Failing grades for individual health insurance market

Posted by on Monday, Jul 7, 2008

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

Failing Grades: State Consumer Protections in the Individual Health Insurance Market

Families USA
June 2008

Key Findings

  • Only five states prohibit all insurance companies from cherry-picking the healthiest consumers and excluding everyone else.
  • In 35 states and the District of Columbia, there are no limits on how much insurers can vary premiums based on health status. An additional six states have limits that still allow dramatic variations in premiums.
  • In 21 states and the District of Columbia, insurers can exclude coverage for pre-existing conditions for more than one year. In eight of those states and the District of Columbia, insurers can exclude coverage for pre-existing conditions for the duration of an individual’s policy.
  • In 20 states and the District of Columbia, insurers can set and raise premiums without adequate oversight.
  • In 45 states and the District of Columbia, insurers can spend less than 75 cents of every premium dollar on medical services.
  • Insurers in 29 states and the District of Columbia are allowed to look at a policyholder’s medical history and perform medical underwriting months, or even years, after they issued the policy.
  • In 44 states and the District of Columbia, insurers can revoke an individual’s health insurance policy without advance review by the state.

http://www.familiesusa.org/assets/pdfs/failing-grades.pdf

Most of the politicians are telling us that national health insurance is not politically feasible. They tell us that we should not abandon what is already working well for us: the private insurance industry. They tell us that they would improve the private insurance market so that health plans would become affordable for all of us while still providing us with the protection that we need.

Looking at this Families USA report card of private plans in the individual market, it is clear that the private insurance utopia that they envision does not exist. Because of the lax regulatory requirements in far too many states, the insurers have been able to dodge their responsibility to cover everyone regardless of their health care needs.

So what kind of improvement in the insurance market are the politicians proposing?

Sen. McCain would further relax the regulatory oversight which would result in some insurance products with lower premiums, but at the cost of reducing even further the inadequate consumer protections we have. Being able to afford health insurance is of almost no value if it makes health care itself even less affordable.

Sen. Obama would close many of the insurance loopholes noted in this report by increasing the regulatory oversight of this industry. What would happen to insurance premiums if you required the plans to include everyone regardless of needs, and required them to provide benefits comprehensive enough to prevent financial hardship? Sen. Obama certainly knows, and this is why he says that we cannot require each individual to purchase insurance until he has made the plans affordable. Merely wishing that you could make comprehensive private plans affordable will never make it happen.

Numerous simulations and the experience of other nations have proven that using private health plans to provide reasonably comprehensive coverage for everyone is by far the most expensive method of financing health care. Looking at the Families USA report card, you can imagine how expensive it would be to bring our coverage up to a passing grade level. A single payer national health program would be less expensive and much more efficient. Why would a more expensive model that isn’t working for us be considered to be more feasible than a less expensive model that would?

Conservatives in government, free market stakeholders, and their lobbyists won a big one last week.  Even after the House gave overwhelming bipartisan support to the Medicare Improvements for Patients and Providers Act (HR. 6331) by a vote of 355-59 (including 129 Republican votes), the Senate fell two votes short of the 60 votes needed to overcome a presidential veto.  Presidential candidate Obama voted in favor of the bill; McCain was a no-show.  The bill would have cancelled a physician pay cut of 10.6 percent, reduced overpayments to private Medicare plans, improved coverage of mental health and preventive services under Medicare, and added consumer protections for enrollees in private plans.  President Bush planned to veto the legislation because of payment reductions to private plans and the improved benefits, claiming that they would “reduce access, benefits and choices for many of the 2.25 million enrollees in Private Fee for Service (PFFS) plans.   Robert Hayes, President of the Medicare Rights Center, called this “a craven submission to the insurance industry”.

Physicians will now see their already low reimbursement fall by an additional 10.6 percent, many may stop seeing new Medicare patients, patients recovering from strokes and other injuries will face an arbitrary cap on rehabilitative therapy, and 1.5 million seniors and people with disabilities living on less than $1,171 a month ($1,576 for a couple) will be dropped from programs that help them pay for physician services and prescription drugs.  Meanwhile, of course, large overpayments to private Medicare plans continue uninterrupted, and Medicare enrollees will likely be faced with less access at higher costs.

Conservatives have long had an agenda to “save” Medicare by killing it (ie., privatize it, and shrink the public program to a much smaller welfare program).  As part of the Contract with America in 1994, Newt Gingrich, as Speaker of the House, predicted that this kind of “reform” might solve “the Medicare problem” and cause it “to wither on the vine”.  All this fits into a larger goal to shrink government.

