Growth of employer-sponsored underinsurance

Posted by on Tuesday, Jun 2, 2009

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.

Trends In Underinsurance And The Affordability Of Employer Coverage, 2004-2007

Employer coverage helps, but it does not shield workers from health care costs deemed “unaffordable” as a percentage of their incomes.

by Jon R. Gabel, Roland McDevitt, Ryan Lore, Jeremy Pickreign, Heidi Whitmore, and Tina Ding
Health Affairs
June 2, 2009

Based on simulated bill paying, this paper examines trends in comprehensiveness of coverage, out-of-pocket spending for medical services, underinsurance, and the affordability of employer-based insurance from 2004 to 2007. Data are from MarketScan medical claims and an annual survey of employer health benefits. Health plans covered slightly fewer expenses in 2007 than in 2004, but out-of-pocket spending grew more than one-third because of growth in overall health spending. For people at 200 percent of poverty, the percentage spending more than 10 percent of their income out of pocket on premiums plus services increased from 13 percent to 18 percent.

In the United States, if you are sick and earn a modest income, then you are probably underinsured – even if you have employer-based health coverage. In 2007, among people at 200 percent of poverty ($41,300 for a family of four in 2007) who were among the top 25 percent of spenders on health care services, 71 percent were underinsured.


Cost Sharing In Medicaid And CHIP: How Does It Affect Out-Of-Pocket Spending?

by Thomas M. Selden, Genevieve M. Kenney, Matthew S. Pantell, and Joel Ruhter
Health Affairs
June 2, 2009

Rapidly rising spending has prompted debate about increasing cost sharing in Medicaid and the Children’s Health Insurance Program (CHIP). In this paper we assess the role of cost sharing in Medicaid and the CHIP and its potential financial burden on low-income families with children. We find that many families would face high health spending burdens even with minimal cost sharing for their publicly insured children. Adding even modest cost sharing for such children could greatly increase high financial burdens.

Our survey of state policies reveals that a growing number of states are using cost sharing in the form of premiums or copayments, or both, for services in their public coverage programs for children. Premiums and copayments vary greatly across states and generally increase with family income level. Most states have provisions that specify caps on family spending – generally at 5 percent of family income – and premiums are capped in most states for families with more than three children. Yet our analysis of state policies suggests that systems to track family spending and to ensure free access once caps have been reached are generally not well developed.

Higher cost sharing in public programs may reduce public spending. However, half of all publicly insured children in our analysis were poor, and even modest cost sharing can be burdensome for many poor families. Exempting poor children reduces budgetary savings unless much larger cost-sharing burdens are imposed on the remaining families. Optimal targeting of cost sharing is difficult, moreover, when family incomes fluctuate from month to month and when health needs, such as the presence of a an SHCN (Special Health Care Needs) child or a parent in poor health, vary so widely across families.

With the reform debate having been diverted to issues such as offering a public option, changing the tax status of employer-sponsored coverage, or mandating individuals to purchase insurance, little attention is being paid to some of the most fundamental flaws in our dysfunctional system of financing health care. One of the most important has been the ever-increasing incidence of underinsurance that has created financial hardship for individuals and families who do have health insurance coverage.

Underinsurance has long been a prime feature of the individual insurance market as insurers have continued to introduce innovations in an effort to keep their premiums competitive. These innovations inevitably shift more costs to individuals and families that actually have health care needs. In fact, one of the purposes of the proposed insurance exchanges would be to reduce underinsurance by offering individuals plans that are more comparable to the group plans of the employer-sponsored market. Is this an adequate response to this problem?

The Health Affairs article on underinsurance in the employer market answers that question. As the authors state, “In the United States, if you are sick and earn a modest income, then you are probably underinsured – even if you have employer-based health coverage.” The emphasis on slowing the cost of insurance (as opposed to the costs of health care) has extended from the individual market to the employer-sponsored market.

The perversity of this strategy is well exemplified by the expansion of cost-sharing policies in the programs designed to protect lower-income families – Medicaid and CHIP. As the authors of the Health Affairs article on cost sharing in these public programs state, “even modest cost sharing can be burdensome for many poor families.” To minimize the negative financial impact on families, it has been suggested that caps be placed on the total out-of-pocket spending for these families. The problem is that “systems to track family spending and to ensure free access once caps have been reached are generally not well developed.” Furthermore, “Optimal targeting of cost sharing is difficult, moreover, when family incomes fluctuate from month to month and when health needs… vary so widely across families.”

