The following comments are in response to a recent Quote of the Day by Don McCanne about the broken, employer-based health insurance system in the United States.

By Diana Stritzel

I just wanted to say that I really enjoy reading your articles and feedback on what’s going on about health care in the U.S. I don’t remember how I found your list and subscribed to it, but I find it really useful to learn more about the system.

Being German by birth, I find it really awful what people here in the U.S. are being subjected to just to go and see a doctor. I’ve had people at my workplace telling me how horrible it must be that I don’t have the choice of doctor in my country of origin. I was like …What? I never had so many problems in any other country I’ve been in before.

The U.S. is the worst. (I’ve lived in United Kingdom, Italy, New Zealand and Australia.) My employer provides coverage, and not a bad one, as I’ve been told. Now, I’ve had nothing but trouble with the insurer (Aetna). I was on PPO plan before, but now I moved to my employer’s state (California) and I’m covered on Aetna’s HMO plan.

But for all plans I have to go online or call them first, and find a doctor which is in the network, so that Aetna covers it. In Europe I never had that problem, I can go to any doctor anywhere and I don’t need to ask or check with insurance first.

Then there’s the administrative effort required. Every time I go to a doctor, I have to fill out so much paperwork, and sign three statements that I will pay for all charges incurred in case my insurance doesn’t pay. As if that wouldn’t make you feel more miserable than you already are (seeking a doctor in the first place).

And after all that, I’ve still had bills coming to my house, which led me to call my insurance company and they told me I’ll have to pay these, because my doctor requested tests from a lab which is not in Aetna’s network. So now I have to be paranoid about each test the doctor wants to do, and ask the doctor to please use a lab which is covered by Aetna. Outrageous!

After my move to California I was unlucky enough to be in need of emergency room. They suggested I go for a follow-up in a couple of days. Since I hadn’t been to my “PCP” yet, and I live in San Diego, whereas Aetna send me a coverage card which stated that my PCP is in Los Angeles, when trying to change my PCP to one in San Diego I failed in three attempts (one online, and two by phone). Once I was in the doctor’s practice, they called to verify with Aetna that this was changed (because I only had the card which stated the L.A. doctor’s name), and Aetna’s employees said no. (I had been on the phone with them forever until they finally said yes, we’ve changed it.)

The doctor suggested I pay for the visit and claim it back, but I had learned from before (my PPO plan) that Aetna will find a way to never pay these back to me. So again I called them up and asked for changing my doctor. I was wondering why they added a doctor in L.A. in the first place as they had my correct address in San Diego.

Anyway, after subjecting me to lots of useless questions like “When are you planning to change your PCP again?” (which made me wanna cry…. I didn’t choose that doctor!), finally they said that they changed it, and I made them give verbal confirmation to the practice right away, so I could finally see a doctor.

I haven’t received any bills yet, but I’m wondering when they might come.

I think the system as a whole is really awful. Hard to see any light at all, with politicians taking the bribes from insurance companies and such statements as Obama’s below. [Editor’s note: the reference is to President Obama’s comment that moving to a single-payer system would be disruptive.] I don’t understand why Americans don’t fight more for health care, which is one of the most important things to have. The feeling of security that comes with a health care system like in the U.K. (where I studied and lived many years) is just not replaceable.

I for my part wish you all the best, and I do hope you will not stop fighting for your right to health care (yes, in my opinion it is a right which every human should have).

Thanks for your articles and the awareness you bring to this topic. I’m following Ralph Nader as well, and I do hope that despite all the ridiculing your media does to him, that maybe one day someone will listen and change the system. I hope I’ll see the day, I know for sure that I won’t be living in U.S. by then though.

Thanks and keep going!

Originally published in The Berkshire Eagle

Headlines in the Berkshire Eagle recently proclaimed that Berkshire Health Systems (BHS) is cutting the equivalent of 65 full-time jobs, and will lose $3 million this year. This is neither good for employment nor for the health of our population in the Berkshires. The culprits are the cuts to Medicaid and Medicare, the programs that cover 70 percent of the BHS population.

BHS president David Phelps reports that financial problems at Berkshire Medical Center have been aggravated by Massachusetts health care reform. While more patients have enrolled in insurance plans, the reimbursements for these plans are similar to Medicaid rates, which don’t actually cover the cost of care.

As the major non-profit provider of health care for the Berkshire community suffers financially, the for-profit insurance industry, (which only administers the funds, and provides no actual health care services), is raking in the money. In the current economic and health care crisis, United Health Group, America’s largest health insurance company, enjoyed an increase of 8 percent in revenues for the first quarter of 2009, with a net profit of $984 million. There is something wrong when the administrators of the health care funds are making exorbitant profits, while the providers of the health care services are struggling to remain solvent.

