Means Testing, for Medicare

By Tyler Cowen
The New York Times
July 20, 2008

As Mark V. Pauly, professor of health care systems at the University of Pennsylvania, has said, “Medicare as we know it today cannot be sustained over the next 50 years and probably will run into financial difficulties within the next 15.”

There’s one important idea lurking in the shadows that neither campaign is keen to talk about: paying out government benefits more efficiently. To put it bluntly, it means paying out full benefits only to those who really need them, and cutting back on payments to everybody else.

“Means testing” — cutting back on payments to the relatively wealthy — is one way to better allocate benefits. For health care costs, this could be done by expanding Medicaid, which is focused on the needs of the poor… At the same time, the government would need to limit the growth of Medicare… With limited resources, it would be better to reallocate health care subsidies toward the poor…

An alternative path is to put in place more means testing throughout Medicare.

The best option is probably to tie the size of Medicare benefits to a person’s lifetime income, which is relatively easily measured and hard to game, rather than to one’s income or assets in any current year. In essence, higher earners would receive lower benefits instead of facing the prospect of higher taxes, as current trends predict. This policy reflects an ethic of individual responsibility — namely, that people who have earned well throughout their lives should be expected to take care of themselves, precisely so that the truly unfortunate can be helped.

Tyler Cowen is a professor of economics at George Mason University.

http://www.nytimes.com/2008/07/20/business/economy/20view.html?ref=economy

Everyone agrees that health care is now so expensive that those of modest means cannot be expected to contribute as much to the financing of health care as those who are more affluent. Traditionally, the Medicare program has been financed primarily through a common risk pool with contributions paid based on income levels. Now, instead of establishing equity through the revenue side of the balance sheet, efforts are being made to shift equity, or the appearance of equity, over to the benefit/expenditure side.

(For this discussion, revenues are considered to be Part A payroll taxes, and Part B general revenue taxes plus Part B premiums; supplemental premiums, deductibles and coinsurance are considered to be adjustments to the benefits.)

The Medicare Modernization Act, which established the Party D drug benefit, was an effort not only to privatize Medicare but to shift more of the responsibility of paying for care to the individual beneficiaries. The first step towards shifting the funding to the benefit side was the establishment of a means-tested premium for the Part D program. Those with higher incomes pay larger premiums. What could be wrong with that?

Professor Cowen doesn’t really hide the potential impact of means-tested benefits, including means-tested premiums and cost sharing. He suggests that those of limited means (now the majority) should be placed in a Medicaid-like welfare program, while the wealthy pay for more of their care with private funds. This is an explicit endorsement of two-tiered health care: the finest care money can buy for the wealthy, and under-funded mediocre care for the rest of us.

Professor Cowen states, “This policy reflects an ethic of individual responsibility.” That is precisely the problem. It rejects the concept of social solidarity: the glue that holds together the people of all other societies that have universal, comprehensive health care systems.

Financing health care through revenues paid into a single, universal risk pool establishes equity by using progressive tax policies, while providing broad political support for a program from which we would all benefit equally. Providing benefit levels inversely related to life-time income might create the appearance of equity, but, in fact, it destroys equity by forcing many of us into a welfare program, impairing access to the health care that we need.

Instead of means-testing our people, maybe we need to start mean-testing the economists and reject those who really are mean.

The emergency room provides a crucial vessel for our community, a place where, at some unexpected moment, each of us might need to pour all of our hopes. Perhaps that is why the video of the unattended waiting room death of Esmin Green, an appalling, preventable tragedy, inspires such anguish and outrage.

As the New York Times reported:

“I can’t explain what happened there,” Mayor Michael R. Bloomberg said.

Someone may need to clue Mr. Bloomberg in. This death appears to be a result of systemic failure in two areas in which the mayor is credited with great expertise: public health and public management.

ER delays have become routine in America, even as they prove deadly. We remember Edith Rodriguez, Christopher Jones, Beatrice Vance and recognize that many unknown others have died waiting for emergency care.

Hospital ERs, by law, must welcome all patients who present for treatment. Hence last year’s Presidential quip, “I mean, people have access to health care in America. After all, you just go to an emergency room.” Yet over recent years we have seen our ERs progressively overwhelmed.

The Institute of Medicine reported in 2006 that ER visits climbed more than 25 percent over ten years while the number of hospital emergency departments declined by about 10 percent. No wonder we have overcrowded ERs and longer wait times.