The latter is also true of employer-sponsored coverage. Now that underinsurance is a problem for the workforce, some system of capping out-of-pocket spending would be necessary. But because of ever-changing variables, an equitable and efficient system of caps would be almost impossible to design – not to mention the additional administrative efforts that would be required in our system already over-burdened with costly administrative excesses.

Is cost sharing really necessary? How much impact would it have on our total national health expenditures (NHE)? Keep in mind that 80 percent of health care is consumed by about 20 percent of the population. Most of that 80 percent of spending would fall into the category of catastrophic, and almost everyone agrees that catastrophic costs should be fully covered.

Cost sharing policies impact primarily the remaining 80 percent of us who have comparatively few health care needs. Even if cost sharing were fully effective in eliminating non-beneficial health care (it isn’t), how much would that save? Cost sharing might reduce spending by as much as 30 percent (a number in dispute), but at least half of that is for beneficial services. The 15 percent of marginal or non-beneficial services as a portion of the 20 percent of NHE spent on the 80 percent who are healthy would produce a savings of about 3 percent of our NHE.

Since cost sharing is a very imperfect policy, the net benefit would be no where near this ideal. Not only would cost sharing continue to pose barriers to beneficial health care services, it would continue to perpetuate the plague of underinsurance now permeating the employer-sponsored market. The net cost of eliminating cost sharing, thereby ensuring that everyone has the health care that they need without facing financial hardship, would be very small indeed.

But let’s not digress into policies that would impact our health and our finances. Let’s go back to the cat fight over a public option. The private insurance industry must be popping the champagne corks now that they have deceived us into thinking this non-issue is the reform debate that we must be engaged in. They won again, and this time they didn’t even need to bring out Harry and Louise.

People Get Ready

Posted by on Friday, May 29, 2009

“People get ready, there’s a train a’comin’, Don’t need no ticket, you just get on board.”
– Curtis Mayfield

“If not now, If not now, tell me when?”
– Carrie Newcomer

….The closing songs sung by Carrie Newcomer at the Affordable Healthcare For All Rally on Monument Circle, across from WellPoint’s headquarters, May 20, 2009

Jim Mitchiner from PNHP Michigan arranged for me to speak to the House of Delegates at the annual meeting of the Michigan State Medical Society this April. There I met David Share, a physician working for Blue Cross of Michigan, which is still an independent non-profit insurance company like all the Blues were less than 20 years ago. They can’t turn down anyone with a pre-existing condition. Their board is made up of consumers and providers whose average annual compensation is under $50 thousand a year, compared with over $300 thousand per year on the WellPoint board. They support 42 free clinics throughout the state. It’s what the Blue Cross brand used to stand for. The idea of calling for WellPoint to re-mutualize was born.

Think globally and act locally. Some years ago I realized that we could do both by taking our message to one of the state’s largest employers, WellPoint based in Indianapolis. Starting as a non-profit state-based Blue Cross program like all the others, Blue Cross of Indiana de-mutualized in the 90’s. It went from non-profit to for-profit, raised a ton of money with a Wall Street stock offering, and started a rampage of mergers and acquisitions. In 2003 they merged with WellPoint, better known as Blue Cross of California, and became the largest health insurer in the country. For closing that deal, CEO Larry Glascock got a $42.5 million bonus. The HQ remained in Indiana, but WellPoint stayed as the name of the new company.

My wife Karen and I bought 5 shares (WLP, currently about $45 a share) a few years ago just so we could go to the annual meeting. Other members of our PNHP affiliate Hoosiers for a Commonsense Health Plan had stock as well, and a tradition was born. We have annually harangued them about recission, Medicare Advantage, Ingenex,and many other scandals – they are an easy target.

We needed something new this year in order to keep their attention and that of the media. I wrote an Op-Ed for the Indianapolis Star published 5 days before the meeting/rally with my critique of the company, including my dismay that our shareholder dollars were being spent trying to influence the healthcare reform debate. I noted “Last month the Sacramento Bee reported that in California WellPoint was making 3 million computer generated phone calls a week to try to influence the debate on reform. BusinessWeek magazine‘s headline called them ‘Robo-Calls.’ In 2007 the company spent $2 million on a publicity campaign to sink Governor Schwarzenneger’s proposal for a state universal care system.”

I concluded with:

“I fear that the for-profit insurance industry in America is the biggest barrier to achieving affordable universal coverage.

“With that in mind, I have a proposal for the board to consider – For the good of the company and the good of the country, I propose that WellPoint re-mutualize. That WellPoint return to its not-for-profit Blue Cross roots and spin back off all the state Blues that it acquired over the last 15 years.

