By Lynn M. Petrovich for CommonSense2.com
For the Love of Universal Health Care
Some time ago I received a letter from my employer regarding its health insurance policy which said there would be some changes to it. First of all, that’s never good. Second, I wasn’t sure what the letter meant. I was confused. I thought it meant whatever I had been doing, I couldn’t do anymore, but I wasn’t sure. You see, I hadn’t been doing anything prior to receiving the letter, and I didn’t know if I should still not be doing anything or if I should start doing something. Actually, doing nothing is what I do best…well, when it comes to this health care thing, that is. If I don’t need to use it, then that is when it works best for me and my family.
I mean, trying to understand the mechanics of our current health care structure requires an advanced degree in doublespeak. There’s a contract but somehow it’s always subject to unilateral alteration, especially if profits start dropping, then these insurance companies look for ways to re-assess the relationship (According to MS magazine until the year 2014, domestic violence, pregnancy, and cesarean sections are pre-existing conditions which could render a claim denied).
And there are times, I admit, I have to hand it to our for-profit health insurance for their ingenuity. The aforementioned letter forewarned of a 12 page pamphlet entitled “Important Notice of Changes to Policy”. Among the 40 or so “revisions” (which all increased insured’s out of pocket costs) was a real gem: The Company would no longer reimburse policyholders for prosthetic devices not prescribed by a physician and for which there was no loss of limb.
I wonder how long that had been going on before someone became the wiser.
So you can see why I’m rather claim-shy; I avoid doctors and hospitals like the plague. That is, until one night several months ago when the ultimate crisis happened: A family member became ill, and we had to go to our local emergency room. A total of 37 hours, including one night, was spent in the hospital. Then we got the bill. It totaled $16,808.
After the deductible, our insurance company paid $2,739. That’s it. Which begs the question: Which was the cost of the hospital’s services, $16,808 or $2,739?
I’ve spent months trying to get an answer to this question. Everyone at the hospital from accounting, to billing, the doctors and nurses, employees, former employees, collection agents, even the hospital’s Executive Director have been unable to articulate the tabulation of this invoice. I’m told “it’s complicated, very, very complicated” and “no one knows exactly how the bills are computed because it’s complicated.” There’s the chauvinistic approach: “Mrs. Petrovich, you don’t need to know because it has nothing to do with you.” And the demeaning: “It’s something you wouldn’t understand.” Of course then there’s the ever lovin’: “It’s just something we do, an adjusting entry, and no one really knows how it’s done because [you got it] it’s complicated.”
Without the knowledge of exactly how hospital bills are calculated, how can we ascertain if medical costs are indeed increasing? I mean if they’re just throwing darts at a board, we have no control or foundation for determining medical cost trends.
And quite frankly, how difficult can it be? I mean pardon the analogy, but it’s not brain surgery. It’s cost accounting 101.
Reviewing the hospital’s detail of services rendered, among the charges were $8,786 for the room (one night), and another $2,609 for the emergency room (2 hours – ouch!), and $368 for one X-ray (was it printed on gold?).
Here’s an interesting tidbit: If you can afford health insurance, the hospital will accept $2,739 as payment in full; if you can’t afford health insurance, you’ll owe more, like $16,808.
That’s not complicated, that’s sick.
So in an effort to thwart my frustration with regard to how much the hospital’s services cost to the hospital and why they would negotiate with our for-profit health insurance conglomerates to accept a sum that is sixteen percent of what they billed, I decided to dive into their financial statements because, like most hospitals in America, it’s a non-profit 501(c)(3) institution. IRS Form 990s are public information.
There are strict guidelines for operating a non profit, 501(c)(3), which is understandable because non profit entities pay no income, property, or sales taxes. Contributions are tax deductible. Also, an important component is that earnings (not referred to as profits, but as “surplus”) may not benefit any individual or stakeholder and must be retained by the organization and used to further their cause, which must advance the welfare of the public.
The latest IRS Form 990 available, 2008, was very interesting. The hospital, whose mission statement is to provide “medically necessary health care services to all individuals regardless of race, color, national origin, religion, or ability to pay” had a loss of almost $10 million on revenues of $266 million (of course we don’t know which set of books were used to tabulate the revenue, the one showing $16,808 or the one booking $2,739). Despite this loss, they doled out bonuses to their (already) highly compensated employees. Since this hospital is part of a system of hospitals and that conglomerate paid its Executive Director in excess of $3 million (including half a million as bonus), I reviewed at least a dozen hospital’s financials in the Tri-State area (Among nine hospitals, compensation to highly salaried personnel totaled over $55 million).
This particular hospital wrote off almost $12 million as uncollectible. (In fact one of their collection agencies told me they typically see over 1,000 accounts per year which they deem as uncollectible.). This hospital had a cumulative net fund balance (what’s left over after subtracting what’s owed) of negative $48 million.
Here’s something worthy of note: Stuck to the hospital room’s pegboard was a flyer which said they were on a “cost-cutting” mission and had partnered with doctors in a “profit-sharing” measure (not sure how a non profit has profit sharing). This mission included several critical modifications to their policies – like not changing patients’ bed linens daily unless they were soiled. Hey, aren’t hospital infections one of the largest problems of staying in the hospital? Just thinking out loud here but maybe they could cut out bloated paychecks, bonuses, “incentive” compensation programs (apparently a quarter to half a million dollars salary isn’t enough enticement), severance packages, world class travel and hotel rooms; or advertising and 12 page glossy color brochures with pictures of happy people catching butterflies which I receive ad nauseam (and are nothing more than teasers to people who can’t afford healthcare).
Some of the other hospitals had investment losses in the millions on derivatives which have become totally worthless. I’d cut that shit out completely. I mean it seems to me for every dollar lost on derivatives, they’ve got to make that up by charging more from people who can’t afford to pay you in the first place.
And for goodness sake, change the bed sheets already!
Oh the interesting information I found when digging into Form 990s, that is, those hospitals that didn’t close their doors. Here are some more highlights:
A NJ regional trauma hospital (6 CEOs with compensation in excess of $4.4 million) had unrealized losses on investments of almost $60 million. It wrote off almost $50 million as uncollectible.