For several years the fact that emergency room delays can mean life or death has made its way into the mainstream discussion.

This year, a benchmark study, by Dr. Andrew Wilper and other Harvard researchers, published in Health Affairs, found that heart attack patients admitted to the ER in 1997 typically waited 8 minutes for treatment, but in 2004 waited 20 minutes, a 150 percent increase.

Because hospitals often lack sufficient inpatient beds, as well as nurses, critically ill or mentally ill ER patients “boarding in the ER,” waiting for intensive care or a psychiatric unit can create a bottleneck, leading to a backup for hours, even days, ultimately causing the diversion of ambulances to another hospital and a greater risk of death for those who are critically ill.

Surprisingly, insured Americans crowd the ERs, not the uninsured. This spring the Annals of Emergency Medicine published a study by Dr. Ellen Weber (and others) that shows the proportion of the uninsured who go to the emergency room declined modestly over a 7 year period, a time when the proportion of uninsured in America rose steadily.

Private health insurance has erected financial disincentives that convince patients to avoid care, for the costs of premiums, co-pays, deductibles and other out-of-pocket expenses have outstripped wages. These days far too many, insured and uninsured, wait to seek medical attention until they are simply too sick to avoid the emergency room. And far too many lack primary and preventive care.

If patients who leave the ER are likely to find themselves bewildered about their treatment, what it means to have insurance “coverage” can be more confusing. A visit to the ER can bring on the up-front co-pay, the daunting deductible (listed on the bill as the “patient responsibility”), as well as other unaffordable out-of-pocket costs, all of which combine to clobber our families financially.

Crowding in the ER weighs upon caregivers too. To be sure those who work in the ER witness terrible human suffering, often bravely, with an an expected psychological toll. Yet confronting wholly unjustified tragedies, products of the system itself, threaten “burnout” – and these frustrations mount along recurring themes like too many patients whose emergency might have been prevented if they had a primary care provider, too few staff, too few beds or a lack of specialty services for sick patients.

With grim consequences for patients, some specialists and primary care doctors no longer take call to back up the ER. For example the St. Petersburg Times reports: “If you sever your fingers in Florida, Tampa may be the only place to get them sewn back on.” (What happens to patients with such injuries at the other 200+ Florida hospitals with ERs?!)

Ambulatory surgical centers, encouraged by private health insurance payments, compete with hospitals for insured patients, thus diverting patients, specialists and revenue away from hospitals. (In contrast, specialist on call to the emergency room find unpredictable off-hours demands, where patients are likely to be high risk and possibly underinsured or uninsured.) Market forces thus undermine our ERs.

Where the percentage of low-income patients tends to be great, specialists tend to be scarce, increasing the likelihood that a severely ill patient (from a hospital that serves a low-income area) may need to go on to another hospital for inpatient care. Health disparities, by race and by region, have grown worse, not better, in recent years. While American life expectancy overall has increased, “the life expectancy of a significant segment of the population is actually declining or at best stagnating.” How is this possible when health spending, per person, is more than 50% more in the United States than any other nation?

The indignities of the emergency room worsen as disparities in American health care grow. We must not allow our front-line colleagues, ER nurses and doctors, in whose hands we place the hopes of our community, to struggle in isolation. Local solutions will not be found to solve systemic, nationwide problems.

Swamped with patients, many of whom have already delayed seeking medical attention, and starved of resources and specialists, our ERs are ailing. The perverse incentives that drag down our ERs – and thus all of us – are the product of the American system of health care financing: private health insurance.

“Systemic failure” led to Esmin Green’s death. These words in the New York Times reflect public awareness of the nationwide crisis in American health care.

Private health insurance, with its unaffordable costs and its billing games, with its intolerable intrusions into personal and professional decisions, undermines both patients and caregivers. Private health insurance must be replaced by public financing.

Single-payer reform of the American health system offers the minimum incremental change needed to improve the care of patients, lessen inequalities and disparities in care, defend and expand patient choice and autonomy, redistribute resources toward care, toward our emergency rooms, and away from bureaucratic waste, profit-making, personal gain and thus reign in costs.

For the health of our nation, for the sake of our emergency room patients and caregivers, we need single payer now.

