Family budgets strained by out-of-pocket health spending

Posted by on Thursday, Dec 18, 2008

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

Living on the Edge: Health Care Expenses Strain Family Budgets

By Peter J. Cunningham, Carolyn Miller, and Alwyn Cassil
Center for Studying Health System Change
December 2008

Affordability of medical care is a central focus of health care reform efforts. As health care costs continue to increase and the economy declines sharply, there is very little cushion in family budgets for health care costs, even for families with insurance coverage. Financial pressures on families from medical bills increase sharply when out-of-pocket spending for health care services exceeds 2.5 percent of family income, according to a new national study by the Center for Studying Health System Change (HSC). Low-income families and people in poor health experience financial pressures at even lower levels of spending, largely because they have already accumulated large medical debts they are unable to pay off.

There is little consensus among policy makers on how to set affordability standards in medical care, in part because there is little empirical evidence to guide these decisions. In addition, most of the policy focus has been on identifying affordability standards for insurance premiums, such as in the Massachusetts health reform, with much less attention on affordability standards for out-of-pocket spending on medical services. Some analysts propose setting affordability standards based on the current distribution of out-of-pocket spending for services, such as typical spending levels for a privately insured, middle-income population.

However, a limitation with this approach is that unlike spending for premiums, mortgages, rents, and other household necessities, out-of-pocket spending on medical care is much less predictable, often unexpected and not entirely discretionary. While families may be able to budget for preventive and routine health care needs, high out-of-pocket medical spending by families is more often associated with urgent or serious health conditions, as well as provider recommendations for treatment, rather than discretionary patient choices. Thus, what people actually spend out of pocket on medical care reflects–at least in part–what they need or are prescribed, not necessarily what they can afford.

Everyone is concerned about health care costs, and there is now a consensus that we must do something about it.

The leading proposals for health care reform are designed primarily to make health insurance affordable, when what we really need to do is make health care affordable. These proposals use insurance product design and tax policies to try to balance the health benefits provided with the ability of the individual to contribute to the premium. In an effort to keep the premium affordable, patient cost sharing is included as an incentive to reduce utilization of both beneficial and marginal health care services and products.

This study demonstrates a major flaw with this approach. Although the family may be able to budget for a modest component of an insurance premium that remains the same each month, family budgets are now so tight that a mere 2.5 percent of family income that might be required for out-of-pocket cost sharing can be a family budget buster. This study shows that cost sharing can impair both family finances and family health care access.

Financing of our health care system should be totally separated from health care access. Even modest financial barriers to access should be removed from the delivery side of health care. Cost sharing has only a negligible impact on our total national health expenditures yet it can have a serious impact on the finances and health of individuals and their families.

On the financing side, attempting to establish insurance premiums that would be affordable based on family income requires an administratively complex system of matching premiums with benefits and using tax policies to establish equitable contributions by families. This is because we have been fixated on the concept that each family must have a specific, designated private health plan and the financing must fit that plan.

It doesn’t have to be that way. Look at the traditional Medicare program. A single risk pool is established for all Medicare beneficiaries and that pool is financed primarily through equitable taxes. Medicare does have cost sharing, but this study shows us that Medicare would serve us even better if cost sharing were eliminated, fully funding the risk pool to cover payment for all essential services.

The most efficient and equitable method of financing health care for all of us would be to establish one single, universal risk pool and fund it with a system of progressive taxes. We can all pay our fair taxes, but, with fairly spartan family budgets now being the norm, we shouldn’t have to budget medical costs that are less predictable, often unexpected, and frequently in excess of discretionary income.

The public insurance option and AHIP's battle against it

Posted by on Wednesday, Dec 17, 2008

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

The Case For Public Plan Choice In National Health Reform

By Jacob S. Hacker, Ph.D.
Berkeley Law Center on Health, Economic, and Family Security
December 16, 2008

This brief has made three main points. First, public health insurance outperforms private insurance in controlling costs while maintaining access and benefits–even when compared with private plans that are regulated to ensure broad coverage. Second, public insurance has also made major strides in quality improvement, and a new public plan working with Medicare alongside private plans would be able to make much greater strides in the future. Third, a competing public plan is essential to set a benchmark for private plans, providing a “check and balance” that ensures private plans, as well as the public plan, uphold high standards.

Even within a reformed system, private plans will continue to have incentives to engage in activities that undermine health security, such as tailoring their benefits or provider networks to discourage less healthy people from enrolling. Moreover, acting alone, private plans have historically paid insufficient attention to obtaining greater value. This is in part because of their limited reach, inherent instability, and the frequent movement of patients in and out of their subscriber base, and in part because of their generally weak incentives to invest in broadly distributed information on quality or to share their performance data with other interested parties. Public plan choice creates an institutional “check and balance,” encouraging private plans to uphold high standards of quality, affordability, and access.

