The Urgent Need for National Health Care Reform

Posted by on Tuesday, Oct 13, 2009

I have requested that this letter from the Harvard Medical School (Class of 1955) be posted on our blog. I wanted to call attention to this letter even though it doesn’t explicitly support single payer, because many of the signers are strong single payer advocates. The signers include significant leaders in medicine – chairmen of departments, deans, professors at major medical schools and prominent practicing physicians. I hope that they will turn their advocacy in the future towards promoting Medicare for All. —Oliver Fein, M.D.

Fifty-nine members of the Harvard Medical School Class of 1959 are convinced that reform of the American health care system is essential, must be substantial and carefully designed, and must include a public health insurance option.

We present our position in this statement, a result of intense discussions begun at our June reunion commemorating 50 years since graduation. We are a majority of our 112 living American classmates. Six declined to sign the statement because they disagree with it, 3 more because it is not detailed enough, and 44 expressed no opinion.

Each of the signers has 50 years of experience and leadership in clinical practice, medical education, administration, and/or research. Our collective careers cover a wide variety of primary care and specialty fields in a range of organizational settings, in both private practice and academia, across the United States.

We believe that our humane and enlightened country, committed to “life, liberty and the pursuit of happiness”, has the obligation to provide everyone with the opportunity to obtain affordable insurance and quality health care.

We support President Obama’s proposal that all citizens should be offered the option of a government-sponsored medical insurance plan, along with private options. In our opinion, health care reform will fail without the discipline of competition from a public option.

Excluding a public option would throw away a vital opportunity to test different ways to provide quality care for all. A public plan would help develop and evaluate new standards of practice, malpractice reform, and reimbursement of physicians, and would emphasize preventive care. To be affordable, it would have to avoid financial incentives for unnecessary services and contain measures that curb financial abuse and waste by some hospitals and, unfortunately, by some of our medical colleagues.

A public option would also identify and encourage use of demonstrated best practices shown to be effective at less cost, offer greater access, and provide higher quality of care. Administrative overhead, as now in Medicare, would be significantly lower without for-profit intermediaries. These innovations could help lift the competitive burden that health care places on American employers in the global marketplace, while also offering portability and continuity of coverage during job changes and illness.

Common sense demands a planned, full comparison of the relative benefits of public vs. private options. At the outset, there must be clear and uniform ground rules for measuring, reporting, and evaluating cost, access, and quality of care for all plans.

We urge Congress and the President to take this courageous step at a vital time in our nation’s history.

Names and relevant positions of signers are attached. This statement represents only their opinions, not necessarily those of other 1959 graduates of Harvard Medical School or of that institution.


Norman O. Aarestad, M.D., F.A.C.R.
Radiation oncology, retired
Denver, CO

Eugene M. Abroms, M.D.,
Formerly Prof of Psychiatry,
University of Wisconsin Medical School
Ardmore, PA

Robert S. Adelstein MD
Bethesda, MD

James E. Barrett, M.D.,
Research Professor Emeritus of Community and Family Medicine and Psychiatry,
Dartmouth Medical School
Hanover, NH

Harvey H. Barten, M.D.
Scarsdale, NY

Costan W. Berard, M.D.
Formerly Chairman, Department of Pathology and Laboratory Medicine,
St. Jude Children’s Research Hospital,
Past President, United States and Canadian Academy of Pathology,
St. Helena Island, SC

Robert S. Blacklow, M.D.
Formerly Dean, Northeast Ohio college of Medicine
Currently, Department of Global Health and Social Medicine,
Harvard Medical School
Lincoln, MA

Forst E. Brown, M.D.
Professor Emeritus of Surgery,
Dartmouth Medical School
White River Junction, VT

Charles E. Burden, M. D.
Bath, ME

Boyd R. Burkhardt, M.D,
Clinical Plastic Surgeon,
Tucson, AZ.

Savelly B. Chirman, M.D.
Internal Medicine, retired
Santa Barbara, CA

Norman A. Clemens, M.D.
Clinical Professor of Psychiatry,
Case Western Reserve University School of Medicine,
Cleveland, Ohio

Richard E. Conway, M.D.
Orthopedic Surgery
Rockport, MA

Richard W Darrell, M.D, ScD
Clinical Professor Emeritus of Ophthalmology,
Columbia University
Fort Myers, FL

Donald E. Dillon, M.D.
Hematology/Oncology, retired
Ocean View, DE

Hall Downes, M.D.
Professor Emeritus of Physiology and Pharmacology,
Oregon Health Sciences University
Portland, OR

Karl Engelman, M.D.
Professor Emeritus of Medicine,
University of Pennsylvania
Hilton Head, SC

Charles J. Epstein, M.D., D.Sc.(h.c.)
Professor Emeritus of Pediatrics, , and
Former Director of the Program in Human Genetics,
University of California School of Medicine, San Francisco
Tiburon, CA

Lois Barth Epstein, M..D., D.Sc.(h.c.)
Professor of Pediatrics, Emerita, and
Former Director of the Tumor Immunology and Interferon Laboratory,
Cancer Research Institute,
University of California School of Medicine, San Francisco
Tiburon, CA

