sale to the 1 percent? Since it was Congress that arranged the sale, let’s Occupy Congress!
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.
Self-funded health plans under attack in New Jersey
By Joanne Wojcik
Business Insurance, October 30, 2011
In an Oct. 25 letter to Thomas Considine, commissioner of the New Jersey Department of Banking and Insurance, the Self-Insurance Institute of America Inc. asked the department to rescind a bulletin it issued this month that alleges stop-loss insurers are “cherry-picking” employer groups with good claims experience.
The Oct. 3 bulletin alleges that the insurers, which write excess coverage for self-funded group benefit plans, are “selectively marketing coverage to small employers on the basis of health history of that employer’s employees, and denying coverage to employers based on employee health status. The result of this selective underwriting is to “cherry-pick’ groups less likely to incur claims, leaving the groups more likely to incur claims to the state’s guaranteed-issue insured market. This, in turn, drives premiums up for small employers purchasing insured plans.”
Because stop-loss insurance is excluded from the state’s definition of a health benefit plan, it is not subject to the same regulations as fully insured health coverage, the bulletin states. Therefore, the department has invoked New Jersey’s unfair trade practice law, asserting that “the selective marketing and underwriting described herein constitutes an unfair trade practice.”
Simpsonville, S.C.-based SIIA asserts that the department’s contention is “inflammatory and without merit. Stop-loss insurance is a completely different product than commercial health insurance, so it is misguided to conclude that “unfair competition’ exists,” SIIA said in its letter.
The Employee Retirement Income Security Act’s “regulatory exemption for self-insured (self-funded) plans is a persistent thorn in the side of state insurance regulators,” according to a September statement by Timothy Stoltzfus Jost, a law professor from Washington and Lee University School of Law in Lexington, Va., to the NAIC’s ERISA (B) Subgroup.
“This may be acceptable for large employer groups, which have the bargaining power and expertise to protect their employees. But when small-employer packages purchase “self-insured’ packages from insurers, including stop-loss coverage with very low attachment points and administrative services, they are essentially purchasing conventional health insurance, except that it is free from state regulation,” Mr. Jost said.
Moreover, he said “insurers have always had an incentive to market “self-insurance’ to healthy groups, and small businesses with healthy enrollees have always had an incentive to purchase it. The Affordable Care Act, however, increases these incentives…Insurers understand this and are very actively marketing “self-insured’ products to small groups.”
For smaller employers who want to self-insure their health benefit programs, stop-loss insurance is an imperative. A very large medical bill for one employee or family member could bankrupt a small business. This need to protect against large losses has created a thriving market in self-insured packages from insurers, which escape health plan regulation, yet are beginning to look more like conventional health insurance with extremely high deductibles.
These plans not only provide stop loss coverage at a “low attachment point,” they are now providing administrative services for the employers’ self-insured plans, paying employees’ medical expenses using the employers’ funds. The attachment point – the level at which losses begin to be covered by the insurer – may be $40,000. That is a very low level for a stop-loss plan. Some conventional health plans have deductibles of $50,000. That blurs the distinction between a high deductible in a health insurance plan and a low attachment point in a stop-loss plan.
What is happening is obvious. The insurers are selling these “self-insured packages” as stop-loss plans, avoiding the regulatory oversight for health plans. Yet they actually function as health plans with very high deductibles.
Why does it matter? The insurers can avoid new regulations that prohibit medical underwriting. They are able to cherry pick – limiting the sale of these plans only to businesses with healthy employees, shifting the costs of higher risk employee pools to other programs with guaranteed issue. As Timothy Stoltzfus Jost states, “insurers have always had an incentive to market ‘self-insurance’ to healthy groups, and small businesses with healthy enrollees have always had an incentive to purchase it. The Affordable Care Act, however, increases these incentives…Insurers understand this and are very actively marketing ‘self-insured’ products to small groups.”
The private insurers have an absolute moral obligation to enhance value for their investors, and they must always make every effort to do so. The fault lies not with the private insurers themselves but with a financing model that is dependent on insurers. We need to change the model, switching to a single public insurer.
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.
California gets OK for large cuts to Medi-Cal
By Anna Gorman
Los Angeles Times, October 28, 2011
The Obama administration will allow California to cut hundreds of millions of dollars from Medi-Cal, a move doctors and experts say will make it harder for the poor to get medical treatment.
California plans to reduce rates by 10% to many providers, including physicians, dentists, clinics, pharmacies and most nursing homes, the Centers for Medicare and Medicaid Services announced Thursday.
