Health care reform: time for an end run

Posted by on Monday, Sep 21, 2009

We have seen this coming for many weeks, but the release of the Baucus plan in recent days by the Senate Finance Committee, without any Republican support within the Gang of Six, leaves no more doubt about Republican intentions or votes on health care reform. House Republicans have already been clear in their total opposition to reform bills in the House. Republicans want nothing to do with reform except to derail any plan put forward by the Democrats, and are salivating over making a defeat on health care reform a Waterloo event for the Obama Administation, carrying over into the elections of 2010 and 2012.

Meaningful reform of the health care system, truth be told, was lost more than two years ago when the basic issues were framed up. The Democratic frame was too centrist from the beginning. It was a surrender-in-advance approach intended to gain moderate and some bipartisan support by saying that the system is basically sound and just needs incremental change. “If you like your insurance, you can keep it” was the byword. The real question should have been what kind of financing system should we have—multi-payer, keeping alive through generous subsidies a failing insurance industry, or single-payer public financing coupled with a private delivery system.

So the Democrats started from a weak frame, and through the many compromises along the way in the House and Senate have ended up with an expensive, defanged “reform” bill. Compromises in the political center have not gained Republican votes, and have only lessened the chances of any reform bill being effective. The right has demagogued and distorted the issues, but is correct on one count—any of the bills in Congress (except H. R. 676, the Conyers bill, still relegated to the closet) will fail to contain health care costs, and will instead add at least some $800 billion or more to the federal government’s costs over the next ten years. We have already seen evidence that the pledged contributions toward the costs of health care reform made last spring by corporate stakeholders in our market-based system will be more than repaid to them through new revenue streams to their industries if any of the bills now being considered in Congress are enacted. (links to “Alliance” blogs #28, 29, 30 and 33).

President Obama’s convictions on health care reform are still unclear and contradictory. They seem to be intended as centrist and negotiable, as if nothing is really worth fighting for. He would have “started with single-payer if I were starting from scratch”. Then, even while portraying the insurance companies as villains and obstacles to reform, he concludes that we should build on our private multi-payer system and “hold them honest” with a public option. But weak as the public option has became (link to Blog # 21), he still won’t draw a line in the sand in its defense, calling it “only a sliver of my reform plan.”

There is no question that Obama is a pragmatist. So if only on pragmatic grounds, it is time for him to change course (now!) before his plan is gang-tackled in the middle of the field by opponents in both parties, including Blue Dog Democrats as well as progressives on the left who have given up on his plan. So, Obama needs to pick up the single-payer ball (H.R. 676), pivot, roll out to the left, pick up his interference, and run around left end for pay dirt. If he does so, he will have a majority of the public with him, and the number of co-sponsors of the bill will soar as timid members of Congress get political cover and discover stronger backbones. That demonstration of unambiguous presidential leadership could unify the Democratic party in favor of health care reform, and gain further support among fiscal conservatives, whether Republicans or Independents.

Here is what Obama faces if he stays on his present course in the middle of the road. The political discourse will get even uglier and more divided. Amendments from both sides of the aisle will further gut bills pending in Congress. If any bill gets out of committee to votes on the floor in the House and Senate, it will still face further revision by a Joint Conference committee. A bill with bipartisan support appears to be out of the question, and Democrats are likely to become even more fragmented as time goes on. So either a bill dies in Congress or any watered-down bill that may survive to be enacted will likely fail to contain surging costs of health care or make health care and insurance more affordable. Either way, the Democrats lose on the issue, and because of that loss, the stage is set for a Republican counter-attack during the 2010 and 2012 elections.

Based upon what has already happened in Congress and likely political dynamics going forward, here is what any surviving health care bill would probably look like:

• Individual mandate, with minimal restraints on the insurance industry and large federal subsidies for many years to come
• No employer mandate or public option
• Health care exchanges and co-ops, despite lack of evidence for their effectiveness (Link to Blog # 25)
• No negotiation by the government of prescription drugs prices
• Major expansion of Medicaid, again with large federal subsidies and states pushing back against their share of payments
• Minimal or no savings from projected savings hoped for by cutbacks in Medicare and Medicaid
• Continued escalation of health care costs and insurance premiums far above wages and cost-of-living, with little improvement in affordability for millions of Americans
• Record federal and state deficits calling for emergent action

If all that happens, President Obama will lose his credibility, his legacy will be tarnished and his political future clouded. His failure will match that of the Clinton Health Plan in 1993 and 1994, when many of the same mistakes were made. More important, “reform” won’t work, costs will continue to spiral upward, access will further deteriorate, the numbers of uninsured and underinsured will rise further, and the 45,000 American lives lost each year will increase.

The only winners with health care “reform” will be corporate stakeholders who get to keep raising their prices without significant government oversight. The insurance industry will join the list of industries bailed out by generous government subsidies even as they deplore “big government”.

If he were to acknowledge impending failure and change course to the left, this could be Obama’s FDR moment. In 1936, confronted by the Great Depression and corporate self-interest such as we see today, this is what he said to an audience at Madison Square Garden:

“We had to struggle with the old enemies of peace: business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by an organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me and I welcome their hatred.”

This is the kind of bold leadership and political courage called for in our turbulent times today. Our democracy is being challenged, as are our values and character. As usual, time will tell what kind of society we have become.

Dr. John Geyman is professor emeritus of family medicine at the University of Washington School of Medicine in Seattle, a past president of Physicians for a National Health Program and author of “Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It.”

Buy John Geyman’s Books at: http://www.commoncouragepress.com

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NYT Blog: Medicare for all?

Posted by on Monday, Sep 21, 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.

Medicare for All? ‘Crazy,’ ‘Socialized’ and Unlikely

By Katharine Q. Seelye
Prescriptions Blog
The New York Times
September 19, 2009

Jonathan S. Skinner, an economics professor at Dartmouth, said there would be both positive and negative effects from expanding Medicare to all.

“The best thing about expanding Medicare is we can cover everybody with one sweep of the pen and cut administrative costs substantially,” he said.

But, he said, it would probably require a tripling in payroll taxes just to pay hospitals alone. And it would do nothing to control costs, Mr. Skinner said.