The Case For Public Plan Choice In National Health Reform (27 pages):

Key Findings (2 pages):


Insurers Seek Presence at Health Care Sessions

By Robert Pear
The New York Times
December 17, 2008

When supporters of President-elect Barack Obama hold house parties to discuss ways of fixing the health care system over the next two weeks, they may find some unexpected guests.

Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the main lobby for insurance companies, said the group was “mobilizing our grass-roots coalitions and encouraging industry employees” to participate in meetings for the Obama transition team.

Before Mr. Obama even takes office, insurance companies are raising questions about a central element of his plan that calls for creation of a new public insurance program to compete directly with private insurers. A public program would, they fear, have inherent unfair advantages.;health%20insurance=&sq=+&st=nyt&%2334;=&scp=1&pagewanted=print

In this window of opportunity for health care reform, the model that has gained traction and is moving forward is reform based on a combination of employer-sponsored plans, an individual mandate to purchase regulated private plans through an insurance pool or insurance exchange, and an option to purchase a public plan based on an improved version of Medicare.

The private insurance industry knows that if it is to survive, it must be willing to accept everyone in both the employer-sponsored and individual markets, and they now have expressed a willingness to do so. They support a market of competing health plans, with one exception. They oppose the creation of a new competing public program because it would have “inherent unfair advantages.”

What are those advantages? Jacob Hacker, in “The Case For Public Plan Choice In National Health Reform,” explains the many reasons why a public plan is superior to the private plans in providing greater value through higher quality, better access, and greater effectiveness in controlling costs. He states that, by establishing a level playing field, the public plan option would set a benchmark as a standard for private plan performance.

The private plans profess to believe in market competition. Why should they object to a level playing field? Read this paper and you’ll find twenty pages of reasons on why they cannot compete with a public program.

So we’re once again back to the argument that we cannot go straight to a single payer national health program because it is not politically feasible. But what about the feasibility of a public option in a multi-payer system? The insurance industry is opposed because the government has “unfair advantages.” The Republicans say that they are cooperating on a bipartisan approach to reform, but once the doors close, they have made it very clear that a public option will never be approved. Hacker tells us why the public option is absolutely essential in the multi-payer model, but AHIP and the Republicans tell us that it will never happen (and they have the Senate votes to prevent it).

This report is well worth downloading since it explains so well why we need to change to a public insurance program. With minimal editing, such as removing comments about competing private plan innovation, we could use it as a treatise for a new and improved Medicare – a single payer national health program.

The HCAN coalition could use the unedited version to advocate for the multi-payer model, and we could use the edited version to advocate for single payer. Since neither approach is “feasible,” why don’t we just go for broke? To Medicare for All in one single leap!

Speak up at Sen. Daschle's house parties

Posted by on Tuesday, Dec 16, 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.

Participant Guide for Health Care Community Discussions

Obama-Biden Transition Project

Policy Background and Key Questions

II. The President-elect’s Health Care Plan

Expand Coverage to all Americans:

* Build upon and strengthen employer coverage;

* Allow people to keep the coverage that they have and maintain patients’ choice of doctor;

* Establish a National Health Insurance Exchange that offers a range of private insurance options as well as a new public plan option;

* Require insurance companies to cover pre-existing conditions so all Americans regardless of their health status or history can get comprehensive benefits at fair and stable premiums;

* Expand Medicaid and SCHIP and provide sliding-scale premium assistance for low-income people.


1. Briefly, from your own experience, what do you perceive is the biggest problem in the health system?

2. How do you choose a doctor or hospital? What are your sources of information? How should public policy promote quality health care providers?

3. Have you or your family members ever experienced difficulty paying medical bills? What do you think policy makers can do to address this problem?

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

5. Do you know how much you or your employer pays for health insurance? What should an employer’s role be in a reformed health care system?

6. Below are examples of the types of preventive services Americans should receive. Have you gotten the prevention you should have? If not, how can public policy help?

7. How can public policy promote healthier lifestyles?

Health Care Community Discussion: Host and Moderator Guide

II. Your Role

If you are serving as the moderator, you should not strongly advocate for specific health policy positions. Instead, your role is to listen, facilitate discussion that elicits the views of all attendees, and help the participants draft a submission to the Transition Health Policy Team. In addition, please identify the most compelling personal stories that illustrate the need for health care reform in our country.

To sign up as a host:

Throughout the nation during the next two weeks HHS Secretary-designate Tom Daschle is encouraging grassroots, community level discussions of health care reform. The purpose is to give the public a sense that they are actively involved in the reform process, avoiding a repetition of the Clinton political error of crafting reform behind closed doors.

If you look at both the moderator guide and the participant guide, it’s quite clear that this is not an effort to collect information to guide the policy makers in their decisions. The fundamental policy decisions have already been made, and they are listed above. This is strictly a process to build on the momentum for reform.

