Supreme Court acknowledges insurers' conflict of interest

Posted by on Wednesday, Sep 3, 2008

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

MetLife V. Glenn: The Court Addresses A Conflict Over Conflicts In ERISA Benefit Administration

by Timothy Stoltzfus Jost
Health Affairs
September 3, 2008

In its June 2008 decision in MetLife v. Glenn, the Supreme Court held that federal courts reviewing claim denials by Employee Retirement Income Security Act (ERISA) employee benefit plan administrators should take into account the fact that plan administrators (insurers or self-insured plans) face a conflict of interest because they pay claims out of their own pockets and arguably stand to profit by denying claims.

As a practical matter, the cost of health benefits to employers and their value to employees are first determined when the employer settles on a benefit, cost-sharing, and premium package for a benefit year. But it is also determined daily as plan administrators (either insurers, self-insured plans, or third-party administrators) make benefit determinations. Although plan coverage is sometimes clear, claims adjudication often involves application of vague terms such as “medically necessary” or “experimental” care to specific situations. Approximately 1.9 million claims are denied by employee benefit plans each year. Each denial potentially decreases the cost of coverage–immediately for self-insured and prospectively for insured employers (which usually pay an experience-rated premium). But denials also potentially decrease the value of coverage to the individual employee.

Claim determinations are ultimately reviewable in the federal courts. The courts’ approach to reviewing these determinations could, therefore, affect the cost of employee benefits. If, on the one hand, courts routinely overturn claim denials, the cost of coverage will increase, not just because plans will lose more appeals, but also because plans will have to litigate more appeals of adverse determinations as members see their chances of appeal improve. Moreover, plans will likely approve more claims initially instead of risking litigation. An increase in the cost of coverage may in turn lead to more employers’ abandoning coverage. On the other hand, if courts routinely defer to plan determinations, upholding most, plans will in all likelihood be more aggressive and confident in denying claims. This could make coverage more affordable but also put employees at risk.

Interpreting an earlier ERISA decision, the Court articulated the question as to what extent courts should defer to the decision of the plan administrator when the administrator faces a conflict of interest because it is essentially paying the claim out of its own pocket and stands to profit if the claim is denied. The Court decided that this conflict must be taken into account as a “factor” in judicial review. This paper analyzes the Court’s decision, the background of the decision, and its potential effect on American health policy.

In this important decision the Court affirmed the obvious. Employer-sponsored plans and their administrators, whether private insurers or self-insured plans, have a conflict of interest when making benefit decisions. Denial of claims benefit the employers and/or insurers, and approval of claims benefit the employees. On this, the justices were in unanimous agreement.

Much of the criticism of private insurance has been directed toward the flagrant, egregious abuses in the individual insurance market. Far more is wasted on administrative services that are designed to weight the conflict of interest heavily in favor of the insurer at the cost of patient-beneficiary. Those who support reform based on private insurance acknowledge that the individual plans would have to be replaced with options that more closely resemble employer-sponsored plans. Is that wise from a health policy perspective?

An important implication of this Supreme Court decision is that costs for employer-sponsored plans will likely increase. Legal costs may rise because of an increase in challenges to claims decisions, which may cause an increase in benefit costs because of employer/insurer decisions to avoid the effort and legal costs of challenging claims for non-beneficial and non-contract services.

Would a single payer national health program eliminate the conflict of interest between the payer of benefits (the government) and the recipient of benefits (the patient)? Of course not. But, as a society, this conflict should work to our benefit.

Our own public program would have a mission to finance all necessary care for all of us. At the same time, it would have a responsibility as stewards of our tax funds to not waste money on non-beneficial services and products. Although disputes would be inevitable in marginal circumstances, the decisions would be based on balancing the needs of the patient with efficiency in the use of our public funds.

Employers would no longer have to face the awkward decisions of saving money by denying care for their employees.

In contrast, private insurers welcome the opportunity to reduce their overhead by denying care to patients. That might be good business, but it’s terrible health policy.