Gerald C. Finkel M.D.
Clinical Professor of Pathology,
Univ. of Washington
Seattle, WA

Frederick B. Glaser, M.D., F.R.C.P. (Canada)
Professor Emeritus of Psychiatry,
Brody School of Medicine, East Carolina University
Greenville, NC

Warren M. Gold, M.D.
Professor of Medicine,
University of California, San Francisco
San Francisco, CA

Robert A. Goldstone, M.D.
Orthopedic Surgery
Glen Rock, NJ

Anne M. Haywood, M.D.
Associate Professor of Pediatrics and of Microbiology & Immunology,
University of Rochester
Rochester, NY

Arthur L. Herbst, M.D
Joseph B Delee Distinguished Service Professor Emeritus,
University of Chicago
Chicago, IL

Kenneth Herrmann, M.D.
Research Virologist,
Centers for Disease Control & Prevention, retired
Atlanta, GA

David Korn, M. D.
Vice Provost for Research,
Harvard University
Professor of Pathology,
Harvard Medical School
Boston, MA

Anton O. Kris, M.D.
Clinical Professor of Psychiatry,
Harvard Medical School
Cambridge, MA

Nelson R. Lampert, M.D.
Clinical Professor of Surgery, retired
University of California, San Francisco
Ross, CA

Lucian L .Leape, M.D.
Adjunct Professor of Health Policy,
Harvard School of Public Health
Cambridge, MA

Cavin P. Leeman, M.D.
Clinical Professor Emeritus of Psychiatry,
SUNY Downstate Medical Center
New York, NY

Herbert Lessow, M.D.
New York, NY

John T. Maltsberger, M.D.
Associate Clinical Professor of Psychiatry,
Harvard Medical School
Boston, MA

Ira Marks, M.D., F.A.A.P.
Pediatrics, retired
Old Chatham, NY

Kilmer McCully, M.D.
Chief, Pathology and Laboratory Medicine,
VA Boston Healthcare System
Winchester, MA

John F. Merrifield, M.D.
Psychiatry, retired
Lexington, MA

Eli C. Messinger, M.D.,
Formerly Clinical Associate Professor of Psychiatry,
New York Medical College
New York, NY

Roger V. Moseley, M.D.
Formerly Asst. Clinical Professor of Surgery,
College of Medicine and Dentistry (NJ)
Princeton, NJ

J. David Poutasse, M.D.
Radiology, retired
Pittsfield, MA

James W. Prichard, M.D.
Professor Emeritus of Neurology,
Yale Medical School,
West Tisbury, MA

Judith L. Rapoport, M.D.
Washington, DC

Stanley I. Rapoport, M.D.
Washington, DC.

George D. Raymond, M.D.
Gastroenterology, retired
West Palm Beach, FL

William Reed, M.D.
Internal Medicine, retired
Albuquerque, NM

Richard S. Rivlin, M.D.
Formerly Professor of Medicine, and
Director, Career Development Program,
Nutrition and Cancer Prevention,
Weill-Cornell Medical College
Scarsdale, NY

John J. Roach, M.D.
Seattle, WA

Norman Robbins, M.D., Ph.D.
Professor Emeritus of Neurosciences,
Case Western Reserve University School of Medicine
Shaker Heights, OH

Irwin H. Rosenberg, M.D.
University Professor and Dean Emeritus,
Tufts University and Friedman School of Nutrition Science and Policy
Boston, MA

David Rush, M.D.
Professor Emeritus of Nutrition, Community Health and Pediatrics,
Tufts University
Cambridge, MA

Kevin G. Ryan, M.D.
Radiologist, retired
Port Ludlow, WA

Richard G. Sanderson, M.D.
Cardiothoracic Surgery, retired
Tucson, AZ

Paul E. Sapir, M.D.
Clinical Assistant Professor of Psychiatry & Human Behavior,
Warren Alpert Medical School, Brown University
Providence, RI

Peter B. Schneider, M.D.
Professor of Medicine and Radiology (Nuclear Medicine),
University of Massachusetts Medical School
Worcester, MA

Richard Lee Schoenbrun, M.D., Ph.D.
Psychiatry, San Francisco Community Mental Health Center
Belvedere, CA

Gordon M. Shepherd, M.D., D.Phil.
Professor of Neurobiology,
Yale University School of Medicine
Hamden, CT

John J. Soltys, M.D.
Professor of Psychiatry, retired
Univ. Of North Carolina Medical School
Chapel Hill, NC

Bruce W. Steinhauer, M.D.
Professor, Internal Medicine,
College of Medicine of the University of Tennessee
Memphis, TN

John Urquhart, MD, FRCPE, FAAAS, FRSE
Emeritus Extra-ordinary Professor of Pharmaco-epidemiology,
Maastricht University (Netherlands)
Adjunct Professor of Bioengineering and Therapeutic Sciences,
Center for Drug Development Science,
University of California San Francisco Medical Center
Chief Scientist, AARDEX Group
Palo Alto, CA

Elliot S. Vesell, M.D., Sc.D.
Founding Chairman of Pharmacology,
Evan Pugh Professor of Pharmacology,
Pennsylvania State University College of Medicine
Hershey, PA

Rodberg – Is There Any Way Out for Obama?