We have seen this process before. In 2006, a series of community hearings for the Citizens’ Health Care Working Group (CHCWG) were held throughout the United States:

“When given a choice of ten reform options at public hearings held by the CHCWG, participants clearly favored a national health program by a margin of at least 3 to 1. At meetings where participants were asked to rank the 10 options, national health insurance was ranked first 16 of 19 times (Billings, MT; Denver; Des Moines; Detroit; Eugene, OR; Jackson, MS; Kansas City, MO; Memphis; Miami; New York, NY; Philadelphia; Phoenix; Providence, RI; Sacramento; and Seattle). At two meetings participants were neither polled nor options ranked. Despite the clear public mandate, the CHCWG’s report makes no mention of the vast support for a national health program. Instead, the group’s official recommendations include only generic suggestions such as promoting ‘efforts to improve quality of care and efficiency,’ and finding a way to protect ‘against very high health costs.'” (

The organizers of the CHCWG process were caught off guard by the intense support for a national health program. During the sessions the computer programs had to be modified to include serious consideration of the public insurance option. Yet the final report did not reflect the intensity of this support.

The scripted discussions for Sen. Daschle’s community meetings exclude any consideration of a single payer national health program. The closest they come is to discuss a “public plan like Medicare” that can be purchased as another option to a private plan through an insurance exchange. Yet a legislative staff member for a Democratic Senator recently stated that the “public option” proposal looked at present to be completely blocked by the Republicans – they will only discuss changes based upon the existing private insurance industry. One of the reform negotiators, Republican Senator Mike Enzi, last week wrote, “… we must focus on promoting new options and choices for patients. This means expanding competitive, free market plans – not moving toward a single payer health care system.”

Even though the process is a sham, that doesn’t mean that we shouldn’t speak up. We should do so, though in a civil but firm manner. The very first question asking what is the biggest problem in the health system can be answered by stating that our fragmented financing system based on private plans and public programs is wasting a huge amount of funds that should be used for health care for the uninsured and underinsured, and we can actually do that by replacing our dysfunctional financing system with a single payer national health program. We need to be certain that Sen. Daschle is shocked yet pleasantly surprised to see overwhelming support for single payer about which he has written is “brilliantly simple, ensures equity by providing all people with the same benefits, and saves billions of dollars by creating economies of scale and streamlining administration.”

Be sure to stay at the meetings long enough to be certain that the single payer message is included in the submission to the Transition Health Policy Team. We need to send that message. It remains to be seen whether or not the bureaucrats are going to try to bury it again. If they do, then maybe it’s time for a march on Washington.

OECD Economic Survey of the United States

Posted by on Monday, Dec 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.

Economic Survey of the United States, 2008

OECD (Organization for Economic Cooperation and Development)
Policy Brief
December 2008

The US economy is going through an exceptionally difficult period after having been hit by converging adverse developments, some in reaction to previous excesses during the upswing, others more exogenous. A sharp downturn in the housing market, a financial crisis and temporarily high commodity prices have caused activity to slow sharply during 2008. This happened at a time when the external position was persistently weak and the fiscal stance had become unsustainable in the long term — making for a difficult challenge to steer policy between competing objectives. Policymakers have taken actions to support growth and stabilise the financial system, while keeping a careful eye on inflation expectations. It is nonetheless likely that activity will get worse before it gets better. In addition to these short-term severe difficulties, adverse social trends need to be addressed, including incomplete access to health care, the topic of a special chapter in this Survey.

Health-care reform is needed. Despite health spending being much higher in the United States than in any other OECD country, the US population’s health status does not compare favourably on key indicators, in part because many people do not have adequate financial access to medical care. Starting from the present situation, a plan likely to be successful would replace the health insurance tax exclusion with subsidies for individual purchase of insurance and reform the insurance market as needed. There appears to be wide interest for such reform and numerous packages along these lines have been proposed.

(Omitted here are discussions of the financial crisis and the economic outlook, monetary and fiscal policies, markets for housing finance, and financial sector regulation and supervision.)

* How well does the health system perform?

Notwithstanding very high health spending (about 15% of GDP) and the use of cutting-edge technology, the health status of the US population does not appear to fare well by international comparison.

A particular source of concern is the large number of people who lack adequate health insurance.

Making progress towards health insurance coverage for all Americans should be given a high priority on the policy agenda.

* What could be done to encourage more efficient healthcare purchasing decisions?

The existing health tax exclusion should be terminated.

The tax revenues resulting from the elimination of the tax exclusion would be available to subsidise the purchase of insurance by individuals in a way that is independent of the choice of health plan.

Policy makers should consider means testing these subsidies.

* What could be done to promote health insurance coverage?

At present, the individual health insurance market is not attractive, in part because adverse selection risks have led to high premiums compared to their actuarial value, and because administrative costs are high. These problems could be addressed by increasing the size of risk pools and reforming individual and small-group insurance markets by requiring community-rated and guaranteed-issue policies, thus disconnecting the payments from individual health risks.

