Something for Nothing

By David Brooks
The New York Times
June 22, 2009

On May 12, the Senate Finance Committee held a hearing on health care reform. There was a long table of 13 experts, and a vast majority agreed that ending the tax exemption on employer-provided health benefits should be part of a reform package.

They gave the reasons that experts — on right or left — always give for supporting this idea. The exemption is a giant subsidy to the affluent. It drives up health care costs by encouraging luxurious plans and by separating people from the consequences of their decisions. Furthermore, repealing the exemption could raise hundreds of billions of dollars, which could be used to expand coverage to the uninsured.

Democratic Senator Ron Wyden piped up and noted that he and Republican Senator Robert Bennett have a plan that repeals the exemption and provides universal coverage. The Wyden-Bennett bill has 14 bipartisan co-sponsors and the Congressional Budget Office has found that it would be revenue-neutral.

The Finance Committee’s chairman, Senator Max Baucus, looked exasperated. With that haughty and peremptory manner that they teach in Committee Chairman School, he told Wyden and the world that this idea was not going to happen.

In the World’s Greatest Deliberative Body, senators don’t run things. Chairmen and their staffs run things. During the spring, as the Obama administration faded to invisibility, the finance and health committees separately put together plans. These plans did not alter the employer exemption. They did build on the current system. They did include approaches that have been around since Richard Nixon.

The problem with the committee plans is that they don’t do much to change the underlying incentives, and consequently don’t do much to control costs. “The single most expensive option is to build on the existing system,” says the health care costs guru John Sheils of the Lewin Group.

The C.B.O. measured the plans, and the results were devastating. A successful plan has to be revenue-neutral for the government over the next 10 years, and it has to reduce the total health care burden over the long term so the country doesn’t go bankrupt. The Senate committee plans failed both criteria. They would cost the government more than $1 trillion this decade and send total health care costs zooming at least twice as fast as the economy as a whole.

The C.B.O. reports sent shock waves through Washington. Senators and staffs began casting about for a way to get a good C.B.O. score. President Obama redoubled his rhetoric about fundamentally reducing health care costs. Everybody continued looking around for a compromise that could get a bipartisan majority.

Now you might think that in these circumstances someone might take a second look at the ideas incorporated in the Wyden-Bennett plan, which already has a good C.B.O. score, bipartisan support and a recipe for fundamental reform.

If you did think that, you are mistaking the Senate for a rational organism. For while there are brewing efforts to incorporate a few Wyden-Bennett ideas, there is stiff resistance to the aspects that fundamentally change incentives.

The committee staffs don’t like the approach because it’s not what they’ve been thinking about all these years. The left is uncomfortable with the language of choice and competition. Unions want to protect the benefits packages in their contracts. Campaign consultants are horrified at the thought of fiddling with a popular special privilege.

So the process is moving along as it has been. There is a great deal of talk about the need to restrain costs. There’s discussion about interesting though speculative ideas to bend the cost curve. There are a series of frantic efforts designed to reduce the immediate federal price tag. Some senators and advisers suggest cutting back on universal coverage. Others have come up with a bunch of little cuts in hopes of getting closer to the trillion-dollar tab. The administration has ambitious plans to slash Medicare spending.

But there is almost nothing that gets to the core of the problem. Under the leading approaches, health care providers would still have powerful incentives to provide more and more services and use more expensive technology.

We’ve built an entire health care system (maybe an entire government) on the illusion of something for nothing. Instead of tackling that basic logic, we’ve got a reform process that is trying to evade it.

This would be bad enough in normal times. But the country is already careening toward fiscal ruin. We’ve already passed a nearly $800 billion stimulus package. The public debt is already projected to double over the next 10 years.

Health care reform is important, but it is not worth bankrupting the country over. If this process goes as it has been going — with grand rhetoric and superficial cost containment — then we will be far better off killing this effort and starting over in a few years. Maybe then there will be leaders willing to look at the options staring them in the face.

http://www.nytimes.com/2009/06/23/opinion/23brooks.html

Readers’ Comments:

Don McCanne
San Juan Capistrano, CA
June 23rd, 2009
9:16 am

Two very pertinent points left out would entirely change any conclusions drawn from this commentary:

1) You state that John Sheils has shown that building on the existing system is the single most expensive option for reform. What you didn’t state is that Sheils has also shown that a single payer national health program is the least expensive, and is the most effective in achieving the goals of universality and cost containment.

2) Although you state that Wyden-Bennett has a favorable C.B.O. score, you left out the fact that it was achieved after months of negotiation with the C.B.O. during which numerous changes were made that would shift the burden of future cost increases from the federal budget to individual patients. Financial hardship and bankruptcy due to medical debt is already a problem for insured individuals, and Wyden-Bennett would compound that problem.

Instead of worrying about the federal budget as an isolated problem, Congress needs to start addressing the combined public and private costs for patients. Policy solutions that would work are no secret.

Now that we have a new president espousing health care reform and a Democratic majority in both houses of Congress, isn’t this a time to be excited and optimistic for long-overdue reform? Much as we would like to say “Of course!”, we cannot. The “reform” effort is already way off the track, despite the hype of “progress” in the uncritical mainstream media.

So what’s going wrong? For starters, not all interests are at the negotiating table; noteworthy in its absence of advocates for the public interest. Fundamental questions as to the goals of reform are not being asked, and in fact are being kept out of the discussion. These questions include:

Who is the health care system for (e.g. patients and their families vs. corporate market stakeholders and their investors)?

Should the debate be based on evidence, ideology, or political power of the stakeholders in the present (failing) system?

