Winners and losers in balance billing

Posted by on Monday, Aug 4, 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.

DMHC Builds on Efforts to Protect Patients from Unfair and Unexpected Bills

State of California
Department of Managed Health Care
August 1, 2008

The California Department of Managed Health Care (DMHC) today announced that it has finalized new regulations to restrict the practice of “balance billing” in emergency care settings – a practice that makes patients, not providers or health plans, responsible for paying the disputed difference between their provider’s bill and the health plan’s coverage. The regulations restrict balance billing by making it an unfair billing practice, thus allowing DMHC enforcement actions against those providers who engage in activities that unfairly burden consumers.

“Consumers, employers and taxpayers pay millions of dollars each year in health care premiums in exchange for a promise to protect them from unexpected bills when a health emergency strikes,” said Cindy Ehnes, Director of the DMHC. “The practice of balance billing breaks this promise to consumers and is unacceptable.”

Balance billing happens most often when an HMO patient receives emergency care from a physician or hospital that is not contracted with their health plan.

The DMHC has a strong record of aggressively protecting consumers from unfair balance billing. It recently filed a lawsuit in the Orange County Superior Court to stop Prime Healthcare Services, a Southern California-based hospital chain, from balance billing more than 3,500 HMO patients for services received at its hospitals.

The issue of balance billing stems from a conflict between contracts (health plans) that patients have with their managed care organizations and contracts that physicians and hospitals do not have with the managed care organizations covering patients that they are required to provide services for in emergency situations.

This action by the California Department of Managed Care requires that hospitals and physicians comply with contracts between patients and their managed care organizations, even though a contract to provide services has never been negotiated with these private managed care entities. Thus the providers are required to accept fees that may be lower than their costs – fees that are dictated by the private health plan.

The example of Prime Healthcare Services demonstrates why it was necessary to adopt regulations to prevent patients from being gouged at unfair rack prices. But this action, in protecting patients, also protected the private managed care organizations, often at the cost of ripping off the health care providers.

In contrast, our public insurance program, Medicare, does set rates with which providers must comply (with slight variations depending on accepting assignment or contracting as a provider). Recently, in many regions, Medicare rates have been declining in relation to provider costs. A greater effort must be made by the administrators of Medicare to establish rates that cover legitimate costs and provide fair profits. Only then is it fair to demand compliance with government regulated rates.

If we had a universal single payer national health program, a unified effort would be made to demand fair compensation at a level that would ensure that our health care delivery system would be there when we need it. What we don’t need is private intermediaries that manipulate patients and providers to accomplish their business goals. We’ve had enough of that.

Starbucks has been a model among U. S. employers for its social and moral responsibility to its work force since its founding in 1982. Howard Schultz, who founded the company, grew up in Brooklyn, New York in a hard-working family without health insurance, and never forgot the plight of working class people struggling every day to make ends meet.  He was determined to build a different kind of company—one that makes a profit, builds shareholder value, but also has a social conscience integrated back into the company. As he has said in his excellent book Pour Your Heart Into It,

“From the beginning of my management of Starbucks, I wanted it to be the employer of choice, the company everybody wanted to work for.  By paying more than the going wage in restaurants and retail stores, and by offering benefits that weren’t available elsewhere, I hoped that Starbucks would attract people who were well educated and eager to communicate our passion for coffee.  To my thinking, a generous benefits package was a key competitive advantage.”

The Starbucks story has been phenomenal.  The company went public in 1992 with a market capitalization of $200 million. By 2004 it was worth almost $19 billion.  Its worldwide work force grew to about 172,000 by 2007, and all of its employees in the U. S., even part-time, are offered health insurance with generous coverage.  From the beginning, the company’s consistent policy has been to offer health insurance to all employees working 20 or more hours a week (240 hours per quarter). As a result, Starbucks has had one of the most loyal work forces in American retail business, with a very low rate of attrition.

But the writing was on the wall.  In 2004, Schultz acknowledged in an interview with Business Week that the company’s biggest challenge to future growth was its health care costs, which by then were costing about $200 million a year for its 80,000 U. S. employees—more than the total it was spending on green coffee from Africa, Indonesia, and other countries. As Schultz said at the time “This is completely non-sustainable”, further noting that companies trying to do the right thing for their employees are paying for the many companies not doing so.

Today, Starbucks is hurting.  Caught in this economic downturn, it has been forced to cut thousands of jobs.  About 600 Starbucks stores in this country will be closed over the coming year, as well as most of those in Australia. This week, the company reported its first-ever quarterly loss, a net loss of $6.7 million. The company attributes its problems to the economy, increasing competition from fast-food companies such as McDonalds (not known for its health care coverage), and perhaps to its rapid expansion.