Sen. Kuehl's single payer bill goes to Gov. Schwarzenegger again

Posted by on Tuesday, Sep 2, 2008

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

Calif. Nurses Laud Passage of Single-Payer, SB 840, Seen as National Model for Guaranteed Healthcare for All

September 1, 2008

The California Nurses Association/National Nurses Organizing Committee today hailed the California Legislature’s passage of a single-payer, expanded Medicare for all, style bill that would guarantee quality health care for all Californians — and called it a model for the national healthcare reform debate that is sure to emerge in 2009.

SB 840, authored by State Senator Sheila Kuehl, passed its final legislative hurdle with a vote in the State Senate today and is headed to the desk of Gov. Arnold Schwarzenegger who vetoed an earlier version of the bill two years ago.

“But a lot has changed since then, including the further implosion of our healthcare safety net, and the Governor’s own professed support for universal healthcare,” said CNA/NNOC co-president Malinda Markowitz, RN. Nurses will remind Schwarzenegger of that pledge, she said.

Senate Bill No. 840:


Governor Schwarzenegger’s Health Care Plan

Assembly Bill X1 1, the Health Care Security and Cost Reduction Act:

Requires that all Californians take responsibility for their health coverage (individual mandate).

Guarantees that no Californian will be turned away from buying insurance based on their age or medical history (guarantee issue).

Spreads responsibility across individuals, government, hospitals and employers (shared responsibility).

Makes coverage more affordable for individuals and families through tax credits and subsidies.

Helps keep hospitals and emergency rooms open by increasing Medi-Cal reimbursement rates.

Allows individuals to choose their health coverage and keep their current insurance.

Two years ago California’s Governor Arnold Schwarzenegger vetoed a prior version of this single payer bill stating, “I must veto SB 840 because I cannot support a government-run health care system.”

He then initiated an intensive effort to create legislation that would provide coverage for all Californians, but crafted to comply with his policy principles listed above. His efforts fell short and resulted in AB X1 1 – legislation that would better be characterized as a take-it-or-leave-it package of incremental reforms. There were many beneficial reforms in the package that have broad support, but there were many other severe deficiencies that provoked considerable opposition. The legislative battle was very painful for all of us who believe that everyone should have affordable access to all necessary health care. The bill essentially died in the Senate Health Committee when supporters could muster only one vote in favor of it.

In passing SB 840 once again, the California State Legislature is giving Gov. Schwarzenegger another opportunity to sign legislation that actually would provide health care for everyone through a model that would use our health care dollars much more efficiently. It will be a test to see if his goal of ensuring health care for all Californians is more important to him than his personal anti-government ideology. Let’s hope that he leaves his intellectual exercises on ideology in his cigar tent as he comes out and signs a bill that benefits the health of the people.

WHO report on inequities that kill

Posted by on Monday, Sep 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.

Closing the Gap in a Generation: Health Equity through Action on the

Social Determinants of Health
World Health Organization
August 28, 2008

Inequities are killing people on a “grand scale” reports WHO’s Commission

“(The) toxic combination of bad policies, economics, and politics is, in large measure responsible for the fact that a majority of people in the world do not enjoy the good health that is biologically possible,” the Commissioners write in Closing the Gap in a Generation: Health Equity through Action on the Social Determinants of Health. “Social injustice is killing people on a grand scale.”

Wealth is not necessarily a determinant

Economic growth is raising incomes in many countries but increasing national wealth alone does not necessarily increase national health. Without equitable distribution of benefits, national growth can even exacerbate inequities.

Wealth alone does not have to determine the health of a nation’s population. Some low-income countries such as Cuba, Costa Rica, China, state of Kerala in India and Sri Lanka have achieved levels of good health despite relatively low national incomes. But, the Commission points out, wealth can be wisely used. Nordic countries, for example, have followed policies that encouraged equality of benefits and services, full employment, gender equity and low levels of social exclusion. This, said the Commission, is an outstanding example of what needs to be done everywhere.