“Give up this grand effort to become a behemoth astraddle the insurance market – you have only become a dinosaur.”

Having that published in the state’s largest newspaper, the stage was set for May 20. At 8 AM five of us were seated in the meeting room, and when the time came, I read my statement. Other members of thegroup shared their concerns, most notably that Susan Bayh’s position on the board, with her husband Evan in the Senate as it considers healthcare legislation, has the appearance of a huge conflict of interest. No one outside of our group spoke, except, of course, for the talking heads of the CEO and Chairman of the Board.

At 11 AM, under a clear blue sky in the center of town, Monument Circle, we opened our rally with folk singer Carrie Newcomer. We had 150 people decked out with signs and our blue Medicare For All T-shirts. My comments focused on the for-profit insurance gang being the biggest threat to meaningful reform. We closed with more music, and then 75 of us marched to Senator Bayh’s office a block away. The march made for particularly good TV footage. Thirty of us were able to get into his office and spent a surprisingly good hour with his chief of staff, as the Senator was in DC.

Should WellPoint return to non-profit status and is that part of our PNHP mission and message? In Indiana it’s an effective way to put our local insurance behemoth on the spot, and to get the media to spread our message that the insurance giants are the real enemy of healthcare reform. For those of you in Minnesota (United Health), Kentucky (Humana), Connecticut (Cigna and Aetna), California (HealthNet), Maryland (Coventry), or wherever, the strategy will be different. Confronting the local face of the for-profit health insurance industry has been a successful approach to raising awareness in our state, motivating our supporters, and putting the insurance gang on the defensive.

We’ll be back at WellPoint again next year. We’re all looking forward to it.

People Get Ready, performed by Carrie Newcomer 5/20/09

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If Not Now, Tell Me When, written and performed by Carrie Newcomer

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More small firms drop health care

Posted by on Tuesday, May 26, 2009

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.

More Small Firms Drop Health Care

By Dana Mattioli
The Wall Street Journal
May 26, 2009

Accelerating health-care premiums and sharp revenue shortfalls due to the recession are forcing some small companies to choose between dropping health insurance or laying off workers — or staying in business at all.

About 10% of small businesses are considering eliminating coverage over the next year, up from 3% in 2005, according to a recent survey by National Small Business Association.

That follows earlier declines in coverage, with just 38% of small businesses providing health insurance last year compared to 61% in 1993, according to the trade group. A Hewitt Associates survey found that 19% of all companies plan to stop providing health-care benefits in the next three to five years.

Rampant health care cost escalation is a problem for everyone. In bad economic times the problems are compounded, threatening the viability of employer-sponsored coverage. Small businesses that operate on very narrow margins have no choice but to reduce health benefits by either shifting more of the health care costs to their employees, or by eliminating health plans altogether. The fault lies not with the small business owners, but with the flawed U.S. system of financing health care.

The recent Medicare trustees report indicates that Medicare is facing similar economic challenges. But there is a very crucial difference. Everyone recognizes that the high costs of Medicare reflect the excessive rate of increases in total health care spending, and that runaway costs must be harnessed. The stewards of Medicare would never consider reducing legitimate health care benefits, or worse, eliminating many Medicare beneficiaries from coverage.

The point is that the structure of the financing system really matters. We can have a system in which individuals or employers are forced by economic circumstances to reduce or eliminate the financing of essential health care services, or we can have a system in which the government is forced by economic circumstances to demand greater efficiency by the health care delivery system so that everyone can have the health care that they need.

Unfortunately, members of Congress are moving forward with a model that will leave individuals and employers financially vulnerable for our health care needs – a patchwork of private plans and public programs that grow ever less affordable for most of us.

The model that would work is a single payer national health program. But last week, after a recital of several options that are still on the table, Sen. Baucus finally admitted, “Just to be honest, (single payer) is not on the table because it cannot pass.”

Hmmm… bad policies can pass but good policies can’t? Is there something wrong with the way Congress operates?

Really, Mr. President

Posted by on Monday, May 25, 2009

The Democratic National Committee (DNC), at its Organizing for America website,, has initiated nationally coordinated local events in June, the “Health Care Organizing Kickoff.”

Organizers will call local contacts using an “Invite Call Script:”

“For decades, health care reform has been blocked by special interest lobbying and political point-scoring in Washington. We’re doing everything we can to make sure real reform happens this year. We’re starting by doing something real here in our own community.”