This approach would have a greater impact on coverage if accompanied by a requirement to be insured, as otherwise healthy people may choose to be uninsured rather than to pay community-rated premiums, which are higher than experience-rated premiums for healthy people.

Some hospitals seem prone to high-cost procedures without additional benefit to patients, while others seem able to provide lower-cost care that proves to be effective. The authorities should consider ways to enhance the dissemination of information on the effectiveness and cost of treatments and procedures. Savings could also be made by reducing payments to Medicare Advantage (MA) plans.

Currently, Medicare administrators are prohibited from harnessing competition or negotiating prices of medical equipment and supplies; instead, they must use fee schedules based on historical charges. On the basis of pilot programmes, it has been estimated that using a competitive bidding process instead of the fee schedules could reduce costs by 26% on average, based on strict criteria for product quality and security of suppliers, without significantly reducing access of beneficiaries to supplies. Generalisation of competitive bidding for medical equipment and supplies should not be delayed beyond the 18-month period stipulated in recent legislation.

Policy Brief:

Economic Survey of the United States 2008:,3343,en_2649_33733_41803296_1_1_1_1,00.html

The OECD is an important and highly credible resource for economic studies for the 30 member nations. An Economic Survey is published every 1 1/2 to 2 years for each OECD country. The newly released economic survey of the United States will be widely distributed amongst U.S. economists and policy makers.

For supporters of a single payer national health program, this report is not worth downloading. It is presented here only so that you can be aware of it in the event that someone cites it as an important contribution to our national dialogue on health care reform. It isn’t. The recommendations are the opinion of the OECD economists who have a bias toward regulated insurance markets, as opposed to government-administered public health care financing. That’s really all that you need to understand about the health care reform section of this report.

Jeanne Lambrew guides our future

Posted by on Friday, Dec 12, 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 Highlights

The Washington Post
December 11, 2008

Jeanne Lambrew, who helped Daschle write the book about health care reform, will serve as deputy director of the new White House health policy office. Heads of health advocacy groups have described Lambrew as one of Daschle’s most trusted advisers on health issues. She will oversee planning efforts.


Hearing on Economic Recovery, Job Creation and Investment In America

Statement of Jeanne Lambrew, Ph.D., Associate Professor, LBJ School of Public Affairs, University of Texas at Austin, Senior Fellow, Center for American Progress, Action Fund, Austin, Texas
Committee on Ways and Means
October 29,2008

As I will explain, the short-run economic crisis has health policy causes and effects–and arguably the most serious long-run economic challenge is our broken health care system. I’ll conclude with suggestions on policies to address both sets of problems.

A wide range of visions and detailed plans have been developed to fix the broken health system. There is a general consensus on the need to improve quality, efficiency, and access through tools such as better managing chronic disease, promoting prevention, investing in and using comparative effectiveness research, and providing assistance to those with low-income or high-risk. There is less agreement on where, when, and how aggressively to insure more Americans, as can be seen in the presidential candidates’ plans. But rather than discussing these ideas in depth, I will end by making two points on approaches to reform.

The first is the importance of addressing the coverage and cost problems simultaneously. Coverage will continue to erode, even with expansions, if the cost of coverage continues its rapid increase.

Second, solutions should be bold but pragmatic. Important changes to the health system are needed to improve its performance. Realigning payments toward quality and coverage toward prevention, for example, will be necessary but difficult. Increasing participation in health insurance will take resources and regulation. At the same time, changes that are risky or uncertain should be avoided. Specifically, the employer-based health insurance system has its flaws, but remains the primary and trusted source of coverage for most Americans. Public programs like Medicaid and SCHIP are mainstays in the safety net that cannot be easily replaced. And Medicare should be improved but not undermined through arbitrary caps or deep cuts.

No doubt, enacting health reform in the context of economic reform will be hard. But it is not as hard as turning a blind eye while our nation’s health and economic prospects fade due to problems that may be prevented by policy.


The Specter of Socialized Medicine: What Is It and Is It Invading Our Country?

By Marla Bizzle, Denise Fraga, Laurie Seremetis, Jeanne Lambrew
Center for American Progress
May 14, 2008

We’ve stood by and watched the entire industrialized world turn to varying forms of government-supported health care systems for all their citizens. But, in part because of fears about socialized medicine, similar policy changes have been blocked here. What exactly is socialized medicine, and why is it slander in the current health reform debate?

The fact is that socialized medicine in its purest form is difficult to come by in the real world. Some sort of private entity operates or is allowed to operate within almost every health system. These private-entity roles mean that many systems are better classified as single-payer and universal health care systems, which differ from socialized medicine.

To understand the approach to reform that will be supported by President Barack Obama and HHS Secretary Tom Daschle, you need only understand the views of Jeanne Lambrew. Those who have read Sen. Daschle’s “Critical” already have an impression of her views since she was the policy consultant for his book. It is now official that, as deputy director of the new White House health policy office, she will oversee planning efforts for the Obama/Daschle reform program.