Inequities within countries

In the United States, 886,202 deaths would have been averted between 1991 and 2000 if mortality rates between white and African Americans were equalized.

Universal Health Care

Access to and utilization of health care is vital to good and equitable health. The health-care system is itself a social determinant of health, influenced by and influencing the effect of other social determinants. Gender, education, occupation, income, ethnicity, and place of residence are all closely linked to people’s access to, experiences of, and benefits from health care. Leaders in health care have an important stewardship role across all branches of society to ensure that policies and actions in other sectors improve health equity.

The Commission advocates financing the health-care system through general taxation and/or mandatory universal insurance. Public health-care spending has been found to be redistributive in country after country. The evidence is compellingly in favour of a publicly funded health-care system. In particular, it is vital to minimize out-of-pocket spending on health care. The policy imposition of user fees for health care in low- and middle-income countries has led to an overall reduction in utilization and worsening health outcomes. Upwards of 100 million people are pushed into poverty each year through catastrophic household health costs. This is unacceptable. Health-care systems have better health outcomes when built on Primary Health Care (PHC) — that is, both the PHC model that emphasizes locally appropriate action across the range of social determinants, where prevention and promotion are in balance with investment in curative interventions, and an emphasis on the primary level of care with adequate referral to higher levels of care.


Based on this compelling evidence, the Commission makes three overarching recommendations to tackle the “corrosive effects of inequality of life chances”:

1. Improve daily living conditions, including the circumstances in which people are born, grow, live, work and age.

2. Tackle the inequitable distribution of power, money and resources — the structural drivers of those conditions — globally, nationally and locally.

3. Measure and understand the problem and assess the impact of action.

Press release:

Executive Summary (40 pages):

Full report (256 pages):

On this Labor Day weekend, a time that we celebrate the great contributions of American workers, the release of this report could not be more timely. Hard working Americans are experiencing the adverse consequences of the increasing inequities in the social determinants of health, inequities that really only society is equipped to address. Today, Hurricane Gustav is descending on our Gulf Coast, testing further whether we as a society can join together to meet our challenges, or if instead those affected are simply left on their own.

Please excuse me for a personal moment of introspection. For over ten years I’ve been a full-time volunteer for Physicians for a National Program. I remember well a conversation I had several years ago with David Himmelstein, a cofounder of PNHP. We observed that, while the task of achieving health care for everyone in the United States seemed almost arduous, it was a miniscule problem compared to the needs throughout the world. Ours was such a tiny task in comparison. We didn’t need more money. We merely needed to fix the way we finance health care as an essential first step to begin to address these inequities.

Ten years later one simple number gives us an inkling of the degree of our success. This report shows that over 800,000 African Americans have died prematurely in the United States in the past decade merely because we have failed to address these inequities in the social
determinants of health.

(moment of silence)

Hopefully we’ll do better with Gustav than we did with Katrina, having learned a lesson. But do we really need more lessons on the social determinants of health before we begin to act? Eight hundred thousand is far too many painful lessons for me.

As our health care “system” continues to fall apart in its crisis of access and affordability, new coalitions are popping up all around us, each espousing the urgent need for “ health care reform”. These are some of the bigger, more recent coalitions:

  • Divided We Fail (includes AARP, the Business Round table, and the ServiceEmployees International Union (SEIU); committed to a “search for solutions to health care” – – – by building on private insurance.
  • The National Coalition on Benefits (includes more than 50 of the largest corporations and most powerful lobbying organizations, including private health insurers, the Business Roundtable, and the U. S. Chamber of Commerce; they lobby to keep large employers’ insurance plans exempt from regulation)
  • Health Care for America Now (HCAN), a coalition of many national organizations, including the American Nurses Association,, and the Progressive Action Network; their common purpose is to promote “an American solution” which assures universal health coverage “through the largest possible risk pools” for affordable health care in an inclusive and accessible system leaving nobody out; it retains choice of a private health plan.
  • Five other organizations — the American Cancer Society’s Cancer Action Network, the American Hospital Association, the Catholic Health Association, Families USA, and the National Federation of Independent Business (NFIB, which represents small business); this group is co-sponsoring the latest Harry and Louise advertising campaign, which expresses concern about cost and access problems, urging that “health care should be at the top of the next president’s agenda. Bring everyone to the table, and make it happen”.