Posted by on Friday, Oct 9, 2009

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

Is There Any Way Out for Obama?

By Leonard Rodberg

Progressives worry that, if Obama’s health reform plan (hereafter called the “Plan”) fails to pass, a latter-day right-wing Gingrich movement will take over the Congress in 2010 and the White House in 2012. What I have not heard, but what I am increasingly coming to believe, is that, if the Plan passes in any of its current forms, things will go just as badly for him! Why is that?

The general reason is that the Plan is a DOG. It is a terrible, complex plan that will accomplish almost nothing. Relatively few people will benefit from it, while everyone who has to use health care will continue to experience the mess that is, and will continue to be, the American health care system. And, because of the new requirements built into the Plan, health care finance will become even more complex and confusing.

More specifically:

1. The large majority of people, who receive their insurance from their employer, will see no benefit whatsoever from the Plan. Most will, in fact, find their premiums rising as new requirements imposed by the Plan (e.g., the elimination of lifetime limits) raise the cost of insurance. And, of course, to their undoubted surprise, most of them will not have access to the public option, even if there is one.

2. Most provisions of the Plan will not become effective until 2013. This gives four years for Republicans to criticize the Plan, including (1) its use of cuts in Medicare reimbursements and Medicare Advantage premiums as principal sources of funding, (2) its lack of any real or believable mechanism for containing costs, and (3) its bureaucratic complexity.

3. The taxes on high-cost insurance plans, the other principal source of funding, will cause those who now have good insurance (called, pejoratively, “Cadillac” plans) to find these plans heavily taxed and their employers given a strong incentive to cut back on their benefits. Instead of reducing underinsurance, this part of the Plan will increase it! (And the rest of the plan does little about underinsurance at all.)

4. During the four years of waiting for the Plan to take effect, costs will continue to rise. By the time the Plan takes effect, costs are likely to be at least 25% greater than now. Even more people will find insurance and health care unaffordable. People will ask “What was health reform about?” The disillusionment will be great.

5. The complexity of the plan, including (1) federal rules regarding what kinds of employer-based insurance plans are “qualified,” (2) new income tax forms that will be needed to implement the individual mandate, and (3) the process of determining income eligibility for everyone, will all lend themselves to criticism and even ridicule.

Is there a way out? Not, in my view, as long as Obama sticks with this worthless and unworkable Plan. Only if we were to adopt a much simpler plan that would benefit everyone — a Medicare for All plan — would he be seen as actually addressing the problem and really offering a workable solution. Short of that, he, and all of us, are in real trouble.

(Leonard Rodberg, Ph.D. is Professor and Chair, Urban Studies Department, Queens College/CUNY.)

“If we don’t pass this…”

You hear that phrase in almost every speech made in support of the “Plan” – the reform proposal of President Obama and the Democrats in Congress. It has the implicit threat that if the Plan is not passed, we will be condemned to continue to live with the deteriorating health care mess that we now have. If we do pass the Plan, we will be condemned to live with the deteriorating health care mess that we will have – the mess that Professor Rodberg so adeptly describes.

With all of the rhetoric about choice, why should we be limited to these two options? Neither one is acceptable!

We cannot leave things the way they are. Yet we cannot allow this awful legislation to pass. We may have to have a lockdown of Congress until they get it right, but, if that’s what it takes, let’s do it!

What is the right penalty to enforce an individual mandate?

Posted by on Thursday, Oct 8, 2009

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

Give people breathing room

By Sen. Charles E. Schumer
USA Today
October 8, 2009

Sen. Olympia Snowe of Maine and I decided to give some breathing room to families faced with the uneasy choice of buying insurance they can’t afford or paying a stiff penalty that they also can’t afford. Our proposal, which passed the Senate Finance Committee 22-1, exempts Americans from the requirement to buy insurance if the cost of the available plans exceeds 8% of their income. We also reduced the amount of the penalty and phased it in over time, to make sure the reformed system works before we punish people for not participating.


CBO Understates Major Impact Of Weakened Individual Mandate

BlueCross BlueShield Association
October 7, 2009

It is difficult to understand why the Congressional Budget Office (CBO) estimate did not show a greater impact from the significant weakening of the mandate in the amended bill. Amendments approved during the Senate Finance Committee mark-up eviscerated the individual mandate — completely eliminating it in 2013, significantly lowering penalties to the point that it will only represent about 15 percent of the cost of a premium by 2017. Further, many individuals would be exempt from the penalties altogether. This is likely to result in millions of people foregoing coverage.

The current reform proposal before Congress would encourage more uninsured individuals to purchase health care coverage by assessing a financial penalty on those who fail to do so, thus enforcing an individual mandate to purchase insurance.