All of this is predictable. U. S. employers need a healthy work force, but can no longer afford to provide comprehensive employer-sponsored coverage (ESI). The average cost of ESI is now over $15,000 a year for a family of four, with the employer paying for about 60 percent of that and the employee picking up the rest. All of these numbers keep going up each year by three or four times the cost of living and median wages. As a result, more employers are cutting back on coverage (if provided at all), passing along more costs to their employees, and eliminating retiree coverage altogether (eg., General Motors). It is an open question how much longer employers with a social conscience, such as Starbucks and Costco, can continue to offer coverage.

Fortunately, there is a fix for this problem— single-payer national health insurance (NHI) along the lines of the Conyers bill (HR 676) in Congress with 93 co-sponsors.  Both employers and employees would pay less than they do now for better coverage.  By eliminating the waste and inefficiencies of 1,300 private insurers, NHI will save more than $300 billion a year and still guarantee coverage of all Americans. The differences in overhead between private and public financing are striking—Medicare operates as a single-payer system with an overhead of about 3 percent, compared to an average of 18 percent for commercial carriers and 26.5 percent for investor-owned Blue Cross plans.  Under HR 676 employers will pay a payroll tax of about 7.7 percent (less than their average of 8.5 percent now) while individuals will pay an income tax averaging about 2 percent for most taxpayers.

NHI will not solve all of the problems now being confronted by Starbucks and other U. S. employers, but will go a long way to level the playing field in a global economy. We can no longer afford the skyrocketing costs of private health insurance for less reliable and more skimpy coverage each year. Employers and employees alike, as well as our country, will win with NHI.

Howard Schultz has built a legendary company with a social conscience.  But the landscape and business environment is changing fast. He can add to his legacy by taking a leadership role in helping other employers to see NHI as an advantage to their future.

John Geyman is the Author of Shredding the Social Contract: The Privatization of Medicare, Common Courage Press, 2006, and Do Not Resuscitate: Why the Health Insurance Is Dying, and How We Must Replace It, Common Courage Press, 2008, Use only with permission of the Author.

Buy These Books:

Medicare national coverage determinations

Posted by on Friday, Aug 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.

New list offers sneak peek into agenda of device, pharmaceutical industries

By Jeffrey Young
The Hill
July 31, 2008

The Centers for Medicare and Medicaid Services (CMS) has published its first-ever quarterly list of drugs, medical devices and procedures that Medicare patients may no longer be able to access.

The list, posted on CMS’s website this week, provides an unprecedented glimpse into what companies or sectors might be celebrating or mourning in the months ahead. It’s the Medicare national coverage determinations, or NCDs, that can be the difference between whether a drug- or device maker sees a huge return on research and development or a crushing bust.

And in an effort to improve transparency and public input, all members of the public — whether business interests, healthcare providers or patients — will able to provide CMS with comments.

CMS lists 19 potential topics for national coverage determinations in the next quarter-year. These topics include drugs to treat anemia, “proton beam therapy” to treat prostate cancer, and tiny, implantable devices that keep coronary arteries open while dispensing medication, called drug-eluting stents.

Not only does Medicare command a large portion of the healthcare marketplace, private insurance companies regularly adopt the same or similar coverage policies based on Medicare’s decisions.

CMS’s regional contractors make the vast majority of coverage determinations. In most cases when the agency’s headquarters steps in, it is in response to a request by manufacturers or medical providers seeking greater clarity on Medicare’s coverage policies based on variations in the locally made decisions. Other times, CMS will initiate a national coverage determination based on agency staff recommendations when they see, for example, new clinical evidence that they believe merits a reconsideration of an old decision.

Based on the statutory standard of whether the new technology or procedure is “reasonable and necessary,” the resultant policy then applies to Medicare providers and patients across the country.

(CMS Chief Medical Officer Barry) Straube stressed that the actual NCD process will not change and that CMS does not intend to centralize coverage determinations. “We have no plans right now to change the national coverage-versus-local coverage decision process,” he said, noting that CMS lacks the financial resources to take over for the regional contractors.

Medicare national coverage determinations (NCDs) are inevitably controversial. Decisions on what procedures, devices and drugs are to be covered must balance the wishes of patients to have unlimited access to all possible care, regardless of demonstrated benefit or lack thereof, with the responsibility of the stewards of our tax funds to not waste them on care that is of no benefit and often is detrimental.

The ethics are fairly straightforward. Medicare, being a publicly-financed program, has an obligation to fund appropriate care, but also has an obligation to prevent misuse of our public funds. Inappropriate care should never be considered to be a right of an individual when the taxpayer would have to pick up the tab.

Generally, a national health program would macro-manage the health care funds, whereas micromanagement of the patient’s care would be provided by the patient’s personal health care professionals. But high-tech care has been the largest contributor to the continuing escalation in health care costs. We are at a point where we should no longer permit the unquestioned use of public funds for unlimited, expensive high-tech care that has not been demonstrated to be of benefit, and sometimes causes harm.