The private for-profit insurance industry diverts roughly $400 billion/year from medical services. In addition, the Senate Commerce Committee recently released a staff report about how health insurers have forced consumers to pay billions of dollars in medical bills that the insurers should have paid themselves.

Will the current health care reform being formulated in Washington address these issues? Not a chance, even if President Obama gets a public plan option into the reform legislation. Dr. Steffie Woolhandler, a founder of the 16,000-member Physicians for a National Health Program, stated in her testimony to Congress: “Insurers compete by not paying for care: by denying payment and shifting costs onto patients or other payers. These bad behaviors confer a decisive competitive advantage. A public plan option would either emulate them — becoming a clone of private insurance — or go under. A kinder, gentler public plan option would quickly fail in the marketplace, saddled with the sickest, most expensive patients, whose high costs would drive premiums to uncompetitive levels.”

In addition, the overhead for a public plan option would be higher than for Medicare, which automatically enrolls seniors at 65, deducts premiums from Social Security checks, and does no marketing. The administrative costs for the whole health care system would remain astronomical, as health care providers would continue to struggle with mountains of paperwork and denials of payment from multiple insurance companies. A public plan option would not curb the escalating costs of new technology, and would not address variability in the quality of care.

The only way to attain universal health care coverage, while containing escalating health care costs and standardizing quality of care, is to eliminate the insurance companies, and establish a single-payer “Improved Medicare for All” program. Hospitals, doctors and other providers must be adequately reimbursed for their medical services. This would be possible if the profiteering and waste of the health insurance industry were eliminated, and those health care dollars went to the actual provision of medical care. And hospitals could be paid like fire departments, with a single monthly check and little billing. There is federal legislation for a national health program in both houses of Congress, John Conyers bill, HR 676, and Bernie Sanders bill in the Senate, S.703.

Last year a survey of doctors showed that 59 percent support a national health plan, up from 49 percent in 2002. (Only one in five doctors are in the American Medical Association, which opposes a national health plan). So why is single-payer health care reform “off the table”‘ as Senator Max Baucus, chairman of the Finance Committee, said, before he threw eight single-payer advocates, including several doctors, out of a “public roundtable discussion” and had them arrested. Could it be related to the more than $1 million in donations Baucus received from the insurance and pharmaceutical industries in the 2008 election year cycle?

Wendell Potter, a former health insurance industry insider has this to say, “. . . big for-profit insurers have high-jacked our health care system and turned it into a giant ATM for Wall Street investors, and . . . the industry is using its massive wealth and influence to determine what is (and is not) included in the health reform legislation members of Congress are now writing.”

What is going on in Washington right now is not in the best interests of patients, or the doctors and hospitals that serve them. Patients have no lobbyists speaking for their interests in Congress. Most doctors do not want the AMA to speak for them. Contact your congressmen and ask them to sponsor HR 676 and Bernie Sander’s bill. (On his Web site, Sanders also has an online petition you can sign and pass along to your friends).

A pay-go option for health-care reform

By John Geyman
The Seattle Times
July 6, 2009

As Congress recessed for the July Fourth holiday, the debate over health-care reform was reaching a fever pitch. Now the top domestic issue for the Obama administration, the biggest questions are how much a reform bill will cost and how to pay for it, quite aside from how effective a “reform package” will be.

Skyrocketing costs that are out of control are the hallmark of our present system. Yet legislators have already acceded to pressures and dollars from stakeholders in the present system (within which costs are revenue) and are only considering options that “build on the present system.”

After months of work, legislative committees in Congress have brought forth drafts of proposals that the Congressional Budget Office (CBO) is starting to score in terms of cost and effectiveness. As expected, the costs of these incremental proposals are high — the first number of $1.6 trillion over 10 years (while still leaving 36 million Americans uninsured) sent these committees back to the drawing board. At the moment, leading Senate Democrats are hailing $1 trillion over 10 years as potentially doable.

After presiding over huge deficits during their eight years in power, Republicans are now demanding “pay as you go” (pay-go) policies. Together with Blue Dog Democrats, they are threatening to act as spoilers of any health-care-reform bill on its price tag alone.

Given the dimensions of these difficult economic times — including a $1.8 trillion deficit for 2009, $5 trillion in new federal debt over this year and next, and rising unemployment — pay-go makes good sense. And the president is making the case that his health-care plan must pay for itself.