As Senator Schumer states, if that penalty is too high, those who can’t afford the insurance premium wouldn’t be able to afford the penalty either. Thus the Senate Finance Committee passed an amendment that offers these individuals and families “breathing room” by granting them the right to remain uninsured by paying a more modest penalty than previously proposed. That penalty might still be a hardship for many, but worse would be the hardship of having no health insurance al all.

BlueCross BlueShield Association points out that these lower penalties would likely result in millions of people foregoing coverage. That would risk adverse selection in which individuals who need health care would buy the plans, and the healthy would opt out as long as their health care needs were minimal. That would drive up premiums, making the plans even less affordable. Worse (strictly from the private insurers’ perspective) is that would knock out a significant portion of the market that they are attempting to capture.

So what is the proper balance to achieve optimal benefit from the penalty under the individual mandate? Students of George Lakoff will recognize that we have here a problem with framing. Members of Congress have decided that their preferred solution to the problems of coverage and affordability is that everyone not eligible for public programs must purchase private health plans. This framing eliminates more effective solutions and excessively limits the policy options. Seeking the proper balance for the mandate penalty leads to a dead end since there is no proper balance. The flaw is not in the penalty. The flaw is in the mandate to purchase unaffordable private plans.

We can help Congress with framing that will lead to the reform that we need, but will they ever be willing to listen?

IBM CEO Palmisano on single payer

Posted by on Wednesday, Oct 7, 2009

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

IBM CEO Sees Big Opportunity In Health-Care Technology

By Peter Loftus
The Wall Street Journal
October 6, 2009

The chief executive of International Business Machines Corp. (IBM) sees a huge business opportunity in making the U.S. health-care system more efficient.

(Sam) Palmisano sees IBM providing everything from electronic-health records technology to ultra-tiny personal devices that read DNA and cost less than $1,000. He likened those technologies to health-care equivalents of universal bar-codes in the retail industry, which made that industry more efficient.

But Palmisano acknowledged that single-payer, government health systems outside the U.S. make it easier to use technology for health-information sharing, because health information is more centralized.

“The advantage of a government payer or centralized system is they can begin to create incentives for change much more so than you can in a fragmented model,” he said.

He said the federal government could save itself $900 billion over 10 years in health-care spending by simply managing it better.

So IBM CEO Sam Palmisano says that single payer, government health systems have an advantage over fragmented systems (like ours in the U.S.) since they can create incentives for change. That seems counter to those who claim (falsely) that government systems suppress innovation.

He also states that the federal government could manage health care spending better (as Medicare and the VA have done).

Wow! Welcome aboard!

Bad advice from the OECD

Posted by on Tuesday, Oct 6, 2009

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

The Organization for Economic Cooperation and Development and Health Care Reform in the United States

By Don R. McCanne
International Journal of Health Services
Volume 39, Number 4 / 2009


Among OECD nations, the United States is an outlier in having the highest per capita health care costs in a system that unnecessarily exposes many individuals to financial hardship, physical suffering, and even death. President Obama and Congress are currently involved in a process to reform the flawed health care system. The OECD has contributed to that process by releasing a paper, “Health Care Reform in the United States,” which describes some of the problems that must be addressed, but then provides proposed solutions that omit consideration of a more equitable and efficient universal public insurance program. The same omission is taking place in Washington, DC. By reinforcing proposals that support the private insurance industry, the source of much of the waste and inequities in health care, the authors of the OECD paper have failed in their responsibility to inform on policies rather than politics.

The OECD has a mission of bringing together governments “committed to democracy and the market economy.” Their release of a paper supporting a private insurance model of reform for the United States seemed to be a fulfillment of this mission. But even their paper added nothing that would refute what we already know from our efforts at reform: the private insurance model is an expensive, wasteful, inequitable, and a fairly ineffective model of ensuring affordable, high quality care for everyone.

It’s not too late to change. Many undoubtedly contend that most of the political capital has been spent and that we cannot go back, but political capital is not a finite commodity. Political capital can be wasted, as it has been on the current reform process. Pursuing policies that cater to the private insurance industry at the cost of health care justice very rapidly depletes political capital. But new political capital can be generated simply by pursuing popular policies that would lead to success in achieving our goals.

The OECD is not going to help us infuse more political capital into the process, but we can do it ourselves. Communicate. Educate. Grassroots. Coalitions. Just think of how much political capital we could generate as long as our goal is affordable, high quality health care for everyone. The supply would be endless.

Continued insurer discrimination assured

Posted by on Monday, Oct 5, 2009

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

Discrimination by Insurers Likely Even With Reform, Experts Say

By David S. Hilzenrath
The Washington Post
October 4, 2009

If insurers are prohibited from openly rejecting people with preexisting conditions, they could try to cherry-pick through more subtle means. For example, offering free health club memberships tends to attract people who can use the equipment, says Paul Precht, director of policy at the Medicare Rights Center.