Opponents of government health programs frequently charge that such coverage decisions deny patients life-saving care. Care that might be reasonably expected to reduce suffering or even save a life is not the care that is denied. A cancer drug that has a reasonable probability of providing a significant remission or even a cure is never withheld. Rather, an expensive cancer drug that has not been demonstrated to provide improved outcomes might well be denied. Spending $100,000 of taxpayer funds to provide a false sense of hope where there is no hope is not only wasteful, but it is also cruel because of the adverse effects of such therapies, and the dashed hopes that follow. “Well, we don’t know whether this $100,000 drug will do any good, but let’s try it anyway” should no longer be adequate justification for using public funds for therapeutic whims, even in tragic cases.

It is often said that a national health insurance program should be administered on a regional basis rather than nationally. But this does not necessarily mean that national coverage determinations must rest with regional contractors as they now often do in the Medicare system. Some of the complaints about Medicare stem from the inconsistencies in coverage decisions.

Claiming that CMS lacks the financial resources to centralize national coverage determinations is certainly a feeble excuse for not providing taxpayers with oversight of spending on expensive, unproven, high-tech services. Hopefully 2009 will bring us more enlightened national leaders.

MedPoint and IntelliScript – harmful additions to the administrative excesses

Posted by on Thursday, Jul 31, 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.

They Know What’s in Your Medicine Cabinet

by Chad Terhune
July 23,2008

That prescription you just picked up at the drugstore could hurt your chances of getting health insurance.

An untold number of people have been rejected for medical coverage for a reason they never could have guessed: Insurance companies are using huge, commercially available prescription databases to screen out applicants based on their drug purchases.
Most consumers and even many insurance agents are unaware that Humana, UnitedHealth Group , Aetna (AET), Blue Cross plans, and other insurance giants have ready access to applicants’ prescription histories.

An investigation last year by the Federal Trade Commission found that the two companies supplying these pharmacy profiles—MedPoint and IntelliScript—violated federal law for years by keeping the system hidden from consumers. But the FTC has merely required disclosure if prescription information causes denial of coverage or some other adverse action; the agency imposed no penalties.

MedPoint and IntelliScript buy the data they disseminate mostly from another group of middleman companies known as pharmacy-benefit managers (PBMs). Large PBMs, such as Medco Health Solutions, provide services to insurers and employers. In playing that role, the PBMs gain broad access to prescription information from drugstores.

MedPoint and IntelliScript represent the type of administrative services that the private insurance industry is selling us. These services are not for the purpose of assisting individuals in gaining access to the health care that they need. These services are for the purpose of allowing the insurance industry to exclude from their plans anyone who might actually need health care. And we’re paying more in administrative costs to defeat this risk pooling function of insurance.

Some say that all we have to do is to increase regulatory oversight of this industry in order to use private insurance as the framework of comprehensive reform. The problem with this reasoning is that business model of private insurers in the United States has nothing in common with the model of private insurers used in some other nations with comprehensive systems. Other nations use private plans to bring everyone in under the umbrella of insurance coverage. We use private plans to keep premiums affordable while shoving those who need health care out into the storm to either fend on their own or to be picked up by taxpayer-financed safety net programs.

We will not achieve our goal of universal health care merely by increasing regulatory oversight of the insurers. We will have to totally transform the private insurance industry from a “successful” business model where success is measured by not paying for health care that people need, to a public service model where success is measured by seeing that all of us get the care we need.

Rather than disassembling these companies and rebuilding them as new private insurance entities within a social insurance system, it would be far easier, more efficient, more equitable and less expensive to dismiss them and replace them with our own publicly-financed and publicly-administered program.

If we leave them in place and merely increase regulation, their business model will dictate that they must introduce yet more innovations that circumvent regulation for the purpose of enhancing their business outcomes while shifting more of the responsibility of financing health care to the taxpayers. We can’t afford it any more. We need an efficient system that actually gets people the health care that they need.

Woolhandler on the ethics of reform

Posted by on Monday, Jul 28, 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.

Ethical Questions in the Reform of Health and Medical Care

The President’s Council on Bioethics
June 26, 2008

Chairman Edmund Pellegrino: This afternoon we’re going to look at the ethical questions from the point of view of people who are involved in designing and propagating and thinking about various programs to which we referred.


Chairman Pellegrino: I’m going to move ahead and ask each of these panelists to briefly state why they think — I hope this isn’t too aggressive a question — why they think the program that they’re most closely associated with is a morally acceptable one.

Stephanie Woolhandler, M.D: Well, I think that the single-payer proposal is the only ethical one on the table because it’s the only one with proven effectiveness. I think that many of these proposals up here are known to be ineffective. They’ve been tried, and they failed. Perhaps the best you could say about some of them is they’re an experimental treatment. So I just think if we’re concerned about 18,000 deaths each year from lack of health insurance, we’re actually obligated from a moral point of view to go with something that’s proven, which would be some form of nonprofit national health insurance.

