Lessons of 401(k) plans for health care

Posted by on Thursday, Aug 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.

Lessons From the Evolution of 401(k) Retirement Plans for Increased Consumerism in Health Care: An Application of Behavioral Research

By Jodi DiCenzo and Paul Fronstin
Employee Benefit Research Institute (EBRI)
August 2008

Retirement and health benefits following a similar evolution:

The private sector’s shift away from “traditional” company-financed pension plans toward individual 401(k) accounts illustrates how benefit decision-making and responsibility have shifted from the employer to the worker. The current trend in health care design toward “consumer-driven” health plans illustrates the same trend with health benefits.

Health plan design is encountering the same obstacles as 401(k)s did:

Efforts to make workers more involved and responsible for their health benefits have run into the same problems that 401(k) plans did: Workers tend to delay or be disengaged from both retirement and health care decisions, these issues require long-term planning, and workers see both retirement and health care decisions as complex and difficult.

Among the behavioral lessons learned from retirement plans:

  • More choice is not always better: Behavioral research, particularly with 401(k) retirement plans, has shown that increased choice can have negative consequences: More is not always better and may even be worse in some cases. Many people remain disengaged from matters they do not have an immediate need to address, and by the time the need becomes immediate, it is often too late. Many, if not most, workers are probably not capable of making the most appropriate retirement planning or health care choices — it is simply too difficult.
  • Education and information are not enough: Research has shown that education has resulted in little to no improvement in workers’ knowledge of retirement saving and investing. In addition, empirical evidence suggests that even when “educated” employees know, most of them fail to act on their knowledge. The heavy investment that many employers have made in retirement education and information programs often fails to produce the desired results.
  • Financial incentives don’t always work: Financial incentives, such as an employer match in a 401(k) plan and tax breaks, also fall short of motivating optimal behaviors. Despite the tax-favored status of contributions and the existence of employer matching contributions, a significant portion of eligible workers still do not contribute to a 401(k) plan.

http://www.ebri.org/pdf/briefspdf/EBRI_IB_08-2008.pdf

The theme of this report is that lessons can be learned from the behavior of employees regarding their individual 401(k) retirement plans that can be applied to their participation in consumer-driven health plans, but the importance of these observations is far greater than merely providing suggestions to “nudge” employees into these programs. The behavioral observations are precisely those that would be anticipated in programs that are designed to shift the responsibility for retirement and health security from the employer to the individual.

Traditionally many employers provided generous health and retirement benefits to their employees. Participation was automatic and was welcomed by the employees as part of their employment compensation packages.

Once employers became concerned about the costs of these programs, they responded by shifting the responsibilities to the individual employees. First the traditional pension plans were shifted to individual 401(k) plans, and now health plans are being shifted to consumer-driven plans, especially health savings accounts or health reimbursement arrangements coupled with a high-deductible health plan. As the authors state, the decisions required tend to be complex and difficult, which tend to delay or disengage the employee from these decisions.

Compare this with Medicare and Social Security. These are retirement and health benefit programs in which enrollment is automatic, and with benefits that are so popular every politician has learned not to touch this third rail.

Employers should be relieved of their responsibility to develop and manage these programs, but placing that responsibility in the hands of each individual would be disastrous. With a median household income of $50,000 most simply cannot afford either adequate health benefit plans or retirement income security. A new study by Elizabeth Warren reveals that this is already at a crisis level – personal bankruptcy for retirees has skyrocketed.

The missing ingredient is social solidarity. Through social insurance programs we could all have both health security and retirement security that is completely automatic. We already have the money. But solidarity? That doesn’t take money; that takes will.

Census report already takes a hit

Posted by on Wednesday, Aug 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.

Thousands of California children are in danger of losing health insurance

By Jordan Rau
Los Angeles Times
August 24, 2008

California’s promising strides toward extending medical coverage to all its children, a longtime goal of Gov. Arnold Schwarzenegger and one advocates believed was in reach by decade’s end, has stalled — and thousands of kids are in danger of losing insurance.