The DNC hope is to solicit personal stories “about the importance of health care reform in your life” and to organize house parties to discuss the President’s “principles” and to plan volunteer activities on the weekend of June 27, a “local Health Care Day of Service.” Participants will be asked to “brainstorm” about volunteering for a day at a community health center, or hosting an SCHIP education program, or holding a blood donation drive, or running “a healthy food drive/health care fair.”

Back in December the Obama-Biden transition team organized thousands of “Health Care Community Discussions.” The President-elect (with Tom Daschle) issued a call for “health care reform that comes from the ground up.

As the community meetings occurred, PNHP received a flood of reports from participants that single payer was the unanimous recommendation from hundreds of gatherings. The official report confirmed that single-payer reform was discussed by 27% of 3,276 house parties (at least 884 meetings) and admitted that “the majority of those groups supported this idea.”

This support came in spite of the fact that participants and moderators were instructed to follow a script that appeared custom-tailored to keep single payer out of the discussion. The official instructions offered reform based upon employer-sponsored health insurance as the only option:

“In addition to employer-based coverage, would the group like the option to purchase a private plan through an insurance-exchange or a public plan like Medicare?”

Even so, more than 1 of 4 meetings proposed that a single publicly financed national health program was the answer to the American health care crisis.

The transition team report blamed the popularity of single payer on “encouragement by advocacy groups,” characterized the proposal as “radical change” and devoted about one solitary page in a 122-page document, enough to dismiss single payer proposal and its advocates. So much for health reform that comes from the ground up.

This year a nationwide movement for single payer national health insurance has taken root progressively. At every turn — from the White House summit to the regional White House forums to the Senate Committee on Finance to the halls of the Capitol to our home congressional districts — single payer advocates have been there. So often now we are the only ones at the meeting not paid to attend. Our movement has grown strong enough to inspire righteous and dignified civil disobedience.

Obviously it is time for the Democratic National Committee to “kickoff” and do “something real” for “real reform.” Let us hope that millions join the campaign. Really.

Imagine a day of service in which volunteers organize a free personal bankruptcy clinic, or a bus trip to Canada to purchase prescription drugs, or an advance-planning workshop about Medicaid enrollment to cover nursing home costs, or a session on how to appeal the hospital bill, or a day of tabulations of insurance industry profits, overhead and campaign donations, or a seminar on how to raise the most money — raffles, dances and bake sales — when the volunteer fire company goes all out for the local child with leukemia who has exhausted the parents’ insurance benefit…

The majority of the nation knows that the only proposal that will fulfill your principles, Mr. President — reduce costs, expand our choice of health care provider and give access to excellent health care to everyone — is a single payer national health program.

Mr. President, your nation needs you to get real, get back to health reform that comes from the ground up and keep the promise:

“The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don’t. I work for the American people. I didn’t come here to do the same thing we’ve been doing or to take small steps forward, I came to provide the sweeping change that this country demanded when it went to the polls in November.”
— President Obama, February 28, 2009, “Keeping Promises.”

Sen. Baucus defines universal coverage

Posted by on Friday, May 22, 2009

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 Care Reform Newsmaker Series: Sen. Max Baucus

Kaiser Family Foundation
May 21, 2009

John Reichard, CQ HealthBeat: I understood you to say, Senator, that you don’t expect to get to universal coverage, that you’re going to get it as close as you possibly can. Is that correct, and then, if so, what does that mean in terms of the ability to keep the health insurance industry at the table? You know, they’re saying that an individual mandate is necessary for guaranteed issue and rating reforms. Do those things then go away?

Senator Max Baucus: Oh, not at all. As a matter of fact, they’re very much there, and you’re correct in your sort of implications. A key to this is everyone having health insurance. It’s very, very hard to accomplish our objectives without everybody having health insurance. A primary objective is that everybody should have health insurance. That’s an objective in itself. Without that then… groups falling out, then it’s much more difficult to accomplish delivery system reform. We want the public and private health providers to be basically working together on delivery system reform. One way to get at that is to work with CMS.. work with the private sector. We want metrics, quality metrics so that CMS, Medicare and other providers are kind of working off the same page.

When I say we won’t get full universal coverage, CBO tells us we’ll get up to 94, 96 percent. There are always are going to be some people who just, you can’t find them, you know, don’t get health insurance. You never attain perfection. And this is going to be good. I think 94, 96 percent is pretty good. There will be, like undocumented aliens for example. We’re not going to cover undocumented… undocumented workers. That’s too politically explosive. But the main point that you want to make, the main point you are making is we will get near universal coverage. I like that word. Nearly everyone is going to have health insurance.

So according to Sen. Baucus, a key to reform is “everyone having health insurance.” By that he means that everyone will have health insurance – except the 12 to 18 million who won’t. That’s “pretty good,” he says.

