National health insurance makes the green journal

Posted by on Tuesday, Jul 15, 2008

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

National Health Insurance: Could It Work in the US?

By James E. Dalen, MD, MPH, Joseph S. Alpert, MD
The American Journal of Medicine
July 2008

National health insurance covers the entire population of many European countries at a much lower cost than US health care. Could such a system of national health insurance work in the US? We already have such a system — it is called Medicare, and it has worked very well for more than 40 years! Medicare pays the private sector to deliver quality health care to more than 44 million Americans. Those who stick with traditional Medicare have free choice of physicians and hospitals. Nearly every US physician and nearly every hospital in the US has elected to participate in Medicare.

In a 2003 Pew poll, 67% favored government guaranteed national health insurance even if meant higher taxes, and a 2007 New York Times/CBS poll reported that 64% stated that the Federal government should guarantee health insurance for all Americans. Maybe the American people are ahead of their legislators!

http://download.journals.elsevierhealth.com/pdfs/journals/0002-9343/PIIS0002934308002465.pdf

Reading a message in support of a Medicare-like national health insurance program is certainly not a new experience for single payer advocates. What is astonishing is that this was published in “the green journal,” The American Journal of Medicine, one of the most prestigious medical publications in this nation. Furthermore, it was coauthored by the Editor-in-Chief, Joseph Alpert.

National health insurance is no longer a fringe concept. The American people have made it mainstream. It has become an imperative. We now need to elect legislators who understand that.

Uwe Reinhardt on the Dutch system

Posted by on Monday, Jul 14, 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.

Americans down on the U.S. health-care system

By Kristen Gerencher
MarketWatch
July 13, 2008

Americans are fed up with the headaches in their system, but that’s generally not due to the quality of care they receive, said Uwe Reinhardt, professor of economic and public affairs at Princeton University.

“What Americans are upset about is the unbelievable hassle of having to select health insurance, maybe not getting it … losing insurance when they lose their job,” Reinhardt said. “The American citizen is massively insecure.”

Doctors and nurses routinely hear demoralizing news that U.S. medicine is inferior “when the real problem is the way we finance health care and the hassle of claiming insurance,” he said.

The Dutch financing system has been transitioning to a new model in the last year, where residents contribute payroll taxes into a central fund, Reinhardt said. Then they receive a voucher to buy coverage from nonprofit or for-profit private insurers.

“The system is so tightly regulated and so many transfers are made among people to make sure everyone can afford the insurance and everyone has access to the same care that it’s really just a social insurance system in disguise,” Reinhardt said. “It’s not even vaguely close to the U.S. system.”

http://www.marketwatch.com/news/story/vital-signs-americans-rate-us/story.aspx?guid=%7B86F29D04-FC2D-466F-ADF6-2435468CE406%7D&dist=hpts

The United States currently has a private insurance system that has proven to be quite inadequate in ensuring that all of us receive the health care that we need. Some single out the new Dutch system as a model demonstrating that private plans could work for us if we merely improve the insurance markets and provide a competing public insurance option.

As Professor Reinhardt states, the Dutch system is not even vaguely close to the U.S. system, but rather is a social insurance system in disguise. Merely expanding our private plans to cover more people would not in any way emulate the Dutch system.

Some claim that a single payer system is not politically feasible because it would be too disruptive to our existing health care financing system. Yet they concede that the private insurance industry would have to undergo a massive transformation to eliminate the profound inefficiencies, inadequacies and inequities in our current system. Tight regulation of a totally transformed private insurance industry would certainly be disruptive to these players in our current financing system.

Is disruption really all that bad? The technology industry advances and thrives on innovative disruptions. New, improved, lower-cost technology replaces older, less effective, and more expensive technology. New technology is certainly disruptive to the establishment, but we shed few tears for those older companies that are no longer relevant and are replaced by newer firms.

Our current private insurance industry is functioning so poorly that, at a minimum, it requires wholesale disruption by being transformed into a highly-regulated program of social insurance. But then why should we try to revive an obsolete, last-century system of health care financing when a modern, single payer national health program would be so much more efficient?

Isn’t single payer precisely the disruptive innovation that we now need? And really, who would shed tears over the demise of the private insurers as we know them?

"Keeping the insurance you have" – Don't believe it!