“Medicare is dysfunctional,” he said. “It provides the wrong incentives to doctors. This would be extending that dysfunctionality to the entire population.”

Expanding Medicare, he said, is “the cotton candy solution: it feels really good, but after a while, your stomach starts to go ‘ewwww.’ ”

http://prescriptions.blogs.nytimes.com/2009/09/19/medicare-for-all-crazy-socialized-and-unlikely/

And…

Fostering Accountable Health Care: Moving Forward In Medicare

By Elliott S. Fisher, Mark B. McClellan, John Bertko, Steven M. Lieberman, Julie J. Lee, Julie L. Lewis and Jonathan S. Skinner
Health Affairs
January 27, 2009

To succeed, health care reform must slow spending growth while improving quality. We propose a new approach to help achieve more integrated and efficient care by fostering local organizational accountability for quality and costs through performance measurement and “shared savings” payment reform. The approach is practical and feasible: it is voluntary for providers, builds on current referral patterns, requires no change in benefits or lock-in for beneficiaries, and offers the possibility of sustained provider incomes even as total costs are constrained. We simulate the potential expenditure impact and show that significant Medicare savings are possible.

http://content.healthaffairs.org/cgi/content/abstract/28/2/w219

Several readers found fault with Katharine Seelye’s dismissal of “Medicare for all” single payer reform as being too complicated, imposing a big tax increase on the middle class, and driving doctors and hospitals out of business because of low reimbursement rates. She also quoted Stuart Altman as saying it would be too disruptive, and Robert Moffit as saying that it would mean too much government intrusion.

Too complicated? A single payer system is much simpler and more efficient than the fragmented multi-payer system under consideration by Congress. Big tax increase? Moving from individual insurance premiums to a single taxpayer-financed risk pool would not only be more efficient, but it would finally make the way we pay for health care much more equitable. Driving doctors and hospitals out of business because of rates? The stewards of a single payer system would never establish a deficient pricing system that would shut down our health care delivery system.

Disruptive? Our overpriced and underperforming health care system screams out for disruption. Too much government intrusion? Most other industrialized nations have demonstrated that more government involvement than we have is an essential ingredient in achieving a better performing system at a lower cost.

Jonathan Skinner, whose comments were selected from Seelye’s article, is part of the Dartmouth group that demonstrated large variations in health care spending that do not correlate with quality and outcomes. Medicare’s fee-for-service payment system is thought to contribute to this inconsistency by rewarding greater frequency and intensity of services while ignoring quality.

It is great that Skinner and his colleagues, and others as well, are looking at options that might provide us with greater value in our health care purchasing. It is ironic, however, that they propose “fostering accountable health care in Medicare” while he states that the “cotton candy solution” of expanding Medicare would make your stomach go “ewww.”

An improved Medicare that covered everyone would provide the financing environment that would ensure the best health care value attainable. There’s no “ewww” there.

Americans are dying at a faster rate — 1 every 12 minutes, 5 an hour, 120 a day, 45,000 a year — not from war or natural disaster, but from lack of health insurance.

That’s the stunning finding of a study published today in the American Journal of Public Health by leading researchers at Harvard Medical School. The report, “Health Insurance and Mortality in U.S. Adults,” reveals that the uninsured have a 40 percent higher risk of death than those with private insurance, resulting in 45,000 preventable deaths annually.

These are our friends and neighbors, our fellow Americans who can’t afford or otherwise get private health insurance. Increasingly, this group includes nearly all lower-income and a growing majority of middle-class Americans.

The Institute of Medicine estimated in 2002 that more than 18,000 Americans between the ages of 19 and 64 were dying each year as a result of being uninsured. The new number is two and a half times that figure.

Trying to get by, the uninsured and underinsured delay necessary care, put off filling drug prescriptions or take only some of their medications each day. Most are just one major illness or accident away from financial ruin.

A growing number of patients with cancer have to turn down recommended chemotherapy or radiation treatment because of inability to pay for care. If they have insurance, many find that the small print in their policies excludes such coverage. If they are uninsured, their risk of death multiplies. No one in dire need of medical care should be put in this lose-lose situation.

We’re not talking about a third world country. This is the United States, one of the most industrialized nations in the world. But increasingly, we look more like a developing country — 42nd in the world for life expectancy (behind Japan and most of Europe), and ranked last among 19 OECD countries in preventable deaths that should not occur in the presence of timely and effective health care.

Meanwhile, the charade goes on, as our elected representatives in Congress dither over health care reform. None of the bills in Congress will resolve the affordability and access problems.

The Congressional Budget Office estimates the House health reform bill would still leave 17 million persons uninsured and that Sen. Baucus’ bill, unveiled yesterday, would leave 25 million uninsured. That translates into tens of thousands of unnecessary deaths every year.

There are now 3,300 health industry lobbyists running around Washington, D.C., trying to shape the small print to their advantage in whatever bill finally gets passed (if any). The insurance and pharmaceutical companies and their hangers-on are spending $5 million a week to block real reform. Suffice it to say that none of these companies have the best interests of the uninsured or the underinsured at heart.

Through its trade group, America’s Health Insurance Programs, the industry is fighting for its life (but not our lives). And so far, it is winning. By “cooperating” with health care “reform” by pledging to eliminate pre-existing conditions as a barrier to coverage, and saying they will take all comers in return for a government mandate that everyone be required to buy its shoddy products, the insurers are poised to reap a massive financial windfall.

So far, the bills in Congress set no limits on what the insurers can charge for premiums, and the legal requirements for covered benefits are likely to be minimal.

If a “reform” bill along these lines passes, it will be a bonanza for insurers, drug and medical device manufacturers, and other players in the medical-industrial complex, all at our expense. Since their revenues are our costs (as patients and taxpayers), there will be no cost containment.

We can prevent another 45,000 Americans from dying next year. An effective cure to the health care crisis is within our reach, and it lies within a single-payer, Medicare-for-All plan. By cutting out private insurance companies, we would not only save taxpayers billions, but deliver quality care to everyone. We shouldn’t have to wait another 12 minutes.