Something interesting is happening. First, “Health Care for America Now” (HCAN) announced their $40 million K-street-based grand coalition, that had many good points to it, but tried to take Single Payer off the agenda. Then they put up a Blog on their website, and it promptly filled up with the real grassroots supporting Single Payer and calling them out on it. Then one of their coalition partners, the AFL-CIO put up a Blog supporting HCAN… five out of five commenters supported Single Payer… and then they closed comments! Meanwhile back at HCAN, their blogs continue to fill up with Single Payer advocates. Apparently we are the real grass roots after all.

While the beltway and people “who knew better” did little after 1994, it has been Single Payer advocates who continued more then anybody to do the hard work of actually building a grassroots infrastructure and support.

As Jon Cohn admitted:

You can see it in the press coverage, as reporters, myself included, hype the work of lawmakers like Senator Ron Wyden, who has been pushing a bipartisan bill that would give everybody private insurance. Meanwhile, almost nobody bothers to interview Representative John Conyers, even though his single-payer bill has 90 co-sponsors–not enough to earn it passage, perhaps, but surely enough to earn it a place in the conversation.

Actually HR-676 now has 91 co-sponsers, having added one more just this past week.

HR-676 has been endorsed by over 417 union organizations in 48 states including 107 Central Labor Councils and Area Labor Federations and 33 state AFL-CIO’s (KY, PA, CT, OH, DE, ND, WA, SC, WY, VT, FL, WI, WV, SD, NC, MO,MN, ME, AR, MD-DC, TX, IA, AZ, TN, OR, GA, OK, KS, CO, IN, AL, CA & AK).

It has the vigourous support of the largest Nurse’s Union (CNA/NNOC), and the largest Nurses professional association (ANA). And the National Association of Social Workers.

It was endorsed last year by largest physician specialty group, the American College of Physicians which represents Internists, and in a recent editorial in their professional journal (.pdf).

And of course Physicians for a National Program (PNHP) with organized activists in most States.

It has been recently endorsed by the U..S. Conference of Mayors.

Oh yes… HR-676 has also been endorsed by the Assembly of the Urban Caucus of the Episcopal Church, General Board on Global Ministries of the United Methodist Church and the Presbyterian Health, Education and Welfare Association of the Presbyterian Church (USA). And most recently Unitarian-Universalist.

We have explained why as a matter of policy it is a mistake to take Single Payer off the table and to ignore John Conyers HR-676.

So, just maybe it is not a good idea to ignore us or tell us shut up. We have explained why it is wrong as a matter of strategy, politics and real coalition building.

None of us wants there to be no real reform (even if it is a first step) in 2009-2010!

But do not ignore us.
Do not tell us to shut up.
Do not tell us to go away.
Do not ask for our support after the fact.

So here is a deal… You include single payer advocates at the table from the beginning, you leave single payer in as an option, and I (speaking just for myself, not necessarily PNHP as an organization) won’t insist on it as the only option. This is just the beginning of the fight with AHIP, Pharma, the for-profit hospitals… there’s no need to take any of our chips off the table before real negotiations even begin. Let us organize and fight together?

Insurance industry forming activist army

By Chris Frates
POLITICO
July 16, 2008

Ahead of the approaching health care reform storm, the insurance industry is building an ark: a nationwide education campaign aimed at raising an activist army at least 100,000 strong.

The unprecedented effort by America’s Health Insurance Plans, called the Campaign for an American Solution, includes a nationwide listening tour, advertising and an intense recruitment effort aimed at signing up Americans who are satisfied with their private insurance coverage.

Often viewed in Washington as a faceless, profit-driven industry, health insurers hope that hitting the road and starting a fan club will help lawmakers better understand the value of their products.

The group is pushing for universal coverage through strengthened private/public partnership. The industry wants to expand access to Medicaid and the state Children’s Health Insurance Program; provide tax credits to parents covering their children with private insurance; and create more portable and flexible tax-free health savings accounts, (AHIP spokesman Michael) Tuffin said.

If states were to provide coverage for those too expensive to insure, he said, the industry would be willing to offer guaranteed coverage to everyone else…

http://www.politico.com/news/stories/0708/11814.html

So the insurance industry wants to sign up 100,000 individuals in its fan club to provide free marketing for the private insurance concept. In spite of criticisms, the industry has not changed its goals. They want taxpayers to provide coverage for those too expensive to insure – the 20 percent of people who are responsible for 80 percent of health care costs, but the industry is quite willing to offer guaranteed coverage to everyone else – the 80 percent of people who are quite healthy.