Conservatives continue to claim that private Medicare plans are more efficient and save money.  It is astounding (but hardly surprising) how big the disconnect has become between their rhetoric and reality.

Consider these facts:

  • Traditional Medicare operates with an administrative overhead of about 3 percent (vs. private plans at least five times higher)
  • Medicare plus Choice plans received 13 percent overpayments compared to  traditional FFS Medicare between 1998 and 2000, yet many left the market due to insufficient profits, forcing 2.4 million seniors to find other coverage and often change doctors.
  • The Medicare Prescription Drug, Improvement and Modernization Act of 2003 further privatized Medicare by establishing Medicare Advantage as the sequel to Medicare plus Choice, creating the new “more flexible” Private Fee for Service (PFFS) option (even more expensive than other Medicare Advantage plans), and forbidding the government from negotiating lower drug prices with manufacturers, as the VA does so well with 45 percent discounts.
  • PFFS plans receive 19 percent overpayments from the government, but often restrict choice and are not available in many areas; in 2005 they overstated their projected payments for medical care and instead  took in an additional $ 1.4 billion in profits, according to a recent study by the GAO.

We need to ask where the outrage is with all this.  In 1988, Congress passed the Medicare Catastrophic Coverage Act, which required Medicare beneficiaries to pay more than 80 percent of the new benefits themselves.  A firestorm of protest erupted.  As Chairman of the House Ways and Means Committee, Dan Rostenkowski (D-Ill) had led the way in passing this legislation.  When he returned to Chicago, his chauffeured  car was surrounded by 50 angry seniors who pounded on  the car windows and beat on it with signs protesting the bill.  This incident received wide press coverage, forcing Congress to repeal it the next year.

This year’s elections give us an opportunity to express outrage again over this latest attack on the Medicare program.  As a 43 year old program assuring comprehensive coverage with full choice of physician and hospital for more than 42 million Americans, it has served as a reliable bulwark for guaranteed access for seniors and the disabled.  While it needs some reform (especially by eliminating its overpriced and exploitive private  plans without offsetting increased value), it can serve as a model upon which to build a single-payer public financing system to cover all Americans while preserving the strengths of our private delivery system.

Adapted from Shredding the Social Contract: The Privatization of Medicare, Common Courage Press, 2006, and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, forthcoming, August 2008. Both books by by John Geyman. With permission of the publisher, Common Courage Press, Monroe, ME.

Buy This Book: http://commoncouragepress.com/index.cfm?action=book&bookid=396

Adapted from Shredding the Social Contract: The Privatization of Medicare, Common Courage Press, 2006, and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, forthcoming, August 2008. Both books by by John Geyman. With permission of the publisher, Common Courage Press, Monroe, ME.

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Britain's NICE and social solidarity

Posted by on Thursday, Jul 3, 2008

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

Britain Weighs the Social Cost of High-Priced Drugs

By Joanne Silberner
NPR
July 3, 2008

Funding ‘Wonder’ Drugs

The government agency that decides what drugs the NHS will provide is the National Institute for Health and Clinical Excellence (NICE). Sir Michael Rawlins, chairman of NICE, says he knows his agency’s rulings can cause much disappointment.

Paying huge amounts of money for every new drug with the faintest hope of extending life by even a small amount would make it impossible for the NHS to provide universal care.

And Rawlins is sure that someday Americans will have to deal more directly with these same thorny questions of rationing and hope.

The United States will one day have to take cost effectiveness into account, he says. “There is no doubt about it all. You cannot keep on increasing your health care costs at the rate you are for so poor return. You are 29th in the world in life expectancy. You pay twice as much for health care as anyone else on God’s Earth.”

Social Solidarity

And then of course, he points to the millions of Americans with no access to health care because they can’t afford it.

“We have in Britain, as in most of Europe actually, a health care system based on social solidarity,” he says. “We look after each other when we’re sick. And that’s very precious to us in Britain. And I think that’s what we find so difficult about your health care system; you don’t have that.”

Cancer patient Donald Sutherland is happy with the British system, even with its limits.

“I think we’re quite patient people, albeit if we want something, we’ll make sure that we get it,” he says. “In my experience, I can only say that whenever I’ve needed the National Health Service, it’s always been there, and I’ve always had first-class treatment.”