Dr. John Geyman is professor emeritus of family medicine at the University of Washington School of Medicine in Seattle, a past president of Physicians for a National Health Program and author of “Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It.”

Buy John Geyman’s Books at: http://www.commoncouragepress.com

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45,000 deaths attributable to uninsurance

Posted by on Friday, Sep 18, 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.

Health Insurance and Mortality in US Adults

By Andrew P. Wilper, MD, MPH, Steffie Woolhandler, MD, MPH, Karen E. Lasser, MD, MPH, Danny McCormick, MD, MPH, David H. Bor, MD, and David U. Himmelstein, MD
American Journal of Public Health
September 17, 2009

Conclusions

Lack of health insurance is associated with as many as 44,789 deaths per year in the United States. The increased risk of death attributable to uninsurance suggests that alternative measures of access to medical care for the uninsured, such as community health centers, do not provide the protection of private health insurance. Despite widespread acknowledgment that enacting universal coverage would be life saving, doing so remains politically thorny. Now that health reform is again on the political agenda, health professionals have the opportunity to advocate universal coverage.

http://www.ajph.org/cgi/content/abstract/AJPH.2008.157685v1

This study analyzed data from the Third National Health and Nutrition Examination Survey (NHANES III) conducted by the National Center for Health Statistics (NCHS). This was a scientifically rigid analysis of a highly credible data source. The study concludes that the deaths of about 45,000 people each year are associated with the lack of health insurance.

A previous, widely-quoted study from the Institute of Medicine concluded that each year the deaths of 18,000 people are related to a lack of health insurance. This number was updated to 22,000 by a study from the Urban Institute. The current study indicates that 45,000 is a highly credible number and can be used as a reasonable estimate of the extent of the problem.

The precise number does matter for those individuals unfortunate enough to become a member of this statistical group. But an exact count is not important for those of us attempting to provide health care justice for all. We know that uninsurance kills people and that it must be eliminated.

Congress and the Obama administration have selected a model of reform that has no hope of insuring everyone. Their model includes hardship waivers that explicitly acknowledge this unacceptable deficiency. It is astonishing that they continue to reject a less expensive and more efficient model that automatically insures everyone: a single payer national health program. You would think that they would show some interest in a model that actually saves lives.

Americans are satisfied with their insurance – Not!

Posted by on Thursday, Sep 17, 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.

Data Note: Americans’ Satisfaction with Insurance Coverage

Kaiser Family Foundation
September 2009

Some Dissatisfaction Despite Positive Ratings

How would you rate your overall insurance coverage?

90% – Excellent/Good

9% – Not so good/Poor

Of those who rate their coverage not so good/poor:

Percent dissatisfied with:

74% – The amount you spend out of pocket on health care costs your insurance doesn’t cover

56% – The amount you pay for your health insurance coverage

46% – The amount of paperwork and number of calls required to manage your health insurance

53% – The number and kind of treatments your health insurance will cover

32% – Your choice of doctors and hospitals

22% – The quality of health care you receive

Of those who rate their coverage excellent/good:

33% – Had problems paying medical bills in the past 12 months

66% – Report dissatisfaction with at least one element of care (listed above)

86% – Had problems paying OR report dissatisfaction with at least once element of care (listed above)

Conclusion

Though a large majority of the public reports satisfaction with their health insurance coverage, a closer look identifies significant variations among demographic groups and those with differing health care needs. The non-elderly, lower income Americans and those in fair or poor health – the very people who are most likely to need to use health care services – are less likely to say they are satisfied with their health coverage than their counterparts. And though most Americans say their insurance is excellent or good — significant portions of these groups still report problems paying their medical bills or dissatisfaction with certain aspects of their coverage. Higher levels of dissatisfaction with coverage are also clustered among those who are more vulnerable and likely to use the health care system – those with low incomes or in poor health.

As policy makers, interest groups and the news media continue to discuss the potential effects of health reform on individual families, it is important to remember that, though most Americans express a level of contentedness with their health insurance coverage, dissatisfaction, anxiety and problems with cost remain. Significant minorities report problems paying medical bills or delaying care and a majority of Americans say they are at least somewhat worried about being able to afford the health care services they need, their quality of health care services getting worse, and, among those who are insured, losing their coverage.

http://www.kff.org/kaiserpolls/upload/7979.pdf

According to this study conducted last month, 90% of insured Americans rated their insurance coverage either excellent or good. Yet when asked about specifics, only 14% of those rating their coverage excellent or good reported that they did not have any problems with paying their medical bills in the last 12 months and that they were satisfied with the elements of coverage listed above.

So good or excellent equates with premiums that are too high, with excessive out-of-pocket costs for uncovered services, with inadequate plan benefits, with excessive administrative hassles, with reduced choice of health care professionals and institutions, or with problems paying medical bills in the past 12 months.

What a disconnect! We need to start having a forthright conversation with all of these duped Americans who believe that their insurers are giving them a good deal.

What does a $13,375 premium mean for reform?

Posted by on Wednesday, Sep 16, 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.

Employer Health Benefits

2009 Annual Survey
Kaiser Family Foundation
September 15, 2009

Premiums for employer-sponsored health insurance rose to $13,375 annually for family coverage this year.

http://www.kff.org/insurance/ehbs091509nr.cfm

Report (238 pages):
http://ehbs.kff.org/pdf/2009/7936.pdf

Employer-sponsored health plans insure not only the largest sector of our society, but also the healthiest: the healthy workforce and their young healthy families. Because of the greater purchasing leverage of employers, economies of group plans, better regulatory oversight, and the lower average health care needs of the beneficiaries, premiums being paid for employer-sponsored plans represent the greatest value that we can expect in health care financing. Today a working family pays $13,375 for its coverage (which includes the employer contribution paid indirectly by the employee in forgone wage or salary increases).

Keep in mind that, in addition to the $13,375 premium, the family also pays the deductible, co-payments, coinsurance, costs of out-of-network care, and costs of products and services that are not benefits of the plan.

Many perceptive observers of the reform process are beginning to realize that the proposals may have a significant negative impact on the finances of middle-income Americans. What would a $13,375 premium mean to a middle-income family?