Just imagine the placards that these fan club members might carry at the demonstrations supporting the private insurance industry:

KEEP THE SICK OUT OF MY HEALTH PLAN!

SOCIAL INSURANCE SUCKS!

WE WANT CHEAP HEALTH INSURANCE – NOT EXPENSIVE HEALTH CARE!

MEDICARE MY A**!

NO PATIENCE FOR PATIENTS!

LONG LIVE PRIVATE INSURANCE MARKETS!

DON’T TAX ME – TAX THAT SICK ONE BEHIND THE TREE!

We who are advocates for the Single Payer (aka: expanded and improved Medicare for all) approach to acheving real universal health coverage in the United States are often accused of being zealots opposing the supposedly acheivable good (pre-compromising proposals like HCAN’s) for the an idealistic unacheivable best. A more balanced then most version of this argument appears under the title Single Minded by Jon Cohn in the New Republic.  Don McCanne has a response here.

But as a one of those who has supported the obvious need for some sort of “universal health care” since I was first learned about the issue as a college and medical student in the 1980s, and only came to single payer per se recently, I have a few of my own points to make:

1: Strong or Weak?

Ironically, we single payer advocates are apparently so weak that we should be dismissed out of hand and not even have a seat at the negotiating table? But then again we are also strong enough to be warned not to wreck “doable reform”?

It is the Beltway sensible moderates who have worked hard to ignore the actual presendce of single-payer grassroots and to exclude its advocates from the table, not the other way around. And frankly, it is tiresome to be dismissed upfront (and then be blamed for not participating or getting on board).

We are the ones who actually have a real grassroots movement. The single payer proposal in Congress, HR-676, has more signed-on co-sponsors then then any other “universal health reform bill.” It has a higher percent of the House then the Wyden bill has in the Senate. HCAN could have included single payer advocates as part of their mix, could have included support for HR-676 “Improved and expanded Medicare for All” as one option still in the mix of possibilities to be promoted; in their language and in their “poll”; etc.). First they exclude us from the table, then they call us rejectionist zealots after the fact.

I first encountered this back in 1992 after Bill Clinton was elected with our support, and they actively kept single payer advocates from the pre-inaugural economic summit. Similarly we were kept out of participating in the closed door development of the Clinton health plan during 1992-1994. More recently there was the so called Citizens’ Health Care Working Group, where the citizens part supported single payer but the establishment organizers made sure they were ignored. Similarly during the early part of the primaries, during the Clinton listening tour in 2007, citizens for single payer were a majority at many of her gatherings, but were actively ignored. Most recently, leading up to HCAN, there have been numerous conference call by the “Unity” group at which single-payer advocates are told to be quiet and “get over it”. At a Health Affairs sponsered press conference in D.C., ostensibly for discussing just the candidates Obama and McCain plans, other folks from AHIP, Wyden, etc., were in fact also invited and spoke. Nobody from Conyers office or single-payer groups was invited ahead of time.

Unlike those with $40 million K-street campaign-cycle-only Ads, we are the ones who have been working at the real grassroots level to inform the public and health care professionals since the last pre-compromise plan went down in flames (not due to us) in 1994. WE have made progress, as noted by the recent survey published in the Annals of Internal Medcine showing a 59% of U.S. physicians would be in favor of a single payer system, up 10%.

2: Strategy of Pre-Compromising with the Insurance Companies?

No matter what “Reform” is proposed the opposition – AHIP, Pharma, the for-profit hospitals, and free market fundamentalists will start off by opposing it. We don’t see the advantage of pre-compromising before the negotiations even begin. I prefer to keep all my bargaining chips until the real negotiations begin.

3: Politics and Overton Window & Framing?

Putting aside for the moment that we are correct as a matter of pure policy; just as a matter of politics does it make sense for us to shut-up? There is the Overton Window argument.

For those who do argue for pre-compromised mixed plan on the basis of political expediency/feasibility, is it not really better for them to also have folks arguing from their left? Is it not a good thing to have some pull from left, while they are also being fought from the right by AHIP and free market fundementalists?