Far too much has already been written about the Clintons’ failed attempt at reform. But Jeanne Lambrew was there, and Senators Kennedy, Daschle and Baucus were on the scene. Whatever other lessons were learned, those involved both then and now cannot be dissuaded from their belief that reform, though bold, must also be pragmatic.

One definition of pragmatic provided by the American Heritage Dictionary is “relating to or being the study of cause and effect in historical or political events with emphasis on the practical lessons to be learned from them.”

Jeanne Lambrew has learned that our nation’s health and economic problems can “be prevented by policy.” She has also learned that the specter of socialized medicine should no longer be allowed to block comprehensive reform in the United States.

If pragmatism represents the practical lessons learned, then doesn’t it seem that the pragmatic approach to health reform should represent the most effective and efficient policies, and that we should not be timid in our efforts merely because someone fears that they may hear the term, socialized medicine? Aren’t these the lessons we learned?

Yet Jeanne Lambrew insists on continuing with and expanding our current inefficient, fragmented multi-payer system that can never achieve our goals of equitable, high-quality, comprehensive care for absolutely everyone. She is a brilliant individual who is more informed than most on the policy issues. She rejects the nonsense about the socialized medicine bogeyman. So why does she and the other Washington veterans continue to begin from a position that single payer is not feasible?

The feasibility issue lies within the Senate, with Senator Chuck Grassley as the proxy. He certainly recognizes the problems. He understands the rationale of single payer. He doesn’t accept the disastrous status quo. But feasibility? Is he really going to insist that we abandon important policy choices that would actually work?

You don’t need to answer that. Just look for higher costs, more mediocrity, continued inequity, and adoption of highly flawed, wish-they-would-work policies.

Hospital mortality rates by payment source

Posted by on Thursday, Dec 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.

Mortality in California Hospitals, 2006

State of California
Office of Statewide Health Planning and Development (OSHPD)
November 2008

In-hospital mortality refers to deaths that occur to patients during the time they are hospitalized.

The data sources for these analyses were the Office of Statewide Health Planning and Development (OSHPD) Patient Discharge Data for 2006, which includes death certificate data for 2006 and information for all patients who were hospitalized in California during that year.

Patients paying for care out-of-pocket were 80% more likely to die (Odds Ratio = 1.8) and patients covered by Medi-Cal were 60% more likely to die (Odds Ratio = 1.6), compared with patients covered by private insurance. (From a table in this report, the odds ratio for Medicare was 1.1.)

Although it is tempting to say that being uninsured causes an 80 percent higher death rate for hospitalized patients, and being on Medi-Cal (California’s Medicaid) causes a 60 percent increase in deaths, these population sectors undoubtedly varied in factors other than simply the source of payment for their hospital bills.

For this study, privately insured patients were the reference source (i.e., the base of 1.0 to determine the odds ratio for those with other payment sources). Privately insured patients in California include primarily the younger and relatively healthy workforce and their healthy families, plus those able to pass underwriting standards in the individual health insurance market. It would not be unreasonable to assume that this group would have a lower in-hospital death rate than groups that include older individuals and individuals with greater medical problems.

Medi-Cal is a welfare program for low-income people, a group with other demographic factors that could put them at greater risk of facing lethal medical conditions. The Medi-Cal program is severely underfunded, and that has reduced participation by health care providers, significantly limiting access to care for this more vulnerable population. For this reason health care reform that includes a role for Medicaid is problematic. Although eliminating Medicaid would not eliminate the other negative health factors for this group, a uniform financing system for everyone at least would reduce financial barriers to access.

Of greater concern is the very high death rate in the self-pay group (uninsured). These are people under 65, 80 percent of whom have a head of household who is employed. This is the “working America” sector, but with more modest incomes on average, and in jobs without affordable employer-sponsored health plans. This is a group in which other demographic variants are not nearly as great as this one single factor of not having health insurance. The benefits of health care reform that would include this group in a uniform financing system for everyone are obvious.

The Medicare numbers are interesting. The Medicare sector includes seniors and individuals with long-term disabilities, creating the largest high-risk insurance pool in the nation. You would expect this group to have a much higher death rate than the younger, healthier privately insured sector. Yet Medicare patients have only a 10 percent higher in-hospital death rate than do those from the healthiest sector of our population. Undoubtedly privately insured patients who are hospitalized have developed significant problems, separately them from their peer group. That likely explains why they have an in-hospital death rate approaching that of the high-risk Medicare population.

The real, non-intuitive, take-home lesson is that Medicare patients have an in-hospital death rate that is much lower than the uninsured, much lower than Medi-Cal patients, and that is close to the death rate of the younger, privately insured patients.

Medicare is a program that works. With some improvements, it would serve all of us well while eliminating the waste and inequities of our dysfunctional, fragmented, multi-payer system.