…legislative budget negotiators this year have decided to increase premiums for the state’s Healthy Families program (SCHIP), which pays for medical care for more than 850,000 children of low-income workers who are above the federal poverty line. The state estimates that the parents of 19,000 children will end up dropping out of the program by July…

Lawmakers also have decided to require the parents of 3.4 million Californians who are below the federal poverty line to renew their Medi-Cal health coverage every six months. The Schwarzenegger administration expects that rule will pare Medi-Cal rolls by about 196,000 children over the next two years.

The changes to subsidized or free health programs come as private health initiatives that pay for the care of children are running out of money, causing them to limit the number they cover. These privately run initiatives exist in 30 counties, arranging medical care for children who are not legal residents or whose families earn slightly more than the threshold for public programs. Enrollment in the initiatives has dropped by 8,000 in the last two years, to 80,000, according to Wendy Lazarus, co-president of the Children’s Partnership, a nonprofit advocacy group.

http://www.latimes.com/news/local/la-me-kidshealth24-2008aug24,0,4590020,full.story

The good news in yesterday’s Census Bureau release was that increased enrollment in government health programs more than offset the decline in private insurance coverage, especially for children. Nationally, there were 512,000 fewer uninsured children in 2007 than there were in 2006, primarily because of increased Medicaid and SCHIP enrollment.

Only one year later, over 200,000 children in California alone are projected to lose their coverage.

Think about that.

If SCHIP and Medicaid expansion represent the successes of incrementalism, then how do you define failure?

Try this one. Failure is the perpetuation of policies that do not ensure that everyone is automatically included, for life, in a program that enables affordable access to all necessary health care.

Success would be easy – merely adopt a single payer national health program. So why are we so fixated on perpetuating failure?

Census Bureau on the uninsured

Posted by on Tuesday, Aug 26, 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.

Income, Poverty, and Health Insurance Coverage in the United States: 2007

U.S. Census Bureau
August 2008

What Is Health Insurance Coverage?

For reporting purposes, the Census Bureau broadly classifies health insurance coverage as private coverage or government coverage. Private health insurance is a plan provided through an employer or a union or purchased by an individual from a private company. Government health insurance includes the federal programs Medicare, Medicaid, and military health care; the State Children’s Health Insurance Program (SCHIP); and individual state health plans. People were considered “insured” if they were covered by any type of health insurance for part or all of the previous calendar year. They were considered “uninsured” if they were not covered by any type of health insurance at any time in that year.

Highlights

  • Both the percentage and number of people without health insurance decreased in 2007. The percentage without health insurance was 15.3 percent in 2007, down from 15.8 percent in 2006, and the number of uninsured was 45.7 million, down from 47.0 million.
  • The number of people with health insurance increased to 253.4 million in 2007 (up from 249.8 million in 2006). The number of people covered by private health insurance (202.0 million) in 2007 was not statistically different from 2006, while the number of people covered by government health insurance increased to 83.0 million, up from 80.3 million in 2006.
  • The percentage of people covered by private health insurance was 67.5 percent, down from 67.9 percent in 2006. The percentage of people covered by employment-based health insurance decreased to 59.3 in 2007 from 59.7 percent in 2006. The number of people covered by employment-based health insurance, 177.4 million, was not statistically different from 2006.
  • The percentage of people covered by government health insurance programs increased to 27.8 percent in 2007, from 27.0 percent in 2006. The percentage and number of people covered by Medicaid increased to 13.2 percent and 39.6 million in 2007, up from 12.9 percent and 38.3 million in 2006.
  • In 2007, the percentage and number of children under 18 years old without health insurance were 11.0 percent and 8.1 million, lower than they were in 2006 — 11.7 percent and 8.7 million. Although the uninsured rate for children in poverty decreased to 17.6 percent in 2007, from 19.3 percent in 2006, children in poverty were more likely to be uninsured than all children.
  • The uninsured rate and number of uninsured for non-Hispanic Whites decreased in 2007 to 10.4 percent and 20.5 million (from 10.8 percent and 21.2 million in 2006). The uninsured rate for Blacks decreased to 19.5 percent in 2007 from 20.5 percent in 2006. The number of uninsured Blacks in 2007 was not statistically different from 2006, at 7.4 million.
  • The percentage and the number of uninsured Hispanics were 32.1 percent and 14.8 million in 2007, lower than 34.1 percent and 15.3 million in 2006.

http://www.census.gov/hhes/www/hlthins/hlthin07/hlth07asc.html

And…

Number of Uninsured Drops…

By The Associated Press
The Washington Post
August 26, 2008

The Census Bureau reports that the number of people lacking health insurance dropped by more than 1 million in 2007, the first annual decline since the Bush administration took office.