Being uncooperative on insurance claims can chase away the chronically ill. For people who have few medical bills, it is less of a factor, said Karen Pollitz, research professor at the Georgetown University Health Policy Institute.

And to avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark V. Pauly, professor of health-care management at the University of Pennsylvania’s Wharton School.

At a more nuts-and-bolts level, AHIP has been trying to shape the legislation in ways that could help insurers attract the healthy and avoid the sick, though it has given other reasons for advancing those positions.

By itself, a ban on discrimination would not eliminate the economic pressure to discriminate.

“It would probably increase the incentive for cherry-picking,” Pauly said.

No matter how tightly regulated, investor-owned private insurers will always find ways to avoid enrolling those with greater health care needs. To fulfill their business responsibilities they are mandated to control costs in any way possible. To remain competitive and survive, nonprofit insurers must follow their lead.

A public insurance program has a mission of assisting individuals in getting the care they need. It is especially important to include those who have greater needs.

What does this say about a stand-alone “public option” that competes with private plans on a level playing field by being fully funded by the beneficiaries? Adverse selection would drive the premiums sky high, and the program would fail.

Would we really want our government to engage in the same injustices of the marketplace in which the public administrators would devise schemes to exclude higher cost patients from the government program, just so they could keep the premiums competitive? Of course not. Almost everyone agrees that the government should serve as the safety net, and yet the proposed public option safety net is all holes and no mesh.

If the government were in charge of our health insurance, we would expect it to provide all of us with the coverage that we need. Yet when the private sector is in charge, we reward it richly for devising ways of preventing us from having the coverage that we need.

Maybe before we do anything else, we need to address our pervasive cognitive dissonance.

by Kip Sullivan, JD

October 2, 2009

Douglas W. Elmendorf
Congressional Budget Office
US Congress
Washington, DC 20515-6925

Dear Mr. Elmendorf:

I write to ask for information about the methodology the CBO used to analyze the impact of the public plan (“public option”) in the Affordable Health Choices Act (drafted by the Senate health committee) and HR 3200 (drafted by three committee chairs in the House), and the health insurance cooperatives in America’s Healthy Future Act (drafted by Sen. Max Baucus). The CBO’s discussion of the public plan called for by the Senate health committee bill and HR 3200 assumes the public plan would be available throughout the country. In contrast, CBO’s discussion of the health insurance co-operatives called for by the Baucus bill assumes the co-ops would be unlikely to thrive, or even survive, in many parts of the country.

I can find no information that indicates what evidence, if any, CBO used to reach these conclusions. My statement is based on five letters from you:

July 2 letter to the late Sen. Ted Kennedy, chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee;

July 14 letter to Rep. Charles Rangel, chairman of the Ways and Means Committee;

July 26 letter to Rep. Dave Camp, ranking member of the Ways and Means Committee;

September 10 letter to Sen. Michael Enzi, ranking member of the Senate HELP Committee;

September 16 letter to Sen. Max Baucus, chairman of the Senate Finance Committee.

Although you have written other letters about these three bills, I believe the five letters I listed above are the ones in which you presented conclusions about the “public option” and the health insurance cooperatives that required that you determine, or at least make an assumption about, whether they could survive and participate in all, some or no US health insurance markets.

In Part I of the addendum to this letter, I quote examples of such conclusions. Here I offer a summary of the conclusions that require, in my view, an explanation of your assumptions about the viability of the “option” programs and the co-ops:

• The “public option” in the HELP Committee bill will have premiums roughly equal to those of the insurers it competes with, will enroll few people, will allow its enrollees greater freedom to choose providers, and will utilize few or none of the managed care tactics widely used by the insurance industry.

• The “public option” in HR 3200 will be able to induce a substantial number of providers throughout the country to participate in the public plan, will be able to set its premiums 10 percent below those of the plans it competes with, and will be able to enroll roughly 10 million people.

• The health insurance co-ops under the Baucus proposal will probably not survive in many markets, and where they do they will enroll relatively few people.

Obviously the first two conclusions rest on the premise that “option” insurance programs will start up and succeed in all or most American health insurance markets. The third conclusion (the one about the co-ops) rests on the premise that there is something different about co-ops from the “option” programs that warrants more pessimism. These conclusions raise these questions:

Did the CBO make an explicit determination that the “public option” program in the Senate health bill and HR 3200 will be able to establish itself in all or even some insurance markets in the United States, and if so, what evidence led you to that conclusion?

Did the CBO determine that the health insurance co-ops in the Baucus bill will not be able to survive in some or most US markets, and if so, what evidence led you to that conclusion?

Upon what basis did you determine that the public plan in the Senate HELP Committee bill will not limit enrollees’ choice of provider and will not use managed care tactics or will use them less frequently than the insurance industry does? (Enrollees will, of course, prefer these features, but these features will make it more difficult for the Secretary of the Department of Health and Human Services (HHS), who will be in charge of setting up the “public option,” to break into any given health insurance market.)