Cindy Mann, deputy administrator of the Centers for Medicare and Medicaid Services, told reporters the action gives California the flexibility it had requested to address its budget shortfall. “We know that the reductions that are being approved today will have significant impact on affected providers, and we regret the very difficult budget circumstances that have led to their implementation,” she said.
California, which already spends less per beneficiary than any other state, has led the way in aggressively slashing its programs. Now the government’s decision to allow California to move forward with its plans sets a precedent for other states seeking to reduce their Medicaid bills.
The California Medical Assn. expressed frustration over the new cuts, saying that physicians could receive as little as $11 a visit. Doctors will have no choice but to stop seeing Medi-Cal patients, said CEO Dustin Corcoran. “You can’t pay the bills at these rates,” he said. “They are unconscionably low.”
Federal healthcare reform, which includes a massive expansion of Medicaid, also could be seriously hampered by this new round of cuts, Corcoran said.
“They built federal healthcare reform on the foundation of Medi-Cal, and they just destroyed that foundation,” he said. “We have a hard time seeing how healthcare reform has a chance of being successful in the state of California after these cuts are implemented.”
One of the most important components of the Affordable Care Act is the expansion of Medicaid coverage for uninsured, low-income individuals. Does the Obama administration seriously believe that this will be an effective step toward bringing affordable health care to everyone?
Look at what they just approved for California. The state already spends less per Medicaid (Medi-Cal) beneficiary than any other state, yet the Obama administration has approved another 10 percent reduction. Just wait until the budget cutters in other states get wind of this!
Theoretically, drastic payment reductions are met by further ratcheting down overhead expenses. At $11 per office visit, only a fraction of expenses can be covered, no matter how stringent the budgeting. In essence, the government is asking providers to help finance Medicaid through their own personal charity. Trying to cover 7.6 million Medi-Cal patients in the state by depending on provider charity is asking more than the system can bear.
Two quotes above need to be repeated.
Cindy Mann, deputy administrator of the Centers for Medicare and Medicaid Services: “We know that the reductions that are being approved today will have significant impact on affected providers.”
Dustin Corcoran, CEO of the California Medical Association: “They built federal healthcare reform on the foundation of Medi-Cal, and they just destroyed that foundation.”
And the other major component of the Affordable Care Act? A mandate for individuals to purchase inadequate coverage by paying unaffordable premiums.
The Obama administration officials and their co-conspirators in Congress could not have been serious about bringing us real reform. If they were, we would have an improved Medicare covering everyone.
Physicians for a National Health Program and the American Public Health Association are currently holding their national meetings in Washington, D.C. We need to go to Freedom Plaza and join the Occupy Movement.
Healthcare reform penalizes married couples, says report
By Julian Pecquet
The Hill, October 27, 2011
The report concludes that fewer than 2 million couples — out of 60 million nationwide — are projected to benefit from the insurance subsidies, while “almost half of the beneficiaries of the tax credit will be unmarried individuals without dependent children.”
One reason is that subsidies, which start in 2014, are tied to the federal poverty level, which does not increase proportionally along with household size.
Another problem is a snafu in the law that The Hill first reported back in July.
The law offers insurance subsidies for workers if their employer doesn’t provide affordable coverage, but proposed regulations released in August peg that affordability to individual, not family, coverage. As a result, a worker’s spouse and children would not have access to subsidies if that worker were offered affordable coverage — even if the worker could not afford the family coverage offered by the employer.
The American Academy of Pediatrics is spearheading a sign-on letter to the Centers for Medicare and Medicaid Services (CMS) that decries a “family penalty” that will “negatively impact the opportunity to access quality health insurance for significant numbers of children.”
This is yet one more example of the fundamental strategic flaw of trying to design reform to fit a fragmented system of private health plans and public programs. Instead of a complex set of rules which are designed to protect the insurance industry, it would have been so much easier and much more efficient to design reform around the patient instead by simply declaring that everyone is covered by a single comprehensive program that is equitably funded. We can still do that.
It’s Consumer Spending, Stupid
By James Livingston
The New York Times, October 25, 2011
AS an economic historian who has been studying American capitalism for 35 years, I’m going to let you in on the best-kept secret of the last century: private investment — that is, using business profits to increase productivity and output — doesn’t actually drive economic growth. Consumer debt and government spending do. Private investment isn’t even necessary to promote growth.
This is, to put it mildly, a controversial claim. Economists will tell you that private business investment causes growth because it pays for the new plant or equipment that creates jobs, improves labor productivity and increases workers’ incomes. As a result, you’ll hear politicians insisting that more incentives for private investors — lower taxes on corporate profits — will lead to faster and better-balanced growth.