Conventional “wisdom” (as generated by the mainstream corporate media) says that any health-care reform will cost a lot, and that there is no pay-go option. But there is.

Single-payer financing (public financing coupled with a private delivery system, a reformed “Medicare for All”), as embodied in Rep. John Conyers’ bill (HR 676 in the House) with its 83 co-sponsors, will yield savings of some $400 billion a year. That’s enough to assure universal coverage for all Americans while eliminating all co-pays and deductibles — the ultimate pay-go. Single-payer will give us far more efficient, affordable, effective and reliable health care than our present multipayer system. Health insurers have known for years that they can’t compete on a level playing field with single-payer, and have only been surviving by favorable tax policies and other subsidies from the government.

This recent testimony before the U.S. Senate Committee on Commerce, Science and Transportation by Wendell Potter, former head of corporate communications at Cigna, says it all: “I know from personal experience that members of Congress and the public have good reason to question the honesty and trustworthiness of the insurance industry. Insurers make promises they have no intention of keeping, they flout regulations designed to protect consumers, and they make it nearly impossible to understand — or even to obtain — information we need.”

Many studies over the past two decades, including those by the CBO, the Government Accountability Office (GAO) and the nonpartisan Economic Policy Institute, have concluded that single-payer can assure universal coverage and still save money. HR 676 needs to be brought out of the closet and put on the table for CBO scoring against other options being considered in Congress, all of which cost much more and fail to provide universal coverage.

President Obama has brought forward the concept of audacity of hope. Is it too audacious now to hope that the legislators we elect to Congress can see beyond their campaign contributions and the lobbying efforts by corporate stakeholders to require that single-payer be scored?

(Dr. John Geyman is professor emeritus of Family Medicine at the University of Washington, past president of Physicians for a National Health Program, and a member of the Institute of Medicine.)

http://seattletimes.nwsource.com/html/opinion/2009424809_guest07geyman.html

As expected, Congress ran into problems when they tried to figure out how to pay for health care reform. They stubbornly adhered to the principle that reform must be built on our dysfunctional system of profitable private plans for the healthy and taxpayer-financed public programs for the sick, even though numerous studies have shown that this is the most expensive model of reform.

Before the process began it was already understood that health care has now become so expensive that a health plan with adequate benefits would require massive public subsidies to make it affordable for average-income individuals and families. It is the size of the subsidies that would be required for them to work that would be the budget busters. Now that they are at the point that decisions must be made, they are relying on a process analogous to innovation in the marketplace, shunning their obligation to be responsible public stewards.

For the average American, they are establishing a standard of a bottom-tier package of benefits (a bizarre concept that requires greater out-of-pocket spending for those needing health care than that required of the wealthy with their higher-tiered plans). They are paring back the income eligibility levels such that there would be no subsidy above 300 percent of the poverty level ($32,500 for an individual or $66,000 for a family of four). These numbers simply do not make health care affordable for middle-income Americans when you consider that the Milliman Medical Index is now $16,771 (the average cost of family health care for the healthier sector covered by employer-sponsore plans). That doesn’t even count the taxes that middle-income Americans pay to support the massive government spending on health care programs.

Congress’s “market innovation” for pay-go is to fully fund the waste built into the private insurance model of health care financing, and pay for it out of the pockets of middle Americans who happen to need health care – defeating the very purpose of health care reform.

John Geyman is right. Single payer financing, a reformed Medicare for all, is precisely the pay-go solution that Congress desperately needs if reform is to accomplish the goal of making health care affordable for all. All we need is for President Obama to meet with Baucus, Kennedy, Dodd, Waxman, Reid, Pelosi and a few others to see who is going to give Karen Ignagni the bad news – bad news for her and her industry, but great news for America.

Insurance Disruption due to Spousal Medicare Transitions: Implications for Access to Care and Health Care Utilization for Women Approaching Age 65

By Jessica R. Schumacher, Maureen A. Smith, Jinn-Ing Liou, Nancy Pandhi
HSR
June 2009

Objective: To assess whether a husband’s Medicare transition leads to insurance disruptions for his wife that impact her perceived access to care, health care utilization, or health status.

Principal Findings: After adjustment, women who experienced an insurance disruption due to their husband’s Medicare transition had a greater probability of experiencing a change in usual clinic/provider (71 percent), delaying filling or taking fewer medications than prescribed because of cost (75 percent), going to the emergency room (52 percent), and had lower average mental health scores than women who did not experience an insurance disruption.