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/26/AR2008082600863.html?hpid=moreheadlines

The Associated Press story just released on the decline of 1.3 million in the numbers of uninsured will surely be welcome news. It was especially good news for those who gained coverage in 2007. Should we be celebrating? Let’s look at some of the statistics.

  • The percentage of people covered by employment-based health insurance declined by 0.4 percent, continuing a downward trend. The foundation of employment-bsed coverage continues to deteriorate.
  • The percentage of people covered by government health insurance programs increased 0.8 percent, more than offsetting the decline in employer-sponsored coverage. The net improvement in the numbers is due to an expansion of government programs.
  • The percentage of people covered by Medicaid increased 0.3 percent. That amounts to an increase of 1.3 million individuals, which just happens to be the same number as the decline in the uninsured. The chronic underfunding of this program has sacrificed access because of the lack of willing providers. Expanding a program that has perpetuated impaired access does not seem to be a wise policy choice.
  • People who were uninsured for only part of the year were counted in this study as being insured. Yet studies have confirmed that having only intermittent coverage impairs access and outcomes.
  • This study remains silent on the explosion in the rate of underinsurance, a phenomenon that is difficult to measure anyway. Counting the numbers of people who have insurance coverage provides a very incomplete picture if that coverage does not protect individuals from financial hardship in the face of medical need.
  • A slight improvement in the percentages for Blacks and Hispanics is of little consolation when compared to the enormity of these disparities.

Celebration time? Don’t think so.

Cost of covering the uninsured

Posted by on Monday, Aug 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.

Covering The Uninsured In 2008: Current Costs, Sources Of Payment, And Incremental Costs

by Jack Hadley, John Holahan, Teresa Coughlin, and Dawn Miller
Health Affairs
August 25, 2008

People uninsured for any part of 2008 spend about $30 billion out of pocket and receive approximately $56 billion in uncompensated care while uninsured. Government programs finance about 75 percent of uncompensated care. If all uninsured people were fully covered, their medical spending would increase by $122.6 billion. The increase represents 5 percent of current national health spending and 0.8 percent of gross domestic product. However, it is neither the cost of a specific plan nor necessarily the same as the government’s costs, which could be higher, depending on plans’ financing structures and the extent of crowd-out.

Incremental resource cost versus transfer or crowd-out costs.

Most important for the policy debate, however, it is essential to differentiate the incremental resource cost of insurance expansion from transfer or crowd-out costs, and from the more thorny issue of the financing of insurance expansion. Incremental resource cost is a key number for assessing the cost-effectiveness of expanding insurance coverage–that is, comparing the value of improved health associated with expanded coverage to its resource cost.

However, the additional cost of care used by the uninsured is not the same as the cost to the government of a coverage expansion, since out-of-pocket spending and income-related premium payments by the newly insured are likely to pay some of these extra costs. Further, the cost attributed to any broad health care financing reform could be much higher, depending on the extent to which people drop their prior coverage in favor of coverage under the new plan or retain their current coverage but receive new public subsidies to help pay their premiums.

These costs are not new national resources being devoted to health care but, rather, represent a transfer of spending from one type of coverage to another: although government spends more, many individuals, families, and businesses spend less. The savings to businesses and families in private insurance premiums and out-of-pocket spending can be large and are often overlooked in health reform cost calculations that focus on increased government spending. How the cost of the subsidies is distributed among different classes of people and geographic areas is at least as major a political issue as the amount of the subsidies.

http://content.healthaffairs.org/cgi/content/full/hlthaff.27.5.w399/DC1

Previous studies by Jack Hadley and his colleagues have shown that the increase in medical spending that would result from expanding insurance coverage to the uninsured would have been about $55 billion in 2001. For 2008, because of rapid increases in health care costs, continuing growth in the number of uninsured people, and changes in the characteristics of the uninsured population, that estimate has increased to about $122.6 billion. Even at this level, the cost of expanding coverage to everyone would be “remarkably small — about the same as the growth of real health care spending over eighteen months” (Aaron, Health Affairs blog, 8/25).