The barriers to market entry for a new insurer are very high in the vast majority of American health insurance markets. These barriers would not melt away simply because the potential entrant calls itself a “public option” (or anything else). These barriers apply to insurance companies, co-ops, “public options,” employer coalitions, and all other entities. The most important barriers are the high degree of consolidation that exists in nearly all health insurance markets and the necessity, in the age of managed care, of creating networks of providers (as opposed to simply letting enrollees see any licensed provider).

Here in Minnesota the market has been virtually impenetrable to new entrants for two decades. Numerous observers and industry insiders have said the reason for that is the high level of concentration within the health insurance industry and the need for insurers to create or rent provider networks (see Part II of the addendum to this letter for examples of such statements).

Members of Congress and the CBO cannot assume that entry into all or most of today’s health insurance markets is automatic or even feasible. Proponents of any proposal that relies on that assumption have an obligation to explain and document their assumption. To my knowledge, that has not been done. I realize the failure of the proponents of the “option” and co-ops to document that assumption makes CBO’s job very difficult. Nevertheless, I believe CBO has an obligation to call attention to the barriers the Secretary of HHS and the co-ops will face in trying to create new insurance plans and to attempt to determine whether those barriers can be overcome.

To remain silent about those barriers – to assume them away without notifying the recipients of your letters that that’s what you’ve done – strikes me as a substantial deviation from CBO’s standards.


Kip Sullivan, JD



Part I. Excerpts from five letters from CBO to members of Congress

The new draft [of the Senate HELP Committee bill] also includes provisions regarding a “public plan,” but those provisions did not have a substantial effect on the cost or enrollment projections, largely because the public plan would pay providers of health care at rates comparable to privately negotiated rates – and thus was not projected to have premiums lower than those charged by private insurance plans in the exchanges. (Letter to Sen. Kennedy, July 2, 2009, page 3)

Another significant feature of the insurance exchanges [in HR 3200] is that they would include a public plan that largely pays Medicare-based rates for medical goods and services. CBO estimates that the premiums for …. the public plan would be about 10 percent cheaper than a typical private plan offered in the exchanges. (page 5) …. Enrollment in the public plan would also depend on the number of providers who chose to participate in it. Providers would not be required to participate in the public plan in order to participate in Medicare, and CBO assumed that some providers would elect not to participate in the public plan because its payment rates would be lower, on average, than private rates. Even so, CBO’s judgment is that a substantial number of providers would elect to participate in the public plan, in part because they would expect a plan run by HHS [the Department of Health and Human Services] to attract substantial enrollment. … CBO estimates that roughly one-third of the people obtaining subsidized coverage through the insurance exchanges would be enrolled in the public plan—so enrollment in that plan would be about 9 million or 10 million once the proposal was fully implemented. (page 6) (Letter to Rep. Rangel, July 14, 2009)

… CBO … assumed that [under HR 3200] only firms with 50 or fewer employees would be permitted to buy coverage through the exchanges, and we estimated that about 6 million workers and their dependents would obtain coverage in that way. We also estimated that about one third of those enrollees would choose the public plan…. (Letter to Rep. Camp, July 26, 2009, page 5)

Under [the Senate HELP Committee] proposal, the public plan would… pay negotiated rates to providers of health care…. CBO’s assessment is that premiums for the public plan would typically be roughly comparable to the average premiums of private plans offered in the insurance exchanges…[A] public plan as structured in the introduced bill would probably attract a substantial minority of enrollees (in part because it would include a relatively broad network of providers and would be likely to engage in only limited management of its health care benefits). (Letter to Sen. Enzi, September 10, 2009, pages 5 and 6)

(The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.) (Letter to Sen. Baucus, September 26, 2009, page 5)

Part II. Evidence supporting the conclusion that the Minnesota health insurance market is extremely difficult to enter

In 1988, the Minnesota Department of Health reported, “It is becoming increasingly difficult to ‘crack’ the Minnesota health plan market.” The reason, said the Department, was that new entrants found it very difficult to assemble the critical mass of enrollees and providers needed to compete with the largest insurance companies in Minnesota (Minnesota Health Plan Markets, 1987, February 1988, page 18).

Scholars at George Washington University visited the Twin Cities area in 1991 and reached the same conclusion. They reported, “There is now little chance of market entry by a small newcomer plan unless it is sponsored by one of [the] giants” (National Health Forum, Where Does Marketplace Competition in Health Care Take Us? Impressions, Issues, and Unanswered Questions from the NHPF Site Visit to Minneapolis-St. Paul, January 1991, June 1991, page 5). The “giants” referred to in the preceding quote were Blue Cross Blue Shield of Minnesota and four HMOs that dominated the Twin Cities by 1991. Since 1991, the four HMOs have consolidated into two – HealthPartners and Medica.

In 1994 Prudential fled Minnesota’s managed care market even though Prudential enjoyed excellent name recognition, insured 30,000 Minnesotans, and had contracts with 800 primary care physicians and 1,500 specialists. As the Minneapolis Star Tribune put it,

Prudential did not grow large enough or fast enough in the Twin Cities market to maintain a substantial lead, analysts said. The firm was easily overshadowed by heavyweights such as HealthPartners and Medica…. And these bruisers and others like them are merging or forming alliances that kept welterweights like Prudential Plus on the ropes. (Dee DePass, “Prudential to discontinue managed care health plan,” Star Tribune, July 9, 1994, 1D).