Conclusions: Despite consistent insurance coverage, the insurance disruption that accompanies a spouse’s Medicare transition has adverse access and health care utilization consequences for women.

http://www.hsr.org/hsr/abstract.jsp?aid=44347877138

Most individuals experience a sense of relief on turning 65 because they know that they have the security of being covered by Medicare for the remainder of their lives. But that relief is often tempered by concerns over the transitional problem of having a wife who is not yet 65, but who experiences a disruption in her insurance because she had been covered as a dependent on her husband’s plan. This study demonstrates that such disruptions can have adverse consequences for health care.

How would the current reform proposals address this problem? Likely she would be mandated to purchase an individual plan through the insurance exchange, probably at a higher premium since plans would be allowed to use age as a factor in setting rates. This could be quite expensive just at a time that the couple is trying to pull together their financial plans for their retirement years. Also since almost all private health plans assess financial penalties for failure to use their contracted providers, she could lose the choice of continuing to use her current health care professionals. What would happen if she has a serious medical problem and has already initiated a complicated medical regimen (e.g., cancer chemotherapy, radiation, and staged surgery)?

Should Congress include in the reform legislation a measure that would cover the spouse under Medicare once the eligible individual turns 65? If so, should the taxpayers fund that coverage, even if the spouse is 32? If, instead, a premium is to be paid, would it be based on the actuarial value of a risk pool composed of high-cost retirees and individuals with long-term disabilities (i.e., the current Medicare program)? If the husband is leaving an employer-sponsored plan, would the former employer be required to continue the spouse’s coverage to avoid transitional disruptions? If so, who pays and how much?

We will always face these issues and many more as long as Congress insists that we are each mandated to finance our health care through our fragmented, dysfunctional, multi-payer insurance system.

All we really need to do is fix Medicare, and then make enrollment automatic for everyone. But then that would break the bond of trust that President Obama and the members of Congress have established with Karen Ignagni. That seems to be a much stronger bond than they have with the other 306 million of us.

Town Hall on Health Care

President Obama
The White House
July 1, 2009

Here’s the problem, is that the way our health care system evolved in the United States, it evolved based on employers providing health insurance to their employees through private insurers. And so that’s still the way that the vast majority of you get your insurance. And for us to transition completely from an employer-based system of private insurance to a single-payer system could be hugely disruptive. And my attitude has been that we should be able to find a way to create a uniquely American solution to this problem that controls costs but preserves the innovation that is introduced in part with a free market system.

We want to build on what works about the system and fix what’s broken about the system.

http://www.whitehouse.gov/the_press_office/Remarks-of-the-President-in-an-Online-Town-Hall-on-Health-Care-Reform/

And…

Health Insurance Coverage: Early Release of Estimates from the National Health Interview Survey, 2008

by Robin A. Cohen, Ph.D. and Michael E. Martinez, M.P.H., M.H.S.A.
CDC

In 2008, 60.2% of unemployed adults aged 18-64 years and 22.2% of employed adults in this age group had been uninsured for at least part of the past year.

Among persons under age 65 with private health insurance, 17% with employer-based coverage were enrolled in a HDHP, compared with almost 45% of those with a private plan that was directly purchased or obtained through means other than an employer.

http://www.cdc.gov/nchs/data/nhis/earlyrelease/insur200906.pdf

Everywhere you turn those rejecting single payer, including President Obama, say that we want to build on what works and fix what’s broken. They say that what works is our employer-sponsored system of coverage. But does it?

Employer-sponsored plans fail to cover about one-fifth of the workforce. Of those who are covered many have been switched to high-deductible health plans (HDHP), a form of inadequate underinsurance that has been more characteristic of the individual insurance market.

Although the employer-sponsored system falls short for far too many of us, one of the most serious deficiencies is that it is dependent on employment. Well, of course. But that means that three-fifths of the unemployed remain without coverage. And of those insured who do not receive their coverage through their work, 45% have HDHP underinsurance products.

This is really a lousy insurance infrastructure that we are trying to prop up. And nobody in Washington is considering seriously the massive amount of tax subsidies that would be required to help everyone purchase plans with adequate benefits. Establishing an insurance exchange for employers and individuals is of little help if the subsidies won’t fill the gap of affordability. But adequate subsidies are off the table because they are budget busters.

How about dumping what’s broken, and building on a system that works – Medicare.