It is not the lack of funds that has impeded reform. As a nation we could easily afford to cover everyone. So what is the problem?

We already have proven that reform cannot be accomplished by incremental expansions of our current programs, even with introductions of new targeted programs (e.g., SCHIP). The effectiveness and equity of health care financing have continued to deteriorate under the incremental approach to reform. No reform proposal is capable of leaving those with coverage alone while collecting $122 billion and spending it exclusively on those who are currently uninsured.

Only through comprehensive reform could we provide all necessary health care for everyone at a cost comparable to today’s spending. Not just any reform would do. In fact, the policies that we would need to adopt would limit the reform options to some form of social insurance such as a single payer national health program.

Transforming a financing system for a $2 trillion industry inevitably results in winners and losers. Our policies to date have made winners of the entrenched vested interests that have so much to gain (money), while making losers of the patients that the industry should be serving (losing affordable health care access).

It’s time to make patients the winners. That means that a well financed and well managed health care delivery system would also fall into the winners’ category. There will be losers, but, gee, aren’t they already losers anyway?

Adult children covered by parents' plans

Posted by on Friday, Aug 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.

Health coverage boon for young adults

By Ray Long and Monique Garcia
Chicago Tribune
August 19, 2008

Young adults could stay on their parents’ health insurance until they turn 26 under a new law pushed by Gov. Rod Blagojevich and approved Tuesday by the Illinois Senate.

The estimated 300,000 twentysomethings who are eligible wouldn’t have to live at home — or even in Illinois. And if they’re in the military, they could remain covered by mom and dad until they turn 30. They must stay single, however.

http://www.chicagotribune.com/news/nationworld/chi-legis-insurance-20aug20,0,6922973.story

For those who contend that comprehensive reform is not politically feasible and that reform must occur in incremental steps, this is precisely the type of legislation that they support. Young adults frequently fall through the cracks in health insurance coverage, having one of the highest rates of uninsurance. This legislation provides them with another option for health insurance and, theoretically, should reduce the total numbers of uninsured.

Should we celebrate this success of the incrementalists? Maybe, but before we do we should attempt to understand some of the other policy implications.

  • Young adults with conditions such as diabetes, hypertension or HIV infection need coverage and would more likely continue in their parents’ plans – a classic example of adverse selection. Whether individual or employer-sponsored plans, allowing more high-cost adults to opt into the insurance pools will inevitably cause an increase in premiums. At a time when affordability of coverage already has become a problem, higher premiums will cause more to drop coverage.
  • In small groups, adding one individual with significant chronic disease can cause premiums to skyrocket, making the plan unaffordable for the entire group.
  • Even if initially in good health, young adults can develop chronic conditions while covered by their parents’ plans, which might make them uninsurable when they are no longer eligible for those plans. They would be disqualified for the low-cost plans designed for the young invincibles.
  • Keeping an adult child on the plan can cause the premium to be set at a family rate rather than at the much less expensive rates for individuals or couples. A policy that expands the window of eligibility is of little value if you can’t pay for it.
  • This legislation requires that the adult child remain single. Basing eligibility for insurance coverage simply on marital status can have perverse policy implications, possibly impacting the very foundation of the family.
  • The primary reason that so many young adults are uninsured is because they have difficulty spending a large amount of money on health coverage when they need the money for other purposes, and it is quite unlikely that they would need much health care anyway. They would rather take their chances. Of course, as free riders, if they should ever develop major problems, they would shift their costs of care to the rest of us.

The benefits of this legislation are greater than the deficiencies, but it is such a tiny baby step, and a flawed one at that, that it cannot begin to compensate for the persistent deterioration in coverage that continues to plague us.