The House bill, HR 3200, cuts off premium subsidies at 400% of the federal poverty level, which is $88,200 for a family of four. That family, under the House bill, would have to pay over 15% of its income just for a $13,375 premium. Under the Senate Finance proposal released by Sen. Baucus today, the cutoff is at 300% ($66,150), so that family would pay over 20% of income just for the premium.

But wait, there’s more. The legislative proposals also provide for an annual maximum for out-of-pocket expenses, and they remove the life-time maximum on health care coverage. Since some of the care over those limits represents the 80% of health care that is used by the sickest 20% of the population, those costs can be very significant. The insurers will have no choice but to add those costs to the premiums. But the family also will have to add to its health care bill the costs below the out-of-pocket maximum, plus the costs that are not covered by the plan, even though they exceed the maximum.

One method of controlling premium prices is to strip benefits out of the plans. As an example, the Senate Finance proposal released today would make available a “young invincible” catastrophic plan for young adults. Measures that reduce benefits might make premiums more affordable, but they do so by shifting more costs as out-of-pocket expenses to those who need care, costs which would be unaffordable for many middle-income Americans. For those who say that the out-of-pocket maximums would take care of that problem, keep in mind that the balance would have to be collected in higher premiums.

Anyway you slice or dice it, a $13,375 health care benefit package plus out-of-pocket expenses are no longer affordable for tens of millions of middle-income Americans, even with subsidies. Depending on the final details, that could be over half of our population!

Congress must quit low-balling us. Let’s demand a legitimate analysis using the most credible numbers available and then see what this program will cost each of us.

Once we have those numbers and compare them with what a single payer system would cost each of us, there would be no contest. Of course, similar studies have already been done, and everyone except the wealthiest would pay less. And the wealthy would never know the difference unless their accountants singled out those numbers for their perusal.

Compassion for some; Solidarity for all

Posted by on Tuesday, Sep 15, 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.

Obama’s Mistakes in Health Care Reform

By Vicente Navarro
CounterPunch
September 7, 2009

Error Number Three

Obama plans to cover the uninsured by increasing taxes on the rich (a very popular measure, as shown in all polls) and by transferring funds saved through increased efficiencies in existing programs, including Medicare (an unpopular measure, for the reasons I’ve mentioned). We see here the same problems we’ve seen with other programs targeted to specific, small sectors of the population, such as the poor. Programs that are not universal (i.e., do not benefit everyone) are intrinsically unpopular. This is why antipoverty programs are unpopular. People feel that they are paying, through taxation, for programs that do not benefit them. Compassion is not, and never has been, a successful motivation for public policy. Solidarity is. You support others with the understanding that they will support you when you need it most. The long history of social policy, in the U.S. and elsewhere, shows that universality is a better way to get popular support for a program than means-testing for programs targeted to specific vulnerable groups. The limited popularity of the welfare state in the U.S. is precisely due to the fact that most programs are not universal but means-tested. The history of social policy shows that the best way to resolve poverty is not by developing antipoverty programs, but by developing universal programs to which all people are entitled — for example, job and incomes programs. In the same way, the problem of noncoverage by health insurance will not be resolved without resolving the problem of undercoverage, because both result from the same failing: the absence of government power to ensure universal rights. There is no health care system in the world (including the fashionable Swiss model) that provides universal health benefits coverage without the government intervening, using its muscle to control prices and practices. The various proposals being put forward by the Obama administration are simply tinkering with, not resolving, the problem. You can call this government role “single-payer” or whatever, but our experience in the U.S. has already shown (what other countries have known and practiced for decades) that without government intervention, all the measures now being proposed by this administration will be handsome bailouts for the medical-insurance-pharmaceutical complex.

(Vicente Navarro, M.D., Ph.D. is Professor of Health Policy at The Johns Hopkins University and editor-in-chief of the International Journal of Health Services.)

http://www.counterpunch.org/navarro09072009.html

The subtitle of this article is “Why Obama Needed Single Payer on the Table.” The full article is well worth reading.

Medicare has long been a flashpoint generating intense disagreement across party lines over the role of private markets versus that of government.

Republicans have fought against Medicare from the very beginning. They bitterly opposed it in various committees in both houses of Congress in 1964 -1965. But they relented, at least for a while, in the face of strong public support for the program, and it passed with bipartisan support.

Almost overnight, tens of millions of American seniors gained access to affordable health care. Medicare was also a boon to the medical profession, hospitals, and the insurance industry, since Blue Cross became the main fiscal intermediary between government, physicians and hospitals.

But that honeymoon was not to last. Republicans have been trying to rein in “entitlement programs” and chip away at Medicare since the start of the Reagan years in 1980. As Speaker of the House in 1994, with a new Republican majority in Congress, Newt Gingrich introduced a bill to privatize and convert Medicare to a smaller program with defined contributions instead of one for all seniors with benefits defined by law. His statement at the time clarified the conservative agenda: (This kind of ‘reform’ might result in “solving the Medicare problem” and lead it to “wither on the vine.” Later pronouncements have followed along the same line, as illustrated by Grover Norquist’s desire to “shrink the government down to the size that it could be drowned in a bathtub.”

With the Balanced Budget Act of 1997, the conservatives’ goal to privatize Medicare was advanced with the new Medicare + Choice (M + C) program. These private plans, mostly HMOs and PPOs, were promoted as offering more choice and value than traditional Medicare. But their subsequent track record belied those claims. Instead, these programs proved themselves unstable in the marketplace, seeking out favorable markets, leaving others when profits were not sufficient, cherry picking the market by avoiding sicker enrollees, and costing the government an average of 13 percent more per enrollee than in traditional Medicare. About one-third of Medicare beneficiaries enrolled in M + C plans between 1999 and 2002 were dropped when their plans abandoned the market, often forcing patients to change physicians and return to regular Medicare.