Sutherland’s big interest is in more funding for the search for an effective treatment for lung cancer. And he doesn’t expect his fellow taxpayers to pay for a drug until there’s solid proof that there’s a benefit.

http://www.npr.org/templates/story/story.php?storyId=91996282

And…

Weighing the Costs of a CT Scan’s Look Inside the Heart

By Alex Berenson and Reed Abelson
The New York Times
June 29, 2008

(CT angiograms) were given to more than 150,000 people in this country last year at a cost exceeding $100 million. Their use is expected to soar through the next decade. But there is scant evidence that the scans benefit most patients.

And they expose patients to large doses of radiation, equivalent to at least several hundred X-rays, creating a small but real cancer risk.

Mr. (Robert) Franks has a family history of cardiac disease, and his father and two uncles died of heart attacks. But Mr. Franks… is in excellent shape.

(Mr. Franks) decided to have a nuclear stress test. When that test showed no problem, the cardiologist who conducted it said he did not need more testing.

After doing research on the Internet, (Mr. Franks) found Dr. (Harvey) Hecht, who recommended a CT angiogram. Dr. Hecht acknowledged that Mr. Franks probably did not have severe heart disease. But he said the scan would be valuable anyway because it might reassure him. And his insurance would cover the cost.

http://www.nytimes.com/2008/06/29/business/29scan.html?hp=&pagewanted=all

One of the more important reasons that the U.S. health care system is so much more expensive than those of other nations is our well documented excess use of expensive high-tech services and products. As much as 30 percent of spending is for services of little or no benefit, and often leads to adverse consequences as a direct result of the intervention or indirectly due to other interventions that this overuse may lead to.

$100,000 drugs that have a 100 percent incidence of poisoning, but have only a negligible impact on the malignancy targeted, are not the breakthrough technology that those profiting from them imply. An expensive imaging procedure that has not been demonstrated to be of benefit, but has radiation doses known to cause cancer, is another breakthrough that favorably impacts profits to the detriment of patients.

We can learn much from the National Institute for Health and Clinical Excellence (NICE), an independent organization that provides Britain’s National Health Service with “national guidance on promoting good health and preventing and treating ill health.” Sadly, much of the publicity in the U.S. on NICE has come from the opponents of a government role in health care, claiming that NICE is depriving British citizens of life-saving cures. In fact, NICE is reducing the waste of taxpayer funds by providing better guidance on how those funds should be spent.

Compare that to the United States. Mr. Franks (NY Times article above) received an expensive test that was not medically indicated, but that perhaps could provide him with reassurance, and it would add to Dr. Hecht’s income, possibly at the cost of giving Mr. Franks cancer. But it was okay because his insurance would pay for it. What?

Whether health care is paid for by a public program or a private insurance plan, we all pay for it. Excess public spending wastes our taxes, but excess private insurer spending wastes our premium dollars and further adds a surcharge in outrageous administrative costs that are tacked on to our health care bill.

A NICE-like program combined with public financing in the United States would dramatically increase the value received for health care spending for all of us, and isn’t that what social solidarity is all about?

You should go to the NICE website to familiarize yourself with this program. Not only will you be able to answer the ideologues who try to demonize this program, but, much more importantly, you will be in a position to advocate with greater confidence for an even better health care system that is more affordable for all of us.

National Institute for Health and Clinical Excellence (NICE):
http://www.nice.org.uk/

Let's end the Medicare Advantage shell game

Posted by on Wednesday, Jul 2, 2008

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

Medicare Advantage in 2008

By Marsha, Gold, Sc.D.
The Henry J. Kaiser Family Foundation
June 2008

Today, a disproportionate share of the growth in MA (Medicare Advantage) appears to reflect industry response to higher payments, the ease of establishing PFFS (private fee-for-service) plans that involve no networks, and the ability to piggyback on existing administrative structures used to market Medigap and other insurance products. It is possible that some of the PFFS growth could migrate eventually to more managed options. Lack of traction among regional PPOs (preferred provider organizations) suggests that any such migration would be most likely in local plans, as long as that option remains. The growth in local CCP (coordinated care plan) availability is moderately encouraging, but also contrasts with the relatively stagnant state of current CCP enrollment and limited national scope of offerings currently available in the CCP market through most major MA firms. While this analysis does not address this aspect, there is the possibility that PFFS itself is eroding the more managed segments of the MA market. Such erosion would run counter to the interest of some policymakers who support transitioning beneficiaries to more managed products that are presumed to more effectively manage patient care at a lower cost to Medicare.