The general public seems to agree. According to a New York Times/CBS News poll in May, a majority of Americans believe that increased corporate taxes “would discourage American companies from creating jobs.”
But history shows that this is wrong.
Between 1900 and 2000, real gross domestic product per capita (the output of goods and services per person) grew more than 600 percent. Meanwhile, net business investment declined 70 percent as a share of G.D.P. What’s more, in 1900 almost all investment came from the private sector — from companies, not from government — whereas in 2000, most investment was either from government spending (out of tax revenues) or “residential investment,” which means consumer spending on housing, rather than business expenditure on plants, equipment and labor.
In other words, over the course of the last century, net business investment atrophied while G.D.P. per capita increased spectacularly. And the source of that growth? Increased consumer spending, coupled with and amplified by government outlays.
The architects of the Reagan revolution tried to reverse these trends as a cure for the stagflation of the 1970s, but couldn’t. In fact, private or business investment kept declining in the ’80s and after. Peter G. Peterson, a former commerce secretary, complained that real growth after 1982 — after President Ronald Reagan cut corporate tax rates — coincided with “by far the weakest net investment effort in our postwar history.”
President George W. Bush’s tax cuts had similar effects between 2001 and 2007: real growth in the absence of new investment. According to the Organization for Economic Cooperation and Development, retained corporate earnings that remain uninvested are now close to 8 percent of G.D.P., a staggering sum in view of the unemployment crisis we face.
So corporate profits do not drive economic growth — they’re just restless sums of surplus capital, ready to flood speculative markets at home and abroad. In the 1920s, they inflated the stock market bubble, and then caused the Great Crash. Since the Reagan revolution, these superfluous profits have fed corporate mergers and takeovers, driven the dot-com craze, financed the “shadow banking” system of hedge funds and securitized investment vehicles, fueled monetary meltdowns in every hemisphere and inflated the housing bubble.
Why, then, do so many Americans support cutting taxes on corporate profits while insisting that thrift is the cure for what ails the rest of us, as individuals and a nation? Why have the 99 percent looked to the 1 percent for leadership when it comes to our economic future?
A big part of the problem is that we doubt the moral worth of consumer culture. Like the abstemious ant who scolds the feckless grasshopper as winter approaches, we think that saving is the right thing to do. Even as we shop with abandon, we feel that if only we could contain our unruly desires, we’d be committing ourselves to a better future. But we’re wrong.
Consumer spending is not only the key to economic recovery in the short term; it’s also necessary for balanced growth in the long term. If our goal is to repair our damaged economy, we should bank on consumer culture — and that entails a redistribution of income away from profits toward wages, enabled by tax policy and enforced by government spending. (The increased trade deficit that might result should not deter us, since a large portion of manufactured imports come from American-owned multinational corporations that operate overseas.)
We don’t need the traders and the C.E.O.’s and the analysts — the 1 percent — to collect and manage our savings. Instead, we consumers need to save less and spend more in the name of a better future. We don’t need to silence the ant, but we’d better start listening to the grasshopper.
(James Livingston, a professor of history at Rutgers, is the author of “Against Thrift: Why Consumer Culture Is Good for the Economy, the Environment and Your Soul.”)
According to Professor James Livingston, the key to economic recovery is to use tax policy and government spending to redistribute income away from profits and toward wages so that it can be spent on products and services. So what does this have to do with health care?
Our current national policies have moved us in the wrong direction. The tax burden in the United States is one of the lowest of OECD nations. We are told that taxes need to be reduced further to enhance profits that can then be reinvested in our economy. Yet those profits are not being directed to consumer spending. Instead this surplus capital has been used in financial markets to wreak havoc on our economy. The billionaires scoop up more funds while the consumers have even less income to spend. What we need is an infusion of more funds into the economy – spending on real products and services, not on destructive financial instruments.
Health care is one of the most, if not the most, valuable sectors of our economy. Spending on health care is one of the better things that we can do. Yet our current policies are directed to shifting more of the costs to individuals with health care needs, with the result that there will be a decrease in health care purchasing simply because the health care consumer doesn’t have enough money.
Cutting back on spending in Medicare and Medicaid, and shifting to the new standard of unaffordable private underinsurance plans called for in the Affordable Care Act will deprive this important, beneficial sector of our economy of much needed consumer/government funds.
It has long been recognized that health care financing must be progressive if we are going to provide essential care for everyone. The retained corporate earnings and other stashes of wealth are crying out to be tapped to be moved back into our economy, whether it’s for health care or for the multitude of other essential needs that should be met in a well functioning society.
For the health care sector of our economy, we need equitable tax policies and government spending. An improved Medicare for all would work just fine. It would be good for our economy, and good for the health of each and everyone of us.