Under single payer, instead of assigning an insurance product to each individual, everyone is automatically provided the health care that they need. They provide only their identification when they access care. Those individuals that you “can’t find” in advance will still receive care when they show up with medical needs. In a single payer system, everyone means everyone – no exceptions.

Injecting the immigration issue into the dialogue on health care reform is a very unfortunate diversion. Should undocumented immigrants be included? That happens to be an easy question for me. I’m a physician. Everyone who needs health care should get health care. Period.

There should never be any test applied to any individual that would disqualify him or her from receiving the health care that he or she needs. In my opinion, that includes immigration status, financial status, but especially the possession of an arbitrary document – a health insurance policy – that has a total disconnect with whether or not the person needs health care. Yet Sen. Baucus would use that “uniquely American” disconnect to leave about 15 million people out of the system, give or take a few million, even though that would cost more to do than to adopt a single payer system that would automatically include absolutely everyone.

2009 Milliman Medical Index

Posted by on Thursday, May 21, 2009

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.

2009 Milliman Medical Index

Milliman, Inc.
May 2009

The fifth annual Milliman Medical Index (MMI) measures average annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program.

The total 2009 medical cost for a typical American family of four is $16,771.

The Milliman Medical Index (MMI) provides us with a very important measure of health care spending in the United States. For 2009, average annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program is $16,771. That number should be front and center in our national dialogue on reform. It is important that we understand what it means.

Over 160 million of us receive our health care coverage through an employer. This sector is the healthy workforce and their young healthy families. This is the largest and least expensive sector to insure. It is the sector that we have presented to the private insurance industry either to insure risk or to provide administrative services for self-insured employers.

Group insurance wastes less on non-medical services than does insurance for individuals or small employers. So between the greater efficiency of employer-sponsored plans, and the low-cost, healthy status of the population insured, the spending on this group (represented by the MMI) shows us the best value that we can expect under our current multi-payer system of financing care.

The MMI is nominally broken down into an employer contribution ($9,947), an employee contribution ($4,004), and employee out-of-pocket costs ($2,820). But virtually all economists agree that the employer contribution is paid by the employee in the form of forgone wage increases. So the entire $16,771 represents the average health care costs for a family of four covered by an employer-sponsored PPO. That is what the average family is actually paying today.

Since this is average, those families with greater medical expenses are actually paying more in out-of-pocket costs. So reform proposals need to take into consideration not only the average $16,771 per family, but also the additional costs for those families with greater health care needs.

It is also important to understand that that the combined employer and employee contributions ($9,947 + $4,004 = $13,951) do not represent the premiums paid. Although the average family is defined as a family with an employer-sponsored PPO, the PPO reflects only the fact that the health care system provided discounts for the care provided. The employer and employee contributions represent the actual payments made for health care (minus the out-of-pocket spending). The MMI specifically excludes the non-medical administrative component of health plan premiums.

Read that again. The MMI ($16,771) represents the actual payments to the health care delivery system and excludes the funds retained by the insurance industry for administrative costs and profits.

Many in the policy community believe that health care costs that exceed 10 percent of family income create a financial hardship for that family. Based on the MMI, the average family with an employer-sponsored PPO would have to have an income of $167,710, though adding the administrative costs of private plans plus any additional out-of-pocket spending that might be required would drive that income threshold further upward.

The 2007 median household income was $50,233. Although that does not represent precisely the family of four with employer-sponsored coverage, it does give us a rough perspective of why the numbers no longer work. Any effective reform proposal based on private plans would have to provide taxpayer-financed subsidies for a typical family with an income below $167,000, plus additional subsidies for administrative costs, and even more subsidies for larger than average health care spending. That means that almost the entire workforce would require subsidies.

So what does the MMI tell us? Only an idiot would isolate the largest and healthiest sector of society into the collective employer-sponsored risk pools, assign a package of benefits to each family, assess contributions to be paid based on that package, shift all non-benefit costs to that family, add a hidden charge for wasteful administrative services, and still leave many families exposed to financial hardship. What does that say for those members of Congress who are hashing out this model of health care reform behind those closed doors?

We need a health care financing system that is funded equitably, based on ability to pay, and that uses the power of our own public monopsony to be certain that each of us receives the care that we need. The MMI tells us that it’s time to enact a single payer national health program.

The reform proposal of the conservative Republicans

Posted by on Wednesday, May 20, 2009

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.