In sum, MA plans are offering expanded choice which is potentially attractive to some beneficiaries and to some employers who offer group retiree coverage. The issue for policymakers is whether such expansion also holds long-term promise for Medicare’s financial condition and overall stability. If it does not, policymakers soon may have limited ability to alter course since continued growth in Medicare Advantage plan enrollment will generate entrenched interests and shifts in money flow that could be hard to reverse.

http://www.kff.org/medicare/upload/7775.pdf

And…

Higher Spending Relative to Medicare Fee-for-Service May Not Ensure Lower Out-of-Pocket Costs for Beneficiaries

GAO (U.S. Government Accountability Office)
Medicare Advantage
February 28, 2008

MA plans receive a per member per month (PMPM) payment to provide services covered under Medicare FFS. Almost all MA plans receive an additional Medicare payment, known as a rebate. Plans use rebates and sometimes additional beneficiary premiums to fund benefits not covered under Medicare fee-for-service; reduce premiums; or reduce beneficiary cost sharing. In 2007, MA plans received about $8.3 billion in rebate payments.

GAO found that MA plans projected they would use their rebates primarily to reduce cost sharing, with relatively little of their rebates projected to be spent on additional benefits. Nearly all plans—91 percent of the 2,055 plans in the study—received a rebate. Of the average rebate payment of $87 PMPM, plans projected they would allocate about $78 PMPM (89 percent) to reduced cost sharing and reduced premiums and $10 PMPM (11 percent) to additional benefits. The average projected PMPM costs of specific additional benefits across all MA plans ranged from $0.11 PMPM for international outpatient emergency services to $4 PMPM for dental care.

While MA plans projected that, on average, beneficiaries in their plans would have cost sharing that was 42 percent of Medicare FFS cost-sharing estimates, some beneficiaries could have higher cost sharing for certain service categories. For example, some plans projected that their beneficiaries would have higher cost sharing, on average, for home health services and inpatient stays, than in Medicare FFS. If beneficiaries frequently used these services that required higher cost sharing than Medicare FFS, it was possible that their overall cost sharing was higher than what they would have paid under Medicare FFS.

Out of total revenues of $783 PMPM, on average, MA plans projected that they would allocate about 87 percent ($683 PMPM) to medical expenses. MA plans projected they would allocate, on average, about 9 percent of total revenue ($71 PMPM) to nonmedical expenses, including administration and marketing expenses; and about 4 percent ($30 PMPM) to the plans’ profits. About 30 percent of beneficiaries were enrolled in plans that projected they would allocate less than 85 percent of their revenues to medical expenses.

As GAO concluded in its report, whether the value that MA beneficiaries receive in the form of reduced cost sharing, lower premiums, and additional benefits is worth the additional cost to Medicare is a decision for policymakers.

http://www.gao.gov/new.items/d08522t.pdf

This week, the AMA and AHIP (America’s Health Insurance Plans) have each begun intensive campaigns to influence Congress on the anticipated Medicare adjustments that will be made when the members return from their recess. The AMA wants to prevent the disastrous 10 percent reduction in physicians’ reimbursement rates, and AHIP does not want that to be paid for by a reduction in overpayments to the private Medicare Advantage plans. It is crucial that we understand what we are purchasing with these Medicare Advantage overpayments.

The Medicare Advantage plans are being paid about 12 percent more (17 percent for PFFS plans) than the costs of patients in the traditional Medicare program. Of the funds received, the plans use 13 percent for non-medical purposes including administration, marketing expenses, and profits (4 percent) or about $101 PMPM, much higher than the administrative costs of the traditional Medicare program. Obviously this is a very expensive program, so what are the beneficiaries receiving for this high cost?

Most of the extra benefits received by the Medicare Advantage enrollees are paid from rebates paid to the plans, amounting to $88 PMPM, obviously less than the $101 the plans are using for administration and profits. The GAO study further found that most of the benefit (89 percent of the rebate, or $78 PMPM) received by the Medicare Advantage beneficiaries was in the form of reduced out-of-pocket payments. Only 11 percent ($10 PMPM) was for additional benefits, a mere drop in the bucket when considering the overall benefits provided by the traditional program.

So we are paying the Medicare Advantage plans a lot of money for for administration and profits, but for what end? Merely to reduce premiums and cost sharing. The private plans waste a tremendous amount of our tax funds accomplishing this when these extra administrative costs and profits would disappear if Congress were to make the same premium and cost sharing adjustments by mere legislative fiat! What a waste!

Worse yet, why shouldn’t everyone in Medicare receive the same relief as the privileged individuals who enroll in the private plans? Congress should end this Medicare Advantage shell game and take the money they are wasting on these plans and distribute it equitably so all Medicare participants can benefit. Even if they use it now to prevent the crumbling of the physician infrastructure, that would still benefit all patients.