As M + C programs became discredited, Republicans renewed their attack on Medicare with the passage in 2003 of the Medicare Prescription Drug, Improvement and Modernization Act (MMA), another bonanza for the insurance and drug industries. The MMA established private Medicare Advantage plans (MA) as successors to M + C plans and turned over the drug benefit to the private sector, even prohibiting the government from negotiating drug prices as the Veterans Administration does so effectively. As expected, MA plans have many of the same problems as M + C plans. They are still subsidized by government overpayments averaging 14 percent more than Medicare, while providing less efficiency, choice, value and reliability than traditional Medicare.

Today, as health care reform proposals take shape amid a highly polarized debate in Congress and across the country, conservatives (including Republicans, Blue Dog Democrats and some Independents) have mobilized once again to expand private markets for the insurance industry and other corporate stakeholders in the medical industrial complex. While overlooking their role in fueling health care inflation in both private and public programs, conservatives are intent on handing the party in power a defeat over health care reform, but at the same time maneuvering to expand future health care markets.

In their strategy to kill ObamaCare (whatever that may turn out to be), they are all of a sudden sounding like defenders of Medicare beneficiaries against the presumed evils of big government. Consider these examples of their new-found protector role of seniors:

• Senator Mike Enzi (R-WY) and member of the Gang of Six charting policy in the Senate Finance Committee, warns that “Democrats are cutting hundreds of billions from the elderly and planning to limit or deny care based on age or disability of patients.”
• House Minority Leader John Boehner (R-OH) claims that projected reductions in the growth of Medicare spending means “fewer choices and lower health care quality for our nation’s seniors.”
• In order to “assure that our greatest generation will receive access to quality health care”, Michael Steele, chairman of the Republican National Committee, recently proposed a ‘Seniors’ Health Care Bill of Rights’ with these provisions:

“(1) We need to protect Medicare and not cut it in the name of ‘health insurance reform’;
(2) We need to prohibit the government from getting between seniors and their doctors;
(3) We need to outlaw any effort to ration health care based on age;
(4) We need to prevent government from dictating the terms of end-of-life care; and (5) We need to protect our veterans by preserving Tricare and other benefit programs for military families.”

The cynicism of these statements almost defies belief, given the long Republican track record of trying to undermine Medicare at every turn. These would-be defenders of Medicare pretend to be protecting seniors from an uncaring government, while raising such scare words as rationing and loss of choice, coverage and benefits. Their real goal is to advance their narrow agenda of undermining public programs by privatizing them to their best advantage.

The Republican machine, based on long experience, is expert at scare tactics. One of many examples is the threat of “death panels”, raised by former vice-presidential candidate Sarah Palin and others in reaction to a provision (Section 1233) in the House bill (H.R. 3200) which would provide funding for voluntary end-of-life counseling by physicians on such matters as living wills. Ironically, this provision was suggested by Johnny Isakson, Republican pro-life senator from Georgia, who has been advocating such counseling for years. But as the Medicare Rights Center, AARP and many experts have confirmed, none of these scare claims have any substance in fact.

So what we are seeing is blatant distortion, disinformation and deception by conservative forces bent on defeating any health care reform advanced by the party in power. Fanning concerns and worries among seniors is intended to weaken seniors’ support for reform and perpetuate the hold of private markets on the system. Meanwhile, of course, Republicans keep trying to exploit private Medicare markets to their own advantage as long as the program is alive.

Adapted in part from Shredding the Social Contract: The Privatization of Medicare, 2006, with permission of the publisher Common Courage Press.

Buy John Geyman’s Books at: http://www.commoncouragepress.com

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Insurance exchange loopholes

Posted by on Monday, Sep 14, 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.

Will U.S. learn its healthcare reform lesson from California?

By Michael Hiltzik
Los Angeles Times
September 14, 2009

The difference between a government program that works and one that fails spectacularly can be razor thin. A few words here, a loophole there, and you can turn a boon for the consumer into a windfall for big business.

That lesson should be fixed in the frontal lobes of everyone in Congress working on the healthcare reform bill, and especially on a piece of the reform puzzle known as the insurance exchange — a key element of the reform plan backed by congressional Democrats and President Obama.

Here in California we know all about the pitfalls of an exchange that doesn’t work, because we established a statewide version in 1992 and attended its funeral in 2006. The state exchange, known originally as the Health Insurance Plan of California and later as PacAdvantage, was designed to give California’s small businesses the collective clout to negotiate with health insurers for lower premiums and consumer-friendly standards.

As written into the benchmark bill in the House of Representatives (H.R. 3200), the federally supervised exchange would be the sole marketplace where individuals and employees of small businesses could buy health insurance. By mandating insurer participation, the exchange would provide customers the choice they don’t get in the market today. By requiring all plans to offer identical base policies it would enable buyers to compare them by price and quality.

But we’re still at the starting line. A lot of mischief can be committed on a bill’s path to enactment. The threat to a functioning exchange will come from vested interests trying to water down the mandates. Insurance companies will want the right to offer catastrophe-only coverage, which is a big moneymaker, or to specialize in the yacht-owning executive market. Lobbyists for health savings accounts, who are carrying water for financial services companies lusting after the fees these accounts generate, will insist on an HSA loophole. And politicians in some states will want to export their bare-bones coverage standards nationwide so they can lure health insurers into headquartering there, the way one-horse states without usury limits, such as South Dakota, made themselves the credit card-issuing capitals of America.

Any loophole will set the stage for others, until the exchange becomes a useless, tattered dream. “If there’s a gap or a loophole, the market will exploit it,” (former president of PacAdvantage John) Grgurina says.

http://www.latimes.com/business/la-fi-hiltzik14-2009sep14,0,7041044.column

A previous qotd also discussed insurance exchange lessons from California:
http://www.pnhp.org/news/2009/august/health_insurance_exc.php

In health care, we spend more and receive less, and everyone agrees that has to change. The decision has been made that we will do that by regulating our dysfunctional health insurance market, and then mandate that everyone who is not covered by other qualifying programs be required to purchase private health plans. To be certain that everyone has access to a plan, an insurance exchange will be established.

Regulations will require guaranteed issue, guaranteed renewability, the end of rescissions, rules to reduce adverse selection, and other measures to improve the functioning of the markets. In his speech to Congress and to the nation, President Obama provoked laughter when he said, “… there remain some significant details to be ironed out…” The particular details that will need to be ironed out should probably provoke grief, anger, disgust or other negative emotions, but they certainly are not funny.