Posted by on Friday, Jul 11, 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.

Statement of Common Purpose

Health Care for America Now!

“A choice of a private insurance plan, including keeping the insurance you have if you like it…”

http://healthcareforamericanow.org/site/content/about_us/

And…

Proposed GM/UAW VEBA: A House of Cards?

By Stephen Diamond
School of Law, Santa Clara University
October 2, 2007

This MOU (Memorandum of Understanding) makes clear that the entire VEBA (voluntary employees’ beneficiary association) structure fails to secure future health care obligations from the potential risk of GM (General Motors) bankruptcy. To put it succinctly, the VEBA structure can be said to balance like a house of cards completely subject to the ups and downs of GM’s financial future. If GM collapses into bankruptcy it is very likely that the VEBA will also collapse.

The basis of this conclusion is simple: according to the MOU GM retains unilateral power to make up to $7 billion of its potential contributions to the VEBA in cash over a twelve to twenty year period through annual payments. Since these payments are to be made in cash they depend entirely on the availability of that cash from GM. But if GM declares bankruptcy there is no means to guarantee now that the cash will be available or that GM will not use the bankruptcy process to shield itself from these future payment obligations. This compounds the problems associated with the Convertible Note whose value rises and falls with GM stock and whose annual interest payment and return of principal could be blocked in bankruptcy.

http://www.soldiersofsolidarity.com/files/relatednewsandreports07-2/GM-UAWVEBADealDescribedAsHouseofCards.html

Stephen F. Diamond, J.D., Ph.D., Associate Professor of Law:
http://www.scu.edu/law/faculty/profile/diamond-stephen.cfm

Pause for a minute. Think back to the insurance you had twenty years ago. Remember? Now… do you still have precisely that same coverage? Unless you are over 85 and have been in the traditional Medicare program for the past twenty years, it is highly likely that you do not.

Why not? After all, wasn’t the coverage then better and much less expensive than what you now have? Likely it provided you with a free choice of physicians and hospitals. It covered all reasonable health care services, maybe with small co-payments for routine services, and complete coverage for catastrophic expenses after a modest hospital deductible. Perhaps it was a non-profit Blue Cross or Blue Shield plan administered in the public interest, rather than today’s for-profit plans with a mission to maximize shareholder return by spending as little as possible on actual patient care. The fine print of the older insurance products designed to serve the patient was quite different from the fine print of today’s insurance products designed to compete in a profit-driven insurance market.

It is probable that your current coverage restricts you to a list of contracted physicians and hospitals, and assesses severe financial penalties if you obtain care outside of the plan. More plans today exclude from coverage some essential services such as obstetrical care and mental health services, and some even go so far as to exclude hospital coverage and specialist services. More of you are finding that the deductible and coinsurance in your plans are now large enough to cause financial hardship if you should develop significant health problems. Medical debt has become a major contributor to personal bankruptcy, and three-fourths of those with medical debt had health insurance when their problems started. All too commonly, health insurance now fails to perform its primary function: protecting us from financial hardship in the face of medical need.

So why do you no longer have the better coverage that you had twenty years ago? You may have changed jobs, likely more than once, and lost the coverage that your prior employer provided. Your employer may have changed plans because of ever-increasing insurance premiums. Frequently your insurer introduces plan innovations such as larger deductibles, a change from fixed-dollar copayments to higher coinsurance percentages, tiering of your cost sharing for services and products, reduction in the benefits covered, dollar caps on payouts, and other innovations all designed to keep premiums competitive in a market of rapidly rising health care costs. You may have lost coverage when your age disqualified you from participating in your parents’ plan. You may have found that health benefit programs have been declining as an incentive offered by new employers. Your children may have lost coverage under the Children’s Health Insurance Program when your income, though modest, disqualified your family from the program. Your union may not have been able to negotiate the continuation of the high-quality coverage that you previously held. Your employer may have reduced or eliminated the retirement coverage that you were promised but not guaranteed. Your employer may have filed for bankruptcy without setting aside the legacy costs of their pensions and retiree health benefit programs. You may have decided to start your own small business and found that you could not qualify for coverage because of your medical history, even if relatively benign, or maybe your small business margins are so narrow that you can’t afford the premiums. You may have been covered previously by a small business owner whose entire group plan was cancelled at renewal because one employee developed diabetes, or another became HIV infected. Your COBRA coverage may have lapsed and you found that the individual insurance market offered you no realistic options. You may have retired before Medicare eligibility, only to find that premiums were truly unaffordable or coverage was not even available because of preexisting medical problems.