Senators Coburn, Burr and Representatives Ryan, Nunes Offer A Better Path Forward on Health Care Reform

Senator Tom Coburn, M.D.
May 20, 2009

Earlier today, U.S. Senators Tom Coburn, M.D. (R-OK) and Richard Burr (R-NC) and U.S. Representatives Paul Ryan (R-WI) and Devin Nunes (R-CA) introduced health care reform legislation that delivers on the shared principles of promoting universal access to quality, affordable health care, and does so without adding billions of dollars in new debt or taxes.

“The Patients’ Choice Act of 2009,” transforms health care in America by strengthening the relationship between the patient and the doctor; using choice and competition rather than rationing and restrictions to contain costs; and ensuring universal, affordable health care for all Americans. “The Patients’ Choice Act” promotes innovative, State-based solutions, along with fundamental reforms in the tax code, to give every American, regardless of employment status, age, or health condition, the ability and the resources to purchase health insurance. The comprehensive legislation includes concrete prevention and transparency initiatives, long overdue reforms to Medicare and Medicaid, investments in wellness programs and health IT, and more.


The Patients’ Choice Act

May 2009

The Patients’ Choice Act transforms health care in America: strengthening the relationship between the patient and the doctor; using the forces of choice and competition rather than rationing and restrictions to contain costs; and ensuring universal, affordable health care for all Americans.

The Patient’s Choice Act of 2009 would encourage states to establish rational and reasonable consumer protections, including the following:

* Creates State Health Insurance Exchanges to give Americans a one-stop marketplace to compare different health insurance policies and select the one that meets their unique needs

* Gives Americans the same standard health benefits as Members of Congress, so all Americans have a wide range of choices

* Protects the most vulnerable Americans to ensure that no individual would be turned down by a participating Exchange insurers based on age or health

* Creates a non-profit, independent board to risk adjust among participating insurance companies to penalize companies that “cherry pick” health patients and reward insurers that encourage prevention/wellness and cover patients with pre-existing conditions

* Expands coverage through auto-enrollment at state and medical points of service, for individuals who do not select a plan at the beginning of the year

* Gives states the ability to band together in regional pooling arrangements, as well as the creation of robust high risk pools, reinsurance markets, or risk adjustment mechanisms to cover those deemed ‘uninsurable’

The Patients’ Choice Act of 2009 would restore fairness in the tax code and give every American, regardless of employment status, the ability to purchase health insurance by:

* Providing an advanceable and refundable tax credit of $2,300 per individual or $5,700 per family

Brief summary:

“Comprehensive” summary:

“The Patients’ Choice Act of 2009” is one of two Republican proposals for health care reform being released today and is considered to be the more conservative version. (The other, “The Medical Rights Act,” is being introduced by the “Tuesday Group” of centrist Republicans in the House, though their report has not been released as of this moment.)

So what do the conservative Republicans propose? They recommend state health insurance exchanges that offer the same benefits as members of Congress receive, with guaranteed issue, with risk adjustment between participating insurance companies, and with auto-enrollment but with the ability to opt out (not unlike an individual mandate with a process to opt out because of a lack of affordability).

There is something more than just vaguely familiar here. Of course! It’s the Democrats’ plan!

In the ultimate of ironies, the Democrats abandoned any consideration of the golden standard for reform, a single payer national health program, and sat down to begin negotiations right in the middle of the conservative wing of the Republican members of Congress. That might provide us with a piece of legislation, but it will never provide us with the health care reform that we desperately need.

(But tread lightly. According to Roll Call this morning, “Top aides to Senate Finance Chairman Max Baucus ( D-Mont.) held a private meeting on Monday with a bloc of prominent Democratic lobbyists, warning them to hold their fire or be left out of negotiations on President Barack Obama’s No. 1 legislative priority.”)

Update: The centrist “Medical Rights Act” has now been released. Rather than being a centrist reform proposal, it is merely worthless libertarian rhetoric:

Senate Finance report on financing health care reform

Posted by on Tuesday, May 19, 2009

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.

Baucus, Grassley Release Policy Options for Financing Comprehensive Health Care Reform

United States Senate
Committee on Finance
News Release
May 18, 2009

The options released today are the third and final round of policy options for discussion before the Finance Committee marks up legislation in June. The options for financing health reform follow the release of policy options for reducing costs in the health care delivery system and for expanding quality, affordable health care coverage to all Americans. Three areas of potential funding sources explored in the financing options are: savings achieved from within the health care system from reductions in current levels of spending; reevaluating current health tax subsidies; and changing non-health tax provisions.