Len Nichols, Ph.D.: — my interpretation of Leviticus… In my view, health care has become like food, a unique gift. We absolutely know people will die without it. It was unacceptable to let people starve back then. It’s unacceptable to let people go without health care now. In my view, those are morally equivalent. But what I love about the gleaning metaphor in Leviticus is that it does not say, “Give the same amount of food to every person.” It does not say, “Give all the food to one person who happens to be hungry.” It does not say, “Bring the poor home and cook for them.” It says, “Leave the food in the field, and the poor have to go get it.” So there’s a mutual obligation. There’s a mutual responsibility, and that’s why I see that reflected perfectly in the combination of personal responsibility, including individual mandate to purchase, and shared responsibility, that is, to make it possible for each individual to achieve their own objective.

James Capretta: Well, I think the program I put forward is the ethically appropriate way to proceed for several reasons. First and foremost, the more that financial resources are put in the hands of patients and consumers to make decisions, the more the system is responsive to those patients and consumers. …it’s the most practically plausible and workable approach. …it doesn’t cede to the federal government all centralized control. And, finally, controlling costs is either a matter of efficiency or queuing, in a sense. And market incentives, financial incentives with oversight can get to more efficiency, trying to do things where people decide on their own that this is less valuable than the price we’ve been paying and not doing it anymore.


Dr. Schneider: And many of the people have spoken with extraordinary confidence and force and have been quite willing to say that the alternatives to their program are highly unsatisfactory. These arguments are all based on data and empirical evidence and arguments that we are entirely incompetent to evaluate.

Dr. Woolhandler: I don’t understand your point. Why would you be incompetent to evaluate these arguments?


Dr. Woolhandler: I’m again just a little amazed at the comment that this group is not prepared to decide on these questions. There are so many IQ points in this room, and people spend so much time thinking about ethics. I mean, the material I present is not rocket science. The Rand study is not rocket science, either. There’s a book about this [holding her fingers about an inch apart] thick that you could probably read in an evening if you want to read it yourself. So I think saying we’re not prepared to decide is actually saying we’re going to step away from a problem that we recognize is very serious and is resulting in 50 deaths today as we meet here and 18,000 deaths a year in the United States.


Prof. Lawler: Dr. Woolhandler seemed to have this ethical theory that when it comes to medical care there should be no exchange of money. So co-pays are immoral. Deductibles are immoral. Whereas your other two, to some extent or another, think actually to introduce a bit of cash here is helpful because understanding yourself as a consumer makes the person delivering the product more responsive and introduces choice.

Dr. Woolhandler: I’ve seen people die because of co-payments and deductibles. Co-payments and deductibles were studied in the Rand experiment. They’ve been studied a couple of times in Canada where they’ve introduced small co-payments and deductibles, and they always have the same effect. Rich people are not affected by them a bit. Low-income people get less care. They get less elective unnecessary care. They also get less life-saving and completely necessary care, and that’s the basis on which I think they’re immoral.


Prof. Dresser: For Dr. Woolhandler , I’m probably mangling this philosophically, but I think Kant said, “Ought implies can.” And so, you know, I love your idea, and if I were queen of the world or the US I would say, “Okay. Go for it.” But I just wonder, if it’s not realistic in this country, then it’s a placebo. So how do you think we’re going to get from here to where you are politically?

Dr. Woolhandler: Well, I think the argument you’re making is politics is the art of the possible. But I actually disagree with that. I actually think politics is the art of creating the possible, and what’s possible is what people believe is possible.

So who would have believed before Rosa Parks that we would have a civil rights movement and a Civil Rights Act? Who would have believed in the mid-1980s that the Soviet Union was about to collapse?

So you can’t just sit here and say based on what you’re seeing today that no change is possible. We’ve got to create the possible, which I think is a challenge to this group and, you know, partly why I reacted so strongly to the suggestion you couldn’t understand it or come to grips with it.

You have tremendous moral suasion. You have the power as a group to make a statement that universal health care is the only ethical policy alternative and that the only proven way to get universal health care is through nonprofit national health insurance.

If you went public with that, you would be creating the possible. You know, you would be creating the possible and helping people believe that this real change is possible. And when I look at those polls about the American people, the American people say they want national health insurance.

It’s not that the people don’t agree. It’s the insurance industry that’s blocked this from debate. They’ve used their full political power and economic power to block it and, frankly, the pharmaceutical industry, as well. And they’ve always opposed this.

And when I first got in this business I was shocked about the pharmaceutical industry opposing it. Well, it turns out they knew something that the American people just learned later, which is every nation with national health insurance negotiates for price discounts on drugs. They knew that, and they were completely and totally opposed to any sort of national health insurance covering drugs because they were going to get lower prices.

So we’ve got the American people endorsing it. We’ve got some very powerful folks opposing it. We need to get it on the agenda, and (it’s) the one real power you have and you can use it, or you can turn your back and say, “We don’t understand this.” You can use that power to put this on the political agenda.

After the November election, it is expected that the President’s Council on Bioethics will release a report on ethical considerations for reforming health care.