NOTE: The Swiss have a universal, highly regulated system of social insurance based on nonprofit private insurance plans. Many consider their system to be superior to ours and one that ours might eventually emulate. Though this message is long, you should save it if you don’t have time to read it now. It explains why an “ideal” system based on private health plans is not such a great idea after all.
OECD Reviews of Health Systems: Switzerland 2011
OECD, World Health Organization
Organization for Economic Cooperation and Development (OECD)
October 18, 2011
Chapter 2 – Health Insurance
In 1996, Switzerland implemented the Health Insurance Law (LAMal), which sought to achieve three main objectives: strengthening solidarity in the Swiss health system, containing health spending, and guaranteeing high-quality coverage.
2.1 General trends in the Swiss health insurance market
The Swiss health insurance market relies on regulated competition based on a set of key principles: health insurers cannot make profits on contracts for mandatory health insurance, consumers have free choice of insurer, and insurers are compelled to accept any applicant. The benefit basket covered by health insurance is defined at national level for all insurees and health insurers must offer the same premium to all enrollees with the same health insurance contract provided they are in the same age category and same region. Health insurers can propose optional health insurance contracts which provide lower premiums in exchange for higher deductibles or “managed care” contracts. Insurers can also offer “bonus” contracts, where insurees receive premium reductions if they do not claim any reimbursement from their insurance fund.
# Swiss health insurance offers comprehensive coverage of health care
In principle, all medical treatments and diagnostics prescribed by doctors and dispensed by licensed professionals are covered, unless they are explicitly excluded from the benefit basket. Mandatory health insurance also covers the costs of medical care provided to patients receiving long-term care in institutions or at home.
After paying a deductible, patients contribute to the cost of care through coinsurance rates – usually 10% of costs – up to an annual ceiling.
“Rationing” has not been part of the political agenda. The level of user charges, however, is one of the highest in the OECD.
# Consumers can choose between different options for health insurance plans
Ordinary contracts offer the highest level of financial protection against health care spending but also have the highest level of premiums. Other forms of health insurance contracts offer lower premiums with either higher deductibles or restrictions in the choice of doctor or hospital.
The take-up of ordinary plans has been continuously declining, first to the benefit of high-deductible health plans. However, since 2004, the popularity of plans with restricted choice of provider has increased dramatically, with the share of insurees choosing such plans (36.9%) now higher than ordinary plans (35.2%), high-deductible plans (27.9%) and bonus plans (0.1%).
# Consumer choice has increased at cantonal level, in spite of market concentration nationally
# Private supplementary health insurance covers one third of the population
2.2 The 1996 Health Insurance Law has strengthened solidarity, but health financing inequalities remain
# Switzerland has reached universal coverage
Health insurers have been required to refuse payment for health care bills presented by negligent defaulters (366,000) until they have fully recovered unpaid premiums and related interests. In March 2010, the parliament revised the law with the objective of protecting people facing serious financial problems for paying premiums.
# Health insurance premiums vary widely across and within cantons
These intra-cantonal premium differences persist because of insurers’ risk-selection activities and also because relatively few insurees switch insurers from year to year, although this number has been rising recently.
# Public subsidies help some individuals and families pay health insurance premiums
By nature, non-income related premiums are very regressive. In 2008, premiums accounted for 11.8% of household income for the lowest income quartile and 3.4% for the highest income quartile.
The LAMal requires premium reductions of at least 50% for children and young adults in training in low and middle income households, but lets cantonal authorities define the thresholds used to define “low and middle income.”
Sixteen cantons fix a maximum percentage of households’ income to be spent on premiums and subsidise any additional amounts. While this limits the households’ effective burden, premium payments remain regressive.
It is worth noting that achieving horizontal equity in health financing is not an explicit policy goal in providing premium subsidies in Switzerland. Furthermore, subsidies do not address health financing inequities resulting in out-of-pocket expenditure, such as copayments and deductibles which are independent of household incomes.
# Swiss patients face relatively high out-of-pocket payments for health care
Per capita out-of-pocket payments in Switzerland are significantly higher than in all other OECD countries: they are 60% higher than the United States and almost three times as high as the OECD average.
# Out-of-pocket payments are usually regressive and thus the least equitable means to finance health care.
The fact that an increasing number of consumers are opting for high-deductible plans is very likely to increase user charges for “essential care” and weaken the solidarity of the health insurance system.
# Contributions to the financing of health spending are inequitable
# Financing health care is a high burden for low-income families
There is some indication that people forego health services due to high out-of-pocket expenditure, and that this is related to socio-economic status.