For some reason hospitals spend large sums on office supplies totaling in the hundreds of millions – comprising over 20% of overhead (I’m talking about for each hospital). That’s a lot of white out!
A central Jersey hospital gave its former CEO severance pay of $732,809; current CEO pay was half a million.
Here’s a good one: One hospital paid two non-medical (i.e. administrative) employees a combined total of $460,000 and yet felt the need to add another $3,000 so they could get their taxes done.
According to a 2/22/10 article in the New York Post, St. Vincent’s Hospital (which closed this year due to insurmountable debt of almost $1 billion) paid NFL Giant’s quarterback Eli Manning at least $600,000 in addition to “first class airfare, lodging, ground transportation and meals for his family” for media events. Mr. Manning is already independently wealthy with a 6 year deal worth almost $100 million and another $5 million a year in endorsements. An astute St. Vincent’s board member noted “Manning’s pact was a ‘bad deal at a bad time’ that could lead to ‘bad publicity” (thousands laid off).
Harlem’s North General Hospital couldn’t hold on either. An official announcement this past April stated: ”Like many health care providers, North General has to find ways to cope with dramatic changes to health care, state funding, the economy and our local area.” North General closed its doors July 2nd (thousands laid off)
In the last decade, Los Angeles County saw 14 hospitals, with emergency rooms, close down due to financial constraints (tens of thousands laid off).
It seems the expense side of hospital ledgers is amok with waste and what we in NJ recognize as “The Blob”, and there’s obviously a tremendous disconnect between what is invoiced by the hospital and what is paid.
According to a report by the Institute for Health & Socio-Economic Policy (IHSP) dated 12/13/2005 (you can find this report at www.calnurse.org), “The Third Annual IHSP Hospital 200: The Nation’s Most – and Least – Expensive Hospitals Fiscal Year 2003/2004″ [”The Report”]:
“When pressed, the hospital industry habitually states that gross hospital charges are irrelevant since actual payments from Medicare and other payers are reimbursed via fixed rates. The question left unasked and unanswered is, if reimbursement rates are absolutely fixed, then why are not hospital gross chares – the ‘list prices’ – fixed and indexed to the same rate?”
“The Report”, p. 5
Exactly. What this Report found in its study of 238 hospitals across America was a shell game referred to as “The Health Care War Economy”:
“High hospital charges have provided ideological cover for health plans to raise once again premium rates by double digits – and to dramatically increase their profits – thus increasing health care costs for large and small employers and federal, state and local government agencies. This has prompted a number of businesses to scale back on the quality of the plan available for their employees and has been a significant contributor to the growing ranks of the uninsured whose only recourse to care is the hospital emergency room – the most expensive form of care. Hospitals then cost shift that economic burden to other payers by raising charges in so far as possible, particularly drug, medical supply and operating room charges, contributing to a self-perpetuating and self-defeating Health Care War Economy of more expensive care, less care, higher premium rates, and more uninsured.
This brings us full circle and is exactly what one should expect as the necessary outcome of the ongoing but unwinnable battle within the Health Care War Economy struggles among pharmaceutical corporations, insurers and hospitals as they do their best to exploit each other in a market care-blind to the nation’s health needs.”
The Report, pgs 14 – 15
This Report details in Table 9, pages 34 through 38, the average total billings-to-cost-ratio of the top 100 Hospitals by State. Some of the most egregious offenders, at one thousand seventy five percent above cost, are Tenet Healthcare (for-profit corporation that owns or leases at least 50 hospitals, $9 billion in 2009 sales), and Temple University in Pennsylvania (nonprofit 501(c)(3), CEO compensation for 2007 was $1.1 million) at nine hundred ninety percent above cost.
The Report reviewed lawsuits filed on behalf of patients who claimed they were unfairly treated:
Scott Ferguson, a retired artist without health insurance, was billed $66,900 for treatment of a heart condition at St. Anthony Central Hospital in Denver last December . If he had had insurance, his attorneys claim the tab would have been about $10,000.
The Report, p. 94
This, our standard industry-wide “health care” practice, indicates health care costs are not necessarily increasing (unless CEOs wants bigger bonuses, severance packages, and maybe a pony), but instead are artificially inflated and in an effort to maximize revenues from those least able to pay for it.
So what do hospitals do when the uninsured or those with limited insurance can’t pay? They aggressively pursue patients – for the inflated billings – by contracting with collection agencies that use any tactic available to secure payment. Many patients end up with ruined credit ratings, garnished wages, high-interest rate credit card debt, or bankrupt.
According to an online news agency, over 62% of bankruptcies filed last year were due to high medical bills, three-quarters of those people had medical insurance: “Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country” said Steffie Woolhander, M.D., of the Harvard Medical School (CNN.com 6/5/09).
So going back to the criteria for establishing and running a non profit 501(c)(3) entity, how does forcing people into poverty or insolvency by insisting on payment for a puffed up hospital bill advance the welfare of the public?
Under our current system, hospitals’ sources of revenue are multiple and costly to obtain. A great deal of overhead must be expended in the (timely) claim filing process in order to secure funds among various entities, to name a few:
(3) TRICARE (military reimbursement to civilian hospitals);
(4) Matching State Medicaid
(5) SCHIP (States’ Children’s Hospital Insurance Plans)
(6) Charity Care,
(7) For-profit private insurance companies which all have their own processing procedures, paperwork, and deadlines
(8) Collection agencies
(9) Attorneys who have filed legal claims against patients.
The Patient Protection and Affordable Care Act, signed into law by President Obama in March, does nothing to stop this abusive health care practice; in fact it enables the dysfunction by forcing more people into it.
So what, as a nation, can we do?
The best solution is Universal Single Payer Health Care which considers health care a basic human right, “un-complicates” the system, and removes the profit motive.
(1) Universal – because everyone would be covered regardless of race, age, sex, employment or ability to pay. It would be publicly financed, privately delivered.
(2) Single Payer – because funding would originate from a single source, a small, fixed payroll tax as a percentage of wages which would be much smaller than what the majority of Americans now pay in insurance premiums (full disclaimer: LeBron James and Paris Hilton would pay more);
(3) Health Care – that is, actual accounting-determined-cost-controlled health care for individuals and not for the exploitation of hospitals, private profit-driven insurance conglomerates, and the pharmaceutical industries.