Access to health care is a complex matter, ranging from availability of health professionals in one’s community to many barriers to care, such as racial/ethnic, geographic, and literacy factors. But as the costs of health care surge ever higher, the financial barrier to care has clearly become the biggest impediment of all. Having insurance used to offer some protection against this barrier, but does so less all the time as the numbers of uninsured and underinsured grow.

As we saw in our last post, the health insurance industry claims, through AHIP, its national trade group, “to expand access to high-quality, cost-effective health care to all Americans.” Let’s examine how well the industry does in meeting that goal.

For many, it’s hard to imagine that at one time health insurance really did assure access to care. Yet at one time, in the early years of the industry, people were insured without regard to pre-existing conditions or their claims experience. Prior to the 1960s, such medical underwriting practices were considered unethical. Reasonable coverage was provided to all comers for community-rated premiums. Today, most insurers try to select healthier enrollees and avoid exposure to higher-risk enrollees and their higher costs of care. To find the last time Americans could depend on health insurance to assure access to care, one has to go back in history at least 40 years; those days are long gone.

The track record of the industry makes it obvious that it can never expand access to care for all Americans. How can AHIP leaders keep a straight face in continuing to proclaim such a mission in view of these inconvenient facts?

  • Of 300 million Americans, 47 million are uninsured and tens of millions underinsured with little protection against the costs of significant illness or injury.
  • Employer-sponsored insurance (ESI), once a mainstay of coverage for working Americans, now covers less than three of five workers; more than one-half of small employers no longer offer their employees either health insurance coverage or benefits toward purchasing coverage.
  • Even when insured, one-half of women between 19 and 64 years of age spend more than 10 percent of their income on out-of-pocket health care expenses. According to a recent analysis by the Henry J. Kaiser Family Foundation, seniors with supplemental Medigap policies actually spend more of their income on premiums and health care than any other group of seniors, including those with traditional Medicare without Medigap coverage.
  • As private insurance markets continue to shrink, the industry turns to generously subsidized public markets; however, growth there is limited by its high costs and is only possible when the government hands out large subsidies (private Medicare Advantage plans, for example, receive subsidies 12 to 19 percent above the costs of traditional Medicare).

These inconvenient truths expose the industry’s goal of expanding access to care as just one more example of self-serving rhetoric without any basis in fact. Just what do we get for continuing to prop up this industry? That’s the subject of the next post.

Adapted from Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, forthcoming, August 2008 by John Geyman. With permission of the publisher, Common Courage Press.

Order link http://commoncouragepress.com/index.cfm?action=book&bookid=396

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The American Association of Health Plans (AHIP) is the national trade group for some 1,300 private health insurers, which collectively provide some kind of coverage for more than 200 million Americans. As the voice of industry, AHIP’s web site boldly describes its goals “to provide a unified voice for the health care financing industry, to expand access to high quality, cost effective health care to all Americans, and to ensure Americans’ financial security through robust insurance markets, product flexibility and innovation, and an abundance of consumer choice.” This post examines how successful the industry has been in one of these goals — the cost and affordability of coverage.

The industry is failing miserably in keeping the costs of coverage affordable.
Consider:

  • The average annual premium for a family of four is now more than $12,000;
  • Premiums grew four times faster than inflation, outstripping wage growth, and increasing 87 percent between 2000 and 2006 (graphic);
  • This explosive growth has been going on for most of the last 20 years.
  • If this continues, as we saw in the first posting, premiums are projected to consume almost one-third of average family income by 2010 and ALL of it by 2025, clearly an impossibility well before that time.

Since almost one-half of Americans earn less than $30,000 a year, the cost of insurance premiums, much less health care itself, are unaffordable for a large part of the population. Health care expenses that are more than 10 percent of annual income are generally considered high; for lower-income adults below 200 percent of federal poverty level ($41,300 for a family of four in 2007), more than 5 percent is high. No wonder, then, that 47 million Americans are uninsured, and that tens of million more are underinsured with scanty ‘coverage’. With near stagnant income and average household debt more than $100,000, health insurance for many is out of the question. For those workers who lose their employer-based coverage, only one in four can afford to regain their coverage under COBRA.

The gap between the rhetorical goal of low cost and price gouging is easy to understand: most insurers are investor owned and put their shareholders first. Insurers refer to the service they provide to their enrollees as a “medical loss ratio”(MLR), a term that shows how much they lose by financing care for patients against how much they make. Seeing care as a “loss” to investors, they try to drive MLR’s down as far as possible, preferably spending no more than 80% of premium revenue on care. As a blatant example of unrestrained corporate greed, share values of United Health, the country’s second largest health insurer, increased by more than 50-fold over the 17 year tenure of its CEO, William McGuire, until he was forced out in 2006 in a stock options backdating scandal after receiving more than $1.6 billion in compensation.