As usual, you can’t tell any of these coalitions’ real agenda by their names. But all of these are committed to preserving the private health insurance industry, and keeping single-payer national health insurance (NHI) off the table. Their message can be very effective by confusing the public, trivializing the debate over policy options, and most importantly, by calling for everyone to come to the table and working toward political compromises which look like reform but are not. Meanwhile, of course, America’s Health Insurance Plans (AHIP), the industry’s trade group, launches its own national propaganda effort Campaign for an American Solution, which argues for “choice” and fails to acknowledge single-payer as an alternative, while the AMA predictably supports continuation of multi-payer financing.

Behind the bland, even patriotic sounding names of these coalitions are conflicts of interest invisible to much of the public. Here are just two examples.

AARP is involved with a lucrative market of supplemental private Medigap plans through United Health; about 60 percent of its revenue (double that from members’ dues) comes from sales of Medigap policies, its membership list, and related activities. AHIP’s conflict of interest, of course, is obvious, but does not restrain its promotional efforts to put itself forward as part of the “reform” process. Since 1999, AHIP has been building its own coalition, the Coalition for Medicare Choices; it includes more than 400,000 senior activists who have lobbied Congress in opposition to cuts in government overpayments to private Medicare plans (already receiving 112 to 119 percent larger payments than traditional Medicare).

In each case, the rhetoric of change obscures the lack of concrete policy changes that could address system problems of health care. Private insurers would like to continue to fragment the market, cherry pick lower-risk healthier people, shift the sick to public financing, avoid regulation, and at the same time receive government subsidies to stay in business.

Alternative Financing Systems and American ValuesBut private insurers are the problem! As pointed out in previous posts, the private insurance industry and open markets have failed, after many incremental attempts over the last 30 years, to resolve system problems. The critical policy alternative before us is: Multi-payer vs Single-payer.

If we frame the alternatives for health care reform on traditional American values, as arguably we should, single-payer wins hands down. The accompanying graphic compares the two financing options by nine values, in each case with unambiguous results favoring single-payer, on the basis of track record and actual experience, not ideology or rhetoric. Health care is not a partisan issue. It is about every American having access to affordable necessary health care, regardless of age, gender, employment, health status, or race. It is about employers being able to compete in a global market with a healthy work force. It is also about pulling together with social solidarity rather than survival of the fittest (those who can pay).

These comparisons between public and private financing are well documented by many studies over the years. But the political process to date keeps allowing well -financed vested interests to change the subject and delay real reform. That happened in 2006 when the Citizen’s Health Care Working Group, created by the Medicare legislation of 2003 and charged with the task of formulating approaches to address health care system problems. Although almost one-half of the more than 800 participants in two years’ of community meetings around the country had supported single-payer NHI as by far the leading option for reform, the resultant document ignored single-payer and instead endorsed a system of private catastrophic coverage with deductibles as high as $30,000, an option not even discussed in community meetings and mostly opposed in online polls.

It is time to recognize distortional politics for what it is, and get on with making our voices heard. Momentum for single-payer NHI is gathering strength, as illustrated by these examples of growing support:

  • There are now 92 sponsors of HR 676 (The United States National Health Insurance Act ) in the House of Congress
  • A majority of Americans have supported publicly-financed NHI for at least 60 years, often as many as two out of three in some surveys; a 2005 national study by the Pew Research Center of the People and the Press found that this support crosses party lines, with 59 percent of social conservatives and 63 percent of pro-government conservatives favoring NHI, even if taxes increase.
  • 59 percent of more than 2,200 U. S. physicians now favor NHI in a survey earlier this year, as do about 60 percent of physicians in Massachusetts and Minnesota ; the American College of Physicians (the second largest medical organization in the country with 125,000 members) has endorsed the single-payer option, as has the American Public Health Association and the California Nurses Association.
  • Organized labor is getting behind single-payer as its employer-based health benefits continue to erode; the AFL-CIO nationally has endorsed the basic principles of single-payer, and a growing number of unions are backing HR 676

The health care crisis challenges our democracy to its core – – – will corporate dollars through deceptively named coalitions continue to trump individual and public will?