No celebrations today – not until we have comprehensive reform that automatically and permanently provides equitably-funded comprehensive coverage for everyone.

Shattuck Lecture on coverage for all Americans

Posted by on Thursday, Aug 21, 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.

Health of the Nation — Coverage for All Americans

Charles D. Baker, Arthur Caplan, Ph.D., Karen Davis, Ph.D., Susan Dentzer, Arnold M. Epstein, M.D., Bill Frist, M.D., Robert S. Galvin, M.D., Ruben J. King-Shaw, Jr., Thomas H. Lee, M.D., Jonathan B. Oberlander, Ph.D., Sara Rosenbaum, J.D., Steven A. Schroeder, M.D., and Reed V. Tuckson, M.D., moderated by Arthur R. Miller, J.D.
The New England Journal of Medicine
August 21, 2008
Shattuck Lecture

Sara Rosenbaum: [Access to care is] the most basic ethical issue of all. But it is a national decision on our part. It’s not the federal decision; it’s not the state decision; it is a national social decision. And we’ve been very bad about this.

Steven Schroeder: I think that a country should be judged by how it treats its less fortunate. In that respect, I’m ashamed of our country.

Jonathan Oberlander: If there’s one lesson that we’ve learned about health reform in the last few decades, [it’s that] being right doesn’t count for very much. We can come up with lots of stories to evoke moral outrage. And it’s not just about the uninsured. There are many Americans with insurance who have inadequate protection and who file for bankruptcy every year because they’re underinsured. But if we’re going to fight this battle for health reform on moral grounds, we’re going to lose.

Jonathan Oberlander: The price tag for universal coverage really is not that much. If you talk about adding the uninsured to the existing system, you’re talking about roughly $100 billion a year. We already spend over $2 trillion, so it’s a mark-up but not much. When we cut taxes in 2001 and 2003, we found the money to do that. When we passed the Medicare Prescription Drug Benefit in 2003, we found the money to do that. When we went to war in Iraq, we found the money to do that. So this is a question of priorities. And the uninsured are not a political priority.

http://www.nejm.org/perspective/health%2Dof%2Dthe%2Dnation%2Dvideo/

It would be worth your time to either watch the video or read the transcript of this very unusual Shattuck Lecture. For one hour Arthur Miller prods this panel on a discussion of important challenges to the American health care system. Comments are invited at the link above.

You likely will be disappointed, but that is precisely why you should at least skim over the transcript. It is disconcerting to see how ineffective a select panel of noted experts can be in framing the problems, much less in approaching any real solutions. Some exceptions are represented by the individuals quoted above.

We can do it – easily. But will we? If the ethics won’t drive us, what will?

(Hint: money. Establishing a value-based single payer system that takes care of everyone would cost less than passively accepting a continuing intolerable increase in health care costs in a system that leaves so many out. We need to target those who pay the bills.)

Insurance falls as medical bills rise

Posted by on Thursday, Aug 21, 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.

Losing Ground: How the Loss of Adequate Health Insurance Is Burdening Working Families

By Sara R. Collins, Ph.D., Jennifer L. Kriss, Michelle M. Doty, Ph.D., and Sheila D. Rustgi
The Commonwealth Fund
August 20, 2008

Using data from four years of the Commonwealth Fund Biennial Health Insurance Survey, this report examines the status of health insurance for U.S. adults under age 65 and the implications for family finances and access to health care. Insurance coverage deteriorated over the past six years, with declines in coverage most severe for moderate-income families. As result, more families are experiencing medical bill problems or cost-related delays in getting needed care. In 2007, nearly two-thirds of U.S. adults, or an estimated 116 million people, struggled to pay medical bills, went without needed care because of cost, were uninsured for a time, or were underinsured (i.e., were insured but not adequately protected from high medical expenses).

http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=700872

And…

Seeing Red: The Growing Burden of Medical Bills and Debt Faced by U.S. Families

By Michelle M. Doty, Ph.D., Sara R. Collins, Ph.D., Sheila D. Rustgi, and Jennifer L. Kriss
The Commonwealth Fund
August 20, 2008