2.3 Competition in health insurance markets does not deliver all its promises
# Switching rates are still low, though increasing in the recent period
# Fragmentation increases administrative costs and premiums
Multiple fund systems, especially with small pools, often coincide with relatively higher administrative costs. Moreover, a risk equalisation mechanism also creates additional administrative costs. Switzerland has relatively higher administrative costs for both social and private health insurance. Those accounted for respectively 5.9% and 17.0% of total health insurance costs.
# Health insurers mainly compete on risk-selection
Van de Ven et al. (2007) listed possible strategies for insurers to select good risks despite their obligation to accept any applicant. The list includes:
* Marketing through targeted advertisements aimed at the healthier.
* Selective contracting with providers (i.e., in managed care contracts) likely to attract the healthier who are more willing to accept limited provider choice.
* Designing complementary insurance benefits packages and setting premiums such that low-risk individuals are attracted.
* Exclusively offering contracts with high deductibles, which will offset higher risk individuals.
* Establishing insurance conglomerates to channel new enrollees to specific contracts depending on their health risks; this strategy most often works due to the huge number of different contracts on offer, limiting the consumer’s ability to be fully informed.
* Identifying high risks via a health status declaration for those seeking complementary insurance.
* Delaying reimbursements for chronically ill persons in order to make them leave the insurance.
* Terminating insurance activity in areas with any high-cost patients.
Many of these strategies are indeed manageable options for Swiss health insurers. The extent to which they really use them is not easy to determine.
# Managed care plans have taken off since 2006 but insurers only modestly “manage care”
The extent to which current managed care networks increase quality and efficiency in health care delivery is not well known. By nature, the impact of managed care is difficult to assess and disentangle from risk-selection, since these specific forms of contracts are known to attract people with good health risk profiles. Thus, age and gender adjusted comparisons of health care spending of managed care policy holders and other insurees are not sufficient to estimate savings achieved through managed care.
# The inclusion of another risk factor into the risk-equalisation formula is a good step but may not be enough
Initially, the risk equalisation mechanism was based on two simple risk factors only: age and gender.
A new and third risk factor – hospitalisation beyond three days in the previous year – has been included in the risk equalisation formula and will be applied from January 2012 onwards. While this new factor will not fully avoid risk selection, it will now also be profitable for insurers to invest in product innovation, i.e. further develop managed care contracts.
The high levels of fragmentation in a country with a small population raises questions about a single health insurer. In theory, a single insurer could pool risks more effectively. In light of risk equalisation mechanisms that are imperfect as long as there remain incentives for risk selection, a single insurer might in principle better ensure health financing equity across the population and strong purchasing, in addition to a tendency for lower administrative costs. Moreover, it provides incentives to focus more on prevention. A single insurer system thus has some important advantages. However, it has also its drawbacks, since it eliminates consumer choice, may inhibit innovation in insurance products or risk under-provision and rationing care when negotiated prices are too low.
Shifting from a multiple insurer system to a single insurer system is with no doubt a tremendous challenge, although Korea demonstrated that a step-wise merging into a single fund is possible. However, this is likely to be particularly difficult for Switzerland, which has a very long history of multiple insurers for over 100 years, a strong preference for choice, and as a reflection of its federalism, an attachment to cantonal organisation. Moreover, there are considerable transaction costs to consider, not least the question about where to place all staff from the current health insurers. Any such reform option thus needs to be critically assessed as to its overall financial implications, its practical implementation as well as political feasibility. In fact, the option of a single insurer in Switzerland has already been rejected several times so far by the population, although a new initiative was launched in 2011.
OECD Reviews of Health Systems: Switzerland 2011 (160 pages):
It is not clear why so many in the U.S. are enamored of the Swiss health insurance system when this OECD/WHO report confirms that it is highly inefficient and fragmented, with profound administrative waste, inequitably funded, with regressive financing and with wide variations in premiums, has the highest out-of-pocket costs, has an increasing prevalence of managed care intrusions, and is controlled by a private insurance industry that has learned how to game risk selection at significant cost to those on the losing end.
There is one bit of good news buried in this report. A single payer system would correct these deficiencies. Although the report mentions the drawbacks of eliminating consumer choice and inhibiting innovation in insurance products, these are actually advantages. The loss in consumer choice is the loss in the ability to choose from a large market of private health plans which often take away provider choice. Eliminating the plans returns choice of providers to the patient. Innovations in insurance products are designed to benefit the private insurers by gaming the system to the detriment of the patients. That’s innovation that they can do without.