Okay, so you say that your plan is an exception, and you want to keep it. You have or did have an employer that is so large and has such great resources that your plan will always be there, including throughout retirement. Well, let’s look at the largest and most successful private health program ever – that of General Motors. Twenty years ago, every General Motors employee knew that he or she had the best health plan available, and for life. Whoa. What was that about General Motors being saddled with legacy costs? This highly successful health program threatened to sink General Motors because of projected future commitments. They ducked that one by establishing a VEBA (voluntary employees’ beneficiary association) and dumped it on UAW (the auto workers union). UAW is now in a position of holding its breath, hoping that the VEBA does not collapse before we have adopted a national health program. Are you really sure that your secure lifetime coverage is stronger than that of General Motors? Don’t count on it.

The point is that hardly anyone under 85 has the same coverage that they had twenty years ago, and that has not been by choice. Factors over which you had very little or no control dictated that you could no longer keep the insurance you had. Today, the politicians promise you that you can keep the insurance you have, if that’s your choice, even though that has hardly ever been true in the past. Is there any reason to expect it to be true in the future?

The politicians propose token programs to control future health care cost increases, but none of these programs will have a significant impact. As long as we rely on a dysfunctional, fragmented system of public programs and private plans to finance health care, we will never control the true cost drivers that are making health care unaffordable for most of us. To keep insurance premiums affordable, the insurers will have no choice but to continue to introduce innovations in their products that will further diminish the capability of the plans to prevent financial hardship for those who need care. That means that you do not have the option of keeping the plan you have today, simply because the insurers will not be able to offer the same plan twenty years from now.

That applies to Medicare as well. It will not be the same in twenty years. But here there is hope. Medicare can be changed so that it works even better to allow us to have access to health care without the potential for financial ruin. If all of us were enrolled in a new and improved Medicare program, we would have the ability to address the true causes of escalating health care costs. We would dramatically reduce the profound administrative waste that is a direct result of trying to finance health care through a disconnected system of a multitude of private plans and public programs wherein none of the players has significant control over our global health care expenditures. A single Medicare-like program would be capable of realigning incentives to encourage the reinforcement of our primary care infrastructure in order to ensure that everyone has access to a system that provides higher quality care at a more reasonable cost. Incentives could also be altered to reduce ineffective and even detrimental high-tech excesses that drive up costs, while ensuring that beneficial high-tech services will always be there when we need them.

If we had a comprehensive, high quality, value-based Medicare system for everyone, then all of us would want to keep the system that we would have, not only for the next twenty years, but for the rest of our lives. In the meantime, don’t let the politicians tell you that you can keep the coverage you have. It likely won’t be there when you need it twenty years from now.

China's failed experiment with the market

Posted by on Thursday, Jul 10, 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.

From A National, Centrally Planned Health System To A System Based On The Market: Lessons From China

By Jin Ma, Mingshan Lu and Hude Quan
Health Affairs
July/August 2008

No other country has undergone health care reforms as dramatic as China’s. Starting in 1978, China reformed its health system from a governmental, centrally planned, and universal system to a heavily market-based one. Now, three decades later, the Chinese government openly acknowledges that the reforms failed and seeks new directions. This paper adds to the literature by examining China’s health care from a system perspective, describing its health services delivery, access, outcomes, and population health in the post-reform era. It also identifies the main issues in the current system and highlights the key lessons learned from China’s reform process.

http://content.healthaffairs.org/cgi/content/abstract/27/4/937

When Incentives And Professionalism Collide

By William C. Hsiao

As Jin Ma and colleagues observe, an unfettered market approach in China has reduced access to care, increased patients’ financial burden, and reduced emphasis on prevention and may have caused declines in quality and outcomes. A major driving force was that perverse incentives altered physicians’ behavior toward self-interest at the expense of patients, even where professional ethics dictated otherwise. Other nations, including India, are grappling with the profit motive and its consequences. Chinese leaders are attempting to deal with these problems by expanding public investment and reducing perverse incentives. However, profit motives remain a powerful, potentially offsetting feature of a reformed system.

http://content.healthaffairs.org/cgi/content/abstract/27/4/949

Fundamental human ethics and mores are the same the world around.