Analysis of the 2007 Commonwealth Fund Biennial Health Insurance Survey finds the proportion of working-age Americans who struggled to pay medical bills and accumulated medical debt climbed from 34 percent to 41 percent, or 72 million people, between 2005 and 2007. In addition, 7 million adults age 65 and older had these problems, bringing the total to 79 million adults with medical debt or bill problems. All income groups reported an increase. Families with low or moderate incomes were particularly hard hit, as were adults who had gaps in health coverage or those underinsured. Because of medical bills or accumulated medical debt, an estimated 28 million adults reported they used up all their savings, 21 million incurred large credit card debt, and another 21 million were unable to pay for basic necessities. Sixty-one percent of those with medical debt or bill problems were insured at the time care was provided.

http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=700868

How well is our health care financing system working? Two-thirds of adults under 65 have problems with their health insurance and paying for health care. Forty-one percent have medical bill problems or are paying off medical debt, even though sixty-one percent of these individuals were insured at the time care was provided.

So what is the response of the politicians to this health care financing crisis? Sen. John McCain says that we should allow insurers to sell us more affordable plans (even though that means that the stripped-down plans would not provide adequate financial protection in the face of medical need). Sen. Barack Obama says that we should authorize only plans with adequate benefits, whether public or private plans (even though that means that even more of us would be unable to afford to purchase the plans). Sen. Max Baucus, Chair of the Senate Finance Committee which must clear all health care financing legislation, says that comprehensive reform is not feasible and that we must proceed with smaller incremental steps, beginning with expanding the children’s health insurance program, and tweaking Medicare.

Wouldn’t you think that the politicians would be interested in reform that would allow us to continue to fund the most expensive health care system of all, without the necessity of exposing individuals to financial hardship merely because they need health care?

I was interviewed by a Canadian journalist this week. He said that the Canadians could not understand how we could spend so much money on our health care system and yet leave so many without adequate protection against financial losses for health care. They think that there is something very fundamentally wrong with our health care financing system that can be fixed. If only we could get our politicians to acknowledge that there is a solution that would actually work: a single payer national health program.

Will the real Harry and Louise please stand up

Posted by on Tuesday, Aug 19, 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.

www.harryandlouisereturn.com
August 20, 2008

Scene: In the kitchen, at the breakfast table

Harry: Health care costs are up again. Small companies are being forced to cut their plans.

Louise: Tell me about it. You know, Lisa’s husband just found out he has cancer.

Harry: But he’s covered. Right?

Louise: No. He just joined a start-up, and he can’t afford a plan.

Harry: Too many people are falling through the cracks.

Louise: Whoever the next president is, health care should be at the top of his agenda. Bring everyone to the table, and make it happen.

(This ad campaign is sponsored by the American Cancer Society Cancer Action Network (ACS CAN), the American Hospital Association (AHA), the Catholic Health Association (CHA), Families USA, and the National Federation of Independent Business (NFIB).)

2008 Harry and Louise ad:
http://harryandlouisereturn.com/

1994 Harry and Louise ad:
http://www.youtube.com/watch?v=Dt31nhleeCg&NR=1

What a refreshing change. In fourteen years, Harry and Louise’s breakfast table conversation has changed from, “If we let the government choose, we lose,” to “Bring everyone to the table and make it happen.” But what does this mean?

At today’s press conference inaugurating this ad campaign, it was clear from the diverse groups involved that the message is that we must all join together to make reform happen. But before the press conference was even over, red flags were raised.

Most disconcerting was the fact that AHIP’s Karen Ignagni was invited to express the support of the private insurance industry in this effort, even though AHIP is not a sponsor of this campaign. During the Q&A, she indicated that AHIP was prepared to support its specific proposal for reform (a model that uses private plans to insure the low-cost healthy, while shifting those with higher-cost needs to taxpayer-funded programs).

When Teddy Davis of ABC News asked about the problem of guaranteed issue without a mandate, Ron Pollack (Families USA) responded, “I don’t think that we’re prepared to answer hypothetical questions.” But really, are crucial fundamental policy issues to be dismissed as mere hypotheticals?