The “debate” over health care reform has already been taken over by the very interests who are themselves a big part of the problem (reminds us of the banking industry and the bailout in process). True to their business model, the insurance, drug, medical device, medical equipment and related health care industries are naturally more interested in their future markets, profits and returns to investors than building a sustainable system of universal access that would rein in their profiteering and hold them more accountable to the public interest. For them, health care costs are revenue, and the “reform process” is an opportunity to protect and expand their future financial wellbeing.

And so we see the people, who are gathered around the White House’s Health Care Summit table or invited to hearings of the Senate Finance Committee, are all committed to building on the flaws of our multi-payer, market-based system, despite all the evidence to the contrary. And in fact, health professionals and activists for the only reform alternative that can actually save money while guaranteeing universal access (single-payer Medicare-for-All), are being excluded and even arrested if they “act up or disrupt” hearings.

While everyone agrees that the soaring and increasingly unaffordable costs of health care should be the principal target of reform, the rhetoric and behavior of the stakeholders, predictably enough, do not match. These examples illustrate the point:

• Many of the stakeholders around the negotiating table have signed on to a voluntary effort to trim $2 trillion from health care spending over the next ten years; these include the American Medical Association, the American Hospital Association, and the trade groups for the insurance, drug and medical device industries. This pledge is based on such vague promises as increasing prevention and wellness programs, better management of chronic illness, reducing hospitalizations, and expansion of electronic medical records. But there is no plan, accountability or credible evidence that any of these approaches will cut costs, and such an effort is already raising antitrust concerns. So this ends up as a vacuous gesture of goodwill in an attempt to avoid major change of the health care marketplace.

• While raising their premium prices at levels four or five times the cost of living and family incomes, and continuing to engage in questionable marketing practices, America’s Health Care Plans (AHIP) fight fiercely against a competitive public option; in the individual market, Blue Cross Blue Shield of Michigan is raising its rates this month by about 50 percent; AHIP pledges to guarantee issue to all comers, but only if the government mandates that everyone should have insurance and provides subsidies to lower-income people to purchase coverage — quite obviously an enormous windfall for a failing industry.

• Even as AHIP postures about opening up its coverage policies and better policing its marketing practices as part of health care reform, Blue Cross Blue Shield of North Carolina stands poised to launch a large disinformation ad campaign against a public plan option if it becomes part of a reform package.

• The Lewin Group, a well-known health services consulting firm, has carried out studies comparing various financing alternatives in a number of states (e.g. California, Vermont, Maryland, Georgia), concluding that single-payer is the only way to provide universal coverage and still save money; however, the Lewin Group was bought last year by Ingenix, in turn owned by UnitedHealth, the second largest insurer in the country; is it any surprise that Lewin’s spokesperson before the Senate Finance Committee was recently silent on the advantages of single-payer?

• PhRMA spent $47 million on lobbying in the first quarter of 2009, one-third more than last year, and many drug companies are raising their prices by 15 to 20 percent and more.

• HCA Inc, an investor-owned chain of 166 hospitals across the country, is reporting that its income before taxes nearly doubled in the first quarter of this year, even though it had fewer hospitals and its admissions declined; Richard Scott, former CEO of HCA until he was forced to resign in 1997 in what became at that time the largest fraud case in American history, now heads up an astroturfing organization, deceptively named Conservatives for Patients’ Rights, that plans to spend some $20 million to kill an Obama health reform plan.

• As opposition gathers on both the left and right of a developing reform proposal, political compromises under the banner of bipartisanship progressively dilute the proposal itself. Showered as they are on both sides of the aisle in Congress by campaign contributions from stakeholders in the medical-industrial complex, legislators seek out political cover of a watered-down bill. Senator Charles Schumer proposes that any public option, if it survives, play by the rules of private insurers, while Blue Dog Democrats rise up against such a public option. The Center for Responsive Politics has documented that fundraising by the average U.S. senator more than tripled over the last eight years; Senator Max Baucus, adamantly opposed to the single-payer option as Chairman of the Senate Finance Committee, raised more than $11 million during the 2003 to 2008 election cycle, including more than half a million dollars from each of three industries — insurance, pharmaceuticals/healthcare products, and health professionals.

So the snake oil is flowing, the political trap is set as moderates and centrists run
for cover in a bipartisan attempt to craft a “reform” bill that won’t upset the stakeholders too much. Ideology and bald political power are controlling the “debate”, which appears certain to derail serious health care reform. Left out of the equation are the track record of the stakeholders, a sense of history, and the interests of the growing population that can no longer afford health care. We seem to have forgotten that the passage of Medicare and Medicaid in 1965 was a bitterly fought battle down to the last vote, without any semblance of bipartisanship. As George Bernard Shaw observed many years ago: “We learn from history that we learn nothing from history”.

Under these circumstances, no bill is better than a bad one that will not rein in costs and will set back health care reform for years to come. Future posts will consider some of these issues in more detail.

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008 by John Geyman. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com/index.cfm?action=book&bookid=376

The House Tri-Committee Health Reform Draft

June 19, 2009
H.R. (discussion draft)
Short Title (to be supplied)

SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES.
(a) RATES ESTABLISHED BY SECRETARY.–
(1) IN GENERAL.–The Secretary shall establish payment rates for the public health insurance option for services and health care providers consistent with this section and may change such payment rates in accordance with section 224.
(2) INITIAL PAYMENT RULES.–
(A) IN GENERAL.–Except as provided in subparagraph (B) and subsection (b)(1), during Y1, Y2, and Y3, the Secretary shall base the payment rates under this section for services and providers described in paragraph (1) on the payment rates for similar services and providers under parts A and B of Medicare.