The Council was formed in 2001 in response to the controversy over President Bush’s decision to deny funds for embryonic stem cell research. With a touch of irony for which this administration is famous, many thought that political ethics were compromised in the selection of supposed ethicists who had already expressed biases incompatible with the ability to objectively assess important issues of bioethics. When one of the members of the Council states that they are incompetent to assess the ethical issues in the reform proposals, it does make you wonder.

It is difficult to know what the report will state, but some of the more enlightened members of the Council clearly do understand the moral imperative behind Steffie Woolhandler’s message. It would be nice if their views, based on actual ethical principles, would prevail in the final report. Regardless, it is really Steffie’s message that is important.

The "dual-eligibles" scam

Posted by on Friday, Jul 25, 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 Part D: Drug Pricing and Manufacturer Windfalls

By the Majority Staff
United States House of Representatives
Committee on Oversight and Government Reform
July 2008


This analysis of confidential data on Medicare Part D and Medicaid drug prices shows that the private Medicare Part D insurers pay significantly higher prices for prescription drugs than does the Medicaid program. In the case of the six million dual eligible beneficiaries, the Medicare Part D insurers paid $3.7 billion more in 2006 and 2007 to purchase the top 100 drugs for dual eligible beneficiaries than they would have paid if they had access to the lower Medicaid drug prices. This increase in costs represents a windfall to drug manufacturers.

Eliminating the drug manufacturer windfall would realize substantial savings to federal taxpayers. Over the next ten years, taxpayers would save $86 billion if the Medicare Part D insurers paid Medicaid prices for drugs used by the dual eligible beneficiaries. If Medicare negotiated directly with drug manufacturers and obtained prices equivalent to the Medicaid prices for all Medicare beneficiaries, the potential savings to taxpayers increases to $156 billion.


Apples, Oranges and “Windfalls”

Republican Staff Analysis


The Part D benefit was designed to offer choice in prescription drug insurance, value for seniors through low negotiated prices, and overall low program costs for taxpayers. It is achieving those goals and exceeding expectations. The Majority report fails to recognize these benefits and instead makes inappropriate and unrealistic price comparisons. Politically appealing but substantively flawed changes like those advocated by the Majority would have serious implications for the prices paid by employers, unions, health care providers, and the uninsured. Likewise, changing the financial incentives in Part D could have a negative impact in the type of drug research and development that is conducted.

Finally, it is worth noting that the Majority has written eight reports on Part D and the program is only in its third year. This represents a significant level of oversight. Without a doubt Medicare requires substantial oversight given its importance to seniors and its uncertain long-term financial prospects. However, the Majority’s criticisms of Part D seem misplaced. Part D costs substantially less than Part A (which primarily pays for hospital based care) and Part B (which primarily pays for physician services). The Hospital Insurance trust fund, Part A’s revenue source, is not adequately financed in the short-term and will be exhausted in 2019. This looming financial crisis has received scant oversight from the Majority.

To understand the basis for the problems with the Medicare Part D drug benefit, you need only to recall that the program was designed by the Medicare privatizers in Congress, with the support of two of the largest lobby interests in the nation: the private insurers and the pharmaceutical firms.

There are a great many problems that have been created by the privatization measures in the Medicare Modernization Act, but here we will limit the discussion not to just the Part D program, but to only one aspect of Part D: the application of Part D to dual-eligibles.

Dual-eligible Medicare beneficiaries are those individuals who not only qualify for Medicare based on age or long-term disabilities, but they also qualify for Medicaid based on their very low incomes. Before Medicare Part D was enacted, they received their drugs through the state-administered Medicaid programs. This worked well for the taxpayers because of the ability of the government to negotiate much lower drug prices, and it worked well for the patients because they received their necessary medications usually without any out-of-pocket expense.

The privatizers were successful in shifting the state-run Medicaid drug benefit into the Part D program. Because the drug benefit for the dual-eligibles is still subsidized, the cost impact was not that great for the beneficiaries, though the administrative hassles, including the need to comply with various formularies offered by the different plans, proved to be more than just an inconvenience.

The taxpayers did not fare at all well with this shift into the Part D program. This study by the Majority Staff demonstrates that taxpayers paid $3,739,000,000 more to the drug manufacturers for the top 100 drugs than they would have under the Medicaid drug program which this replaced. The Republican Staff response glosses over this very real additional cost foisted onto taxpayers.

The Republican response obfuscates and segues into Part A hospital funding – an important problem but not the subject at hand. Buried in their response, the Republicans do state that if the drug benefit for the dual-eligible population were returned to the Medicaid program, “this population would have access to Medicaid price controls and pharmaceutical manufacturers no longer would be benefiting from the purported windfall profits.” Of course they wouldn’t; the taxpayers would benefit.

This example shows once again that health policy science is not complicated. It’s the politics that are so difficult. One side is represented by individuals who want everyone to have affordable access to the health care that they need, and the other side is more interested in enhancing the private sector through measures such as ensuring windfall profits for the pharmaceutical firms.

One thing great about America is that it is our choice… but we do have to make a greater effort to be certain that everyone is making an informed choice.

Is preventing genetic discrimination enough?