Prudential’s own management and other analysts agreed with this explanation.

Five months after Prudential left, American Family Insurance pulled out. (Glenn Howatt, “American Family medical business leaving state,” Minneapolis Star Tribune, December 9, 1994, 1D).

In a 1993 article for the National Journal about the Minnesota market, Julie Kosterlitz quoted Alan Baumgarten, a health policy expert then with the Citizens League:

“In this market, the barriers are very high,” … Baumgarten said. …. New plans … face a catch-22, he said: Unless they have lots of patients, it’s hard to attract doctors and hospitals at competitive prices. But without an extensive network of doctors and hospitals in place, it’s tough to attract patients. (“Monopoly medicine,” July 10, 1993, page 1748)

Other insurers have left Minnesota since 1994. The Minneapolis Star Tribune reported just last week (September 25) that Minnesota’s oldest HMO, FirstPlan of Minnesota, will close its doors at the end of this year for the same reasons Prudential left. Although FirstPlan had been in operation since 1944, and although it insured 18,000 people in a fairly small area (the Duluth-Two Harbors area), it was too small to survive competition with Minnesota’s larger plans. The article went on to report, “FirstPlan isn’t the only one to go under in recent years.” Mayo Health Plan (an HMO run by the Mayo Clinic) and Altru Health Plan in northwestern Minnesota both shut down in 2000. No insurance company, either new or existing, has challenged the dominance of the Big Three in Minnesota – Blue Cross, HealthPartners and Medica – since the mergers that created HealthPartners and Medica in the early 1990s.

Minnesota’s market is not the only highly concentrated health insurance market. High concentration levels characterize the health insurance industry in every state in the country. Eleven other states have more concentrated markets than Minnesota does.

Kip Sullivan, JD is a member of the Steering Committee of the Minnesota Chapter of Physicians for a National Health Program.

Two unacceptable policy flaws

Posted by on Friday, Oct 2, 2009

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

Panel Finishes Work on Health Bill Amendments

By Robert Pear and Jackie Calmes
The New York Times
October 2, 2009

Under Mr. Baucus’s bill, which would require most Americans to carry health insurance, “the consequence for not maintaining insurance would be an excise tax,” up to $1,900 a year for a family.

By a vote of 22 to 1, the committee adopted an amendment delaying and reducing that penalty. The maximum penalty for a family would start at $200 in 2014 and rise to $800 in 2017.

At the same time, the committee decided to exempt a greater number of people from the requirement to have coverage, known as an individual mandate. Under Mr. Baucus’s bill, people would have been exempt if they had to pay more than 10 percent of their adjusted gross income for the cheapest available insurance plan. The amendment lowers the threshold to 8 percent of income.


What Portion of Premiums Should Insurers Pay Out in Benefits?

By Uwe E. Reinhardt
The New York Times
October 2, 2009

In March 2008, the Council of Affordable Health Insurance took aim at state regulations that would require companies selling health insurance in the non-group market to spend at least 70 percent of collected premiums on direct health benefits — a fraction insurers call their “medical loss ratio,” also known as the “health benefit ratio.” In its March 2008 newsletter, the council wrote:

insurers need to have enough money to pay claims. In most states, individual coverage faces [medical] loss ratios between 55 and 65 percent.

On its Web site, the council describes itself as “a research and advocacy association of health insurance carriers active in the individual and small group market.” In effect, the organization tells us here that unless its member companies are allowed to burn 35 to 45 percent of premiums on marketing, broker commissions, administration, other expenses, and profits, they cannot thrive in the non-group market for health insurance.

It is a remarkable statement.

Two difficult issues that stem from using private health plans as the model for reform include: 1) Can you mandate individuals to buy an insurance plan they can’t afford?, and 2) Can you allow insurers free rein on using premium dollars for their own purposes rather than spending them on health care? Let’s see how the Senate Finance Committee approached these.

1) The concern should be about the affordability of health care, but the problem being addressed is the affordability of health plans. The committee has decided that the tier level plan that would be mandated for purchase would provide benefits with an actuarial value of 70 percent. That means that the individual would be responsible for the 30 percent balance, which can make actual health care unaffordable for many (even with subsidies and spending caps). Making plans more affordable makes health care less affordable (bad policy).

Many would decide that the premiums of these inadequate plans would still be more than they would want to pay. To force these individuals to buy the plans a financial penalty would be assessed on those who fail to do so. The closer the penalty is to the premium, the more likely it is for the individuals to buy the plan. The committee recognized that many of those who could not afford the premium would not be able to afford the penalty either. Thus a decision was made to reduce the penalty for non-compliance. Since the numbers who will decline to purchase insurance is inversely related to the amount of the penalty, many more will elect to pay the penalty and remain uninsured (bad policy).