Is this not part of the success the right had? What was crazy talk in the National Review in the 1950s, and a political failure with Goldwater in 1964, becomes the “success” (tax cuts, supply side, deregulation, government is the problem) of Reagan/Bush.

More recently we see the example of same-sex relationships as a case of moving successfully the goal posts. Crazy talk that becomes acceptable in compromise fashion (civil union; state benefit rights) and slowly (but surely?) marriage. Historically we can think of ending slavery, and the vote for women. There were always folks calling for half-way compromise. But the more the side that seemed more “extreme” but in fact had truth and reality on their side won in the end.

For those who prefer, and think that one wins, by framing a policy as a clear moral message, the single payer approach also offers the better way. HCAN starts off by saying that the for-profit private insurance companies are the problem, but then goes on to keep them as wasteful distorting middlemen. Rather then deliberately pre-compromising and keeping keeping the identified problem in the mix, we say who need them, get rid of them. It is similar to the confusing and mixed message the ever so clever moderates came up with of paying for SCHIP expansion with cigarette taxes. A simpler message with moral clarity is what Single Payer offers.

4: Perceived Political Feasibility Aside, Which Reform Will Work?

PNHP’s role and goal is to advocate for the the actual best plan, the one that can actually work to provide coverage that is not only universal, but also that is comprehensive, affordable to individuals and families, and also acheives system wide control of costs. Single Payer, as embodied by HR-676, Improved and Expanded Medicare for All can do this.

The U.S. already spends as much as Europe and the other developed countries do on it public sector health coverage; they provide universal; we are already in effect paying for it, but don’t get it. Keeping the for-profit private insurance companies in the mix allows them to continue to game the system (e.g. skimming the healthy and wealthy; dumping the sick, poor, old on the public system). Continued subsidizing of the wasteful for-profit private insurance companies forgoes $350 savings billion per year. 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.

Alas, 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; indeed so far the increase in coverage in the new Massachusetts plan is among to poor who get public coverage, and the effect if any of mandates and regulated private coverage has not been seen yet. 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.

Single Payer is the one that also control costs! CBO and GAO have previously scored single payer as most economically feasible. So has Lewin on numerous State single payer proposals. So not only does single payer provide care that is more universal and comprehensive then the other reform proposals, it does so with greater cost saving then HCAN or Obama or Wyden-Bennett or McCain. We are correct as a matter of policy and economics.

5: Who Wins “I Told You So” After the Next “Reform” Fails?

It is also a matter of who gets to win the “I told you so” argument after the next reform passes, and if it fails as Single Payer advocates believe it will. At the very least we want to be sure that after the next reform does pass, that if it fails, the next step is forward to single-payer (”see you left the private for-profit in as wasteful cheating unneeded intermediaries”), and not backward (”see government tries to reform things and it went badly”) to market fundamentalism. This is very important, since something is likely to pass after the 2008 elections and I fear for what it will and will not bring.

6: We Are Not Spoilers!

How dare others, especially folks not actually working in health care and for those who are underserved, call us spoilers! Like many other single-payer activists, I already work in the frontlines of providing care to those who are uninsured and underinsured. Many of the PNHP’ers and other single-payer advocates that I know have as their real full time day jobs just such work. And guess what? We could be earning a lot more if we worked elsewhere. Unlike the K-street lobbyists and full time corporate supported think-tanker’s, we are mostly volunteers doing this in addition to the work that pays the bills. Supporters of HR-676, both grassroots, and the 90 co-sponsers in the House, are ALSO the same folks who have always been at the forefront of all the immediate short-term reforms and fights such as those for SCHIP, Medicaid expansion, saving the Medicare from the privatizers, etc. We are hardly rejecting the good/mediocre for the perfect. It sure as heck was not us who shot down the Clinton proposal, even thought they thought they a had a pre-compromised deal with AHIP, in 1994. And frankly, despite some claims, it was not CNA or other single payer advocates who shot down the Schwarzenegger Rube Goldberg-kludge of a plan in California last year. Indeed, case in point, it was the ridiculous economics of that plan which killed it, even though, once again, Lewin had scored California single-payor favorably.

I can’t speak for any individual other then myself, but at the very end of the day I won’t be the reason a half-decent reform does not pass. But, meanwhile, I will fight for it to be at least three-quarters decent instead. But meanwhile “god forbid” we should actually argue for the actual best policy at the beginning.