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Bernstein and Marmor on "Yes But"

Posted by on Friday, Aug 29, 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-for-All: Why We Should Say Yes, Not “Yes But”

by Merton Bernstein and Theodore Marmor
Health Affairs Blog
August 28, 2008

Many health policy experts regard Medicare-for-All as a model for reform of America’s indisputably troubled and costly medical arrangements. They express admiration for its administrative efficiency and the resulting savings that could pay for extending coverage, perhaps to all. For example, in a June 2008 Health Affairs article, Commonwealth Fund authors said: “Compared to a Medicare-for-All approach, our [Building Blocks] framework does not achieve the simplicity, consolidated risk, administrative overhead, and provider payment net savings of covering nearly everyone through Medicare.”

Sometimes even Medicare-for-All admirers succumb to the “yes but” syndrome, as in “yes, but Medicare-for-All is politically impractical.” For example, after praising Medicare-for-All, The Health Care Mess concluded that “political reality compels us to ask whether there are not other ways” (besides Medicare-for-All) and answered that question “yes.” Princeton economist Paul Krugman, who had extolled Medicare-for-All in 2006, put a foot in the “yes but” camp in 2007. He welcomed the Edwards, Massachusetts, and Schwarzenegger plans to compel individuals to select from among insurance plans, thereby forgoing Medicare-for-All’s economies. The Edwards and Obama plans required a Medicare-like plan as one option. Krugman argued that such a plan’s lower cost will eventually crowd out more expensive private plans. This overlooks private insurance’s history of cutting prices to gain market share, later returning to double-digit boosts. Also, the Massachusetts program actually is not universal; it omits children, among others, and it is having real trouble meeting its costs. The California legislature as well rejected the “Governator’s” plan as too costly.

Though the political “yes, buts” surrounding Medicare-for-All prove groundless, they deserve discussion. However, the “yes, buts” should not preempt discussion of Medicare-for-All’s substantive advantages, as they all too often do. For example, the May/June 2008 issue of Health Affairs, a 200-page-plus compendium on health reform and expanding coverage, does not contain a single article devoted to Medicare-for-All. In this post, we first describe the advantages of Medicare-for-All, then demonstrate that the evidence behind the political “yes, buts” is exaggerated and flawed.

Professor Bernstein and Professor Marmor are amongst the most qualified and experienced experts on both health policy and the politics of Medicare and social insurance in general. We need to listen to what they have to say. Be sure to click the link above to read their full message.

Everyone knows that the U.S. health care financing system is in critical condition, and that we once again are entering a political window in which reform is possible. Never has it been more important to understand all of our options.

Yet where are we? Those controlling the serious dialogue on reform (e.g., Health Affairs) have limited the options to proposals that would merely tweak our dysfunctional, fragmented system of financing health care, leaving the private insurance industry as the dominant player in health care misfinancing. Perpetuation of our current system will further expand our almost unbearable costs, and leave us far short of the goal of ensuring that every single individual receives the health care that she or he needs.

Health policy is not rocket science. We know precisely what will work. Most in the policy community (including politicians), who believe that we must seize this opportunity for reform, largely agree that a universal, single payer, Medicare-like program would be the most efficient and effective model of reform. And their response?

Yes but… (UNSPOKEN: let’s not even bring that into the discussion).

Talk about health policy malpractice!

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.

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.,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.


  • 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.


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.

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.

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.,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.

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