Recognizing that many truly cannot afford the premium the committee decided to exempt those for whom the premium would exceed a given percentage of their income. It was recognized that, for many, 10 percent of income was still too high of a price for the cheapest plans, so the committee reduced that threshold to 8 percent. Lowering the threshold increases the numbers qualified for the exemption, leaving more individuals uninsured (bad policy).

2) Private health plans spend far too much of the premium on administrative services, leaving much less for spending on actual health care (a uniquely American approach to health care financing). Some of the proposed changes in regulation of the private insurers theoretically should reduce administrative spending, but there is no requirement for the insurers to do so.

Sen. Jay Rockefeller introduced an amendment that would limit insurers’ administrative spending to 15 percent of the premium so that 85 percent would have to be spent on health care. When you think of our horrendous level of health care spending, 15 percent is still an outrageous amount to remove from the health delivery system (bad policy). Yet both Republican and Democratic committee members were so incensed at the prospect that the government might tell the private insurance industry how it would have to spend its money, that Sen. Rockefeller had to withdraw his amendment. (Even Democrats believe that our money held in trust in an insurance risk pool somehow becomes the property of the insurer to do with as they please.)

Making people buy a product that they can’t afford and that wastes their health care dollars is really bad policy. Really, really bad. And there is absolutely no way that the House, or the Senate, or the Joint Conference Committee can change the framework of the private insurance model to make it work for all of us.

We can’t walk away from reform, but we need to dump this turkey and move on with an improved Medicare for all. That’s the change in policy direction that we need. Change we can believe in.

Will the insurance exchange be as effective as FEHBP?

Posted by on Wednesday, Sep 30, 2009

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

Employees Face Big Hike in Health-Care Costs

By Steve Vogel
The Washington Post
Federal Diary
September 30, 2009

Employees enrolled in the Federal Employees Health Benefits Program will pay an average 8.8 percent more in health-care costs, according to figures released by the Office of Personnel Management.

Blue Cross Blue Shield rates will increase 15 percent for self-only coverage and 12 percent for family coverage, the company said. Enrollees will have to pay more thanks to a wider range of benefits and the company’s wide network of providers, said Jena Estes, vice president of Blue Cross Blue Shield’s federal employee program.

“We have a very strong commitment to managing the costs and managing that trend. You’ll see a real strong focus on coordinating the care and managing the total care,” Estes said.

“This is an enormous increase that erodes federal employees’ standard of living,” Colleen M. Kelley, president of the National Treasury Employees Union, said in a statement.

The American Federation of Government Employees expressed “grave concern” at the news. “FEHBP is getting more and more unaffordable for more people,” said Jacqueline Simon, AFGE public policy director.

Members of Congress are promising reform that will give us choices of coverage, just like they have in the Federal Employees Health Benefits Program (FEHBP). They will do this by establishing an FEHBP-like insurance exchange for the purchase of health plans.

Blue Cross Blue Shield is the most popular program selected by federal employees. They promise to continue with their “very strong commitment to managing the costs.” And how well are they doing? This year’s rate increases are 15 percent for individuals and 12 percent for families.

FEHBP, as an example of an insurance exchange, is proof that a financing system based on private insurance plans is an obsolete model that “is getting more and more unaffordable for more people.” Yet Congress is moving forward with this model.

What about a government financing system? At the Senate Finance markup yesterday, when asked by Sen. Chuck Schumer if Medicare is a good program, Sen. Chuck Grassley replied, “I think that Medicare is part of the social fabric of America.” But then he said that government is not a fair competitor, “it’s a predator.”

Ask federal employees insured by Blue Cross Blue Shield whom they think the predator is. Then ask Medicare beneficiaries.

Medicare should be a part of the social fabric that weaves all of us into its egalitarian patterns, forming an indestructible fabric based on social solidarity.

Are physicians fleeing Medicare?

Posted by on Tuesday, Sep 29, 2009

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

Utilization Trends Indicate Sustained Beneficiary Access with High and Growing Levels of Service in Some Areas of the Nation

Medicare Physician Services
August 2009

GAO found that Medicare beneficiaries experienced few problems accessing physician services during its period of study. Very small percentages of Medicare beneficiaries–less than 3 percent–reported major difficulties accessing physician services in 2007 and 2008. The proportion of beneficiaries who received physician services and the number of services per beneficiary served increased nationwide from April 2000 to April 2008. Indicators of physician willingness to serve Medicare beneficiaries and to accept Medicare fees as payments in full also rose from 2000 to 2008.

In the debate on health care reform we hear that physicians are leaving the Medicare program because they cannot continue to accept the low fees paid by the government. Not true, according to this new GAO report. Physicians are more willing to serve Medicare beneficiaries and to accept Medicare fees as payments in full.

Some might use this finding to support a public option paying Medicare rates, but it is a much more powerful argument when used in support of a single payer, Medicare for all, national health program. Unlike the private insurance plans, Medicare pays enough, but not too much, though appropriate revisions are a continuing work in progress – as it should be.

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