Sadly, this is merely another chapter in the saga of the strange bedfellow coalitions. The policy opinions supported by the participants are mutually incompatible and can only lead to a result that Ron Pollack has described repeatedly: everyone walks away, supporting their second favorite choice – the status quo (even though no one actually supports the status quo). This process is yet another recipe for political inertia.

There are some very fundamental principles which should garner broad support if we are truly serious about reform.

Costs must be contained. Projections that health care will soon consume maybe half of our GDP are totally unrealistic. Essential spending in other sectors of our economy will create a barrier beyond which no further funds would be available for health care. Tragically, the uninsured and under-insured have already crashed into that solid wall, and that includes many middle-income Americans. Cost increases will only move that barrier in front of more and more of us.

There are two fundamental approaches to controlling costs. We can withhold essential health care from people who cannot afford it, an option for the heartless, or we can demand a reduction in wasteful spending such as our profound administrative excesses and our non-beneficial high-tech services. The market has been and always will be incapable of controlling these costs since markets function to sell us more, not fewer, products and services. A monopsony operating in the public interest will be required to bring us greater value and affordability in our health care purchasing, and that can be accomplished only by enacting enabling government policies.

We can no longer accept the suffering and death that occurs amongst us merely because many individuals don’t have the resources to pay for care. Everyone must be included under the umbrella of a comprehensive financing system.

Since average-income individuals can no longer afford their pro rata share of health care financing, a transfer must be enabled through progressive tax policies. Rejection of this fundamental principle would equate with the tacit acceptance for too many of us of financial hardship and bankruptcy as a consequence of ill health.

Louise is right. We need to bring everyone to the table. That includes everyone who needs health care or may need it at some time in the future. That is everyone. Everyone.

Libertarian ideologues and moneygrubbers stand aside. Make room for the people.

Maximum coverage as defined by Anthem Blue Cross

Posted by on Monday, Aug 18, 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.

Letter
From: Anthem Blue Cross, Oxnard, California
To: Don McCanne

Dear Don,

Enclosed you will find a Part D Coordination of Benefits Survey. By completing the survey, it will help assure that you receive the maximum coverage benefits from your drug plan. …

http://www.anthem.com/

What’s this? Why would a generous offer from a health insurer to assist an insured in receiving maximum coverage benefits be included in a health policy forum? The reason is that the apparent intent of this request is very different from its true purpose, and that difference exemplifies one of the most fundamental flaws in our current health care financing system.

The three page questionnaire enclosed with the letter asks for extensive detailed information on matters such as employer, number of fellow employees, insurance company, group number, member/plan ID, Rx PCN, Rx Bin, Person Code, etc. The same questions are asked about the spouse’s employer and coverage as well. There are detailed questions about other supplemental drug coverage, about Coal Miner’s Medical Benefits, and about coverage under no-fault or automobile insurance. There is a detailed question about present or pending Workers’ Compensation claims, including the name and address of your attorney. There is another question about any illness or injury for which another party could be held liable, also including a request for the name and address of your attorney.

A quote from the forty-two page booklet on our Blue Cross of California Part D coverage (now Anthem Blue Cross): “… the prescription drug coverage you get from us will be secondary to your employer or retiree group coverage.”

This is not a process that would afford Anthem Blue Cross the opportunity to increase payment for any prescription drugs that qualify. Assuring that you receive the “maximum coverage benefits” refers to the maximum that will be paid after excluding the legitimate claims that they would shift to other potential payers. Under these circumstances, the maximum benefit frequently would be no benefit payment at all.

There could not be a more clear distinction between the business model of private health plans in the United States, and the social insurance models of private health plans used in other countries. Private plans unified in a social insurance program assist patients in paying for the care they need. Our private insurers, such as Anthem Blue Cross, use every devious method they can to avoid paying for the care that patients need. And they add more wasteful administrative complexity to the health care financing process, made even worse by the fragmentation of the financing system.