No matter what rules are established for the exchanges, there will always be loopholes. Michael Hiltzik has suggested some possibilities. Our experience with the larger private insurers has proven that they can find loopholes that the best policy analysts could never see coming. Unlike the European insurers that have a mission of service, our private insurers that dominate most markets have an obligatory mission of enhancing investor value. Their business ethic mandates that they investigate every opportunity to increase revenues and reduce expenses. The invisible loopholes will always be there, and the entrepreneurial mind will always find them.

The insurance exchanges won’t even be established for four years, and then it will be many more years before the policy community passes judgement on their impact. During that time our public stewards will be busy trying to patch the innumerable loopholes penetrated by the entrepreneurs, only to find more opening up.

In future books recording the history of U.S. health care reform, President Obama will have his own chapter on yet another failed effort. He’ll deserve it because he hardly picked up his baton to orchestrate reform. When Obama should have been conducting Beethoven’s Ninth, Congress was busy writing Rap. Rap might work for a few of us, but the nation deserved much more.

By Kip Sullivan, JD

Advocates of a “public option” claim that the “option” will look like Medicare. They say this about the “option” in both bills that have been introduced to date – the House “reform” bill, HR 3200, and the bill written by the Senate Health, Education, Labor and Pensions (HELP) committee. But this statement is not true.

Medicare is larger than any private insurance company; the “option” in both bills will be small. The traditional Medicare program is a single program with uniform benefits; the “option” in both bills will be a balkanized program that may not be available in all parts of the country. Medicare is administered by public employees; the “options” in both bills will be administered by private-sector corporations, some or all of which will be insurance companies. The “option” in neither bill resembles Medicare.

Review of two previous papers

The “option” provisions of the Senate HELP Committee bill appear in Section 3106. HR 3200’s “option” provisions appear in Title II, Subtitle B, entitled “Public health insurance option.” I have already discussed in some detail Section 3106 in a paper posted on August 14. Readers who want more details on Section 3106 should read that paper.

In another paper I have discussed the claim by “option” advocates that the “option” in HR 3200 is superior to the “option” in the Senate HELP bill. Those who make this claim rest their argument on a mere two sentences in HR 3200. One sentence says doctors and hospitals that participate in Medicare will be deemed to be participants in the “option” unless they “opt out” of the “option.” The other says the “option” is authorized to pay providers at rates linked to Medicare’s rates. Neither argument makes sense. Both sentences are useless and do nothing to augment the power of HR 3200’s moribund “option.”

The purpose of this paper is to examine the rest of the “option” provisions in Title II, Subtitle B of HR 3200 to see if there is any reason to describe HR 3200’s “option” as “like Medicare.” I begin with a summary of the ways in which the “options” in HR 3200 and the Senate HELP bill resemble each other.

Comparison of the “options” in HR 3200 and the HELP bill

The “option” sections of HR 3200 and the HELP bill have these features in common:

~ Both bills authorize the Secretary of DHHS to sell health insurance to the non-elderly. HR 3200 calls the program that will do this the “public health insurance option” while the HELP bill calls it “community health insurance options.” In both bills, “option” insurance can be purchased only within an “exchange” (a one-stop shopping center for health insurance). The exchange will clearly be multiple exchanges at the state level under the HELP bill. The exchange will probably be a single national program under HR 3200.

~ Both bills authorize a start-up fund for the Secretary to use in some unspecified manner to get the “option” program up and running, and require the Secretary to “provide for the repayment” (HR 3200’s phrasing) of the start-up fund within ten years.

~ Both bills authorize subsidies for the relatively small number of Americans who will be eligible to shop within the exchange. These subsidies will be given to eligible individuals regardless of whether they use the subsidy to buy insurance from the “option” or from an insurance company.

~ Both bills authorize the Secretary to contract with corporations to conduct unspecified activities that will somehow lead to the creation of an “option” program throughout the country.

I want to dwell at some length on this last shared feature for two reasons. First, the language in both bills setting forth the role of corporations in creating the “option” is rather convoluted. Second, it’s an extremely important feature.

The bills do not describe the criteria that corporations have to meet to get contracts from the Secretary; instead they refer the reader to criteria laid out in Section 1874A of the Social Security Act. That section spells out criteria corporations have to meet to win contracts to administer the current Medicare program. Under Section 1874A, corporations that win contracts to administer the Medicare program are called “Medicare Administrative Contractors” (MACs). (The task MACs carry out for Medicare is limited in its scope: It is to process claims filed by providers who treat Medicare patients.) Even though the authors of the HELP bill and HR 3200 want the Secretary to use MAC-like criteria in deciding which corporations to contract with to create the “option” program, they chose not to use the “MAC” label for the corporations that will create the “option.” The HELP bill calls them “contracting administrators.” HR 3200 gives these entities no name at all. For lack of a more convenient term, I will refer to the MAC-like corporations in the HR 3200 as “contracting administrators.”

As the preceding rather convoluted description of MACs and contracting administrators suggests, neither the HELP bill nor HR 3200 makes it easy for readers to grasp that corporations, not public employees, will create, and probably run, the “option” program. Neither bill comes right out and says, “The Secretary shall hire private-sector corporations to create and run as many health insurance companies as is necessary to make health insurance available for sale to the non-elderly in each health insurance market in America.” Nor is that fact being ballyhooed by the bills’ authors and proponents. But it’s an important feature for “option” supporters to understand because it undermines the claim “option” advocates make over and over that the “option” will look like Medicare.

In the next two sections, I discuss in more detail the evidence that supports the conclusion that HR 3200’s “option” will be created by corporate America and, in all other important respects, will look like the HELP “option.” I begin with curious statements by Sen. Harry Reid and a spokesman for Health Care for America Now supporting this thesis, and then turn again to the text of HR 3200.