Under Universal Single Payer Health Care, hospitals would be paid a single sum, an amount that is equal to their annual operating costs. That’s it.
On the expense side, there would be no need for
(2) Filing of claim forms
(3) Writing off uncollectible accounts,
(4) Collection costs
(5) Colorful glossy brochures
(7) Lobbying expenses
Of course there would have to be oversight to knock down those million-dollar compensation packages (think employment!).
The cost savings just from uncollectible accounts would be enough to open more hospitals (a review of 10 hospital’s financials showed they collectively wrote off over $212 million – think employment!).
Even better the States would not have to fund charity care, SCHIP, TRICARE, match Federal Medicaid dollars, and any other low-income specific health programs. Conservatively speaking the collective savings would be at least $60 billion.
So under Universal Single Payer Health Care, we are able to save billions of dollars, open new hospitals, increase employment, and streamline costs and funding.
Now that’s a change I wouldn’t mind receiving a letter about!
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.
Commissioners OK health rate plan
By Sarah Kliff
August 17, 2010
The National Association of Insurance Commissioners approved Tuesday morning (by a unanimous vote) a preliminary outline of what insurers will be able to count as medical costs, a document necessitated by the health reform bill’s requirement that insurers spend at least 85 percent of subscriber premiums on medical costs in the large group market and 80 percent for small group and individual plans.
While insurance commissioners moved forward unanimously, familiar fault lines emerged between consumer advocates and industry over the document and how it categorizes medical spending.
“In general, we are very pleased,” said NAIC consumer advocate Timothy Jost, a professor of health policy at Washington & Lee University. “The process has been very open and participatory. We feel like our concerns have been listened to.”
“The NAIC is conducting a transparent and thorough process as it develops the [medical loss ratio] MLR definition, but the current proposal could have the unintended consequence of turning back the clock on efforts to improve patient safety, enhance the quality of care and fight fraud,” AHIP president Karen Ignagni said in a statement.
NAIC approved reporting form (blank):
Letter from AHIP’s Karen Ignagni:
The National Association of Insurance Commissioners (NAIC) has finally come to agreement on the reporting form that likely will be used to determine whether or not the private insurers are in compliance with the required medical loss ratios (MLRs). The agreement is being reported as a victory for health care consumers and a defeat for the private insurance industry, but this ignores the crucial overriding issue.
The debate was over how much of their administrative costs the private insurers would be able to pass off as quality improvements that could be classified as medical expenses. Such reclassifications would allow the insurers to spend more for other non-medical purposes such as marketing and profits. Much of their attempted overreach – some described in Karen Ignagni’s letter – was rejected.
This is not a victory for the health care consumer. We are still stuck with a middleman industry that has been granted the right to keep 15 to 20 percent of our premium dollars to use for their own purposes. Congress and the President rejected a model of reform – an improved Medicare for all – that would have eliminated much of this waste plus the waste of the excess administrative burden that the insurers place on physicians and hospitals. The insurers get to include the latter as medical costs, further padding their margins, but administrative waste doesn’t benefit anyone’s health.
With all of the attention being given to the details of implementing the Patient Protection and Affordable Care Act (PPACA), too many have forgotten about the fact that the financing model in PPACA is irreparably flawed and can never bring us affordable health care for everyone. Instead of frittering away our efforts in the peripheral skirmishes, we need to pull together and win this war.
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 economic crisis and medical care usage
By Annamaria Lusardi, Daniel J. Schneider, Peter Tufano
National Bureau of Economic Research
Working Paper 15843
We use a unique, nationally representative cross-national dataset to document the reduction in individuals’ usage of routine non-emergency medical care in the midst of the economic crisis. A substantially larger fraction of Americans have reduced medical care than have individuals in Great Britain, Canada, France, and Germany, all countries with universal health care systems. At the national level, reductions in medical care are related to the degree to which individuals must pay for it, and within countries are strongly associated with exogenous shocks to wealth and employment.
This five-nation study of the impact of the financial crisis on usage of routine medical care demonstrates that both a decline in employment and a decline in wealth are strongly associated with reductions in medical care. But once again, the United States is an outlier.
U.S. citizens pay the highest out-of-pocket amounts for health care, and therefore were two to five times more likely than Europeans to reduce their use of health care. In difficult economic times, higher cost sharing has a greater negative impact on health care access.
The Patient Protection and Affordable Care Act (PPACA) will intensify this problem because most of the subsidized private plans will have low actuarial values, requiring larger deductibles, higher coinsurance (percentage of costs paid by the patient), and higher copayments (dollar amount paid by the patient).
The health care financing system should be designed to allow individuals to have the health care that they need without exposing them to financial hardship, and that protection certainly should extend into times of economic crises.
Now that PPACA has established underinsurance as the norm, we can anticipate greater reductions in necessary care, especially during difficult economic times. Or instead we could ensure that people receive the care that they need by replacing our financing system with a single payer national health program. As voters, it’s our choice.
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.
Big and beleaguered: WellPoint’s bad image
By Emily Berry
American Medical News
August 16, 2010
Thus far, WellPoint and insurance trade group America’s Health Insurance Plans have responded to criticism about rate increases with variations on the same theme: Medical costs, driven by physicians and hospitals, are rising so dramatically that insurers cannot avoid raising rates.
The argument doesn’t appear to work if WellPoint and AHIP are trying to elicit sympathy or understanding from the public or policymakers.
As it went on the defensive using studies demonstrating higher medical costs, WellPoint reduced payment for physicians in most of its markets by double-digit percentages for certain procedures, and the cuts were across all specialties, said Susanne Madden, CEO of the consulting firm Verden Group in Nyack, N.Y.
“They’ve done a spectacular job destroying customer loyalty and physician loyalty at the same time, and they’re not making any friends in government,” she said. “They don’t seem to have a grasp on the fact that if they do not have physicians as allies in some way, shape or form, they’re going to have a hard time.”
If it cannot raise rates, WellPoint — and other national insurers — will have to cut costs, experts said. This is where physicians might be affected. WellPoint is likely to cut costs by further reducing payments for hospitals and physicians and restricting networks, experts said.