In sum, lack of affordability has become the Achilles heel of the health insurance industry. The theft of money in skyrocketing premiums, cloaked behind the guise of trying to provide “affordable” care, will lead us to look at the other “goals” on the AHIP website. In our next post, we will consider what kind of impact the industry has had on access to health care.

Adapted from Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It, forthcoming, August 2008 by John Geyman. With permission of the Publisher, Common Courage Press.

Order link http://commoncouragepress.com/index.cfm?action=book&bookid=396

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Most of us have by now heard many indictments of private health insurance, from its inefficiencies and unaffordable costs to its profiteering, cherry picking, and avoiding coverage of those who most need insurance. What’s new and may be surprising to many people is this: despite its size and political power, it is a dying industry.

The industry’s track record speaks for itself. It is an imploding industry on a death march. The costs of insurance premiums alone have become unaffordable for tens of millions of Americans, and are increasing several times faster than costs-of-living and family incomes. As the attached graphic shows, premiums will consume almost one-third of average household income by 2010, and all of it by 2025! Moreover, insurance covers less and less of total health care costs.

Access to affordable health care has become a major concern affecting all middle class Americans, with no relief on the horizon. Private insurers go to great lengths to avoid coverage of sick individuals and even high-risk groups. As their employer-based market shrinks, they desperately seek out new lucrative markets with near-worthless limited-benefit policies. Their overall private markets are shrinking, and they now turn to generously subsidized public programs, especially Medicare and Medicaid, for revenue growth.

The health insurance industry is unsustainable, as some of its insiders fear. Bernard Tresnowski, President of Blue Cross/ Blue Shield, issued this warning in 1994: “The good old days, when nobody really paid a lot of attention are gone. We’re now front and center in the public policy sphere… What our future holds depends in many ways on our ability to continue to control the rate of increase of health care costs… It will be a real test over the next five to eight years as to whether the private sector indeed can produce the kind of results that would make health care more affordable.”

Even Wall Street analysts are seeing dark clouds on the horizon for the health insurance industry. Commenting on precipitous drops in share value of Wellpoint, the nation’s largest insurer, Sheryl Skolnick, health care analyst and senior vice president at CRT Capital Group, observed in April, 2008 “that it took Wellpoint imploding for us to figure out that current prices of health plans do not account for growth in medical costs,” and that in order to reverse their downturn insurers must “create affordable health insurance plans that consumers really want to buy instead of affordable-but-barebones plans that do not offer consumers a compelling value.”

Annual Health Insurance Premiums and Household Income, 1996-2025

The industry’s 60-year report card is in, and it has failed the public interest. It is now time to require an efficient, equitable and sustainable financing system that can enable universal coverage for all Americans of necessary health care by spreading risk across our entire population. Subsequent posts will focus on the many ways in which private health insurance cannot meet that challenge.

Adapted from Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, forthcoming, August 2008 by John Geyman. With permission of the publisher, Common Courage Press

Order link http://commoncouragepress.com/index.cfm?action=book&bookid=396

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California's Medicaid disaster

Posted by on Tuesday, Jul 1, 2008

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

Budget deal will do real damage to health care

The choice is clear: Increase taxes or let the impact fall on children and the elderly

Editorial
The Sacramento Bee
July 1, 2008

Faced with a $17 billion deficit, the governor and state lawmakers are considering cuts that would likely drop tens of thousands of children from the Medi-Cal program, the state’s version of Medicaid.

They also are considering restricting adult eligibility requirements for Medi-Cal, hurting families trying to transition from welfare to work.

Elderly patients would also take a hit. As part of a 10 percent cut scheduled to take effect today, the state plans to reduce payments received by pharmacists who serve Medi-Cal patients. Pharmacists say it would force them to lose money on commonly prescribed drugs.

California’s budget crisis is real. It will demand deep cuts, and the state’s health care programs will have to shoulder a share of the sacrifice. But the level of cuts aimed at Medi-Cal, and the nature of those cuts, would have broad and dangerous impacts. Legislators, particularly Republicans who have taken a vow not to raise taxes under any circumstance, need to consider the consequences.