Reducing Geographic Variation

Researchers at Dartmouth and elsewhere have found that health care spending varies widely across the United States. Moreover, higher health care spending does not correspond to better quality care of care. The portion of total spending on health care items and services that do not produce better health outcomes is estimated to be as high as 30 percent of Medicare spending. The policy options explore ways to reduce geographic spending variation by reducing Medicare payments in areas where spending is above the national average. Adjustments would be made to reflect differences in input prices and beneficiary health status.

Exclusion for Employer-Provided Health Insurance

Under current law, employer-provided health insurance is not counted as income for tax purposes and the amount of health care benefits that are counted as tax free is unlimited. This tax-free status encourages employers to offer “Cadillac plans,” or overly generous health care plans that promote the overuse of health care services and drive up health care costs. Moreover, the plans are subsidized by taxpayers as a result of being tax free. The policy options explore five changes to make the exclusion more equitable and efficient. These options include capping the exclusion based on the value of health insurance policy or the income level of the employee eligible for the exclusion. A third option would be to cap the exclusion based on both the value of the health insurance policy and income level. Another option would be to convert the employer-provided health insurance exclusion to an individual tax deduction or credit. The options also consider whether to grandfather in existing plans so that benefits provided under existing collective bargaining agreements are not limited.

Financing Comprehensive Health Care Reform: Proposed Health System Savings
and Revenue Options (41 pages):

The two previous reports:

Transforming the Health Care Delivery System: Proposals to Improve Patient
Care and Reduce Health Care Costs (52 pages):

Expanding Health Care Coverage: Proposals to Provide Affordable Coverage to
All Americans (63 pages):

Tomorrow the members of the Senate Finance Committee will retreat to a closed-door session, taking this report with them to walk through their options for financing comprehensive health care reform. Sen. Baucus and others have said that the success of the reform effort is dependent on their ability to find ways to pay for it. What are their prospects for success?

Most of the options discussed in this report are merely tweaks to our current system of financing health care and can have very little impact in overall health care spending. Some of the changes would be beneficial and some are problematic, but most would fall far short of the financing needs of the multi-payer model that the committee has selected.

There are two potential sources that involve real money, though one is quite explicit and the other is not much more than an abstraction.

Reducing the 30 percent of spending in Medicare that does not improve outcomes (Dartmouth Atlas) would seem like a logical source of funds to pay for reform, but recapturing those funds would be very difficult. Merely reducing payments in regions where spending is above average is a very blunt instrument that can have serious negative impacts even if there were some reduction in waste. Also, no mention is made in this report of the Medicare underpayment in other regions.

A much more appropriate use of any wasted funds that could be recovered would be to increase payments in regions that are underfunded, and to shift funds to services that would improve the quality and efficiency of the system, especially by expanding primary care. If these changes were made not only in Medicare, but in our entire health care system, that would entail a large shift in spending, but only as a redistribution of funds. It is merely an abstraction to think of this as a new source of additional funds to finance the other components of the reform proposal.

The real money is in the tax subsidy we provide by making employer-sponsored insurance a tax deductible benefit. That amounts to about $137 billion. A table in the report lists many other tax subsidies for a total of $194 billion, plus another $93 billion for reduced payroll taxes to make a grand total of $287 billion. It is really the $137 billion that is important since the other numbers are primarily accounting issues. For instance, the $93 billion in reduced payroll taxes must be offset by payroll taxes on the balance of income and/or by other taxes if the Medicare and Social Security programs are to remain solvent.

Can we simply eliminate the tax deductibility of employer-sponsored plans and shift that $137 billion to the reform proposals? No. Since premiums for employer-sponsored plans are paid by employees in the form of forgone wage increases, workers could not collectively afford to pay the additional 137 billion in premium costs. If the deductibility is eliminated, that $137 billion would have to be returned to the workers in the form of tax credits,vouchers, or personal tax deductions. Poof! There goes the real money that the committee is counting on finding somewhere.

The report suggests that since the tax deductibility of employer-sponsored coverage represents a regressive tax policy (the wealthy have more of their premium subsidized with taxes than do lower-income individuals) some of the $137 billion could be recovered from higher-income individuals, even if it would result in more administrative complexities. But then how much are you recovering to pay for reform? Maybe $20 billion? That doesn’t help much with our $2.5 trillion health care budget.

The tragedy is that the report that they are taking into closed session gives them very little to work with. At the hearing leading up to this report, they had arrested the individuals who would explain that we very easily could free up maybe $400 billion in pure waste merely by replacing our dysfunctional multi-payer system with a single payer national health program. Even for those who contend that the amount would not be that great, it would still be far, far more than any other proposal on the table.