WellPoint’s phenomenal business success has been largely due to its ability to offer competitive premiums by limiting what it has had to pay out in health care benefits. Will WellPoint’s business model continue to be viable?
It has targeted its marketing to the healthy workforce and their young, healthy families, and to the portion of the individual market that can pass underwriting standards. Under the Patient Protection and Affordable Care Act (PPACA) WellPoint will no longer be able to exclude individuals with greater health care needs, neither by favorable selection nor by retroactive rescissions. Without other innovative cost controls, premium increases will be inevitable.
Under PPACA, WellPoint will also be required to provide a standard package of benefits, preventing them from reducing health care spending by cutting benefits. They will also be required to provide plans with tiered actuarial values, prohibiting them from requiring ever greater out-of-pocket cost sharing by the patient. Thus premiums will have to reflect the actual increases in health care costs.
It would be possible for WellPoint to slash reimbursement rates for physicians and hospitals, but that would be a terrible business decision wince it would risk a massive exodus from their provider networks.
It is likely that WellPoint and other insurers will establish more restrictive networks with providers who are willing to accept payment reductions in exchange for greater volume, but that loss of choice would certainly further alienate their plan subscribers, also threatening their market.
The plans may search for other innovations, including some of those in PPACA, but at this time there is little prospect that cost savings could be achieved without creating greater animosity amongst patients and providers.
To comply with PPACA, WellPoint will have to increase premiums and market primarily plans with low actuarial values of 60 or 70 percent, leaving excessive out-of-pocket costs for those with health care needs. The subsidies in PPACA are too small to prevent financial hardship, and there is little political will to expand the federal budget by increasing the subsidies.
The situation can only grow worse with time. The WellPoint model will inevitably end up in the trash heap of failed policies as it is replaced with a single payer national health program – a program that would meet the needs of patients and their health care professionals.
Executives at health insurance giants cash in as firms plan fee hikes
By Noam N. Levey
Los Angeles Times
August 11, 2010
The top executives at the nation’s five largest for-profit health insurance companies pulled in nearly $200 million in compensation last year — while their businesses prepared to hit ratepayers with double-digit premium increases, according to a new analysis conducted by Health Care for America Now.
White House spokesman blasts liberal critics
By Peter Nicholas and Tom Hamburger
Los Angeles Times
August 11, 2010
Festering tensions between the White House and liberal activists flared Tuesday, with presidential Press Secretary Robert Gibbs scolding what he called “the professional left” for its vocal objections to President Obama’s record.
“These people ought to be drug tested,” Gibbs said. “They will be satisfied when we have Canadian healthcare and we’ve eliminated the Pentagon. That’s not reality. They wouldn’t be satisfied if Dennis Kucinich was president.”
The backlash against Gibbs was swift.
Dr. Quentin Young, a Chicago physician and national coordinator of Physicians for a National Health Program, which advocates for single-payer health insurance, said he was “incredulous” when he first heard of Gibbs’ comments. Young, an early supporter of Obama, immediately wrote Gibbs.
“I believe that unless you retract the insulting description of deeply committed citizens you will drive off those of us who supported the president’s campaign and have anguished over the fruitless lurches to the right that have characterized the first half of the president’s first term,” Young wrote.
It is no secret what the Democrats under the leadership of President Obama did when it came time to fix our health care system. They left the big corporations in charge of the health care funds. The report on the very high compensation for the top executives of the nation’s five largest for-profit health insurance companies at a time of double digit premium increases leaves no doubt as to who the financing infrastructure is designed to benefit. It is a sickening example of our national priorities which result in a massive transfer from the ordinary people to the wealthy.
Liberals who care are becoming less tolerant. The message has been received by The White House. Their response? We should be “drug tested” for wanting “Canadian healthcare.”
PNHP’s Quentin Young has responded appropriately to presidential Press Secretary Robert Gibbs, as quoted above.
It isn’t that those on the left who wanted a better deal for all Americans are poor losers. It’s that the administration of Change who greased the conduits for the upward flow of societal funds are bad winners.
How effective the mind is in dealing with perceptions and realities brings us to asking another question. Who is it that needs to be drug tested?
“The new health care legislation is a step toward elimination, by slow strangulation, of private health insurance and establishment of government as the ‘single payer.’” – George Will, in his weekly newspaper column, Sunday July 11, 2010
Everyone loves to pick on the Affordable Care Act (ACA), and well they should. This 2,000+ page contraption, this heap of handouts to the special interest lobbyists with a few shiny baubles thrown in to placate the common folk, was not only written by the for-profit health insurance industry but now will be implemented by former WellPoint/Anthem Vice President Liz Fowler who actually penned much of the law in her role as Max Baucus’ chief healthcare counsel for the Senate Finance Committee. You don’t have to make this stuff up, as emptywheel reported on FireDogLake July 14, 2010, “Former WellPoint VP Liz Fowler to Implement Health Care Oversight”
But what about George Will’s fine whine that the insurance industry faces strangling regulation? Robert Pear wrote in the New York Times on August 2 that the new law will lead to more regulation of the industry, and “the transition is full of risks and uncertainty for all involved.” If the Obama administration is going to “regulate the industry for the benefit of consumers,” he noted, then “they can’t help but destabilize or disrupt the existing market.”
Wall Street doesn’t like uncertainty. It detests being destabilized. Stock analysts are not missing out on this. The brokerage firm Edward Jones “downgraded the ratings on the stocks of the three health insurers it covers – UnitedHealth Group, WellPoint and Aetna — to ‘sell’ from ‘hold’ late on Friday [7/30]. Those companies are the three largest U.S. health insurers.” (Reuters 8/2/10)
This new blow comes after legendary investor Warren Buffett pulled the plug on WellPoint and United Health, selling all Berkshire Hathaway’s holdings in the insurance giants during the first quarter of 2010 (“Buffett’s Berkshire Disposes Stake in UnitedHealth, WellPoint”)
Speaking in Virginia, former House Speaker and presumed presidential candidate Newt Gingrich said on May 14,
“The employer-based system will collapse because [the ACA] encourages businesses to drop health care coverage and incur the fine. When employees realize the high costs of the health care exchanges, they will demand a nationalized health care system.“
It only gets worse, or better, depending on your perspective. According to Gingrich, the business community is going to lead the call for single payer Medicare for All.