Checking In With James Gelfand, U.S. Chamber of Commerce

By Jenny Gold
Kaiser Health News
July 1, 2009

The Chamber of Commerce is not mincing words. The senior manager of health policy for the Chamber, James P. Gelfand, says: “The problem is instead of focusing on the 90% of issues that everyone can agree on, we’re getting stuck on the 10% ideological, uncompromisable, unworkable provisions… like creating a government-run insurance plan, forcing employers to provide health insurance. That’s the kind of stuff that reads like a poison pill.”

Q: In congressional testimony, the Chamber’s senior vice president Randel Johnson said the [employer mandate] pay-or-play proposal “holds a Sword of Damocles over the necks of America’s job creators.” Do you believe it represents that kind of threat?

A: You [have to] pare this down to the simplest form — what does this employer mandate do? It makes people who don’t make a lot of money worth less to their employers. Say to yourself, I want to hire someone. I want them to do a simple task. It’s probably worth about $7 an hour. And then you realize, oh wait, because of a new law, I’m going to have to provide gold-plated health insurance. So instead of $7 an hour, it’s going to be more like $20 an hour. Let me tell you something, that person is not getting a job. So we’re just trying to make Congress understand this is a bad, bad policy. It’s gonna hurt the people they want to help.

Q: Many people say the plans on the table right now help lower income people the most. Why does the employer mandate hurt those people who are unable to get insurance?

A: Let’s look at the plan as a whole and what it’s going to do for people who don’t make a whole lot of money. If they’re lucky enough to keep their jobs, which many of them will not be — in fact, a model developed by the president’s own chair of the Council of Economic Advisers found that 4.7 million jobs would be lost based on this employer mandate — well, their benefits are going to be taxed. We’re going to tax them when they buy Coca-Cola. We’re gonna tax them when they buy alcohol. We’re going to force them, if they have a small health plan that they can afford and that appeals to them, to buy a big, rich, expensive health plan. Yeah, I think they’re getting the shaft here.

Q: So far, advertising on health care has been fairly restrained. At what point is it time to ramp up opposition? And what might it look like?

A: You don’t start a battle with nuclear weapons. First thing we’re going to do is try to work inside the system, try to work especially with Sen. Baucus to fix this thing. We don’t want to launch nukes. We don’t want to have a war. We want to support legislation. What will happen at the end of the day? Will Charlie Rangel work with us? I don’t know. I can tell you that at the hearing, he specifically, clearly said, we need the Chamber to get this done. He’s right. And I think as Congress slowly comes to the realization, oh wait, we can’t jam this down America’s throat, we can’t roll employers, we can’t roll the U.S. Chamber, I think the process is going to improve, and hopefully we won’t have to do any of these war tactics of buying air time and stuff like that. Just keep in mind, though, that we could if we had to. We have a massive grassroots network. We put out one e-mail asking people to write letters to Congress about the employer mandate and about the public plan, and we generate somewhere around 50,000 letters to Congress. So I think Congress is realizing that it’s gonna be trouble if they try to roll us.

We really do need reform, and I’m sorry that things have gotten to the point where we’re having to beat up on members of Congress who are proposing wacky schemes instead of pragmatic legislation.

http://www.kaiserhealthnews.org/Checking-In-With/Gelfand.aspx

Wal-Mart, SEIU, CAP letter to President Obama:
http://www.kaiserhealthnews.org/Daily-Reports/2009/June/30/~/media/Images/KHN%20Features/2009/June/30/CAPwalmartSEIU.ashx

“So I think Congress is realizing that it’s gonna be trouble if they try to roll us,” and “I’m sorry that things have gotten to the point where we’re having to beat up on members of Congress.” Was this guy nurtured on “The Sopranos,” or is he the real thing?

Regardless, are the owners of America’s businesses really as heartless as this jerk implies? Do they really believe that their workers would be “getting the shaft” by having health insurance with adequate benefits?

Even Wal-Mart can’t stomach this anymore. In a letter to President Obama yesterday, they stated, “We are for shared responsibility. Not every business can make the same contribution, but everyone must make some contribution. We are for an employer mandate which is fair and broad in its coverage, but any alternative to an employer mandate should not create barriers to hiring entry level employees. We look forward to working with the Administration and Congress to develop a requirement that is both sensible and equitable.”

Employer-mandated insurance is a primitive, inefficient and inequitable method of financing health care. Maybe Wal-Mart and the other business interests are ready to consider a model that is fair for all, efficient, and really does ensure that everyone has affordable access to health care. And if they walk away from the U.S. Chamber of Commerce, they will find advocates that can show them that they don’t even have to break any kneecaps to achieve that.