There are those of us who believe that the people of the United States possess some sort of a superior intellect that allows us to use the sterile tools of market economics to provide a better life for all of us, at least for those of us who are willing to put in a greater effort, without any compromise whatsoever in our ethical and moral principles.

Some of the intellectuals in China had decided that using market dynamics was just the solution that they needed to help modernize the Chinese health care system. Sterile, amoral business decisions allow the leeway to bring out the best in us… and the worst. China got the best for a few, and the worst for the many.

Our health care system represents both the best and the worst, but now is so expensive that we have reached a point that we must realign incentives to promote the best for everyone, and discourage the worst that is draining our resources while benefiting primarily those who are capitalizing on the market.

China’s great experiment with free market health care demonstrates, once again, that mankind’s mores and ethics are best supported by social solidarity, rather than by the market, when establishing policies designed to benefit us all. It is a lesson that most other nations have learned, but one with which we are still struggling.

Health Care for America Now (HCAN) is pushing a superficially attractive health reform model that has a long record of failure – akin to prescribing a placebo for a serious illness when effective treatment is available. They would offer Americans a new public insurance plan and a menu of private ones, with subsidies for coverage for low income families.

This approach reprises the format of Medicare’s ongoing privatization. Despite promises of strict regulation and a level playing field that would allow the public plan to flourish, private insurers would (as they have done in Medicare) predictably overwhelm regulatory efforts through crafty schemes to selectively recruit profitable, lower-cost patients, and avoid the expensively ill. Like the Medicare Advantage program, originally touted as a market-based strategy to improve Medicare’s efficiency, the HCAN plan would evolve into a multibillion dollar subsidy for private insurers whose massive financial power (amassed largely at government expense) would prove a political roadblock to terminating the failed experiment.

Unfortunately, proposals like HCAN’s that cede a central role to private insurers can only add coverage by adding costs. They promise savings from computerization and chronic disease care management. Yet the Congressional Budget Office has warned that there is little or no evidence for such savings.

The HCAN proposal forgoes most of the $350 billion annually in administrative savings possible under single payer national health insurance (NHI). Administrative waste is a natural byproduct of the private insurance firms that would retain a central role under HCAN’s plan. Private plans’ overhead is 12-fold higher than under NHI; the excess is squandered on marketing, underwriting, utilization reviewers and profits, and for the billions paid to executives. And the multiplicity of insurers envisioned in the plan precludes paying hospitals a global, lump sum budget; such budgets would save additional billions by obviating the need for most hospital billing and much of the internal accounting needed to attribute hospital costs to individual patients and payers.

HCAN’s proposal duplicates key elements of health reforms that have passed (and then failed) in multiple states: Massachusetts in 1988; Oregon in 1989; Tennessee, Minnesota and Vermont in 1992; Washington State in 1993; and Maine in 2003. In each case, rising costs scuttled the reform effort; none had a durable impact on the number of uninsured. The 2006 Massachusetts law, which incorporates many of the features of HCAN’s plan, is already threatened by rising costs, despite offering skimpy coverage and leaving many uninsured. And Massachusetts, with its low rate of uninsurance to begin with, and a large fund devoted to care of the uninsured, offered the optimal conditions for trying such a plan.

HCAN’s proposal tries to avoid a head-on collision with private insurers, but the result is a plan that cannot achieve universal coverage or make care affordable. For physicians, offering a placebo in place of effective treatment is a serious ethical violation. Hence, while we salute the good intentions of the members of the HCAN coalition, we must warn against their proposal.

What is "Health Care for America Now" doing?

Posted by on Tuesday, Jul 8, 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 CARE FOR AMERICA NOW!

Campaign launch – July 8, 2008

For coalition members see:
http://healthcareforamericanow.org/site/content/who_we_are/

Campaign ad:

Mother with son, consulting Magic Eight Ball: Will they pay for his inhaler?

Magic Eight Ball: Not likely

Gentleman, in workshop of his garage: Is my surgery covered?

Magic Eight Ball: Don’t think so

Pregnant mother-to-be: Can I chose my child’s doctor?