And well they should. Gingrich wasn’t making this up. On May 6, CNN Money released documents showing that “many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government… AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option.”
Is the Affordable Care Act unaffordable? Isn’t it at least a step in the right direction?
Those questions can only be answered by considering whether the ACA ends up strengthening or weakening the health insurance corporations. Progressive critics of the bill point out that the new legislation hands over $350 billion in government subsidies to the private insurers while mandating consumers to buy the industry’s shoddy products. That, combined with a lack of price controls means the ACA could prove to be a bonanza for the corporate stakeholders in the medical-industrial complex.
On the other hand, the changing marketplace is full of perils, even if the conservative icons quoted above are exaggerating them to stir up fear of Socialized Medicine (and maybe scare up some donations).
If we stand back and rest on our laurels, believing that the ACA will save us, then we are doomed. The industry lobbyists are working overtime to take the best parts of the bill and weaken them, while destroying any good that is in the bill (see Wendell Potter in the Huffington Post on July 27, Health Insurers Leaning on State Insurance Commissioners to “Reform” Reform).
“We believe that Medicare for All is inevitable in the United States. It is up to all of us to determine when the inevitable becomes the reality.”
– Representatives Dennis Kucinich (D-Ohio), John Conyers (D-Mich.), and U.S. Senator Bernie Sanders (I-Vt.), statement for Medicare’s birthday, July 29, 2010
If you’re not inclined to believe George and Newt, then how about Dennis, John, and Bernie: “It is up to all of us to determine when the inevitable becomes the reality.”
The reality is that single payer, Medicare for All, is not inevitable, nor is there any guarantee the ACA won’t bankrupt us while enriching the corporations that lobbied for it.
It reminds me of a slogan we have in Indiana, “Healthcare Reform: We’re Still For It, and We’re Not Done Yet!”
Nationally, with the growing recognition that the health insurance giants stand as the greatest barrier to affordable healthcare for all, investors are beginning to see that this is not an industry socially responsible stockholders should be in (Huffington Post May 12, Napalm, Big Health Insurance, and Divestment).
I went to medical school to take care of sick people. The insurance companies fulfill their fiduciary responsibility to their investors by finding ways not to pay for the care of the sick. All their innovation and creativity go to this goal of not paying for care. No other sector in our crazy healthcare system operates under this incentive.
It will take a mass movement, like those for women’s suffrage and civil rights. It will take a divestment campaign like the one against apartheid in South Africa. We must keep the pressure up, shine a light on their nefarious deeds, drive down their stock prices, and expose them for what they are: parasitic middlemen who add no value while sucking billions out of our economy.
“It is up to all of us to determine when the inevitable becomes the reality.”
In a recent post, we brought together an overall assessment of the Patient Protection and Affordable Care Act of 2010 (PPACA), showing how it cannot be expected to remedy our health care system’s four major problems—lack of universal access, unrelenting surge in costs, decreasing affordability for much of the population, and variable, often mediocre quality of care. That was followed by other posts that took cancer as a bellwether for how patients with serious illness are likely to fare under the new law, again with disappointing results.
Even though the new law is just entering its implementation phase, we already know how and why it will fail to meet urgent needs for reform. More fundamental reform that more directly attacks the forces responsible for system problems will be required, sooner rather than later. But to be more successful the next time around, we need to learn the lessons as to how and why this last reform effort went off the tracks if we are to avoid making the same mistakes once again. That is the subject of this post.
Here are some of more important ways in which the politics of reform diverted the process from the real goals of reform, ending up instead with a nearly $1 trillion bill that serves corporate interests in the medical-industrial complex and Wall Street much better than Main Street and ordinary Americans.
1. Framing of the issues and the entire political process were hijacked by the very interests that are largely responsible for the system’s problems of access, cost and
quality. The opening assumption was that we had to build on the existing system, thereby serving the interests of insurers, drug and medical device makers, hospitals, organized medicine and other parts of the system that would resist structural change. Missing from the subsequent health debate were more basic issues, such as whether health care is a right or a privilege based on ability to pay for just another commodity on the open market, and whether the business model underlying our system is consistent with the long-term public interest. Instead, the language of the debate was dominated on the right by defense of markets as the solution and that government is the enemy, and on the left by such meaningless slogans as “competition” and “guaranteed affordable choice”. The debate then devolved to such arcane details as public options, exchanges and triggers, which much of the public found difficult to track and understand.
2. The democratic process was commandeered by corporate money. Corporate interests, intent on expanding their markets through the “reform” bill, pushed their agenda through lobbying, campaign contributions to key legislators, advertising campaigns through disease advocacy groups and Astroturf organizations, and feeding talking points the media (which thrived on the 24-7 coverage of the battle over a year and a half). These examples illustrate this coordinated effort by industry: Industry representatives were often in critical places as illustrated by these examples: (1) (MSNBC. Obama health czar directed firms in trouble) (2) (Center for Public Integrity, as cited in Moyers, B, Winship, M. The unbearable lightness of reform. Truthout, March 27, 2010)
• Elizabeth Fowler, insurance industry representative turned staffer of the Senate Finance Committee, largely wrote that bill.
• Nancy-Ann DeParle, White House Director of the Office of Health Reform, had received $6 million previously while serving on boards of directors of at least half a dozen companies that were targets of federal investigations, whistleblower lawsuits and other regulatory actions.
• By the time the reform law was finally passed, about 1,750 businesses and organizations had hired some 4,525 lobbyists, eight for every member of Congress, at a cost of $1.2 billion.
3. Market failure was not recognized as the wellspring of our system problems. Market advocates were successful in perpetuating the myth that competition in health care markets can rein in uncontrolled costs, even when experience and many studies confirm the opposite. These examples make the point:
• Continuous escalation of prices and costs by drug and medical device manufacturers, hospitals, physicians and other members of the medical-industrial complex.