By Ryan McIntyre

Dr. Donald J. Palmisano, a past president of the American Medical Association, recently wrote that our country’s health care system “the finest in the world” and went on to say how a publicly financed health care system could ruin what has been built. He cites such potential horrors as long waits for specialists, bureaucratic intervention in medical decisions, and taxpayers bearing the burden of a government plan as reasons to oppose the creation of one.

I have one question for Dr. Palmisano: What country do you live in? In my country, America, we have the best doctors in the world. However, the system we have placed them into is stifling their ability to treat patients to the best of their ability.

Take wait times for specialists. We live in a country where 18 percent of the population lacks health insurance. This means that right from the start at least 46 million people have been cut out of the waiting line. Certainly this shortens the wait time for those of us with insurance, but at what cost in human life and health?

And if you want to go on anecdotal evidence, how do you explain the six-week wait I was told I had when I tried to make an appointment with an orthopedist for back pain?

How about the bureaucratic demons that are plaguing our doctors and patients now? Wait, aren’t these just called HMOs? Private health insurance in the U.S. interferes with the doctor-patient relationship all the time. Pre-approval for procedures, denial of payment, and pharmaceutical formularies – all of these are par for the course in the American health system.

According to the Commonwealth Fund, American doctors spend on average 142 hours annually interacting with health plans, at an estimated annual cost to physician practices of $31 billion, or $68,274 per physician. This works out to be about 3 hours per week. For primary care physicians the time is about 3.5 hours/week.

Now, Dr. Palmisano, if we divide this number by the average appointment time of 18.7 minutes, we see that doctors would be able to see an extra 11 patients per week if we did not have the administrative waste of our current system.

Finally, I agree with you that in these tough economic times, no one wants to saddle anything on taxpayers that they do not already pay. However, our country spent $2.4 trillion in 2008 on health care, with 46 percent coming from government money. This accounted for 17 percent of our GDP. The world’s second-largest spender was Switzerland, and they covered everyone by spending only 10.8 percent. We are already paying more for what we don’t get in the first place.

Our health system is wasteful and inefficient. I agree with you 100 percent when you say that reform should not weaken our health care. That is why I support a single-payer health program, like that in Taiwan, not Britain.

Taiwan spends only 6 percent of their GDP on health care, yet all their citizens are covered and get comprehensive, quality care. How do they do this? Simply put, they cut out all the administrative waste that is burdening the U.S. system. The government pays the bills, the doctors take care of the patients. It’s that simple.

The people there have free choice of physician, and the only thing that causes a wait time is the demand for the particular doctor. This is no different than trying to get an appointment with a high-end neurosurgeon here in the U.S.

Their system is publicly financed, but privately run. Were we to adopt such an approach here, very little would change in the work of our doctors except to lift from their shoulders the enormous paperwork burden that they presently carry. They wouldn’t have to worry about becoming government employees, for example, or told they can’t work in a given area.

Patients would have ultimate choice in provider. All doctors would be in “their plan,” including the one they are seeing now.

At the end of Dr. Palmisano’s article he asked, “Will we have a system that puts the patient in control with the doctor as trusted adviser, or a government-run system…?” My only response is: Why can’t we have both?

Ryan McIntyre is a second year medical student at Albany Medical College and an MPH candidate at SUNY Albany School of Public Health in Albany, NY. He is also a member of Physicians for a National Health Program. He can be reached at mcintyre.ryan@gmail.com.

Debating the Public Option

Paul Starr, Robert B. Reich and Robert Kuttner
The American Prospect
June 29, 2009

In “The Perils of the Public Plan,” Paul Starr warns that a public-insurance option could turn into exactly the opposite of what progressives want. Here he discusses the problems with the Prospect’s two other co-founders, Robert Kuttner and Robert Reich.

Paul Starr:

The public plan will likely end up as a dumping ground for high-cost, mostly low-income people if the exchanges are open only to the individual and small-group market and have inadequate power to risk-adjust premiums or to regulate private insurers’ marketing and benefit design.

In other words, we could get a public plan that instead of “disciplining” private insurers, as the president said last week, actually buttresses their dominance of the system. Watch what you wish for.

Robert Kuttner:

The public option, as it is evolving, is even more dubious than Paul Starr’s apt critique suggests. Under the House leadership bill, people who have coverage through their employers are ineligible. So the proposed, head-to-head competition between the public plan and private competitors is left to employers, not individuals.

Politically, protecting the public option from industry mischief is no less a heavy lift than single-payer. It’s a pity that all the progressive energy that’s gone into defending the public option hasn’t gone to advocate national health insurance.