Reid and Kirsch agree the “option” could be run by a private corporation

The fact that the “option” programs in both bills will be run by privately owned corporations was hinted at by Sen. Majority Leader Harry Reid and Richard Kirsch, the campaign director of Health Care for America Now, on September 1. As the following excerpt from a post on Talking Points Memo suggests, the Democratic leadership and HCAN have known since these bills were first drafted that the “option” programs will not be Medicare-like, but rather will be administered by one or more private-sector corporations:

During a Friday tele-town hall event, Sen. Majority Leader Harry Reid told constituents that he doesn’t think the public option ought to be a government run program like Medicare, but instead favors a “private entity that has direction from the federal government so people that don’t fall within the parameters of being able to get insurance from their employers, they would have a place to go.”
Today, a Reid spokesperson tells me, “[t]he idea is that [Department of Health and Human Services] could contract with a third-party administrator to do the administrative stuff. It would still be policies set by HHS.”
Though this isn’t the reform community’s first preference, it is something they could get behind.
According to Richard Kirsch … such an arrangement might work out OK.
The public option “doesn’t have to be a government agency, though we’d prefer it,” Kirsch said. “The entity would have to be accountable to the public, its risks borne by the public, and its policies set by a public entity.”

Note that both Reid and Kirsch used the singular form of “entity.” They did not use the plural form. That suggests that they were thinking of turning the “option” over to a single corporation, say, United Healthcare, rather than to multiple corporations. In view of the actual language of HR 3200 (which I will discuss further below), and given the rabid resistance such a proposal would provoke – not just from “option” supporters and the public but probably from the insurance industry as well (the industry would no doubt prefer to see multiple contracts scattered among its members) – it is extremely difficult to believe that Reid and Kirsch really meant to imply that the entire “option” program will be turned over to a single corporation.

But regardless of whether Reid and Kirsch really meant to refer to one corporate administrator or dozens of them, why would they wait until September to drop the hint that the “option” will be run by one or more corporations? They have known, or should have known, since at least June (when draft versions of both bills were published) that corporations will play a dominant role in the creation and administration of the “option.” My guess is that Reid and Kirsch avoided revealing the role of corporations till now in order to maintain the illusion among “option” supporters that the “option” will be run by public employees. It’s pretty difficult to convince people the “option” will “look just like Medicare” when you admit it will be run by corporations, many of which will probably be insurance companies. I think Reid and Kirsch decided they might gain more than they lost if they revealed the fact that the “option” will not only create millions of new customers for the insurance industry, but will let corporations actually create the “option” program. They were hoping, in other words, to win over a few Blue Dogs and maybe a Republican or two without losing the votes of any member of Congress who already supports the “option.”

Reading the entrails of HR 3200

Several provisions of Title II, Subtitle B in HR 3200 indicate the authors of HR 3200 understand that the “option” will be run by multiple corporations. These provisions, coupled with an understanding of the obstacles that these corporations will have to overcome to create “option” insurance in every region of the country, support the conclusion that HR 3200’s “option” program will not look like Medicare, but rather will look very much like the hodge-podge of privately-run programs proposed by the Senate HELP Committee.

Three provisions in HR 3200 support the conclusion that the “option” will be run by corporations. One, which I have already discussed briefly, authorizes the Secretary to contract with what the HELP bill calls “contracting administrators.” A second requires the Secretary to make these contracting administrators repay their loans within ten years. A third authorizes the Secretary to engage in “direct contracting with providers” and direct negotiations with drug companies.

HR 3200 authorizes contracts with multiple corporations

Like the HELP bill, HR 3200 indicates public employees will not be setting up the “option” or “options.” This fact stands in sharp contrast to expectations created among the public by “option” advocates. HR 3200 communicates this fact by not authorizing the hiring of public employees and, instead, authorizing the Secretary to “enter into contracts” with corporations described in subsection (a)(4) of section 1874A of the Social Security Act. When you track this statute down and read it, you discover that HR 3200 is talking about corporations called “Medicare Administrative Contractors.”

Notice that the clause from HR 3200 I quoted above – “enter into contracts” – refers to “contracts,” plural. HR 3200’s bill writers obviously anticipate the Secretary will be signing multiple contracts with multiple MAC-like corporations. As I noted in my August 14 article about the HELP bill, the corporations that now qualify for MAC contracts with Medicare are nearly all insurance companies. This shouldn’t be surprising; the skills a corporation is supposed to have to get a MAC contract are virtually identical to those possessed by the typical insurance company. (At the end of this article I present the list of the current MACs I presented in my August 14 paper.)

There are several minor differences between HR 3200 and the HELP bill on this issue of MAC-like contractors. One is that HR 3200 does not require that the MAC-like corporations that get contracts with the Secretary be non-profit, whereas the HELP bill makes the non-profit requirement very clear.

Loan repayment provision

In addition to the remarks by Reid and Kirsch quoted above and the provision in HR 3200 authorizing the Secretary to hire private corporations, two other provisions in HR 3200 strongly suggest that HR 3200’s authors expect the “option” to be run by private corporations. One of them is the provision creating a start-up fund for the “option.”

HR 3200 uses peculiar language to describe who can use this start-up money and who has to repay it. In a paragraph entitled “Start-up funding,” HR 3200 says, “there is hereby appropriated to the Secretary … $2,000,000,000” (emphasis added) plus additional funds “necessary to cover 90 days worth of claims reserves based on projected enrollment.” But in the section requiring these start-up funds to be repaid within ten years, HR 3200 doesn’t say the Secretary shall repay the loans. Rather, it says, “The Secretary shall provide for the repayment of the start-up funding” within ten years (emphasis added).

Is this not peculiar phrasing? If the Secretary is the borrower, why not simply say the Secretary “shall repay the loan”? The only plausible explanation is that the Secretary isn’t going to be the ultimate borrower. The only plausible explanation is that the Secretary will turn around and lend the money to another entity, or more likely, multiple other entities, namely, contracting administrators. For reasons known only to the authors of HR 3200, the bill does not contain language analogous to that in the HELP bill which clearly indicates entities outside of DHHS will be the recipients of the start-up funds. Despite this peculiar omission, it is reasonable to infer that multiple MAC-like entities will be receiving loans from the Secretary under HR 3200.