• A nine-year study by the Community Tracking Study of 12 major U. S. health care markets found these four barriers to efficiency and quality of care: (1) providers’ market power; (2) absence of efficient provider systems; (3) employers’ inability to push the system toward efficiency and quality; and (4) insufficient health care competition, (3) (Nichols, L et al. Are market forces strong enough to deliver efficient health care systems? Confidence is waning. Health Aff (Millwood) 23 (2): 8-21, 2004))
• Consolidation among providers limits choice and competition in many markets. (4) (Kronick, R, Goodman, DC, Weinberg, J, Wagner, E. The marketplace in health care reform. The demographic limitations of managed competition. N Engl J Med 328: 148, 1993)
• A 2006 AMA study found near-monopolies by private insurers in 95 percent of HMO/PPO metropolitan markets. (5) (Associated Press. Study: Health insurers are near monopolies. April 18, 2006)
4. The private insurance industry, already dependent on various kinds of government subsidies, does not offer enough value to retain its 1,300 insurers.
These are the main reasons that the present multi-payer system should be replaced by a not-for-profit single-payer financing system: (6) (Geyman, JP. Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It. Common Courage Press, 2009)
• continued inflation of health care costs, which insurers cannot control.
• growing unaffordability of premiums and health care.
• decreasing coverage of policies with often unaffordable out-of-pocket costs.
• growing economic insecurity and hardship, even for the insured.
• shrinking private insurance markets and cutbacks in public markets.
• adverse selection in shrinking risk pools.
• increasing profits despite declining enrollments (e.g. Aetna profits up by 42 percent in second-quarter 2010). (7) (Veiga, A. Aetna posts higher 2Q profit up 42 percent. Associated Press, July 28, 2010)
• Stockpiling large surpluses even while hiking premiums. (8) (Young, A. Consumer group: Insurers kept surplus while hiking premiums USA Today, July 22, 2010)
5. The Obama Administration has so far been unwilling to confront the special interests and address the real problems. After winning the 2008 election, with the Democrats taking both the House and Senate as well as the White House, the pragmatic and overly cautious incoming president did a 180-degree turn from this statement made five years previously to the Illinois AFL-CIO:
I happen to be a proponent of a single payer universal health care program… (applause)…I see no reason why the United States of America, the wealthiest country in the history of the world, spending 14 percent of its Gross National Product on health care, cannot provide basic health insurance to everybody….But as all of you know, we may not get there immediately. Because first we have to take back the White House, we have to take back the Senate, and we have to take back the House. (9) (Obama. Speech to the Illinois AFL-CIO, June 30, 2003)
As a result of the deals the president made with corporate interests through their voluntary, unenforceable pledges, he joined forces with them in gaining political support for “reform”. But this “alliance” with corporate interests assured that the legislative outcome would meet corporate interests more than those of ordinary Americans. And it leaves the president with little clout to rein in these interests, since he now depends on the PPACA to work. It would be a PR and political disaster if more insurers leave the market, more physicians refuse to see newly “insured” patients, and growing numbers of patients and families see affordable care and choice as disappearing. The state of Maine has already asked the federal government to waive its medical loss ratio (MLR) requirement, fearing disruption of the individual and small business market. (10) (Pear, R. Covering new ground in health system shift. New York Times, August 3, 2010: A13)
6. Policy makers and politicians ignored the lessons of history in attempting incremental “reforms” that had already failed over the last 30 years. Improved access and containment of health care costs have been addressed by many initiatives over the last 30 years, including managed care, employer and individual mandates, tax credits, association health plans, chronic disease management, pay for performance, and expansion of health information technology. Although all have failed to redress these two system problems, they were included in one way or another in the PPACA as more fundamental financing reform, such as shifting to a not-for-profit financing system, was intentionally kept off the table for political reasons.
In sum, the medical-industrial complex won this last battle over health care reform. Robert Kuttner, co-founder of The American Prospect 20 years ago, reminds us of the political challenge ahead: President Obama took office at a moment when free-market ideology, Wall Street hegemony, and conservative incumbency were thoroughly disgraced by recent events. But Obama has not yet been able to translate that failure into a durable progressive counterrevolution. (11) (Kuttner, R. A 20-year odyssey. The American Prospect 21 (7): 3, 2010)
Adapted in part from Hijacked! The Road to Single Payer in the Aftermath of Stolen Health Care Reform, 2010, with permission of the publisher Common Courage Press.
Dropping an insurer requires care and analysis
By Victoria Stagg Elliott
American Medical News
August 9, 2010
Approximately 55.8% of medical practices surveyed earlier this year by the Medical Group Management Assn. said they were renegotiating or eliminating low-paying commercial payer contracts as a way of dealing with the recession.
But deciding which insurer to drop and then, if appropriate, actually taking them off the rolls requires careful analysis and handling.
Questions to consider include: What are the rates that a particular insurer is paying? How does what the insurer actually pays compare with what is billed? How long does it take an insurer to pay? What is the denial rate? Are preauthorization procedures onerous and frequently required? Is there something about a payer that makes it more difficult to work with than others?
Experts suggest next looking at how many patients would be affected.
Other issues to consider include how dropping an insurer may affect referrals from other clinicians, and whether cutting a plan from the rolls means that another will cover more than a quarter of a practice’s patient volume. Most experts say that particular ratio would give one insurer too much sway over a practice. However, they acknowledge that it may be unavoidable in some areas of the country because of insurance industry consolidation.
Physicians should then contact referring physicians as well as affected patients.
Any communication with patients should avoid badmouthing a particular insurance company and include information about possible options, such as staying with the practice and paying an out-of-network rate, or transferring to another physician, experts said.
Had President Obama and Congress selected an improved version of Medicare to provide stable, life-long health care financing for everyone, they would have eliminated the injustices, inequities, and especially the instability of the double contracting processes required by the private insurance model of health care financing.
What is meant by double contracting? Much attention has been given to the purchase of a health care contract – a private health insurance plan – but little attention is paid to the private insurer contracts extracted from physicians and other providers in the health care delivery system.
Whether it is individuals or employers who purchase the private plans, everyone is acutely aware of the perpetual changes in premiums, benefits and cost sharing, which often requires a change in plans or even a change in insurers. Contracting on the patient side is quite unstable, which has allowed the insurers to surreptitiously shift ever more of the financial responsibility to the patient who needs to access care.
Now look at the other contract – the one that the provider of health care services signs with the private insurer. As insurers adopt ever more innovations, the desire and even the ability of the physician or other providers to accept or renew the contracts diminishes. That creates instability in the physician and hospital networks which can very directly impact the insurer/patient contract. Patients may end up stuck with insurance plans that have terminated relationships with their health care professionals.