To keep single payer off the table, to exclude it from their report, and to slam the door on it as they retreat to their secret sessions constitutes legislative malpractice. We should sue them for triple damages. $1,200 billion would certainly pay for a lot of health care. We can pretend that they can come up with $1,200 billion just as they are pretending that they can come up with the funds to pay for the most expensive model of health care reform ever devised, and, at that, one that falls far short on equity, efficiency and universality.

Relman/Angell letter in The New York Times

Posted by on Monday, May 18, 2009

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.

Taming Runaway Health Care Costs

The New York Times
May 16, 2009

To the Editor:

David Leonhardt, in his May 13 column (“Health Care, a Lesson in Pain,” Economic Scene), is quite right that “the only way to have a sustainable universal health care system is to control costs.” But in analyzing the experts’ testimony before the Senate Finance Committee on how to pay for health care, he did not mention a solution that neither the experts nor the committee wants to consider: major reform of the system.

Runaway costs are due largely to high overhead expenses throughout the system, and to the excessive use of expensive technology. Both of these result from a health care system that is organized like a profit-seeking industry instead of a social service.

If we want health care to be a universal entitlement, it cannot be controlled by market forces and the financial interests of insurers and providers (and the investors who own such a large part of the system).

Some kind of government-regulated single-payer insurance plan and a reorganized nonprofit medical care delivery system may be “off the table” for policy makers right now, but we will never achieve affordable universal coverage without major reform that deals with the real causes of medical inflation.

We don’t need more money; we need a new system.

Arnold S. Relman
Marcia Angell

Cambridge, Mass.

The writers, medical doctors, are former editors in chief of The New England Journal of Medicine.

Although single payer advocates were not allowed to testify at the Senate Finance Committee roundtable on reform, the New York Times seems to agree that the concept of comprehensive reform is worthy of their Letters page.

When will the opinion editors decide that the concept is worthy of a guest op-ed? More importantly, when will the news editors decide that the the suffering, financial hardship, and death is worthy of a news report on the political suppression of policies that would greatly improve the health and financial outcomes of those who face significant medical problems? Shouldn’t that be an above-the-fold front page story?

Addendum: Today “single payer health care” was discussed on The Diane Rehm Show by guests Dr. David Himmelstein, Sen. Bernie Saunders, Roger Hickey, and Susan Dentzer. The program is archived at:

Medicare beats employer-sponsored plans

Posted by on Friday, May 15, 2009

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.

Meeting Enrollees’ Needs: How Do Medicare And Employer Coverage Stack Up?

By Karen Davis, Stuart Guterman, Michelle M. Doty, Kristof M. Stremikis
Health Affairs
May 12, 2009

One key issue in health reform concerns the relative roles of coverage offered through private insurance and public programs. This paper compares the experiences of aged Medicare beneficiaries with those of people under age sixty-five who have private employer coverage. Compared with the employer-coverage group, people in the Medicare group report fewer problems obtaining medical care, less financial hardship due to medical bills, and higher overall satisfaction with their coverage. Although access and bill payment problems increased across the board from 2001 to 2007, the gap between Medicare and private employer coverage widened.

Very few individuals, especially those already covered by Medicare, will be surprised by this study. It demonstrates that, compared to people under 65 with private employer-sponsored coverage, Medicare beneficiaries over 65 have fewer problems with access to care, have less financial hardship due to medical bills, and have higher overall satisfaction with their coverage.

The private insurance industry has been taking quite a beating lately, and appropriately so. Much of the criticism has been targeted to the individual and small group insurance market, especially since these more innovative plans have been quite ineffective in preventing financial hardship for those who need care.

In contrast, policy makers and legislators in Washington are claiming that the employer-sponsored segment of the private insurance market is working quite well for us, and reform should include policies to expand this market. But this study isolated the employer-sponsored segment and compared it specifically with Medicare. No contest. Medicare is clearly superior to employer-sponsored plans.

This study will be cited by those who support a Medicare-like option within a market of private plans. But what is the implication for the taxpayers?

An employer-sponsored plan is no longer affordable for average-income workers, and already is subsidized through the tax system. It is absolutely inevitable that additional taxpayer subsidies would be required to pay for private plans, whether through tax credits, tax deductions or vouchers. It is morally wrong to require taxpayers to subsidize inferior private health plans when they could be replaced with a superior, more efficient public insurance program – an expanded and improved Medicare for all.

It’s our tax money. We have a right to demand higher value in health care purchases made by our public stewards – precisely the value that a single payer national health program would bring us.

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