(b) INCENTIVES FOR PARTICIPATING PROVIDERS.–
(1) INITIAL INCENTIVE PERIOD.–
(A) IN GENERAL.–The Secretary shall provide, in the case of services described in sub paragraph (B), for payment rates that are 5 percent greater than the rates established under subsection (a).
(B) SERVICES DESCRIBED.–The services described in this subparagraph are items and professional services furnished during Y1, Y2, and Y3, under the public health insurance option by a physician or other health care practitioner who participates in both Medicare and the public health insurance option.

(2) SUBSEQUENT PERIODS.– Beginning with Y4 and for subsequent years, the Secretary may adjust such rates in order to promote payment accuracy, to ensure adequate beneficiary access to providers, or to promote affordablility and the efficient delivery of medical care.

http://edlabor.house.gov/blog/2009/06/health-care-reform-house-dems.shtml

PUBLIC HEALTH INSURANCE OPTION PROVISIONS IN THE DISCUSSION DRAFT:

OVERVIEW
Available in the new Health Insurance Exchange (Exchange) along with all of the private health insurance plans.

LEVEL PLAYING FIELD
Require public plan to meet the same benefit requirements, and comply with the same insurance market reforms as private plans.
Establish the public plan’s premiums for the local market areas that are designated by the Exchange, just as other insurers do.

PROVIDER PAYMENTS AND PARTICIPATION
Initially utilizes rates similar to those used in Medicare; this tie is severed over time as more flexible payment systems are developed.

http://edlabor.house.gov/documents/111/pdf/publications/DraftHealthCareReform-PublicOption.pdf

And…

House Health Care Plan

Posted by Karen Tumulty
TIME
Swampland (a blog)
June 19, 2009

The key committee chairmen put out an outline today of their approach to health care reform, and there’s one thing they want you to know about it: “Uniquely American,” said House Education and Labor Committee Chairman George Miller.

“We need a uniquely American approach to health care reform,” warns Robert Zirkelbach, a spokesman for the trade lobby America’s Health Insurance Plans.

Anyone who has followed this debate for more than 20 seconds will immediately recognize all this talk of unique Americanism as another way of saying NOT SINGLE PAYER, which is the government-financed system that just about every other industrialized country uses in one form or another. And all this skittishness about single payer explains the delicacy with which the House drafters have tried to finesse the question of whether their system will have a public plan, something like Medicare, but for people under 65.

The answer is, it will have a public plan, and a strong one–at first.

In the early stage, the public plan would reimburse health care providers at rates that are “similar to those used in Medicare”–that is, significantly lower than most private insurers pay them. This is something that the insurance industry, doctors and hospitals will all hate. “A government-run plan that pays based on Medicare rates — for any period of time — is a recipe for disaster,” Scott P. Serota, president and Chief Executive Officer of the Blue Cross and Blue Shield Association, said in a statement issued by the association.

Advocates would argue, on the other hand, that those lower rates could be a powerful engine to bring down health costs. Which is why they won’t be happy with what happens next. According to the summary, this tie to Medicare rates would be “severed over time as more flexible payment systems are developed.” In other words, this public plan would eventually evolve into something that looks–and competes–more like a private insurance company, albeit one that happens to be run by the government. At the news conference, I asked the committee chairmen precisely what that means–When would that happen? And under what circumstances? They couldn’t tell me, and demurred that this is the kind of thing that still needs to be worked out. Waxman said it would take “a period of time” for the public plan to get started, but that “they will at some point compete.”

The House committee chairmen are trying to have it both ways on the public plan.

Of course, the biggest thing that needs to be worked out is how they are going to pay for this bill, which they said would ultimately assure that 95% of Americans have health coverage. What they are looking at is a combination of reductions in Medicare and Medicaid spending and taxes.

Until they figure that part out, all of this other stuff is written in smoke.

http://swampland.blogs.time.com/2009/06/19/house-health-care-plan/

With the release of the discussion draft of the House Tri-Committee reform proposal, the progressive community is celebrating the decision to include a “strong public option” within the health insurance exchange. Its innovative feature, different from other public option proposals, is that it would use lower Medicare-based rates for the first three years, enabling the public option to displace some higher-premium private plans within the insurance exchange. Then in the fourth year, rates would be adjusted to provide a level playing field with the private plans.

Is this the model of the public option that is going to ensure that reform will bring affordable health care to everyone? Well, here are a few things that this reform will NOT accomplish:

* Not a single one of the Republicans or conservative Democrats who are opposed to the public option will sign on to this version. It is a government program not only in name, but in fact. Not only would it eliminate any hope of bipartisan legislation, it is quite likely that it could not even muster the vote of a simple majority.

* By requiring the public option to have the same market reforms as the private plans, it will prevent the government from using the great power of beneficent public social policies. A regulated insurance exchange within a fragmented, multi-payer, business-oriented insurance market would provide a very shaky infrastructure for delivering to the community the benefits of a social insurance program. Even with greater regulation, our private insurers have a business mission whereas the European private insurers have a social mission.

* A public plan that is required to comply with private insurer rules could never provide a back door entry to a single payer system. As Medicare Advantage demonstrates, the private insurers will always use devious means to provide them with an unfair advantage over our public program, even though they provide lower value per dollar spent.

* An insurance exchange, with or without a public option, perpetuates a fragmented system that prevents us from obtaining greater health care value by having the powerful purchasing strength of our own public monopsony – the secret of other systems that have slowed cost inflation.

* The administrative complexity of this model of reform makes it impossible to cover everyone. Initial estimates that this would cover 95 percent of the population are likely overly optimistic. Regardless, supporting a program that would leave even 15 million people on their own to fend for health care reflects a callous disregard for the needs of these individuals, and certainly belies the notion that we are a caring nation.