A better option would be a modest, broadly distributed levy – yes, a tax – to prop up this state’s health care program for the poor. Consider it a down payment on a once-and-future goal: a more universal system of health coverage.

http://www.sacbee.com/110/story/1051327.html

As a welfare program representing patients lacking an adequate political voice, Medicaid has been chronically underfunded. The problem is especially severe in California (where it is called Medi-Cal) with one of the lowest Medicaid reimbursement rates in the nation, and a very large population of low-income individuals who might otherwise qualify for the program. We have more uninsured individuals in California than the entire population of Massachusetts.

Further cuts in Medi-Cal funding will reduce access to providers who cannot continue to accept ever greater losses in caring for patients under this program. Changes in funding and administration of the program will eventually remove close to half a million children from this program (Health Access analysis).

There is no other immediate alternative except to increase revenues – taxes – to pay for this program. Yet the Republicans in the state legislature have vowed not to raise taxes under any circumstance, and they have the power to block the two-thirds vote required for a tax increase.

Compare this with the politics of Medicare. Congress will soon return and restore the 10 percent cut in Medicare payments to physicians that went into effect today. The public has made it quite clear that they will not tolerate political shenanigans directed against our Medicare program.

If the Medi-Cal patients were part of a Medicare program that included everyone, they would be insulated from these budget cuts since the rest of us would demand full funding of the program. One of the great advantages of a single payer national health program is that it would eliminate the welfare-stigmatized Medicaid program. All children would be covered… and so would the rest of us.

AMA supports progressive tax policies for health care

Posted by on Monday, Jun 30, 2008

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

AMA meeting: AMA clarifies plan on tax credits for insurance

By Doug Trapp
American Medical News
July 7, 2008

Existing AMA policy, first approved a decade ago, calls for ending employees’ federal income tax exemption for work-based coverage. That should happen, however, only after establishing a system of tax credits to help people buy health insurance. Related AMA policy also calls for… an individual insurance mandate for those earning more than 500% of the federal poverty level, and subsidies for medically high-risk people.

AMA policy adopted at the (House of Delegates) meeting further specifies that once tax credits are in place, employee exemptions for health insurance spending should end only for federal income taxes — not for state or federal payroll taxes, which include Medicare, Social Security and unemployment taxes. (T)he exemption for payroll taxes… would disproportionately affect lower-income people and raise employers’ payroll taxes, and would not provide additional revenue for health insurance tax credits.

Richard Warner, MD, a Kansas psychiatrist, offered an amendment to maintain tax-free HSA contributions after insurance tax credits are in place, but the house did not adopt it.

Delegates also clarified AMA policy on the tax deductibility of health insurance spending. Previous policy had called for deductibility of out-of-pocket medical expenses and insurance premiums, but the house rescinded it in favor of the tax credit plan. AMA policy still envisions people with lower incomes having more generous tax credits and easier access to them than wealthier people.

David McKalip, MD, a neurosurgeon in St. Petersburg, Fla., offered an amendment to give Americans at all income levels tax credits for purchasing health insurance. He said the AMA policy represents a massive transfer of wealth that would discourage wealthier Americans from having health insurance by ending their tax incentives for buying it. His proposal was rejected.

http://www.ama-assn.org/amednews/2008/07/07/prsk0707.htm

From a policy perspective, this is really great news. The AMA already is on record for supporting progressive financing of our health care system through the use of refundable, advanceable, inversely-income-indexed tax credits to purchase private health plans. The current additional actions of the AMA House of Delegates even more explicitly support the concept of progressive financing of health care, based on ability to pay.

Health savings accounts (HSAs) are a regressive method of financing health care because they provide a greater tax deduction to higher income individuals. The AMA proposal would end this unfair policy by no longer allowing the deduction of HSA contributions from taxable income. An attempt to endorse the continuation of tax-free HSA contributions was rejected.

AMA policies would tend to shift coverage from employer-sponsored plans to the individual market. To encourage this shift, some policymakers recommend eliminating the deductibility of employer-sponsored coverage, and making premiums and out-of-pocket expenses deductible for the individual. The AMA recognizes that this would perpetuate unfair regressive tax policies. Instead, the AMA recommends not allowing the deductibility of medical expenses or premiums, but instead providing tax credits that are inversely proportional to each individual’s income. There could not be a more explicit support of shifting from regressive to progressive tax policies to fund health care.

The AMA also supports a mandate to purchase insurance for individuals with incomes over 500 percent of the federal poverty level. This is another policy that explicitly acknowledges that the wealthy have a responsibility to contribute to the pooling of funds for health care for everyone.

The AMA also supports tax subsidies for high-risk people, yet another acknowledgment that financing of major health care costs must be through progressive tax policies.