Magic Eight Ball: Better not tell you

Concerned woman, too young to die: Will they cover the chemo?

Magic Eight Ball: Doubtful

Off-screen voice: Will health insurance companies ever put your health before their profits?

Magic Eight Ball: Not a chance

Off-screen voice: We can’t trust insurance companies to fix the health care mess.

http://www.youtube.com/watch?v=tirU5qpmFK4

Statement of common purpose:

Our government’s responsibility is to guarantee quality affordable health care for everyone in America and it must play a central role in regulating, financing, and providing health coverage by establishing:

A choice of a private insurance plan, including keeping the insurance you have if you like it, or a public insurance plan without a private insurer middleman that guarantees affordable coverage.

(… and nine other requirements for a regulated private insurance industry.)

http://healthcareforamericanow.org/site/content/statement_of_common_purpose

The members of the Health Care for America Now! (HCAN) coalition are very dedicated, altruistic individuals and organizations who share with us the goal of affordable, comprehensive, high quality care for everyone. They agree with us that the private insurance industry has failed miserably in fulfilling its responsibility to bring to all of us the affordable health care that we need.

The private insurance industry, as it functions today, clearly must be replaced with a system that works. So what is the solution proposed by the HCAN coalition? Let’s replace the private insurance industry with… the private insurance industry. Only let’s regulate it by requiring the insurers to provide us with the comprehensive coverage that we need “through the largest possible pools” – thus ensuring that their products will have premiums that only the very wealthiest of us can afford.
The HCAN coalition also would enact a public program in competition with the private plans to be sure that the private plans would sell us the comprehensive products that we need – a not-so-difficult challenge considering that the public program would be outrageously expensive due to adverse selection. So then we would have a choice of highly-regulated, unaffordable private plans, or an even less affordable public program option.

Why did the coalition insist on including private plans when the industry’s track record is so miserable? It was a political decision based not on which policies would actually work, but rather based on rhetorical framing that would resonate with a public that remains relatively uninformed on the make-or-break nuances of health policy. Focus groups and polls showed that “choice of private plans” resonated well, so they decided to abandon policy and go with messaging.

The members of Physicians for a National Health Program would take a more “doctorly” approach toward reform. While the HCAN coalition is recommending placebo therapy, we would point out that effective treatment is available: a single payer national health program.

Insurers: Women are just too risky

Posted by on Tuesday, Jul 8, 2008

Women readers, get ready to fight. As reported in the Los Angeles Times, Blue Cross Blue Shield of California has decided to charge women more for health care insurance than men. A California woman, Tova Hack, works part-time, and has to buy her own individual health care policy because her employer doesn’t provide health insurance for her. She found out that the cost of her high- deductible, bare-bones individual policy was going up 20 percent. The increase couldn’t be due to the possibility of pregnancy, because her policy didn’t cover pregnancy-related expenses. Blue Cross Blue Shield simply discovered that women are more expensive to insure than men and decided to stick them with the costs.

Blue Cross Blue Shield’s reasoning was straightforward. Insurance companies encourage preventive services. However, their actuarial studies show that, unlike seniors who don’t use insurance company rebates to sign up to join a gym and save the company money, women actually use preventive services, like mammograms and pap smears that cost the insurance company money.

And if, unlike Tova’s policy, their insurance policies do cover prenatal and obstetric services, women understandably seek that care when they are pregnant. Blue Cross Blue Shield of California concluded that women should pay more for their insurance policies than men, since women contribute more to the insurance company’s “medical losses.” (“Medical loss” is insurance-speak for money the company has to pay out for medical care. The ideal scenario for an insurance company is for no one to use the money paid in premiums for actual health care). Insurance companies carve out risk pools to reduce the likelihood that the people they insure will use health care services. Women, it seems, are just too risky.

Meanwhile health insurance company CEOs are receiving benefits that defy belief. For example, Larry Glasscock of Wellpoint left the company in 2007 with a farewell package of $23.9 million. And health insurance company stocks continue to provide revenue for their shareholders, even as primary care doctors, who actually provide medical care, earn less and less.

The Kaiser Foundation health tracking poll recently found that 25 percent of people reported having problems paying for health care and health insurance, and 59 percent said, “We need to get everyone into the same insurance pool so we can spread the costs of sick and healthy people over the whole population.”