* Although this proposal shifts spending between individuals, employers and the government, creating the appearance of financing reform, it does very little to slow the continuing escalation in health care costs. Until that is seriously addressed, as it could be through an improved Medicare for everyone, the rest of this “stuff is written in smoke,” as Karen Tumulty writes.

Illness brings financial ruin and severe and avoidable hardship to millions of families here in the wealthiest nation on earth. Of all bankruptcies in 2007, 62% were precipitated by illness.

Of those bankrupted by medical costs, 4 out of 5 started out with health insurance, according to a study just released by the American Journal of Medicine. Astonishingly, 3 out of 5 managed to still have health insurance at the time of bankruptcy.

More, medical bankruptcy worsened dramatically in the years before the economic downturn of the last year. Bankruptcy due to medical debts rose by 50% between 2001 and 2007. Since then millions of people have had to forfeit their health insurance as they lose their jobs.

I was talking about it with an old friend who came to visit from out of town. She casually remarked: “But now everyone has one of these horrible stories. I have one. My mother has one. Everyone I know has one.”

Her story:

Several years ago I started having recurrent strep tonsilitis infections. My tonsils would get big, like golf balls. One of the times it started happening was on a weekend and there was no way to even make a doctor appointment — if I even had a regular doctor then — so I went to the ER.

But the young resident I saw in the ER wouldn’t do any tests. He gave me a lecture! He said: “People like you are gobbing up the system.” He went on about about how, by coming to the ER, I was driving up health costs for everyone because all I needed was a prescription for antibiotics.

What choice did I have? I remember we got into an argument over a rapid strep test — I knew it would be positive and give him the result he needed to write the prescription. Instead he discharged me with no tests and a big bill.

Then the next day I had a high fever and, you know, I could barely swallow anything, my tonsils were huge. So I went back to the same ER where I was accused of “gobbing up the system” and they admitted me for IV antibiotics and fluids! Well the whole thing cost thousands. I ended up putting it on my credit card.

But pretty soon I couldn’t even make the minimum payments and then collection agents were, like, hounding me. It was awful! So finally I borrowed from my brother and went in person to the collection agency with a check. To this day my brother won’t let me live it down. Whenever I see him he reminds me that somehow it was all my fault. Oh its horrible.

The study, “Medical Bankruptcy in the United States, 2007″ supports the observation that we all know someone with a story like this. The researchers, David Himmelstein, Steffie Woolhandler, Elizabeth Warren and Deborah Thorne, found that those bankrupted were middle class families: 2/3rds had owned a home. 3/5ths had attended college. (What about the people who lacked the means or wherewithal to seek bankruptcy protection, or who, like my friend, simply paid the bill?)

The impact upon the families who were bankrupted was profound. 2/5ths lost income or lost a job due to illness or due to lost work to care for a sick family member. Those who were ill and lost private insurance coverage due to the bankrupting illness, lost their coverage usually because the patient or family caregiver lost their job.

What good is health insurance when in spite of having it, personal medical costs break the household finances?

What good is having health insurance tied to employers, when a family health crisis costs you your job?

My friend did not declare bankruptcy. She has since rebuilt her credit. We know there are millions like her — how many?

President Obama told the American Medical Association meeting this week:

If we do not fix our health care system, America may go the way of GM; paying more, getting less, and going broke.

This week we have had an earful of proposals based upon the failed system of private health insurance, proposals that Don McCanne aptly names “unaffordable undersinsurance.” Meanwhile single payer is getting a hearing throughout the nation and in the halls of Congress. The word is out.

Mr. President: single payer national health insurance is the only proposal that will put an end to medical bankruptcy and keep us from going broke.

Health Care Reform: Draft Proposal

Posted by Ezra Klein
The Washington Post
June 18, 2009

Senate Finance Committee

Excerpts

Benefit Options – Actuarial value
Bronze = 65%
Silver = 73%
Gold = 81%
Platinum = 90%

Tax credit for individuals and families
Up to 300% federal poverty level (FPL)

Medicaid
Children and pregnant women – up to 133% FPL
Parents and childless adults – up to 100% FPL

Individual requirement – fine for non-compliance
Exempt from fine if lowest premium exceeds 15% of income
Exempt from fine if below 100% poverty

http://www.washingtonpost.com/wp-srv/politics/documents/health_care_reform_draft_proposal_061809.pdf

The Senate Finance Committee members were informed by the Congressional Budget Office that the impact their preliminary reform proposal would have on the federal budget would be much greater than a bipartisan consensus would permit. Before moving further forward with the legislative process, the committee is considering changes to reduce the amount of funds that would have to be budgeted. The draft proposal cited above is not a definitive recommendation but merely presents ideas for discussion.

Nevertheless, the process should alarm us. The committee members continue to steadfastly refuse to look at financing options that would be effective in providing affordable health care for everyone. They begin with the insistence that reform be built on the obsolete infrastructure of private health plans, even though they have just proven once again that this archaic model no longer works.

Look what happens when they try to cram reform into this model. They expect an individual or a family with an income of 300% of the federal poverty level to pay 15% of their income for the premium alone, and for that they receive a plan that covers only 65% of the actuarial value of their health care services. They would require Americans to pay to private insurers a premium that they can’t afford, to purchase an underinsurance product that would fail to prevent financial hardship should they need health care, and to fine them should they fail to comply.

So they say, wait, this isn’t final. Let’s work with these numbers so that we can find products with adequate benefits and affordable premiums that do not further burden our federal budget with excess subsidies. As long as our legislators rely on an infrastructure of private health plans, that game will never end. Those numbers do not exist.

There is a way we can do it. We can establish separately a single, equitably-funded, universal risk pool which would be affordable for everyone. We could then use those funds in a much more efficient, single health care purchasing system that would ensure that everyone receives the care that they need.