Why did HR 3200’s authors insist on using the unnecessarily opaque phrase, “shall provide for repayment”? My hypothesis here is identical to my hypothesis about why Sen. Reid and Richard Kirsch delayed revealing the role of corporations in the administration of the “option.” My hypothesis is that the authors of HR 3200 didn’t want to reveal to the public the dominant role private corporations will play in creating and administering the “option.” What the authors of HR 3200 really wanted to say was, “The Secretary shall include in all contracts with contracting administrators a clause requiring that they pay back all loans from the Secretary within ten years.” They didn’t do that because it would have revealed the secret – that the “option” won’t be run by public employees, at least not directly, and it will not look anything like Medicare.

Direct contracting

The third provision in HR 3200’s Title II, Subtitle B which suggests the “option” will be run by multiple corporations is one which authorizes the Secretary to engage in “innovative payment mechanisms,” including “direct contracting with providers.” For those who know what “direct contracting” means, this is a telling clause.

In health policy, “direct contracting” is used to describe the practice of self-insured corporations contracting directly with clinics and hospitals on behalf of their own employers. Direct contracting spread rapidly among large corporations in the early 1990s as employers struggled to find ways to cut their health insurance costs. The contracts between employers and providers are called “direct” in order to distinguish them from the more traditional contracts between employers and insurance companies in which an insurance company agrees to serve as the middleman between the employer and the provider.

The explicit authority in HR 3200 for the Secretary to resort to “direct contracting with providers” makes sense only if the authors of HR 3200 understood that the “option” that the Secretary will oversee will consist of dozens or hundreds of insurance companies. If the “option” really were going to look like the traditional Medicare program – a single program in which Medicare reimburses providers directly – there would be no need for HR 3200 to explicitly authorize the Secretary to deal directly with providers.

Another provision in HR 3200 authorizing the Secretary to negotiate on behalf of all “option” enrollees with the drug industry raises a similar question. If direct negotiations with drug companies has to be specifically authorized by HR 3200, doesn’t that imply that the authors of HR 3200 understand that medical goods and services will be delivered by the “option” through a hodge-podge of insurance companies, just as prescription drugs are now delivered through hundreds of insurance companies under the privatized Medicare Part D program?

The logistics of creating the “option”

Even if HR 3200 stated clearly that the “option” will be run by public employees and not corporations, it would still be reasonable to conclude that the “option” program won’t be a single, uniform program like Medicare, but will instead consist of many programs that vary by state and region. The obstacles that will have to be overcome to create “option” insurance will be the same regardless of whether public or private employees are in charge. Those obstacles will vary from one insurance market to another. The primary obstacle will be the power of the insurance industry in any given market, and this power will be determined primarily by how concentrated the industry is. It will be more difficult to establish the “option” in those markets where one or two insurers insure a majority of the local population than in those markets where no single insurer dominates.

Depending on how successful the corporations in charge of creating “option” insurance are, some parts of the country may have no “option” coverage available at all, some might have “option” insurance that meets only the minimum criteria for coverage spelled out in HR 3200 and the HELP bill, and some might have “option” insurance that exceeds the minimum coverage. Other significant features of the “option” could vary as well, including the premiums and how tightly managed the coverage is (including how much freedom enrollees will have to choose their own doctor).

We need truth in advertising about the “option”

When Jacob Hacker began promoting what is now called the “public option” in 2001, he referred to it as “Medicare Plus.” Given the enormous size of this version of the “option” (Hacker predicted it would enroll at least half of the non-elderly population), Hacker’s comparison of his proposed program with Medicare was not misleading. But after the Democrats introduced draft versions of the Senate HELP bill and HR 3200 last June, “option” advocates should have immediately ceased comparing the “option” to Medicare.

They did not do that. They continued to barrage the public with statements linking the “option” with Medicare. For example, in an interview posted on AlterNet on July 8, Howard Dean responded to a question about what the “option” looks like by saying, “In a nutshell, it looks like Medicare.”

One would think “option” supporters would have an especially strong motive to stop misleading the public about what the “option” will look like. They risk serious embarrassment if the “option” they keep comparing to Medicare turns out to be a hodge-podge of small, ineffective insurance companies created by private corporations. But I am aware of only two instances in which “option” advocates have so much as hinted at the possibility of this outcome. In a paper posted on August 20, Jacob Hacker conceded in a parenthetical remark that “the HELP bill appears to leave open the possibility … that the public plan could be contracted out to private insurers or at least established on a state-by-state basis, two undesirable approaches that should be clearly ruled out in subsequent legislation.” (page 2) The other instance was the September 1 comment by HCAN’s Richard Kirsch, which I quoted above, in which Kirsch agreed with Sen. Reid that the “option” might be administered by a private-sector firm.

“Option” advocates need to do better. They need to tell congressional Democrats the “options” in the HELP bill and HR 3200 will be no match for the insurance industry and that unless the Democrats rewrite the “option” sections to create “options” like Hacker’s original Medicare Plus, they will urge members of Congress and the public to oppose the “reform” legislation.
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Appendix: List of corporations that currently serve as “Medicare Administrative Contractors” for Medicare
• Cahaba Government Benefit Administrators, a subsidiary of Blue Cross and Blue Shield of Alabama;_• First Coast Service Options, a subsidiary of Blue Cross and Blue Shield of Florida;_• Highmark Medical Services, a division of Highmark Blue Cross Blue Shield of Pennsylvania;_• National Government Services, a subsidiary of WellPoint, the nation’s largest health insurance company measured by enrollment (as opposed to revenues);_• National Heritage Insurance Corporation, which is a subsidiary of Electronic Data Systems (the firm Ross Perot founded) which is now a subsidiary of Hewlett Packard;_• Noridian Administrative Services;_• Palmetto GBA, a subsidiary of Blue Cross Blue Shield of South Carolina;_• Pinnacle Business Solutions, a subsidiary of Blue Cross Blue Shield of Arkansas;_• Trailblazer Health Enterprises, a subsidiary of Blue Cross Blue Shield of South Carolina;_• Wisconsin Physicians Services Health Insurance Corporation.
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Kip Sullivan is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program.

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