AARP/UnitedHealth bait and switch

Posted by on Wednesday, Dec 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.

AARP collects royalties, fees from insurers it endorses

By Gary Cohn and Darrell Preston
The Boston Globe
December 5, 2008

(AARP) collects hundreds of millions of dollars annually from insurers who pay for AARP’s endorsement of their policies.

The insurance companies build the cost of these so-called royalties and fees, which amounted to $497.6 million in 2007, into the premiums they charge AARP members, according to AARP’s consolidated financial statement for that year (all insurance products, not just health).

Nowhere were AARP’s conflicting roles more evident than in its lobbying in support of a 2003 bill proposed by President Bush to expand Medicare, the federal health insurance program for people older than 65.

After the Medicare bill was signed into law by Bush in December 2003, AARP was able to expand its contract with Minnetonka, Minnesota-based UnitedHealth Group Inc., which underwrites AARP’s Medicare supplemental insurance plan.

AARP advertises that its Medicare supplemental insurance can save people thousands of dollars. While every type of supplemental policy sold by all companies must offer the same exact coverage under federal rules, AARP doesn’t sell the least expensive.

The AARP/UnitedHealth basic policy costs $582 a year more than a lower-cost competitor in New York and $428 more in Los Angeles, according to data on Medicare’s webpage.

This is yet another example of the profound administrative waste that characterizes health care financing in the United States. Beyond the administrative excesses of AARP’s insurer, UnitedHealth, AARP has inserted itself as another middleman, providing yet another layer of administration, with none of those extra funds going to pay for health care.

A prime example of this excess administrative waste is found in the AARP/UnitedHealth Medigap plans. Congress recognized that the insurers were ripping off our senior citizens by selling Medigap policies that were impossible to compare. Congress then passed legislation requiring that each plan provide the exact same benefits so that it was possible to compare value based on the premium charged for each plan. The Boston Globe article demonstrates that the AARP/UnitedHealth plans have premiums that are about $500 higher, presumably because of the insertion of AARP as a superfluous middleman.

Plan F is the most common Medigap plan selected by Medicare beneficiaries, which is the plan my wife and I have. To see how much more the AARP/UnitedHealth Plan F would cost us compared to our current coverage, I went to their website to get a quote. I found out that the quote for both of us was about $500 less than we are paying! So what gives?

Looking more closely at the table of rates on the AARP/UnitedHealth website, it turns out that these are “first year early enrollment discount rates” that apply only to “new AARP Medicare Supplement Plan enrollees.” Nowhere was there any indication nor any link that would tell you what the second year rates would be. AARP/UnitedHealth has used a classic bait and switch scam to deceive our seniors and circumvent the intent of Congress to provide transparency in the purchase of Medigap plans.

Those currently crafting health care reform tell us that we need an “American solution” using the private insurance industry, and all we need to do is regulate the insurers so that their products will provide us with value. Congress has already regulated the Medigap plans, and what did we get? Even greater administrative waste, but worse, a profoundly dishonest bait and switch scam.

The private insurers have failed this test. No matter how much we regulate them, the private insurers will always find other ways to stick it to us. Their institutional investors will demand that they do so. It’s time time to dump them and adopt a publicly-administered and publicly-financed single payer system that is designed specifically to help patients instead of investors.

Lawrence Livermore retirees lose choice of keeping their health plan

Posted by on Tuesday, Dec 9, 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.

Lab retirees cry foul at health coverage switch

By Suzanne Bohan
San Jose Mercury News – Alameda County
December 5, 2008

One by one, Lawrence Livermore Laboratory retirees took the microphone at a forum this week, and described their confusion, anxiety and anger over dramatic changes under way with their retiree health care benefits.

The crowd of nearly 300 retired scientists, engineers, mechanics and other lab workers, along with some spouses, took to occasional taunts during a Wednesday morning presentation here by the new plan administrator and applauded at pointedly critical remarks.

This year, nearly 4,200 lab retirees and their spouses lose the group health coverage plan they have had. It was first provided by the University of California, which formerly managed Lawrence Livermore Laboratory. They then joined a group plan with virtually identical benefits offered by Lawrence Livermore National Security, or LLNS, a partnership including UC and Bechtel Corporation, which took over lab management in 2007.

And some 2,400 who took early retirement from the lab will also lose the lab’s group coverage when they turn 65 and become eligible for Medicare.

In its place, this year the lab’s Medicare-eligible retirees will join a new trend in the provision of health care benefits — called “defined contributions” — that allows employers to shift the cost of rising health care premiums onto recipients.

With defined contributions, an employer lays out a limited pot of money, typically annually, and the recipient uses it to purchase health care insurance on the open market, and to cover co-payments, deductibles and other health care expenses. Livermore lab retirees, and their spouses, will each get $2,400 annually. Any amount unused rolls over into the next year. But any costs beyond that are paid by the retiree.