But you’ve heard this before. And so have the members of Congress. Yet they continue to craft policies that impair the health care finances and health care access of far too many of us merely to ensure the viability of the obsolete, dysfunctional insurance industry. Talk about perverse priorities!

If you haven’t yet co-signed Sen. Bernie Sanders’ Petition to Congress, please do so now, and ask others to do so as well:

http://sanders.senate.gov/petitions/index.cfm?uid=7fd59f2e-88e1-477a-8eaf-762a5b050809

Judge orders Scrushy to pay $2.8B to shareholders

By The Associated Press
The Washington Post
June 18, 2009

(An Alabama) state judge on Thursday ordered former HealthSouth CEO Richard Scrushy to pay about $2.8 billion to shareholders who sued over accounting fraud at the rehabilitation chain.

Circuit Judge Allwin E. Horn, who heard the case without a jury, ruled in favor of HealthSouth shareholders who filed a civil suit claiming Scrushy was involved in a massive fraud that nearly sent the company into bankruptcy.

The Alabama suit accused Scrushy of unethical dealings with the company while it was going broke and complicity in $2.6 billion in fraudulent earnings and asset reports it filed with regulators from 1996 to 2002. The amount shareholders sought included money they claimed he pocketed through sweetheart deals.

Five former HealthSouth finance chiefs gave testimony implicating Scrushy in a scheme to fraudulently inflate earnings. Scrushy, who hired all five when he ran the company, blamed them and described them as having personal weaknesses.

Scrushy wore a dark business suit in court, but his leg shackles jingled as he arrived for his first day of testimony.

During the lawsuit trial, an attorney for shareholders, John W. Haley, repeatedly confronted Scrushy over what Haley described as obvious conflicts of interest. Among them was HealthSouth’s purchase of 19 acres of land next to Scrushy’s suburban Birmingham estate for $1.9 million, then giving him the land three years later. Scrushy said he got the land instead of a bonus one year.

Haley, sounding incredulous, recounted how Scrushy took an $82 investment in a company that purchased property at a discount from HealthSouth and turned it into a personal profit of some $12 million in four years by leasing the property back to the corporation.

“That’s the way it works in America,” Scrushy said.

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/18/AR2009061801985.html

“A Second Opinion,” by Arnold Relman, M.D.:
http://www.publicaffairsbooks.com/publicaffairsbooks-cgi-bin/display?book=9781586484811

In a landmark 1980 New England Journal of Medicine editorial, former Editor-in-Chief Arnold Relman warned us of the new “Medical-Industrial Complex,” referring to “a medical care system that had begun to attract investors, and in which business interests had started to reshape the behavior of doctors and health care facilities.”

Three decades later, he updated these views in his book, “A Second Opinion.” He writes, “market forces, investors, for-profit corporations, and entrepreneurs are now at the center of the U.S. system, and generation of income is a dominant consideration for most private providers of health care – including those that are not investor owned.” (Not-for-profits must adopt the same perverse behaviors of the for-profits to remain competitive with them.)

With the two great problems to address – 1) the uninsured and underinsured, and 2) skyrocketing health care costs, why should we concern ourselves now with the medical-industrial complex?

First, the medical-industrial complex seeks money, serving those with more money, and shunning those with less money. Theoretically, the private insurance industry would correct this problem by providing the medical-industrial complex with money that many individuals with health care needs simply don’t have. But we’ve all seen how this works. The private insurance industry takes the money from the largest, healthiest sector of our population, and then spends a significant amount of it on administrative services designed to ensure that they can keep as much of that money as possible. The medical-industrial complex has no motivation to try to defeat its money-seeking and money-retaining behavior by increasing the outflow of money to those with health care needs. Thus the problem of the uninsured and underinsured grows worse every year.

Second, the medical-industrial complex, in its drive to fulfill its money-seeking role, does everything that it possibly can to add booster rockets to our skyrocketing health care spending. The culture of the medical-industrial complex provides an economic environment in which the industry thrives, and patients and payers suffer.

Several members of the PNHP leadership have provided decades of well documented, peer review studies confirming that the medical-industrial complex has caused great damage to our health care system, resulting in financial hardship, physical suffering and even death. Although much of our recent advocacy has been around reforming our health care financing system, we have always supported a change from the medical-industrial culture to a culture of a caring health care delivery system that places patients first.

Listening to the national dialogue on reform, you would think that this problem is being ignored. It isn’t. Congressman John Conyers’ HR 676, “United States National Health Care Act or the Expanded and Improved Medicare for All Act,” includes the following language:

“No institution may be a participating provider unless it is a public or not-for-profit institution. Private physicians, private clinics, and private health care providers shall continue to operate as private entities, but are prohibited from being investor owned… For-profit providers of care opting to participate shall be required to convert to not-for-profit status.”

Richard Scrushy, an animal of the medical-industrial complex, now facing a $2.8 billion judgement against him, reminds us of the slogan of the medical industrial complex: “That’s the way it works in America.”

Let’s do all we can to see that it doesn’t work that way anymore.

Sebelius: Single-Payer Health Care Not In Plans

Morning Edition
NPR
June 16, 2009

Interviewer: What’s been the hardest thing for you to explain?

HHS Secretary Kathleen Sebelius: I think that the whole idea of the public option has been difficult, in part because I think some of the opposition has described it as a potential for a draconian scenario that was never part of the discussion in the first place. So disabusing people of what is not going to happen is often difficult because there is no tangible way to do that.

Interviewer: Can you say flat out it’s just never going to be single-payer health insurance, and we’re going to try to write it, if we can, so that it won’t ever be?