The report also cautions that a single payer could “risk under-provision and rationing care when negotiated prices are too low.” This is a criticism of single payer systems that does have some merit, but it ignores the fact that this risk is even greater in privately insured managed care models. All systems face capacity and access problems, but the public stewards of a single payer system are in a position to act in the public interest, whereas private insurers use tools to deliberately obstruct access in order to reduce spending. Public single payer stewards are much more capable than private insurers of using capacity refinement and queue management to reduce the risk of under-provision (rationing) of care. It is true that conservative fiscal hawks, when they are in control, continually threaten excessive budget constraints, but the behavior in the private sector is much worse as ever more of the costs are shifted to those with greater health care needs, creating a formidable financial barrier to care. Our U.S. system of inhumanely rationing care by ability to pay is far worse than systems that struggle with capacity and queues because of budgetary limitations, especially when you consider that we already have by far the largest per capita health care spending of all nations.
The important take-home point is that an “ideal” social insurance program based on the mandatory purchase of highly regulated, nonprofit private health plans, such as that in Switzerland, is far from ideal in that it fails to prevent the flaws inherent in the private insurance model – including segmentation and fragmentation, costly administrative excesses and inefficiency, inequitable regressive financing, excessive premium variation, shifting of costs (risks) to patients in order to protect insurance plans, and, perhaps most fundamentally, rejecting a public service model in favor of a private business model that intrudes in the relationship of patients and their health care professionals and institutions by gaming the system for the primary purpose of achieving success as a business, while relegating serving patients to a secondary role.
In 2007, even though the Swiss understood the advantages of a single payer system, they rejected it in a ballot measure. The predominant reason was that 70 percent of the Swiss were not willing to trade their private insurance plans, which were perceived to be functioning fairly well except for high premiums, for a public program for everyone that they feared would be like their existing health welfare program for the poor, which most believed was plagued by bureaucratic inefficiency and cost overruns. They feared that they would be worse off in such a public program. In their campaign against the single payer proposal, the organization representing Switzerland’s private health insurers, santésuisse, deliberately mislead the public by modeling the single payer proposal as a welfare program that would be funded primarily by middle-income citizens, creating this widely held misperception that resulted in the measure’s defeat.
The Swiss voters will get another chance with a new initiative launched this year. The question is, when will we get our chance?
Wal-Mart Cuts Some Health Care Benefits
By Steven Greenhouse and Reed Abelson
The New York Times, October 20, 2011
After trying to mollify its critics in recent years by offering better health care benefits to its employees, Wal-Mart is substantially rolling back coverage for part-time workers and significantly raising premiums for many full-time staff.
Citing rising costs, Wal-Mart, the nation’s largest private employer, told its employees this week that all future part-time employees who work less than 24 hours a week on average will no longer qualify for any of the company’s health insurance plans.
In addition, any new employees who average 24 hours to 33 hours a week will no longer be able to include a spouse as part of their health care plan, although children can still be covered.
Wal-Mart also significantly reduced the amount of money it contributes to the savings accounts workers can use to pay for medical bills that are not covered under their plan. Last year, the company put $1,000 into accounts for families but it will cut the amount by half for next year to just $500.
Barbara Collins, a sales associate at the Wal-Mart in Placerville, Calif., said that the premiums for the H.M.O. plan for herself and her 5-year-old son would rise to $18 every two weeks from $10. Her big concern, she said, was that her deductible would jump to $5,000 a year, from $1,000 — a daunting amount considering she earns $19,000 a year.
Dan Schlademan, director of Making Change at Walmart, a union-backed campaign, condemned the changes.
“No wonder people are protesting in the streets,” he said. “This is another example of corporations putting profits ahead of what’s good for everyday Americans. It’s outrageous and damaging to many hard-working families that the biggest corporation in America is increasing health care costs for many employees by 40 percent.”
The Richest People in America
September 21, 2011
#6 Christy Walton $24.5B
#9 Jim Walton $21.1B
#10 Alice Walton $20.9B
#11 S. Robson Walton $20.5B
Wage Statistics for 2010
Social Security Online
October 21, 2011
By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $26,363.55 for 2010.
A fundamental principle in the Affordable Care Act is that we would continue to rely very heavily on employer sponsored plans for the majority of health care coverage in America. How is that working? Wal-Mart, the nation’s largest private employer, is increasing the insurance deductible to $5,000 for an employee earning $19,000 per year.
Yet look at her employers. Four members of the Walton family are amongst the eleven wealthiest individuals in America, each worth over $20 billion. (Compare that with the Koch brothers, who own Congress, each worth $25 billion.) This is in a nation with a median wage of $26,364.
Relying on employers to do the right thing no longer cuts it. Not only do they fail to pay enough, they can no longer be relied upon to see that their employees and their families receive adequate health benefits.