Posted by on Thursday, Jul 24, 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.

The Genetic Information Nondiscrimination Act — A Half-Step toward Risk Sharing

By Russell Korobkin, J.D., and Rahul Rajkumar, M.D., J.D.
The New England Journal of Medicine
July 24, 2008

Consider three Americans — one with an increased genetic risk for colon cancer, one with a family history of colon cancer, and one with a colonoscopic finding of several large adenomatous polyps. Under the Genetic Information Nondiscrimination Act (GINA), which was recently signed into law by President George W. Bush, health insurance companies may not refuse to cover and may not raise premiums for the first two people, whose genetic information or family history puts them at higher risk for colon cancer. Insurers could, however, refuse to sell the third person an individual policy or could quadruple his or her premiums. If the third person is enrolled in an employer-sponsored group health plan, insurers could raise the rates for everyone in the group.

In making such distinctions, GINA is emblematic of this country’s piecemeal and inconsistent approach to health care policy, which makes little sense and leaves many Americans without access to care or in danger of financial ruin if they seek care. Our recent history is replete with examples of similar half-measures in health policy.

One response would be to retreat from the egalitarian impulse of GINA and leave health insurance to market forces, as we do with consumer goods. Health insurance risk would be priced as accurately as technology permitted, and patients would pay their own expected medical costs in premiums.

The better solution is to fully embrace the basic ethic of GINA and admit that the law’s distinction between genetic information and other immutable characteristics is arbitrary.

The arbitrary nature of the categories GINA creates suggests that we should fully commit ourselves to the step that the legislation approaches but is too hesitant to take: the prohibition of medical underwriting — the rating and pricing of health insurance on the basis of any health information, not just genetic information. Health insurance premiums should be assessed on the basis of a “community rate” and should be set the same for all people within a given age group — possibly with exceptions somehow made for risk factors that are deemed to be within each person’s reasonable control.

Moreover, to ensure that the costs of bad health are shared equitably, all Americans would have to be in the same risk pool. This would mean enacting a health insurance mandate either for employers or, if health insurance could be made affordable, for individuals — and specifying a minimum set of benefits that everyone would be required to have. Given the growing disparity between the cost of modern medicine and the incomes of many Americans, enforcing such a mandate would be difficult. Even with income-based subsidies, an individual mandate could place an undue financial burden on many families. Nonetheless, bringing everyone into the same risk pool is an important long-term goal.

With such reforms, GINA could become the first step toward a just and sustainable health insurance system. This approach would recognize that, because many of the most important determinants of health are beyond people’s reasonable control, no one should have to bear the costs of health care alone.

The need for the Genetic Information Nondiscrimination Act was obvious. The members of Congress recognized that it would be unfair for private insurers to discriminate against individuals based on their family history or genetic makeup. What is perhaps not so obvious is why Congress chose to ignore all other forms of discrimination by private insurers.

As this article states, medical underwriting should be prohibited in order to permanently eliminate private insurer discrimination. Then a universal risk pool must be established to distribute risk equitably. But for that to work, the authors acknowledge that there must be a mandate that everyone participates.

In recommending community rating and a mandate to participate, the authors further acknowledge that, even with subsidies, reform based on private plans will still place an undue financial burden on many families. That is still a form of discrimination.

What is it that holds back these authors, members of Congress, and others in the health policy community from stating the obvious? Legislating and regulating the private insurance industry may reduce but will never eliminate insurer discrimination; adopting a publicly-funded, single payer national health program would. Why do they choke up when that’s what they need to say?

"The Measure of America"

Posted by on Wednesday, Jul 23, 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.

Development: US fails to measure up on ‘human index’

By Ashley Seager
The Guardian
July 17, 2008

Despite spending $230m (£115m) an hour on healthcare, Americans live shorter lives than citizens of almost every other developed country. And while it has the second-highest income per head in the world, the United States ranks 42nd in terms of life expectancy.

These are some of the startling conclusions from a major new report which attempts to explain why the world’s number-one economy has slipped to 12th place – from 2nd in 1990- in terms of human development.

The American Human Development Report, which applies rankings of health, education and income to the US, paints a surprising picture of a country that spends well over $5bn each day on healthcare – more per person than any other country.

The report, Measure of America, was funded by Oxfam America, the Conrad Hilton Foundation and the Rockefeller Foundation. It shows each of the 11 countries that rank higher than the US in human development has a lower per-capita income.

Those countries score better on the health and knowledge indices that make up the overall human development index (HDI), which is calculated each year by the United Nations Development Programme.

One of the main problems faced by the US, says the report, is that one in six Americans, or about 47 million people, are not covered by health insurance and so have limited access to healthcare.

The US has a higher percentage of children living in poverty than any of the world’s richest countries.

It also reveals 14% of the population – some 40 million Americans – lack the literacy skills to perform simple, everyday tasks such as understanding newspaper articles and instruction manuals.

Inequality remains stark. The richest fifth of Americans earn on average $168,170 a year, almost 15 times the average of the lowest fifth, who make do with $11,352.