Secretary Sebelius: Oh I think that’s very much the case, and, again, if you want anybody to convince people of that, talk to the single-payer proponents who are furious that the single-payer idea is not part of the discussion.

http://www.npr.org/templates/story/story.php?storyId=105442888

The proposal to provide a government-run Medicare-like program as an option for purchase within an insurance exchange of private health plans is vehemently opposed by the insurance industry, the U.S. Chamber of Commerce, the AMA, all Republicans, a large bloc of conservative Democrats, and many others. No amount of negotiation can resuscitate a Medicare-like option. It’s dead.

To avoid losing the support of the progressives and many of the moderates in Congress, efforts are being made to create a new private program that has distinguishing features, primarily cosmetic, that will allow them to mislabel it as a public option. The fear of opponents is that this pseudo-public option could later be transformed into a government-run program. Thus it is imperative that the design of the option would lock it up as a private sector model with no possibility of transformation. Without that assurance, the pseudo-public option will have to be eliminated during markup in order to salvage other reform policies. The opponents will never ever sign on to single-payer-in-waiting.

Those in the progressive community who abandoned single payer to support a public Medicare-like option, believing that this was the politically feasible strategy for success, simply haven’t been paying attention if they still really believe that a government-run public option can survive. They can keep on wishing, but they would be wise to back up their position by signing Sen. Bernie Sanders’ Petition to Congress:

http://sanders.senate.gov/petitions/index.cfm?uid=7fd59f2e-88e1-477a-8eaf-762a5b050809

Letter to Sen. Edward Kennedy, Chairman, Committee on Health, Education, Labor, and Pensions

From CBO Director Douglas Elmendorf
Congressional Budget Office
June 15, 2009

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have completed a preliminary analysis of the major provisions related to health insurance coverage that are contained in title I of draft legislation called the Affordable Health Choices Act, which was released by the Senate Committee on Health, Education, Labor, and Pensions (HELP) on June 9, 2009. Among other things, that draft legislation would establish insurance exchanges (called “gateways”) through which individuals and families could purchase coverage and would provide federal subsidies to substantially reduce the cost of that coverage for some enrollees.

Effects on Insurance Coverage.

According to the preliminary analysis, once the proposal was fully implemented, the number of people who are uninsured would decline to about 36 million or 37 million, representing about 13 percent of the nonelderly population.

Budgetary Impact of Insurance Coverage Provisions.

On a preliminary basis, CBO and the JCT staff estimate that the major provisions in title I of the Affordable Health Choices Act affecting health insurance coverage would result in a net increase in federal deficits of about $1.0 trillion for fiscal years 2010 through 2019. That estimate primarily reflects the subsidies that would be provided to purchase coverage through the new insurance exchanges, which would amount to nearly $1.3 trillion in that period.

Those costs would be partly offset by receipts or savings from three sources: increases in tax revenues stemming from the decline in employment-based coverage; payments of penalties by uninsured individuals; and reductions in outlays for Medicaid and CHIP (relative to current-law projections).

It is important to note, however, that those figures do not represent a formal or complete cost estimate for the draft legislation, for reasons outlined (in the letter). Moreover, because expanded eligibility for the Medicaid program may be added at a later date, those figures are not likely to represent the impact that more comprehensive proposals — which might include a significant expansion of Medicaid or other options for subsidizing coverage for those with income below 150 percent of the federal poverty level — would have both on the federal budget and on the extent of insurance coverage.

http://www.cbo.gov/ftpdocs/103xx/doc10310/06-15-HealthChoicesAct.pdf

Since the Affordable Health Choices Act and the CBO analysis of it are works in progress, the estimates of the net numbers who will gain insurance coverage and the net cost to the government are only preliminary and will likely change with refinements in the legislation and the analysis. What will not change are the fundamental implications of financing health care through government subsidized private health plans plus public programs.

The primary reform goals that most of us support include providing health insurance for everyone that is effective in preventing financial hardship, and controlling the rate of increase in our health care costs. What does the CBO response tell us about the potential of this legislation to meet these two goals?

Regarding the impact on our national health expenditures (NHE), the analysis tells us almost nothing. As with most reports of this nature, they looked primarily at government spending rather than total health care spending. Individuals, employers and the government are all concerned about health care costs. Tax and budget policies that satisfy fiscally conservative legislators by effectively capping government spending while shifting cost increases to individuals and employers do not help us, as a nation, to meet the challenges of run-away health care costs that are harming so many of us. Looking at government spending while ignoring private spending is of little value to us when we are trying to figure out how we are going to pay for health care.

CBO needs to provide us with an estimate of changes in our NHE since we are all paying that. Providing us, in addition, with estimates of government spending can be helpful in establishing tax policies that would help bring equity to health care financing. But let’s have transparency on our full health care spending, public and private.

Regarding the impact on the numbers who will become insured, analyses such as this can provide a ballpark figure. The fact that the policies outlined in the current draft of the legislation would leave 37 million people without coverage likely has Senate HELP Committee members scurrying to patch the holes in the legislation and to look for other refinements that would expand coverage to more individuals.

There is an inverse relationship between government subsidies and the numbers of individuals who are left uninsured. Increasing the number of individuals eligible for the subsidies and increasing the amounts of the subsidies reduce the numbers of individuals left out, but that number will never be zero. A policy of using government subsidies to purchase private plans will always fall short of universality. The only way to cover absolutely everyone is to make enrollment automatic, and to separate the financing by changing from premiums linked to individual plans to a global system financed through equitable tax policies.

Looking only at the numbers of individuals left without insurance skirts another crucial issue. The rate of underinsurance is exploding. Offering multiple tiers of different priced plans in an insurance exchange automatically results in an expansion of underinsurance. Even with subsidies, healthy individuals will select inadequate plans with the lowest premiums, sincerely believing that this is all they can afford. But what good is insurance if you can still be left bankrupt with medical bills?