Oddly in the Jon Cohn article it is Andy Stern who is cited as asking for our grassroots support to make a differnce. This joiner of every compromising coalition there has been (including with WalMart and AHIP), may not be the best spokesperson for calling out single payer advocates. He has his own separatist and exclusionary agendas with regard to some single payer advocating unions such as CNA and many AFL-CIO affiliates. Actually several SEIU locals have endorsed HR-676.

The real problem is not that Single payer advocates are unwilling to support HCAN. The real problem is that Single Payer advocates have been and still are being actively excluded from all the these other efforts. It is nice that they have gotten around to co-opting our message after we laid the ground work for them with years of hard work. Although they are using our message that the Insurance companies are the problem, even if they are too invested in pre-compromise to follow through to the conclusion. Maybe if they would be more inclusive of us upfront, we could indeed work jointly, equally, together as true partners.

Retiree Benefits Take Another Hit

By Vanessa Fuhrmans and Theo Francis
The Wall Street Journal
July 16, 2008

General Motors Corp.’s move to eliminate retiree health benefits for salaried workers is a sobering signal to the rest of the U.S. work force: Even those who are in or near retirement shouldn’t count on keeping the company coverage they have built up.

Since the early 1990s, employers eager to get out from under the increasing burden of covering their retirees’ health care have been whittling away at those benefits. At some companies, new or younger workers have been excluded from retiree health benefits. Older workers and existing retirees often got to keep the benefits, but had to pay a larger share of the overall costs.

But GM’s announcement Tuesday that it would cease medical coverage for its salaried retirees age 65 and above signals that a new era of ever-shrinking benefits has arrived. Beginning in January, even former employees who are already in retirement will lose their benefits, which most of the company’s retirees use to supplement gaps in their traditional Medicare coverage. The auto maker will boost monthly pension payouts to help offset the cuts. The company’s unionized workers aren’t affected by the cut to retiree health benefits.

At this point, employees and retirees “have to feel lucky if they still have retiree [health-care] benefits, and have to start planning for when they won’t,” says Rick McGill, head of retiree medical consulting for employee-benefits firm Hewitt Associates. He says such benefits are “a dying breed.”

http://online.wsj.com/article/SB121617237912356653.html

And…

With Warning, G.M. Takes Wide Cost Cuts

By Bill Vlasic
The New York Times
July 16, 2008

While G.M. has been methodically cutting jobs since 2006, the decision to eliminate health care benefits for salaried retirees over the age of 65 was unexpected. The generous health plans for retirees has long been considered a pillar of the benefit system at G.M.

http://www.nytimes.com/2008/07/16/business/16auto.html?_r=2&hp&oref=slogin&oref=slogin

Last week, a Quote of the Day message discussed why the overwhelming majority of individuals, except those enrolled in the traditional Medicare program, do not have a choice of keeping indefinitely the private health insurance that they currently have. The largest private health benefit program in the nation, that of General Motors, was used as an example of how even the best could not provide absolute security that you could keep the insurance you have.

The message was not meant to be a prediction, but merely a confirmation that, even in the best of circumstances, you may not have the choice of keeping your coverage. The only surprise is how quickly close to 100,000 General Motors retirees lost their employer-sponsored coverage.

Last week’s message is very important. It lists a great many reasons why people do lose the coverage they have, and almost all of the reasons are beyond their control. The message should be used to counter those who contend that their proposal allows you to “keep the insurance you have.” It is available for downloading at:

http://www.pnhp.org/news/2008/july/keeping_the_insuran.php

Also, John Geyman, author of “Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It,” on July 16 posted on the PNHP Blog the entry, “Choice in Private Health Plans: Is It Real?”

We are told regularly by advocates of the free market that more choice, as granted by the unfettered private marketplace, is the key to greater efficiency and value for consumers, whether in health care or otherwise. AHIP (the American Association of Health Plans) is committed to providing an “abundance of consumer choice” in its offerings.