Robert Reich:

I’d prefer a single-payer, but it’s got no skin in the game. The only practical hope we have for expanding coverage and taming health-care costs lies with the public option. That’s why it’s the epicenter of the current fight. The House is supportive, but the Senate is backing off because Republicans and Blue Dog Democrats have been told it’s a Trojan horse for single-payer. And the medical-industrial lobbies are hard at work convincing the public that the public option will lead to a wholesale government takeover of the health-care system.

Yesterday the president said he might sign a health-care bill that did not include a public option. That’s exactly the wrong message. If progressives fail to work hard for a public option because it’s not a single-payer, or we allow the other side to demagogue a public option, we miss the moment.

Paul Starr:

The public option has gotten all the political attention, but the real “crux” of reform is the system of rules that govern all competing plans. If the Democrats can’t get a strong public plan through the Senate but can get a strong design of the exchanges by trading off a weak public plan, they should take that deal and pass the bill.

Robert Kuttner:

It’s interesting and significant that the three co-founders of the Prospect are reprising the three major strands of progressive views on health reform. Robert Reich is arguing that the Obama plan, with the public option, is the best practical brand of reform available. Paul Starr, holding out for something that looks a lot like the Clinton plan, argues (convincingly in my view) that the most likely form of the public option will backfire. And I continue to be the single-payer guy. We’ve been having different versions of this friendly argument for two decades, as has the progressive community.

Reich says that single-player has “no skin in the game.” Well, let’s put some there, rather than being apologists for a threadbare cloak of a public option.

Where Starr and I disagree is on both his diagnosis of Medicare for All, and on his optimism that “exchanges” could be designed in a way that would meet his hopes (the exchanges sound a lot like the purchasing pools of the Bill Clinton plan that Paul Starr helped devise).

Although Starr and Reich seem to disagree, they have one thing in common. They are both somewhat wishful about what it would take politically to legislate the crucial details of either the Obama public option (Reich) or the exchanges (Starr) necessary to achieve meaningful reforms. In order for the fine print in either approach to do the job, progressives would need first to crush the industry influence in Congress that is very likely to hobble either strategy. And both Reich and Starr are right that a weakened version of the Obama plan could well be worse than nothing.

The political reality is that Medicare for All is no harder politically than a version of the Obama plan that would meet all the tests that Reich and Starr apply. And it would be far simpler and more cost effective.

The regulatory and political nightmare of doing everything that Starr insists is necessary to get a system of insurance exchanges to work efficiently is actually far more of a daunting challenge than having a single system under direct public control. And the odds are that the Obama administration, by the time it is done reassuring Max Baucus, the health insurance industry, the drug companies, and the Blue Dogs, will settle for far less than Starr’s formula.

Reich may say that if we just work hard enough, we can prevent that fate and still get a good program. But Obama began with less than what we need, and he has not painted this as a battle of the people against the interests. The bill gets weaker with each succeeding round. I suspect that by the time there is finally legislation for him to sign, Reich and Starr will both feel that it falls way short. It is high time for progressives to stop settling for badly flawed second bests and to throw their energy into a first best that could rally popular support and produce a system that serves everyone.

To read the full article:
http://prospect.org/cs/articles?article=debating_the_public_option

To rephrase the very important point that Paul Starr brings to this debate, it is not the design of the public option that is crucial to successful reform under the model being advanced in Congress, but rather it is that the design of the insurance exchanges must be absolutely compliant with the rules of social insurance. If the exchanges are poorly designed, the public option would become a Medicaid-like dumping ground for low-income people with high-cost problems, and would suffer from a lack of willing providers because of chronic underfunding. And poorly designed exchanges could never meet the test of social insurance.

Robert Reich would have us design an empowered public option that could shape up the private insurers by exerting full competitive pressure within the exchanges. That’s a nice wish, but all Republicans and an insurmountable number of Democrats in Congress have already made an irrevocable decision that an empowered public option will never survive the legislative process. It is possible that the “public option” label might survive, but only if applied to a private market-type plan, public in name only.

So can the insurance exchanges function as a bona fide social insurance program? Look at some of the decisions that have already been made.

Social insurance programs based on private plans require an individual mandate for everyone to purchase the plans, except those whose incomes are too low and therefore qualify for public programs. Congress and the state governors are very concerned about the costs of the Medicaid program and want it to be limited to the poor, especially since Medicaid is crippling many state budgets. Medicaid will not be expanded to include average-income individuals.