The US also ranks first among the 30 rich countries of the Organisation of Economic Cooperation and Development in terms of the number of people in prison, both in absolute terms and as a percentage of the total population. It has 5% of the world’s people but 24% of its prisoners.

“Human development is concerned with what I take to be the basic development idea: namely, advancing the richness of human life, rather than the richness of the economy in which human beings live, which is only a part of it,” said the Nobel laureate economist Amartya Sen, who developed the HDI in 1990.

“We get in this report … an evaluation of what the limitations of human development are in the US but also … how the relative place of America has been slipping in comparison with other countries over recent years.”


Testimony before the Joint Economic Committee

By Kristen Lewis
American Human Development Project
July 23, 2008

It is important to note that the U.S. has higher income scores than every country but Luxembourg on the global scale – we’re still #2 in income. But the eleven countries ahead of us – particularly fast-moving countries like Australia and Ireland – have been more successful and efficient in transforming income into positive health and education outcomes for their people.

Based on the data in the American Human Development Index and the information and analysis in the American Human Development Report, a steady, broad-based advance of human development in the United States as well as greater security for middle class families will require attention to several priorities.

  • For Americans to live longer, healthier lives as well as remain solvent when serious illness strikes, it is obvious from the report that progress depends in large part on a comprehensive resolution of the problem of health insurance.
  • The days when basic skills were sufficient to ensure a life of reasonable economic security and full participation in society are past; the labor market today is unkind to those who lack high school diplomas, and jobs that afford financial security increasingly require college degrees.
  • For Americans to sustain, or obtain, a decent standard of living, the wages and opportunities of millions of Americans must improve. Growing inequality in income distribution and wealth raises a profound question for Americans: Can the uniquely middle-class nation that emerged in the twentieth century survive into the twenty-first century? Or is it fracturing into a land of great extremes?

American Human Development Project:

“The Measure of America,” Executive Summary:

“The American Human Development Project’s mission is to stimulate fact-based public debate about and political attention to human development issues in the United States and to empower people to hold elected officials accountable for progress on issues we all care about: health, education and income.”

From the testimony of Harvard Law School Professor Elizabeth Warren (also available at the link above): “Seven years of flat or declining wages, seven years of increasing costs, and seven years of mounting debts have placed unprecedented stress on the ordinary families. By every critical financial measure, these families are losing ground. Without changes in critical economic policies, the strong middle class that has been the backbone of the American economy and the American democracy is in jeopardy.”

When we are addressing the narrower problem of health insurance for everyone, does the broader issue of human development really matter? Well, yes, and here’s why.

The current national debate on reform has concentrated on various models designed to provide insurance coverage to more people. Several policies would fall short of universal coverage, but, to make matters worse, other recommendations accelerate the transition to a market of underinsurance products. Increasing the number of individuals with nominal but inadequate health care coverage defeats one major goal of improving human development within the United States.

In this political season, we need to assess candidates based on whether their policies are merely gimmicks designed to look like they are addressing problems such as the uninsured, or if their policies truly are based on the fundamental goal of improving human development.

Those who are dedicated to human development will make every effort to see that everyone does have health care coverage that actually works. They’ll also support policies that address our serious deficiencies in education and in income levels.

Providing health care alone without improving human development will only serve to be certain that we will remain number one in incarcerating our people. We have more than enough national wealth to be number one in human development.

We should ask our politicians to show us precisely how their policies would improve human development – realizing the dreams of the middle class for a greater number of us. If they don’t provide us with truly concrete proposals, then ask them what plans they have to increase the capacity of our prisons. If they have a well-thought-out answer for that, then maybe we should look elsewhere for candidates with a greater sense of social solidarity.

A decade of change for those with chronic conditions

Posted by on Tuesday, Jul 22, 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.

Eroding Access Among Nonelderly U.S. Adults With Chronic Conditions: Ten Years Of Change

By Catherine Hoffman and Karyn Schwartz
Health Affairs
July 22, 2008

More than 40 percent of the U.S. population lives with one or more chronic conditions. However, because people with chronic conditions have greater health needs than others, they account for three-quarters of all personal medical care spending in this country. We focused on nonelderly adults with chronic conditions.

Both the connection to health care and its affordability worsened for many nonelderly U.S. adults living with chronic conditions between 1997 and 2006. This erosion varied by health insurance coverage. Access to care among uninsured adults with chronic conditions deteriorated on all of our basic measures between 1997 and 2006. In addition, more of both the privately and publicly insured with chronic conditions went without health care because of its cost over this ten-year span.

It would have been sad if this report had demonstrated that there had been no improvement in access and affordability in the past decade for this expensive, non-elderly population with chronic conditions. What it did show is that access and affordability deteriorated further, even amongst the insured. That’s not sad; that’s tragic.

Obviously our national health policies are not working. Dare anyone suggest that we change them?