This proposal leaves too many without health insurance, fails to control our escalating health care costs, and expands the market of underinsurance products. The staff members at CBO, JCT, the HELP Committee, the Finance Committee, and the House Committees will get busy introducing policy refinements for the legislative proposals. Then they will finally bring us a product that leaves too many without health insurance, fails to control our escalating health care costs, and expands the market of underinsurance products.

Paying for Health Care Reform

The White House
June 13, 2009

Health Care Reserve Fund ($ in billions – over 10 years)

$635 – FY 2010 Budget
$309 – Medicare and Medicaid Savings
$326 – Revenues

$313 – Additional Medicare and Medicaid Savings
$110 – Incorporate productivity adjustments into Medicare payment
$106 – Reduce hospital subsidies for treating the uninsured as coverage increases
$75 – Pay better prices for Medicare Part D drugs
$22 – Other

Total: $948

http://www.whitehouse.gov/MedicareFactSheetFinal/

What does President Obama mean when he says that this is how we’re going to pay for most of his health care reform proposals? Is he referring to savings in the actual costs of health care that would offset the increased spending that would result from expanding coverage? Or is he merely referring to a decrease in government spending that helps with government budgets, but doesn’t really have much impact on our total national health expenditures (NHE)?

Two-thirds of the proposed funding already appears in his FY 2010 budget. He would reduce overpayments to Medicare Advantage plans, reduce Medicare and Medicaid fraud (sure), reduce hospital readmissions (block the entrances?), and reduce Medicare hospital payments by measuring quality (hmmm). In this fact sheet, the only revenue increase mentioned is limiting the value of itemized deductions for families making over a quarter-million dollars a year, a proposal that has proven to be quite controversial.

The new proposals in this fact sheet include a reduction in spending based on improved productivity, extrapolating the improved productivity in the entire U.S. economy and applying it to health care (not exactly noted for assembly lines, displacing health care with information technology systems, etc.). It includes a reduction in payments to Disproportionate Share Hospitals (excess share of uninsured) which would be made possible by providing insurance to those currently uninsured. This is more of an accounting gimmick since it merely moves government spending from the hospitals to the insurance plans. Also proposed is a reduction in drug reimbursement for beneficiaries dually eligible for Medicare and Medicaid, a minute fraction of what could be saved by negotiating fair prices for all of us under a universal national health program.

Merely playing with numbers does not provide us with the comprehensive structural reform that we would need to accomplish our two primary goals: 1) health care for everyone, and 2) slowing health care cost escalation to sustainable levels. As long as the politicians can continue to distract us with cat fights over the public option, or whatever, we will never have what we really need: a new and improved Medicare for all.

The following remarks were presented to the Congressional Progressive Caucus on June 4.

By Nick Skala

Today the Congressional Progressive Caucus faces a choice. That choice is whether Members should maintain their unflinching support for single-payer, or to accede to intense political pressure to support the plan currently being developed in Congress under the direction of President Obama: a mandate for Americans to purchase an insurance plan from a massive new regulatory “exchange,” with one plan potentially being a “public option.”

The difference between these choices could not be more stark: single-payer has at its core the elimination of U.S.-style private insurance, using huge administrative savings and inherent cost control mechanisms to provide comprehensive, sustainable universal coverage.

The “public option” preserves all of the systemic defects inherent in reliance on a patchwork of private insurance companies to finance health care, a system which has been a miserable failure both in providing health coverage and controlling costs.

Elimination of U.S.-style private insurance has been a prerequisite to the achievement of universal health care in every other industrialized country in the world. In contrast, public program expansions coupled with mandates have failed everywhere they’ve been tried, both domestically and internationally.

Many progressives accept that the “public option” is inferior to a single-payer system, yet support it because of its perceived political expedience. It is my aim today to convince you that the “public option” program currently being developed is not only bad health policy, but bad health politics.

On two separate occasions last month, physicians and nurses were dragged from the Senate Finance Committee in handcuffs for demanding that single-payer be considered in our nation’s health reform debate. These were American doctors and nurses, people who care for patients, people who want to practice medicine, not protest and disrupt Congress.

But these professionals risked their careers and their freedom. They did this not because they thought that the “public option” was “good” and single-payer “better.” They did it because they are firmly convinced, by well-established health policy science, that the so-called “public option” has no hope of remedying the systemic defects that cause their patients to suffer and die, sometimes before their very eyes.

Millions of dollars have been spent by political advocacy groups to commission polls and statistics “proving” that their health reform is “politically feasible.” Yet political winds do not make good health policy. Careful examination of science and experience do. And it is in the science and experience that we see that single-payer offers the only way to truly comprehensive, universal and sustainable health care, and that “public option” schemes offer only more of the same: tens of millions of uninsured, rapidly deteriorating coverage, an epidemic of medical bankruptcy, and skyrocketing costs that will eventually cripple the system.

First, because the “public option” is built around the retention of private insurance companies, it is unable – in contrast to single-payer – to recapture the $400 billion in administrative waste that private insurers currently generate in their drive to fight claims, issue denials and screen out the sick. A single-payer system would redirect these huge savings back into the system, requiring no net increase in health spending.

In contrast, the “public option” will require huge new sources of revenue, currently estimated at around $1 trillion over the next decade. Rather than cutting this bloat, the public option adds yet another layer of useless and complicated bureaucracy in the form of an “exchange,” which serves no useful function other than to police and broker private insurance companies.

Second, because the “public option” fails to contain the cost control mechanism inherent in single-payer, such as global budgeting, bulk purchasing and planned capital expenditures, any gains in coverage will quickly be erased as costs skyrocket and government is forced to choose between raising revenue and cutting benefits.