So what does this vaunted increased choice, as claimed by the insurance industry, look like? Is it a choice of plans that offer financial security against the cost of major illness or injury, as should be the goal of insurance? These examples belie that premise:

The trend in employer-sponsored health insurance (ESI) is to cover fewer people with less coverage all the time, and to eliminate coverage for retirees if at all possible (eg., the auto industry)

Even when covered, there are many circumstances where enrollees’ choices are minimal or non-existent, such as when their health plans make changes in network providers and hospitals, when plans withdraw from the market, or when lock-in rules restrict them from making changes at their own option

If one loses ESI, there is little recourse for many in the individual market, as these examples show:  because of pre-existing conditions, many applicants are rejected for coverage; many who are not rejected cannot afford the premiums, which are one and a half times higher than the usual costs of ESI coverage; if one loses one’s job, COBRA guarantees coverage for another 18 months, but only one –quarter of those people can afford continued coverage.

The Boston-based Access Project, a non-profit resource center working to improve health and health care access since 1998, recently conducted in-depth interviews with 45 people in seven states who had  accrued medical debt while being privately insured.  They found that only one-half of interviewees who had ESI were offered any choice of plans; even if they had a choice, they tended to choose a plan with the lowest premium because that was all they could afford, even though they felt vulnerable to increased out-of-pocket expenses.

The insurance industry has trotted out a growing number of limited benefit policies (LBP’s) in recent years; do they offer useful choices? Here are two examples of heavily marketed plans at the moment: large employers such as Wall Mart, McDonalds and Lowe’s, often have annual caps of coverage as low as $1,000 to $2,500; Aetna’s Affordable Health Choices caps hospital benefits at $2,000 and accident/ER benefits at $1,000. Is this what market advocates have in mind about choice?

The health insurance industry is actually much more consolidated than we might think; the American Medical Association has found that private insurers have near-monopolies in 95 percent of HMO/PPO metropolitan markets; many of these markets have triggered antitrust concerns by the Department of Justice; as the accompanying graphic shows, a few insurers dominate the market in most states

The trends are obvious for the private health insurance industry – less coverage all the time for more money.  It is a failed industry, though many have not yet recognized it (Wall Street is beginning to have concerns about its future). It succeeds only as long as its enormous administrative and overhead costs are paid by consumers convinced that their “choice” offers more value. All trends indicate, however, that it is an unsustainable industry. The sooner that Americans realize that, the better, since we have another, better choice as to how to finance health care – a single-payer public financing system with one big risk pool, combined with our private delivery system.

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

Visit John Geyman’s web site: http://www.JohnGeymanMD.org

Disputations: Is Single-Payer Health Care The Best Option?

The problem with split-the-difference incremental reform.

by Don McCanne
The New Republic
July 16, 2008

The enthusiasm for the model of reform described by Jacob Hacker and endorsed by the Health Care for America Now (HCAN) coalition, which Jonathan Cohn wrote about in his recent New Republic piece “Single-Minded,” is understandable. It is a model that attempts to align policy with politics, allegedly meeting the previously unattainable threshold of feasibility. But is it feasible, and will it even work?

Anyone who really believes in this model understands that the private insurance plans would have to be very tightly regulated to reduce the profound deficiencies in our current insurance markets. The current private insurance business model depends on selling the insurers’ products to the large numbers of us who are healthy, especially the healthy workforce and their healthy families, while avoiding the need to contribute to the risk pools that cover those who have greater health care needs. Those costs are largely passed on to taxpayers through government programs.

Other nations that use private plans require effective pooling between plans through various regulatory mechanisms, reducing the problem of adverse selection and ensuring that premiums or taxes are adequate to pay for the care for those with greater needs. Even if the pools are nominally segregated, they function more like a universal risk pool through mechanisms such as risk adjustment and post-claims inter-insurance transfers.

The United States has a unique problem that would make it much more difficult to require private insurers to participate in a quasi-universal risk pool. On a per capita basis, we pay far more for health care than do other nations. Average-income individuals in other nations that use private plans can still afford premiums (or their tax equivalents). In those countries, only low-income individuals require some form of government subsidy for their care.

Compare that with the United States. For healthy risk pools, such as those of employer-sponsored plans, premiums are no longer affordable for average-income individuals and families, whether paid directly by the insured, or nominally by the employer. Imagine a tightly regulated insurance market that ended adverse selection and required benefits at a level that would prevent financial hardship for those with health care needs. The private insurers would find it absolutely impossible to provide us with compliant products that had affordable premiums.

Because of our very high costs, we must accept the fact that the insurance function is no longer simply a transfer from the many who are healthy to the fewer with health care needs, but it now must also include a partial transfer from the wealthy to middle- and lower-income individuals with needs. There is no alternative to this wealth transfer, and that alone creates doubt as to whether a model of highly regulated private plans is politically feasible.