If we eliminate the multiple, for-profit insurance companies and have a single-payer health care system, funded and administered by the government, everyone would be in the same risk pool. Women would not have to pay more for health insurance because they take good care of themselves by getting pap smears, mammograms and prenatal care. Women would not be discriminated against because they are the ones who get pregnant, have babies, and use obstetrical services. Women would not be punished just for being women.

If the multiple private health insurance companies were eliminated, $350 billion in administrative funds would be saved. These funds could be used to cover everyone with a universal, comprehensive, single-payer health insurance that would provide not only medical care and prescription drugs, but would also pay for long term care for our seniors.

Recently, at the national convention of the League of Women Voters, women voted unanimously to make advocacy for, and education about, health care reform a top priority. Women have fought long and hard for their rights in the past decades. It is time for them to take on the insurance companies, and fight for their right to affordable and accessible health care.

Originally published in the Berkshire Eagle

Although we pay more and more each year for health insurance (average premium for a family of four now over $12,000), we get less and less for it. Insurers continue to take high profits first, leaving enrollees more vulnerable to high out-of-pocket costs for health care.

A 2007 study of small-group and individual insurance markets in California, published by Health Affairs, shines a bright light on this problem. “Actuarial value” was defined as “the proportion of claims expenses for covered services paid by the insurance plan for a large standardized population.” Between 2003 and 2006, the actuarial value in the small-group market held at 0.83 (83 percent of bills paid), but fell precipitously in the individual market from 75 to 55 percent. The investigators concluded that, without reform of the marketplace, people of average means will be faced with catastrophic health care bills.

As we saw in an earlier post, insurers try to avoid coverage of people at higher risk of illness and cherry pick the market for healthier enrollees. They pursue a goal to keep their medical-loss ratios (MLRs) below 80 percent if at all possible (ie., retain 20 percent or more for overhead and profits).

As the market for employer-sponsored health insurance continues to shrink, insurers are now targeting healthier people in the individual market, especially in the 20 to 30s and 50 to 64 age groups. These examples reveal how little coverage these new policies actually provide.

  • Wellpoint and Aetna (the largest and third largest insurer in the country, respectively)  are marketing individual insurance packages for young adults, the fastest growing population of uninsured Americans. They offer these policies in states where looser regulations  don’t get in the way of cherry picking enrollees. Wellpoint offers three Tonik plans with different deductibles (Thrill Seeker, with a $5,000 deductible; Part-time Daredevil, $3,000; and Calculated Risk Taker, $1,500).  None of these plans cover maternity benefits, a leading expense during childbearing years, with average costs for normal pregnancy and delivery now $8,000 to $12,000.  The MLR for these policies is about 70 percent.
  • Aetna’s new Affordable Health Choice plan caps hospital benefits at $2,000 and accident/ER benefits at $1,000.
  • Limited benefit policies being sold to such large employers as Wall Mart and McDonalds often have annual caps as low as $1,000 to $2,000.
  • Some early retirees are opting for high-deductible plans with deductibles as high as $7,500; a 50-year-old male nonsmoker living in Colorado could expect to pay $1,000 for such a policy.

These examples make a mockery of AHIP’s stated goals to “expand access to
high quality, cost-effective health care”, but they do succeed in meeting another of their goals –“product flexibility and innovation”. But at a high cost, much higher than public and not-for-profit programs. Investor-owned Blue Cross plans operate with overhead and profits exceeding 26 percent, in sharp contrast to traditional Medicare, which spends more than 97 percent of its budget on direct medical care, and Kaiser Permanente, which spent 96 percent of premium revenue on patient care in 2000.

Why do we put up with such an expensive industry that provides so little protection against the cost of necessary health care?  Part of the answer is that we are constantly bombarded with the claimed advantages of “choice”. We will look at just how much choice we really have in the next post.

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

Purchase book from Common Courage Press: http://www.commoncouragepress.com/index.cfm?action=book&bookid=396

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Failing grades for individual health insurance market

Posted by on Monday, Jul 7, 2008

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

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

Families USA
June 2008

Key Findings

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

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

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

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

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

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

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

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

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

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

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

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

Consider these facts:

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

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

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

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

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

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

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