Third, because of this inability to control costs or realize administrative savings, the coverage and benefits that can be offered will be of the same type currently offered by private carriers, which cause millions of insured Americans to go without needed care due to costs and have led to an epidemic of medical bankruptcies.

Supporters of incremental reform once again promise us universal coverage without structural reform, but we’ve heard this promise dozens of times before.

Virtually all of the reforms being floated by President Obama and other centrist Democrats have been tried, and have failed repeatedly. Plans that combined mandates to purchase coverage with Medicaid expansions fell apart in Massachusetts (1988), Oregon (1992), and Washington state (1993); the latest iteration (Massachusetts, 2006) is already stumbling, with uninsurance again rising and costs soaring. Tennessee’s experiment with a massive Medicaid expansion and a public plan option worked – for one year, until rising costs sank it.

The Federal Employee Health Benefit Program (the model for a health insurance exchange) leaves hundreds of thousands of federal workers uninsured, and has proven unable to contain costs.

Negative results in a recent series of randomized trials explodes the hope that chronic disease management will cut costs. And the CBO has thrown a wet blanket on the notion that electronic medical records save money.

As Drs. David Himmelstein and Steffie Woolhandler, co-founders of Physicians for a National Health Program, have remarked, a public plan option does not lead toward single-payer, but toward the segregation of patients, with profitable ones in private plans and unprofitable ones in the public plan. A quarter-century of experience with public/private competition in the Medicare program demonstrates that the private plans will not allow a level playing field. Despite strict regulation, private insurers have successfully cherry-picked healthier seniors, and have exploited regional health spending differences to their advantage. They have progressively undermined the public plan – which started as a single-payer system for seniors and have now become a funding mechanism for HMOs – and a place to dump the unprofitably ill.

Progressive supporters of the “public option” readily concede that single-payer is a superior system. Indeed, their response to evidence that their plan won’t work is to commission more charts and graphs emphasizing its political feasibility.

The “public option” is truly the embodiment of health policy designed by sound bytes, cobbled together from snippets of information gathered from focus groups and public opinion polls, and centered around well-polling buzzwords such as “choice” and “shared responsibility.”

Such a plan may be enough to excite the political classes in Washington, who care more about what they think can pass the Congress than what will actually deliver universal, comprehensive health care for all. But doctors and nurses, the people who actually work in the health system, see right through it. They are going to jail because they know that this plan won’t work for their patients.

Nobody is going to jail for the “public option,” because the American people cannot be inspired by band-aids and half-measures it is impossible to believe in.

These doctors and nurses are the manifestation of a social movement, millions strong, that is waiting to be mobilized by the leadership of the Members in this room. Polls consistently show that two-thirds of the American people want single-payer. At a recent hearing in Montana convened by Sen. Max Baucus, only 10 people of three hundred said they were happy with the insurance they have. Sixty percent of physicians support single-payer, as do the U.S. Conference of Mayors and 39 state labor federations and hundreds of local unions across the country.

We’re told that holding out for single-payer is politically unwise, but to compromise and accept a bad plan at precisely the time when popular support and grassroots energy are on the side of true reform is the real political miscalculation.

The history of great social achievement is rife with instances in which the forces of institutionalized power told social movements – as they now tell this one – that what they wanted was too much, or too fast, or too soon. I think, of course, of the abolition of human slavery, the enfranchisement of women, the Civil Rights Movement, Social Security, the minimum wage, an end to child labor. In each of these instances, social movements held fast to their principles and soon discovered that they had been told was “politically unfeasible” one moment was political reality the next.

We currently have a better chance to pass single-payer than Lyndon Johnson had when he passed Medicare. Unlike the public option, single-payer – because it holds the potential to finally realize universal, equitable health care – can be a vehicle to inspire the American people for progressive change.

The voices of doctors and nurses can achieve extraordinary resonance when they speak selflessly in their patients’ interest. But your leadership is crucial to inspire the American people. It is my hope that you’ll see fit to provide it.

Click here for a printable version of the handout below.

The “Public Option” Fails as Health Politics:

But Getting “Something” is Better than Getting “Nothing,” Isn’t It?

Not if that “something” makes it more difficult to reach a real solution and ensures temporary relief will be followed by prolonged suffering. The “public option” may allow some people to buy inadequate insurance products for a short time. But such a system will quickly be crushed by the weight of rising health care costs, as Medicaid, SCHIP and dozens of state initiatives have been.

In addition, expending political capital on reforms that we know will fail makes the public cynical and gives ammunition to those who say that the government cannot create effective programs. Hence, any attempt at real reform is delayed, usually by decades. The minor temporal relief that reformers might get by acquiescing to insurance industry demands is simply not worth the continued suffering of the American people.

But Such a System to Could be a “Step” Towards Universal Coverage, Right?

No. Enacting phony “universal coverage” has not brought any state closer to a single-payer system. Since the early 1990s, Minnesota, Oregon, Maine, Florida, Utah, Washington, California, Vermont and Massachusetts have been among the states that have attempted to “patch-up” their fundamentally fl awed systems while retaining a place for insurance companies. All have failed. Upon passage, incremental reforms in each of these states were hailed by politicians and the media as a “step toward universal coverage.” Yet despite all the claims of pragmatism, incremental reformers have been unable to shepherd through meaningful change in nearly four decades of trying. And while reformers in these states continue to wait for the next “step,” residents continue to suffer.

The definition of insanity is to repeat an action expecting a different result. This is exactly what we have done in continuing to advocate incremental reforms as “steps” toward single-payer. What Americans need is not more proposals for patchwork reforms. We need leaders willing to stand up for the only solution that will work.

Nick Skala is a member of Physicians for a National Health Program (www.pnhp.org).