Last week’s action by Congress to override President Bush’s veto of the Medicare Improvements for Patients and Providers Act (HR 6331) was a landmark step toward reversing the tide of privatization of Medicare over the last three decades.  The votes in Congress were a resounding defeat for conservative policies and the lobbying efforts of the insurance industry.  There was no ambiguity in the override votes — 383 to 41 in the House and 70 to 26 in the Senate, with 153 Republicans in the House and 21 Republicans in the Senate defying the president. The courageous leadership of Senator Edward Kennedy, long a champion of better access to health care, helped to head off a disastrous veto of this legislation despite his current medical problems.

The major reason given for the presidential veto was the bill’s cuts of overpayments to private Medicare plans and the alleged “decreased choice available to seniors.” Conservative policy makers were unrelenting in their reaction to the override. Mike Leavitt, HHS Secretary, opined in the Washington Times that “Democrats in Congress have loaded this bill with provisions that undermine choice and, worse, pave the way to still more government control of Americans’ personal health care decisions.”

The bill cancels the 10.6 percent cut in physician reimbursement which would have taken place, instead providing a 1.1 percent increase. The bill’s provisions will cost about $20 billion over the next five years, with about $14 billion coming from cuts in overpayments to Medicare Advantage, the private plans. It will save taxpayers about $45 billion over the next 10 years. New consumer protections will be put in place to reduce deceptive marketing by private plans and to hold them more accountable. Other improvements include reduction of copayments for mental health services from 50 percent to 20 percent (the usual for other Medicare services), new authority for HHS to require coverage of certain drugs, and an increase in low-income assistance for Medicare beneficiaries.

A brief historical review shows just how big a change this overturned veto is concerning overpayments to private Medicare plans. Private Medicare HMOs were first authorized by Congress through the Social Security Amendments of 1972. Payment rates were to be negotiated in advance between HMOs and Medicare on the basis of capitation (ie., the number of enrollees in the plan). HMOs were required to share any cost savings on a 50-50 basis with Medicare, and were limited to a profit of 10 percent of Medicare’s payments. The private market found this unattractive, and by 1980 only one HMO had contracted with Medicare.

In an effort to increase enrollment in private Medicare HMOs, Congress passed the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), which liberalized payment arrangements for participating plans.  It was assumed that managed care would save money, so payments were set at 95 percent of what Medicare expected to pay, by county of residence, for care of enrollees in traditional fee-for-service (FFS) Medicare. Although HMOs continued to complain about poor reimbursement, they could generate large profits by enrolling healthier people needing less care and avoiding sicker patients. It was soon found that sicker patients who were disenrolled by HMOs cost Medicare 160 percent more in the first six months after disenrollment. A 1989 report estimated that Medicare was paying 15 to 33 percent more for care of beneficiaries in private HMOs than in Original Medicare.

When Republicans took control of both houses of Congress in 1994, they increased their efforts to privatize Medicare. The Balanced Budget Act of 1997 (BBA) created Medicare + Choice (M+C) plans, with complex reimbursement arrangements that still afforded substantial profits by cherry picking the market. Private plans were not required to adjust their payments because of the lesser risk of their enrollees. The General Accounting Office in 2000 reported that Medicare spent about 21 percent more on M+C enrollees than it would have spent under Original Medicare. Despite this news, Congress passed the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) that same year, which further increased M+C payments, with fewer regulatory requirements.  Many M+C HMOs gamed the system, raising premiums to generate higher profits, restricting services, and then often exiting the market.

More recently, of course, we had the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) (also dubbed the Medicare Middleman Multiplication Act by New York Times columnist Paul Krugman). The MMA continued generous overpayments to Medicare Advantage (MA), the successor to M+C. Overpayments of MA plans average 13 percent higher than Original Medicare (19 percent higher for the most popular private fee-for-service ((PFFS) plans, still with no effective risk adjustment.

So history over three decades is quite clear that private plans cost more than traditional Medicare, are less reliable, and wouldn’t be in business at all without overpayments. The privatized Medicare experiment has failed. The latest action by Congress is an important first step in reversing the failures of privatization, but much more needs to be done. These further reforms are high on the list for further action by Congress:
•  eliminate all overpayments entirely (there are still $150 billion in
overpayments available to private Medicare plans over the next 10 years,
despite this recent modest cut)
•   require a level playing field for all private plans (they won’t play!)
•   add cost-effectiveness as a criterion for determining coverage and
reimbursement policies of Medicare
•   and allow the government to use its bulk purchasing power to negotiate
discounts for drugs, medical devices and supplies.

Let’s hope that last week’s overwhelming votes in Congress opposing conservative rhetoric and the health insurance lobby emboldens those running for Congress this year, the 2009 Congress, and our new President (Obama!) to build on this important first step toward health care reform.

Buy This Book:

Adapted from Shredding the Social Contract: The Privatization of Medicare, Common Courage Press, 2006, and by John Geyman, With permission of the publisher, Common Courage Press, Monroe, ME.

About this blog

Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

News from activists

PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.