It’s time to enact an improved Medicare for all, even if we have to “Occupy Congress” to accomplish that.
UK medical group rejects new skin cancer treatment
By Maria Cheng
Bloomberg Businessweek, October 14, 2011
An independent British medical watchdog says the first treatment proven to help people with the deadliest form of skin cancer is too expensive to be used by the U.K.’s health care system, a recommendation critics called a potential death sentence.
The drug, Bristol-Meyers Squibb’s Yervoy, has offered some hope to people with advanced skin cancers, though a recent study showed it only worked in a small segment of patients studied, and they lived just four months longer than patients given older medications.
The National Institute for Clinical Excellence, or NICE, advised Friday that at a cost of 80,000 pounds ($126,600) Yervoy “could not be considered a cost-effective use” of health funds. A final decision is expected next month after a public consultation.
In the U.K., most medicines are paid for by the government, as long as they’re recommended by the cost-efficiency watchdog. The agency commonly rejects expensive drugs, including recently advising against new treatments for prostate cancer, breast cancer, and multiple sclerosis, though patients and doctors are increasingly protesting the decisions.
The government usually adopts NICE’s recommendations, meaning doctors in the government-funded health service cannot prescribe Yervoy without NICE’s approval.
In its decision, NICE said it was not convinced by the evidence, saying the data for Yervoy, which works by stimulating the immune system to fight cancer, did not compare it to older drugs used to treat melanoma. NICE also said the trial was too short to know how long the drug’s effects would last and raised concerns about the drug’s side effects, including diarrhea, rash, fatigue and nausea, which they said could affect a patient’s quality of life.
“We need to be sure that new treatments provide sufficient benefits to justify the significant cost (the health care system) is being asked to pay,” said Sir Andrew Dillon, NICE’s chief executive, in a statement.
Patient groups and charities slammed the decision, labeling it a “death sentence” for people with advanced skin cancer.
U.K. Agency Rejects Bristol-Myers Skin Cancer Drug
By Jonathan D. Rockoff and Sten Stovall
The Wall Street Journal, October 14, 2011
Yervoy is expected to be a blockbuster for Bristol, with more than $1 billion in yearly sales. The therapy was approved in the U.S. in March and in Europe in July. It had $95 million in sales during the second quarter. Bristol CEO Lamberto Andreotti recently said the company was “very happy with the results so far” from the drug’s uptake.
“The price of Yervoy reflects the value of Yervoy,” Mr. Andreotti added, at the Pharmaceutical Strategic Alliances conference in New York last month.
Melanoma (stage III or IV) – ipilimumab: appraisal consultation document
National Institute for Health and Clinical Excellence (NICE)
October 12, 2011
Ipilimumab is not recommended for the treatment of advanced (unresectable or metastatic) malignant melanoma in people who have received prior therapy.
The Committee was satisfied that ipilimumab meets the criteria for being a life-extending, end-of-life treatment and that the trial evidence presented for this consideration was robust.
The Committee acknowledged that few advances had been made in the treatment of advanced melanoma in recent years and ipilimumab could be considered a significant innovation for a disease with a high unmet clinical need.
Despite the combined value of these factors the Committee considered that the magnitude of additional weight that would need to be assigned to the QALY gains (quality-adjusted life years) for people with advanced (unresectable or metastatic) melanoma would be too great for ipilimumab to be considered a cost-effective use of NHS resources.
Should a $126,000 drug (Yervoy, ipilimumab) that produced only a very minimal benefit in a small segment of patients studied, yet caused significant side affects, be included in program that we finance? Is there no limit as to what we should add to coverage when our national health expenditures are already challenging individual, business and government budgets?
When the CEO of the manufacturer of this drug says, “The price of Yervoy reflects the value of Yervoy,” we should take a serious look at what constitutes value. That’s precisely what NICE did. Their fairly detailed report should be read before endorsing “anything goes” health care.
There is a limit. When we are picking up the tab, either through taxes for government programs or through premiums for private plans, we should be very concerned about how are funds are being spent.
Additional comment from Merton Bernstein:
Shouldn’t we also question the validity of the price assigned by the manufacturer? The likelihood is that its development was aided by some public funds. If a useful drug is out of reach for those who need it, should not the patent owner modify normal cost calculations to bring it within the reach of more people? It seems to me that pricing drugs should include element reflecting who bore the cost of development and who bears the cost of its unavailability because of cost considerations.