Instead of being stuck with a single, one-size-fits-all, government program (that would cover all legitimate beneficial services for all of us), we were given choice – choice of unstable, double-contracted private plans offered by the double-crossing private insurance industry. Nice choice.
Health plan acquisitions target small- to medium-sized companies
By Emily Berry
American Medical News
August 9, 2010
As a newly reformed health system takes shape, private equity firms are eyeing investments in health plans.
“Private equity funds are out to make money, to invest money, and they’ve got money they want to put to work now,” said Chip Clark, partner in the provider care sector in Ernst & Young’s North America Transaction Advisory Services practice.
Investments are likely to target small- to medium-size plans that won’t elicit intense regulatory scrutiny, as well as Medicaid contractors likely to continue making money from growing Medicaid rolls and cash-strapped states, observers said.
“Sustainability is going to require companies that can operate on thinner margins with a wider portfolio of products and services,” said Paul Keckley, PhD, executive director of the Deloitte Center for Health Solutions, the health research services arm of Deloitte LLP. “A substantial amount of consolidation is very likely.”
He said private equity investors he advises are watching for good opportunities in the health care industry, including health insurance plans. A business in the midst of a wave of change isn’t necessarily a bad thing in their eyes, he said. “It’s exactly what private equity looks for: sectors that are volatile, sectors where there’s tremendous opportunity for synergy, sectors where you could pick up a pretty strong management team.”
The Patient Protection and Affordable Care Act (PPACA) has provided expanded investment opportunities for the private equity firms. Two of the greatest opportunities include: 1) consolidation through acquisition of small and medium-size health insurance companies, and 2) takeover of Medicaid contractors in an environment of expanding programs in cash-strapped states.
As Ernst and Young’s Chip Clark says, “Private equity funds are out to make money, to invest money, and they’ve got money they want to put to work now.”
Health care money managers very understandably have always placed business first, even if it harms patients and the original sources of payments – be it individuals, employers or government. Instead of giving us a financing infrastructure that placed patients first, PPACA has greatly expanded the business opportunities for the money managers.
This theme is getting old.
In our last post, we reviewed a daunting set of challenges to access and quality of care for Americans unfortunate enough to get cancer. In this post, we ask the obvious question whether, and to what extent, the new health care law, the Patient Protection and Affordable Care Act of 2010 (PPACA), may help to alleviate these problems.
On the potentially positive side of the ledger, PPACA will extend insurance coverage by 32 million people by 2019 (including 16 million on Medicaid); will provide subsidies starting in 2014 to help many lower-income people afford coverage; will eliminate cost-sharing for many preventive services; will provide new funding to increase the capacity of community health centers; will put in place some limited reforms of the insurance industry, such as prohibiting exclusions based on pre-existing conditions and banning annual and lifetime limits; and will establish a new non-profit Patient-Centered Outcomes Research Institute charged with assessing the relative outcomes, effectiveness and appropriateness of different treatments.
All that might at first appear to remedy many of the system problems facing cancer patients, but this is unfortunately not the case, for these kinds of reasons.
1. At least 23 million people will still be uninsured in 2019, while tens of millions more will be underinsured. Exchanges don’t become available to help the uninsured gain coverage for four more years, and even then that coverage may well be unaffordable for many. The individual mandate, as the primary lever to expand coverage in 2014, faces an uncertain future over constitutional challenges; 71 percent of Missouri voters have already opposed that mandate in a referendum. (1) (Landers, P. Missouri voters oppose mandatory health insurance. Wall Street Journal on line. August 4, 2010) Medicaid expansion is delayed until 2014, and then will still be underfunded with many restrictions to care. As one example of recent cutbacks, the University Medical Center, as the only public oncology facility in Nevada, was shut down in 2009 leaving some 2,000 uninsured and underinsured cancer patients stranded. (2) (Pelley, S. The recession impact: Closing the clinic. 60 minutes: Bad economy leaves patients without health insurance in dire straits. April 5, 2009) As the economic downturn continues and the states make further draconian cuts, we can only expect Medicaid coverage to become even less adequate.
2. The rapidly rising costs of cancer care keep going up unabated. Under PPACA, the market still rules on prices.The costs of cancer care increase by about 20 percent a year. (3) (Newcomer, L. Oncology’s perfect storm: The next decade. Am J Manag Care 11 (no. 17, Sup), S507, December 2005) Chemotherapy drugs lead the charge, and drug makers can set their prices with little restraint. As just one example, Ovation Pharmaceuticals raised the prices of four of its drugs by up to 3,436 percent (not a typo!) in 2006, including Cosmegen, its drug for Wilm’s tumor, a cancer of the kidney in children. (4) (Appleby, J. Drug prices up 100% — or higher. USA Today: August 8-10, 2008) By 2007, three approved targeted drugs for cancer were costing about $100,000 a year. (5) (McKoy, JM, Fitzner, KA, Dewards, BJ et al. Cost considerations in the management of cancer in the older patient. Oncology 21 (7): 8522, 2007) Other cancer treatments are also right up there. A course of proton beam therapy for prostate cancer (already over-utilized beyond indications) costs about $50,000. (6) (Pollack, A. Hospitals chase a nuclear tool to fight cancer. New York Times, December 27, 2007)