Extend Health Inc., which is partly owned by America Online founder Steve Case’s Revolution Health, is now the contact point for lab retirees on Medicare. The firm acts as a health insurance broker, offering more than 170,000 plans nationwide from an array of insurers. Trained advisers work with retirees to sift though the options to find the best plan. Retirees then pay their premiums directly and are reimbursed from their $2,400 yearly allotment.

Alain Enthoven, an emeritus professor with Stanford University’s Graduate School of Business who sits on Extend Health’s advisory board, sympathized with the trauma of changing health plans but said the movement toward defined contributions is essential for controlling costs by making recipients more conscious of health care expenses, which have been rising every year since the late 1990s.

“What most people have is too good to be true,” said Enthoven, one of the early pioneers in the managed care movement.

“People are not going to go on having what they had in the past,” Enthoven continued. “It’s just not a sustainable model.”

Mark Beach, a spokesman for the AARP’s California office, agreed that health care reform requires more sharing of costs by individuals.

“Any intellectual worth their salt will say that’s a part of containing costs,” he said.

The current Democratic proposals for health care reform promise that you can keep the health insurance you have, if that’s what you prefer. This policy was included in the reform models to avoid losing the support of those who have been promised life-long coverage with very generous plans. Career scientists and engineers at the prestigious Lawrence Livermore Laboratory, managed by the University of California, were secure in knowing that nothing could happen to their excellent, life-long coverage offered as a perk to attract the best.

Enter Bechtel Corporation. After one year, their life-long retirement coverage is dropped, and they are given an annual defined contribution of $2400 to supplement the basic Medicare program. Just wait until the Medicare Advantage subsidies are cut back, and then see what they can purchase with that. None of them were given the option of keeping the plan they had.

Alain Enthoven says that their coverage was “too good to be true” and was “not sustainable.” So in his view what is sustainable is a shift to a defined contribution, which may make individuals better health insurance shoppers, but does so with the tradeoff of making access to actual health care less affordable. That has adverse health consequences.

Costs can be contained without creating financial barriers to care simply by adopting a single payer national health program. But according to AARP’s spokesman, apparently us intellectuals who would reduce patient cost sharing to improve access simply aren’t worth our salt. Now that really advances the health policy dialogue.

The important message here is that this is only one of thousands of examples where individuals who wanted to keep the insurance they had were not allowed to do so. It was not their choice. Some of the many reasons that individuals involuntarily lose their coverage were discussed in a previous Quote of the Day. Since our politicians are about to provide us with reform that allows us to keep the coverage we have, it would be of value to review that message now to see why keeping the coverage you have is only a fantasy for most of us.

Sen. Daschle's "Critical"

Posted by on Monday, Dec 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.

Critical: What We Can Do About the Health-Care Crisis

By Senator Tom Daschle, with Scott S. Greenberger and Jeanne M. Lambrew
Thomas Dunne Books, February 2008

The key question for any health-care reform plan is, “How will it cover people?” Most of the world’s highest-ranking health-care systems employ some kind of “single-payer” strategy – that is, the government, directly or through insurers, is responsible for paying doctors, hospitals, and other health-care providers. Supporters say single-payer is brilliantly simple, ensures equity by providing all people with the same benefits, and saves billions of dollars by creating economies of scale and streamlining administration. But pure single-payer system is politically problematic in the United States, at least right now. Even though polls show that seniors are happier with Medicare than younger people are with their private insurance, opponents of reform have demonized government-run systems as “socialized medicine.”

I have strong views on what an “ideal” system would look like. But I’m not willing to sacrifice worthy improvements on the altar of perfection. I find it encouraging that the leading Democratic presidential contenders appear to share this attitude. The proposals that Obama, Clinton, and Edwards put forward would improve our current system rather than scrapping it, using the Massachusetts reform plan as a model.

The Federal Health Board

I believe a Federal Health Board should be charged with establishing the system’s framework and filling in most of the details. This independent board would be insulated from political pressure and, at the same time, accountable to elected officials and the American people.

First, it would set the rules for the expanded FEHBP, placing conditions on the private insurers wishing to participate.

Second, the Federal Health Board would promote “high-value” medical care by recommending coverage of those drugs and procedures backed by solid evidence.

A third function of the Federal Health Board would be to align incentives with high-quality care.

Finally, the Federal Health Board might also play a role in rationalizing our health-care infrastructure.

When it was announced that Tom Daschle was Barack Obama’s choice to be Secretary of Health and Human Services, it was also announced that he would not only be an administrator, but also he would lead the team that is crafting the definitive health care reform proposal for the Obama administration. That is why Sen. Daschle’s book, “Critical,” is important to us. It provides us with the views of the person who will be working with Congress to reform our health care system.

The fundamentals of his proposal are essentially the same as those proposed by Barack Obama, Max Baucus, and most of the other Democrats who have been advocating for reform. He would continue employer-sponsored coverage, expand public programs, and provide an FEHBP-type program, including a Medicare-like option. He would attempt to achieve universal coverage through an individual mandate with financial assistance for lower-income individuals.