Essential Health Benefits: Balancing Coverage and Costs (2011)
Institute of Medicine
“The committee concludes that the EHB (Essential Health Benefits) should be defined as a package that will fall under a predefined cost target rather than building a package and then finding out what it would cost.” (Section 4, page 7)
When the Institute of Medicine (IOM) released its recommendations on the method for determining essential health benefits for the private plans to be offered in the state insurance exchanges called for in the Accountable Care Act, advocates of comprehensive health care for everyone were quite disappointed, to say the least. When looking through this 300 page report for an explanation as to why they recommended such intolerably skimpy benefits, the one sentence above stands out.
By predefining a specific cost target and then defining a benefit package to fit those costs, the committee explicitly has recommended that the new standard for health insurance in America should be a defined contribution rather than a defined benefit.
This concept, which is permeating our public and private social programs, has been one of the most destructive to our unifying stance of social solidarity. Many have seen their pensions based on defined benefits being converted into individual plans in which contributions are defined but benefits are no longer guaranteed, being dependent on the variables of investment returns and, more importantly, the gamble that you won’t outlive your personal account. (Of course, the annuity industry is quite willing to take a major portion of your account in exchange for guaranteeing you less generous payments for the remainder of your life.)
The privatization health care schemes, such as the proposed voucher program for Medicare, also would provide a defined contribution to be used to purchase a skimpier, ill-defined benefit package, unless the individual contributes more personal funds that many simply do not have.
The IOM recommendation for the exchange plans does the same. The standard defined contribution would be subsidies provided toward the price of a skimpy plan with inadequate benefits. If the individual wants a plan with adequate defined benefits, an additional personal contribution to the premium would be required to buy up to a better plan, again with the questionable assumption that the person has the funds.
The media keep reporting that participants in Occupy Wall Street and similar demonstrations throughout the nation don’t seem to know what they want. That is blatantly untrue. They want our economy to work not only for the top 1 percent, but for the other 99 percent of us as well. Taking away our defined benefits and substituting an inadequate contribution is precisely the the type of activity that has left middle-income Americans behind.
Let’s take a stand. Let’s immediately let President Obama and Secretary Sebelius know that we won’t tolerate this injustice. Then let’s expand the protests into a national movement that returns America to the people. We may have to have a dialogue with the Tea Party people as to just what that means. It doesn’t mean abandoning government, but rather it means taking control of our government so it works for the benefit of all of us – a defined benefit, if you’ll permit.
FOR ACTION TODAY
A recent Quote of the Day message expressed alarm at the fact that the Institute of Medicine is recommending a grossly inadequate, skimpy, spartan standard for the package of benefits to be offered by health plans in the state insurance exchanges being established under the Affordable Care Act:
Following is a letter asking the Obama administration to reject this recommendation. Though only selected names will be used in publicizing this letter, we encourage everyone who concurs with the views expressed to sign it, using this link:
President Obama: Reject the Institute of Medicine’s skimpy health plan prescription
We protest the Institute of Medicine’s (IOM) recommendation that cost rather than medical need be the basis for defining the “essential benefits” that insurance policies must cover when the federal health reform law takes effect in 2014. If adopted by the Department of Health and Human Services, this recommendation will sacrifice many lives and cause much suffering. We call on Secretary Sebelius and President Obama to reject them.
The IOM proposal would base the required coverage on the benefits typical of plans currently offered by small businesses – enshrining these skimpy plans as the new standard. These bare-bones policies come with a long list of uncovered services and saddle enrollees with unaffordable co-payments and deductibles.
Already, millions of underinsured Americans forgo essential care: adults with heart attacks delay seeking emergency care; children forgo needed primary and specialty care; patients fail to fill prescriptions for lifesaving medications; and serious illness often leads to financial catastrophe.
The inadequate coverage the IOM recommends would shift costs from corporate and government payers onto families already burdened by illness. Yet this strategy will not lower costs. Delaying care frequently creates even higher costs. Steadily rising co-payments and deductibles over the past two decades have failed to stem skyrocketing medical inflation. And nations that assure comprehensive coverage – with out-of-pocket costs a fraction of those in the United States – have experienced both slower cost growth and greater health gains than our country.
Our patients urgently need what people in these other nations already enjoy: universal and comprehensive coverage in a nonprofit system that prioritizes human need over corporate profit.
The IOM committee was riddled with conflicts of interest, many members having amassed personal wealth and career success through their involvement with health insurers and other for-profit health care firms. Its recommendations were lauded by insurance industry leaders who have sought to undermine real health reform at every turn. As the Lancet noted on its Dec. 5, 2009, cover: “Corporate influence renders the U.S. government incapable of making policy on the basis of evidence and the public interest.”
Sadly, the committee’s damaging recommendations suggest that this corporate bug has also infected the IOM.
Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.
PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.