3. Health insurance and cancer care have become increasingly unaffordable for many patients and families. According to the Kaiser Family Foundation, the average premium for a family of four was $13,375 in 2009. (7) (Fritze, J. Average family health insurance policy: $13, 375, up 5%. USA Today, September 16, 2009) Translating that to affordability terms, the Commonwealth Fund has developed criteria marking when payments become unaffordable, as measured against other essential costs of living—above 10 percent is considered a financial hardship. (8) (Schoen, C, Doty, M, Collins, SR, Holmgren, AL. Commonwealth Fund. Insured but not protected: How many adults are underinsured, the experiences of adults with inadequate coverage mirror those of their uninsured peers, especially among the chronically ill. Health Affairs Web Exclusive, June 14, 2005) That means that an annual household income of $130,000 a year would be required to cover health insurance without financial hardship, quite aside from the costs of health care themselves if family members get sick! And the cost of health insurance is going up by 10 to 13 percent in 2010, depending on type of plan. (9) (Moeller, P. Double-digit medical expense trend to continue. U. S. News & World Report, September 3, 2009) The PPACA will not help this problem. The Congressional Budget Office has projected that annual family insurance premiums in 2016 will cost more than $20,000, not including deductibles and other out-of-pocket costs, despite implementation of the new health care “reform” law. (10) (Congressional Budget Office. An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act. November 30, 2009) The actual costs of health care are an even bigger burden for patients and families than insurance, especially for cancer care. Even for those with insurance, out-of-pocket expenditures keep going up as more cost-sharing is added through deductibles, co-payments and coinsurance. As the costs of chemotherapy drugs continue skyward, insurers typically require enrollees to pay coinsurance of 20 to 33 percent toward the cost of these drugs. If uninsured, the costs are even higher since hospitals typically charge them rates that are almost 2.5 those charged to insurers. (11) (Anderson, GF. From ‘soak the rich’ to ‘soak the poor’: recent trends in hospital pricing. Health Aff (Millwood) 26: 780-89, 2007) Thomson Reuters reported in 2008 that one in four patients with advanced cancer with annual incomes less than $40,000 were refusing recommended treatment because of cost. (12) (Szabo, L. Study: Many cancer patients foregoing care because of cost. USA Today, October 13, 2008) And the recession of the last two years now finds an increasing number of patients reducing or stopping their life-extending chemotherapy drugs in hopes of their precious supplies lasting longer, but instead resulting in rapid regrowth of their cancers. (13) (Gardner, A. Recession causing cancer patients to quit life-extending drugs. Bloomberg BusinessWeek, August 4, 2010)
4. The PPACA will end up reducing choice of coverage for many Americans. The Exchanges will not be open for business until 2014, and then only for the uninsured and some small businesses. Affordability of adequate coverage through Exchanges remains open to question. And for those already insured, the trend is toward more restricted choice. The country’s biggest health insurers are now testing plans with tightly controlled networks of providers that will often force the insured to change physicians or pay much higher costs for the privilege of keeping their own doctors. (13) (Abelson, R. Insurers push plans that limit choice of doctor. New York Times, July 27 2010)
5. Insurance “reforms” won’t prevent insurers from gaming the new system, maximizing their own profits as their underinsurance products become ever less adequate. Insurers still have many ways to get around some of the regulations put in place by PPACA. For starters, existing insurance plans were grandfathered in without having to implement such requirements as stopping the use of pre-existing conditions to deny coverage. Annual and lifetime caps won’t be implemented until 2014; even then existing plans are permanently exempted from both requirements. (14) (Andrews, M. Caps on coverage. A big point of conflict. New York Times, January 27, 2010: A:15) As the rules get written by the Department of Health and Human Services (HHS), insurers are lobbying hard for regulations least restrictive to their business practices, such as counting many administrative costs as direct patient care (e.g. calculations of medical loss ratios (MLRs), credentialing of physicians, quality assurance initiatives). They have wide latitude to set their premium rates despite the concerns of regulators. Plans can still deny coverage or even cancel policies. They have already forced the government to backpedal on the requirement that they offer coverage to children up to 26 years of age on their parents’ policies—insurers are now permitted to set limited signup periods for such coverage, such as just one month a year. (15) (Associated Press. Health insurers win concession on kids’ coverage. July 29, 2010) In Florida, Blue Cross and Blue Shield, Aetna and Golden Rule (a subsidiary of UnitedHealth) have notified the insurance commissioner that they will stop issuing individual policies for children. (16) (Alonzo-Zaldivar, R. Some insurers stop writing new coverage for kids. Philly.com, July 27, 2010)
One of the most critical rule-setting matters before HHS is the definition of minimal benefits, still pending. Many insurers now have fine-print restrictions in their policies that cancer patients find too late, such as steep surcharges for top-tier hospitals and higher coinsurance for Tier 4 chemotherapy drugs and radiation therapy. (17) (Court, J. Insurance: you pay, they bait and switch. Los Angeles Times, May 8, 2002) More than one-half of enrollees in private Medicare plans have no annual limits on their out-of-pocket costs, and many of these plans exclude coverage for chemotherapy. (18) (Medicare Rights Center. Clean house. Asclepios 8 (10), March 6, 2008)
6. The quality of cancer care will still suffer on two counts—the under-use of necessary care and the over-use of some services of marginal value that at times are even harmful. Although the PPACA may alleviate some of the access barriers for some cancer patients at least four years down the road, the main cost and affordability barriers will continue with little restraint so that many cancer patients will under-use essential care. Since most reimbursement policies are not significantly altered and perverse incentives for physicians and hospitals to provide more services will continue, over-utilization of services of marginal value will remain a system problem. One common example makes the point. Radical prostatectomy is still performed in 60 percent of American men less than 75 years of age, often resulting in bowel, urinary or sexual dysfunction; many of these men did not need surgery in the first place. (19) (Bill-Axelson, A, Holmberg, L, Ruutu, M et al. Radical prostatectomy versus watchful waiting in early prostate cancer: The Scandinavian Prostate Cancer Group-4 randomized trial. J Natl Cancer Inst 100 (16), 2008) (20) (Wilt, TJ. SPCG-4: A needed START to PIVOTAL Data to Promote and Protect Evidence-Based Cancer Care. J Natl Cancer Inst 100 (16): 1123-5, 2008) The new Patient-Centered Outcomes Research Institute will not be operational until near the end of this decade, and then will not be empowered to set coverage and reimbursement policies based on clinical efficacy and cost-effectiveness.
So, back to our original question, in view of the above, we have to conclude that the new health care law, the PPACA, may make some marginal gains in a few areas, but will not remedy access and quality problems in cancer care, and will leave many patients and families in even more desperate straits than they are now. In essence—too little and too late. More fundamental reform will be required to redress the excesses of our market-based system, as we will consider in our next posts.
Adapted in part, with permission of the publisher, Common Courage Press, from The Cancer Generation: Baby Boomers Facing a Perfect Storm (2009) and Hijacked: The Road to Single Payer in the Aftermath of Stolen Health Care Reform (2010).
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