We have to get over the idea that financing should be through premiums set by the actuarial value of the benefits in the insurance products. Those premiums are no longer affordable for most of us, and the complexities of income-related adjustments, whether through premium adjustments or tax credits, create an administrative nightmare. It is time that we separate the financing of the universal risk pool from the health care benefit package. The tax system provides us with the most equitable and efficient method of financing our global health care costs.

Perhaps a more compelling reason that the private insurance model no longer works is that it is very ineffective in slowing the increases in health care costs, and everyone agrees that affordability is now a major problem. Most of the current political cost-saving proposals would have very little impact on total costs. We need to address the true major cost drivers: the profound administrative excesses, the lack of an adequate primary care infrastructure, the waste of non-beneficial high-tech excesses, and the lack of a rational system of health care pricing. Even in a regulated environment, it would be very difficult for a multitude of private insurers and public programs to have much impact on these excess costs. Most economists agree that a monopsony, or single purchaser of health care products and services, would be most effective in extracting value through a negotiated realignment of incentives in our health care purchasing.

This debate that is taking place within the progressive community is missing the center of the feasibility dispute. It is implied that the Hacker/HCAN progressive model would be just fine if the single payer advocates would come to their senses and join in. It ignores the fact that this model is simply not politically feasible: it loses the support of market enthusiasts because of its dependency on tight regulatory control, intrusion by a government insurance program, and the necessity of a massive infusion of tax funds.

If you are going to accept that those changes are necessary to provide adequate coverage for everyone, then you might as well go ahead and establish a much more efficient and effective single payer national health program. Some may argue that explicit calls for income transfer and bureaucratic control of spending are what limit the political feasibility of the single payer model, but the private plans/public option model would have to incorporate the same principles, and their advocates should be very frank about that upfront.

So, the bottom line? We need reform that provides everyone the health care that they need, without financial barriers that would impede access. We can attempt to maneuver around the ubiquitous mines and trap doors of the political common ground of Hacker/HCAN, and still end up short if we survive. Or we can go straight to a proven model that would accomplish all of our financing goals–a single payer national health program.

For the full article:
http://tnr.com/politics/story.html?id=7aa401b5-f1f4-4564-921c-00f97b917605%20

The real debate over health care reform today centers over one fundamental choice. Are we going to continue to try to finance health care through private plans competing in the marketplace, a guarantee that access and equity problems would only grow worse, or are we going to use our own government resources to fix our financing system so that it works for everyone?

This shouldn’t even be a debate. Financial hardship, physical suffering and even death will increase without significant government intervention.

Unfortunately, a much less important debate has erupted within the community of those supporting a government role in ensuring that everyone has affordable access to all necessary health care. That debate is over whether or not private health plans should play a role in a reformed health care financing system.

Eliminating a socialized-medicine national health service from the list of options, that leaves us with two basic choices. We can either radically transform the private health plans into a system of social insurance, or we can replace the plans with a Medicare-like single payer national health program. Either would work, but the trade-offs are significant.

Systems using private plans are more expensive, largely because of greater administrative complexity. Equity is more difficult to achieve in a multi-payer system. A system of universal risk pooling would have to be superimposed on the private plans, making us wonder why we would even want to keep them since they would no longer be providing their insurance function of transferring risk.

Today, affordability is a concern for everyone. Health care will never again be affordable for all of us unless we adopt structural changes within our health care delivery system. As stated in the TNR article, “We need to address the true major cost drivers: the profound administrative excesses, the lack of an adequate primary care infrastructure, the waste of non-beneficial high-tech excesses, and the lack of a rational system of health care pricing.” Realigning incentives to accomplish these goals would be a relatively straightforward task for a single payer government monopsony. In contrast, a market of competing private plans would not have the power of a monopsony and would have to rely on the government to achieve these same goals.

Those supporting the private plan/public option model need to be explicit in describing their model, beginning with simple concepts such as how they would prevent adverse selection in the public option. If we are going to have an equitable and effective health care financing system for all of us, then their task of radically transforming the private insurance industry so that it would actually work is far greater than our task of improving Medicare and then providing it to everyone. Let’s hear how they would do it.

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.

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?