Adequate health insurance plans are no longer affordable for average-income individuals and families. Some form of tax subsidies will be required to assist with the mandated purchase of these plans. The amount of tax funds that would be required for everyone to be able to purchase coverage has proven to be far more than members of Congress are willing to budget. Consequently, it has been decided that hardship waivers must be a part of any reform legislation, effectively providing tens of millions of individuals with a government permission slip to remain uninsured.

Just to try to pull a few more in, the government will require insurers to provide multiple tiers of coverage. The lowest tier will be designed to be affordable, even though affordable plans, by design, are underinsurance products that fail to protect those who need health care.

Then the government would regulate the insurance exchanges, but look at the results in the most highly regulated states. No state has escaped the problems that are driving our current efforts at reform. No matter how many regulations are passed, the private insurers have always introduced innovations that relieved them of any real responsibility to address the severe deficiencies in our dysfunctional health care system.

Paul Starr may want well designed insurance exchanges, but this Congress has already rejected them. Robert Reich may want an empowered public plan, but this Congress has already rejected that.

As Robert Kuttner states, “progressives would need first to crush the industry influence in Congress that is very likely to hobble either strategy.”

But then, “It is high time for progressives to stop settling for badly flawed second bests and to throw their energy into a first best that could rally popular support and produce a system that serves everyone.”

And, “The political reality is that Medicare for All is no harder politically than a version of the Obama plan that would meet all the tests that Reich and Starr apply. And it would be far simpler and more cost effective.”

Wealth, Income, And The Affordability Of Health Insurance

By Didem M. Bernard, Jessica S. Banthin and William E. Encinosa
Health Affairs
May/June 2009

There have been debates over how many uninsured people can afford insurance but refuse to purchase it.

The difference in purchasing power between the insured and the uninsured is not fully revealed by income comparisons. Median income of the privately insured was 2.9 times the median income of the uninsured in 2002-03 ($53,130 versus $18,404). However, median net wealth among those with private insurance was 23.2 times that of the uninsured ($78,472 versus $3,384). This discrepancy is even larger when we focus on families in the individual market. Median net wealth among those with nongroup insurance was 34.6 times that of the uninsured without access to employer coverage ($105,819 versus $3,057). Our results suggest that assets are an important determinant of effective affordability, undermining the notion that many people are uninsured by choice.

http://content.healthaffairs.org/cgi/content/abstract/28/3/887

By now you must be annoyed by those on the right who repeatedly claim that we do not have a problem with uninsured individuals. They say that the actual problem is that we are not counting them properly. Most of the uninsured would be insured, if only they showed a little more personal responsibility.

Many of the uninsured have incomes that are low enough to establish their eligibility for public programs. But those denying the problem would exclude these individuals from the count because they are “technically insured,” but merely too lazy to enroll. This ignores the multiple logistical barriers that make it impossible to enroll everyone who is eligible.

Many others without insurance are “illegals” who do not have their immigration papers in order. As long as we continue with national policies that include these individuals in our workforce, regardless of immigration status, then we have to accept the fact that they are part of our intrinsic economy and will access our health care system. Excluding them from the count would understate the issues we face when trying to figure out how to finance the care of uninsured individuals.

Although these undercounters dismiss most of the uninsured as failures of personal responsibility, they do remain conflicted on higher-income individuals who elect not to purchase insurance. Some consider these to be individuals who are exercising their right to freedom of choice – the freedom to self-insure instead of purchasing an insurance plan. Others consider these to be free riders who transfer the risk of catastrophic costs to the rest of us who are already paying our share.

But are these really individuals who are simply declining to purchase coverage they can afford? With health care costs now averaging $16,700 for an employed worker with a family of four, that takes quite a bit out of a typical income of $60,000. Many of theses families have little in the way of assets, living paycheck to paycheck, and really don’t have enough money to purchase a reasonable health plan.

This Health Affairs study demonstrates that not only income but also net wealth are important determinants of whether or not health insurance is affordable. Expanding net wealth requires both a higher level of discretionary income and a longer interval to accumulate assets. Thus both income margins and time are variables that influence the affordability of health insurance.

Since current proposals for reform would use tax subsidies to help individuals and families purchase private health plans, does this mean that we need to establish an eligibility grid that includes both income and net assets as variables? If we did, we might see an epidemic of personal failure based on the inability of so many to master the logistical requirements of the eligibility grid. (Have you tired calculating your precise net wealth recently?)

Why do we keep playing these games with all of the variables that go into determining our insurance status? Why don’t we simply make it automatic for everyone? If you exist, you’re covered.