Perhaps the most exciting news of all is the action taken on an amendment offered in protest to the “massive transfer of wealth” that would take place by ending the regressive tax incentives to purchase private insurance. (Technically, the AMA proposal would end the “massive transfer of wealth to the wealthy” through health plan deductibility, and replace it with a transfer to lower-income individuals who need help paying for health care.) The AMA rejected this amendment, seeing through the mean-spirited “massive transfer of wealth” rhetoric. AMA members are first and foremost physicians who really do care about their patients.

In relying on private health plans to provide coverage, the AMA still has a major hurdle before reaching a model that actually would work. They do support greater regulation of the insurance plans, but through a robust market of private plan choices. Regulations are required to make the plans do their job of providing us with affordable access to health care, whereas markets function to provide us with price-competitive insurance products that keep prices down by preventing us from having affordable access to health care that we need. We can avoid that perpetual push-pull by replacing the private plans with a single risk pool, funded through progressive tax policies, and administered by our own public agency.

The AMA is getting closer. If they would just knock down this private-plan hurdle, the AMA could lead the way.

Senate advances plot to privatize Medicare

Posted by on Friday, Jun 27, 2008

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

Medicare Advantage Organizations: Actual Expenses and Profits Compared to Projections for 2005

GAO
June 24, 2008

On average, MA organizations’ self-reported actual medical expenditures as a percentage of revenue were lower in 2005 than they had projected. MA organizations, on average, reported spending 85.7 percent of total revenue on medical expenses in 2005, but had projected medical expenditures of 90.2 percent of total revenue. Because organizations spent less revenue on medical expenses than projected, they earned higher average profits than projected. On average, MA organizations’ self-reported actual profit margin was 5.1 percent of total revenue, which is approximately $1.14 billion more in profits in 2005 than MA organizations projected.

http://www.gao.gov/new.items/d08827r.pdf

And…

Medicare Cloture Narrowly Fails

By Drew Armstrong
CQ Politics
June 26, 2008

It now looks certain that doctors will take a deep cut to their Medicare payment rates next week, after the Senate failed to move forward on a take-it-or-leave-it Medicare bill offered up by Democrats.

The White House reiterated its veto threat against the bill on Thursday, likely making moot the narrow victory that seemed possible for Democrats. The administration opposes a provision that would partially offset the cost of the bill by cutting some bonus payments to private Medicare Advantage plans in areas with teaching hospitals. It also disagreed with a provision to limit a subset of the plans known as “private fee for service,” saying the bill would “reduce access, benefits, and choices for many of the approximately 2.25 million beneficiaries who have chosen to enroll in” those plans.

The Medicare Advantage plans are paid at a higher rate than traditional Medicare, and Democrats have long argued that the private plans’ rates should be cut.

The Bush administration and many Republicans argue that the plans inject private competition into the market and will eventually lower costs.

The House passed the measure two days ago, 355-59, in a vote comfortably more than the two-thirds majority that would be needed to override a presidential veto.

http://www.cqpolitics.com/wmspage.cfm?docID=news-000002907388&parm1=1&cpage=1

The political defeat of the measure to prevent Medicare pay cuts for physicians was not partisan. Enough Republicans joined Democrats in the House to form a veto-proof majority in support of the legislation. Though many Republicans also joined the Democrats in the Senate, they came up one vote short on cloture. Sens. Obama and Clinton interrupted campaign activities to vote, but Sen. McCain was a no-show.

This was a victory for conservative/libertarian ideologues who wish to destroy the traditional Medicare program and replace it with private health plans. Their first step was to use taxpayer funds to overpay private Medicare Advantage plans so that patients would be attracted by the greater benefits that could be offered (benefits that in all fairness should be offered as well to those remaining in the traditional program). The next step is to reduce compensation in the traditional Medicare program so that physicians will bail out. Fee reductions of about 40 percent are scheduled over the next couple of years, which should accelerate the physician exodus. That would convert Medicare into an underfunded Medicaid-type welfare program, with patients fleeing to the private options.

The eventual surprise that Medicare Advantage beneficiaries are not anticipating is that it will be converted into a defined contribution program with the costs of health care inflation being shifted to the patients’ portion of the Medicare Advantage premium and to other out-of-pocket cost sharing.

Fortunately, many Republicans do support the social solidarity represented by Medicare. They are offended by the efforts to waste taxpayer funds on the excesses of private insurers in a nefarious plot to destroy the best health care financing program we have (though it needs further improvement). Joining with the Democrats, these Republicans will surely do the right thing when they return from their recess. Sen. McCain will also have another opportunity to dispel the claim that he offers us only four more years of Bush policies.

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