If we were to adopt a financing system using private insurers that would provide adequate affordable coverage for everyone, then we would have to totally transform the private insurance industry into a social insurance model. For that transformation to be equitable and effective, those who do not want to give up the coverage they have would have to acknowledge that their plan would be transformed anyway to comply with requirements for universal risk pooling, guaranteed issue, prevention of adverse selection, adequate benefit package, elimination of under-insurance, and other measures that define social insurance programs.

That transformation would be both politically and administratively more difficult and more expensive than replacing private insurers with a more efficient and effective single payer national health program. Besides, why do we insist on continuing to protect an industry that thrives by cheating us out of our health care benefits?

Health care cost increases continue to plague employers

Posted by on Friday, Aug 15, 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.

Employers Face 10.6 Percent Health Care Cost Increases, Says Aon Consulting

Aon
August 12, 2008

Health care costs are expected to increase on average 10.6 percent in the next 12 months, according to Aon Consulting Worldwide, the global human capital consulting organization of Aon Corporation.

Aon Consulting surveyed more than 70 leading health care insurers, representing more than 100 million insured individuals, and found that health care costs are projected to increase by 10.6 percent for HMOs, 10.5 percent for POS plans, 10.7 percent for PPOs and 10.5 percent for CDH plans. These represent the lowest trend rate increases since the study began in 2001.

http://aon.mediaroom.com/index.php?s=43&item=1285

And…

PwC Health and Wellness Touchstone Survey Results

PricewaterhouseCoopers
June, 2008

561 companies across the United States responded to the survey.

Self-insurance is the primary funding mechanism for respondent companies.

Over 65% of survey participants said that their medical plan cost increases for 2007 over 2006 and 2008 over 2007 (before plan design changes) will be in excess of 5%.
– Over 30% believe increases will be over 10%
– Over 7% believe increases will be over 15%
(A bar graph indicates that the ’07/’08 average trend is about 7.4% for companies with less than 5000 employees, and 6.0% for those with greater than 5000 employees.)

Future Solutions: Cost Shifting

– 41% of survey participants plan to increase employee contributions over the next two years
– 38% of survey participants plan to increase medical plan cost sharing through plan design changes over the next two years

http://www.pwc.com/extweb/pwcpublications.nsf/docid/574877A4F50E390285257483005250AE?OpenDocument

The health care cost data from these two consulting firms are important because they represent the increases in the costs of employer-sponsored coverage – the Aon survey representing the costs of private health insurance plans, and the PricewaterhouseCoopers survey representing the costs for self-insured employers. A few conclusions can be drawn from these surveys.

  • Although reports of the Aon survey celebrated the “lowest trend rate increases since the study began in 2001,” the increases continue to be far in excess of the rate of inflation. The mainstay of health care coverage for the majority of us – employer-sponsored plans – is becoming ever less affordable. Private insurers and self-insured employers have not been able to moderate this trend.
  • The increases for self-insured employers are not as great as for employers that depend on private health insurance plans. This is further evidence that the private insurers have fallen far short of their claims that they have been effective in controlling health care costs. The opposite is true. The waste of their administrative excesses is placing a greater financial burden on the purchasers of their plans.
  • Although the increases for the self-insured are not as great, they still demonstrate that employers themselves have not been successful in harnessing the excessive costs in health care.
  • The Aon survey demonstrates that the rates for consumer-directed plans (CDH) continue to increase as much as the other models of private insurance plans. CDH plans are not a solution for rising health care costs.
  • Employers are continuing to seek relief by shifting more of the costs to their employees through greater employee contributions and innovative plan designs that will only compound the rapidly growing problem of under-insurance.

Employers control health care coverage for close to 60 percent of us. In spite of this buying power, they have been unable to control cost increases. The private insurers have only made the problem worse. We do understand where much of the waste is occurring (administrative excesses, detrimental high-tech excesses, inappropriate pricing, lack of an adequate primary care infrastructure, etc.), but we haven’t established an effective financing system that would address these cost and quality problems.

The solution is simple. We merely need to combine all health care funds into a single national health program. The monopsony that would be created (a single buyer of health care services) would have the market power to reduce the waste while realigning incentives to provide us with affordable access to a high quality health care delivery system. Monopsonies in the private sector can be quite nefarious, but our own beneficent public monopsony would serve us all well.

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