Daschle also includes other concepts that are making the political rounds, such as information systems, community health centers, quality measurements, and “shared responsibility.”

One essential reform that seems to be missing from his proposal is the need to reinforce our primary care infrastructure, providing everyone with a medical home. Maybe that could be extrapolated from his call for rationalizing our health care infrastructure, but, if so, it is of such great importance that he should advocate for it explicitly.

What is relatively unique in Daschle’s proposal is the recommendation for a Federal Health Board, based on a model similar to the Federal Reserve System. One of the more important functions would be to provide oversight of the private insurance industry in his multi-payer system, a role that would be unnecessary in a single payer system. The other functions he describes can easily be or already are provided by existing agencies, though introduction of a single payer system would certainly be accompanied with appropriate bureaucratic reform.

Although he recommends that this board be quasi-independent, insulated from political influence, there is still risk that ideological extremists could gain control. Think of the failure of the Federal Reserve System to provide adequate oversight of our financial system, contributing to our current financial meltdown. That might not have occurred if free-market ideologues such as Alan Greenspan had not been in charge of the Federal Reserve. The Supreme Court is also insulated from political interference, yet obviously it too is controlled by ideologues, over whom we have no control. Imagine if we had a Federal Health Board composed of those individuals who, through the Medicare Modernization Act, damaged our public Medicare program. If they had been in control of such a board, we could have been much further down the road toward their goal of a totally privatized Medicare system.

Most troubling is Sen. Daschle’s conclusions on single payer. He describes it as the model used by the “world’s highest-ranking health care systems.” He acknowledges, without dispute, that supporters say that it is “brilliantly simple, ensures equity by providing all people with the same benefits, and saves billions of dollars by creating economies of scale and streamlining administration.” Yet he rejects it merely because it is “politically problematic.” He would sacrifice the “ideal” system because he is “not willing to sacrifice worthy improvements on the altar of perfection.”

It certainly is true that opportunities for enacting beneficial policies can be missed when the politics are not in alignment. But it is also true that bringing the politics into alignment can eliminate the opportunity to enact ideal policies. For success in achieving a high-performance health care system, we shouldn’t sacrifice policy; we should change the politics.

The Doctor’s Door

Posted by on Sunday, Dec 7, 2008

“The Doctor’s Door” by Michael Merenda. Work in progress – unfinished and not released. Performed by Mike and Ruthy.

The Doctor’s Door

The Doctor’s Door
by Michael Merenda

In my youth I traveled
Over land and sea
I fell in love with a farmer’s daughter
And she fell in love with me

Before long we’d married
I took her from her home
Very shortly after that
Something went terribly wrong

I’d gotten her with child
We were of course overjoyed
Until the fever took her body
And neither of us were employed

I went to the door of the doctor
Said, “Help us, Sir, if you can.”
He said he’d not see us without
Five gold pieces in our hand

“Sir, I’ve no gold pieces
But I’ll be forever in your debt
If you would only save my wife
And this unborn child I’ve never met.”

O, the night blew rainy
O, the night blew cold
And my young wife she died that night
Under the doctor’s door

Now that you’ve heard my story
Hang your head and cry
How the rich man turned his back
And let the poor woman die

In my youth I traveled
Over land and sea
I fell in love with a farmer’s daughter
And she fell in love with me

© 2008 Concert Works Music, ASCAP
Reproduced with permission of the author.

Michael Merenda, writer, composer, musician, – an amazing young artist, – is a new father. We heard him in a breathtaking performance with Ruth Ungar Merenda.
Mike and Ruthy, proud parents of infant Will, brought their son to the show. Mike mentioned that although he wrote “The Doctor’s Door” when Ruth was pregnant, he needed to wait until after the baby arrived to perform the song.

We understand! The song speaks so well to the shame and anguish we suffer, but also to our higher calling as physicians.

The members of Physicians for a National Health Program believe it is time to open the doctors’ doors. PNHP members include people like Drs. Arnold Ritterband and Benjamin Friedell. Dr. Friedell founded the Oneonta Free Clinic and Dr. Ritterband founded the Schenectady Free Health Clinic.

PNHP reflects the true calling of our profession: to serve our fellow human beings. We must not allow money interests to ruin the human relation of caregiving. Here PNHP not only reflects the ideals of our profession, but real physician values: 59% of American physicians would prefer to practice under a system of national health insurance.

We not only take to heart the higher purpose of our profession, but the higher purpose of our society. Democracy in the United States has failed when our country has more infant death and more maternal death per pregnancy than any other developed nation. Is health not the foundation of personal freedom?

Michael Merenda’s song inspires us to work harder to win the day when we will hang our heads and cry no more, when we will proudly say that in the United States no one goes without health care.

Thank you, Mike and Ruthy!

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