As the Occupy Wall Street protest continues and spreads, a health care system that meets human needs is increasingly one of the demands.

Last week’s call by the Institute of Medicine to define “essential benefits” for health plans under the federal reform law on the basis of cost, rather than medical need, is a stark reminder of how entrenched corporations are in U.S. health policy.

Insurers are posting their third year of record profits despite – or more likely because of – a huge 9 percent jump in premiums, to $15,073 for employer-sponsored family coverage, and unhealthy benefit-design changes that shift more costs onto patients in the form of co-pays and deductibles.

Already almost half of families who pay over $500 in out-of-pocket charges annually report delaying or going without needed medical care in the past six months.  Overall, 75 million adults went without necessary health care in 2010 due to costs, including one quarter of adults with chronic conditions.

Rather than assure that people with medical needs are able to access care despite recession-ravaged budgets, the IOM chose to heed insurer and employer demands to limit covered services.

While employers’ desires trump patients’ needs inside the beltway, the actual amount of health insurance coverage private employers fund is rapidly dwindling nationwide.  The proportion of Americans whose non-governmental employer pays for most or all of their health insurance is, by my rough calculations (below), 93.5 million people, just 30.6 percent of the population, down from 43.1 percent in 1996 and far less than commonly assumed.

In contrast, tax-payer funded coverage, including coverage for government workers and their dependents as well as Medicare, Medicaid, and other forms of public coverage, is rising, to 135.6 million people, or 44.3 percent of the population, up from 34.2 percent in 1996.

Over the past 14 years, the government has eclipsed the private sector in insuring Americans.   Moreover, the majority of patients insured by the government are elderly, poor, or disabled with greater health needs than those insured by the private sector.  With less than one-third of Americans principally-dependent on private-sector employer-paid coverage last year, it’s time to end corporate influence over U.S. health policy and adopt a system that prioritizes human needs over corporate greed:  single payer national health insurance, or expanded and improved Medicare for all.

Estimates of public and private coverage of Americans in 2010

The Census Bureau reported that 95 million Americans (31 percent) had government health insurance in 2010.  But more Americans’ health coverage, and health costs, are taxpayer-funded than is generally assumed.  Government workers’ insurance is classified by the Census Bureau as “private insurance” even though that coverage is funded by the taxpayer.   Unfortunately, the Census Bureau data does not give a figure for the number of workers and their dependents insured by the government.

I estimated the number of workers and their dependents insured by the government using the ratio of government-paid premiums to total employer-paid premiums, multiplied by the total number of people principally-covered by employer-sponsored health insurance.  According to the Census Bureau, 45.8 percent of 306 million people had employer-based coverage alone in 2010. Using data from CMS (NHE, Table 16, projections 2009-2020), an estimated 29 percent of employer-sponsored health insurance premiums were paid by government in 2010 ($160 billion out of a total of $555 billion).  Using this approach, an estimated 40.6 million people had taxpayer funded coverage through a government employer or as a dependent of a government employee.

Thus, in 2010, a total of 135.6 million Americans had publicly-funded coverage, 44.3 percent of the population.

I calculated the number and proportion of Americans who depended principally on private-sector employer-paid coverage by subtracting people with government-paid employer-based coverage (40.6 million) and people whose employer made no contribution to their premiums (6 million, CPS calculation from Himmelstein/Woolhandler) from the total number of people with employer-sponsored coverage (45.8 percent of 306 million).

Thus, in 2010, a total of 93.5 million people, 30.6 percent of the population, had private-sector employer-paid coverage.

Of the remainder, 16.3 percent were uninsured and 9.8 percent were self-insured.

L.A. County expands no-cost healthcare

By Anna Gorman
Los Angeles Times, October 9, 2011

In one of the largest expansions of health coverage to the uninsured, Los Angeles County is enrolling hundreds of thousands of residents in a publicly funded treatment program and setting the stage for the national healthcare overhaul.

The county hopes to register as many as 550,000 patients and is assigning them to medical clinics for services at no cost to them.

Under President Obama’s controversial healthcare overhaul, millions more uninsured Californians will be eligible for Medicaid — the healthcare program for the poor — beginning in 2014. Even as the debate over the law continues in Washington, California is starting that expansion now and using federal dollars to do so. Altogether, the state expects to receive $2.3 billion to expand and modernize its Medicaid program, known as Medi-Cal, now available only to certain low-income residents.

In L.A. County, the stakes are high. In 2014, the newly insured county residents will be able to seek treatment wherever they want. To keep them with the county, health leaders recognize that they must make the system one of choice rather than of last resort. Otherwise, the only patients left will be illegal immigrants and others still ineligible for public coverage.

“Our survival depends on it,” said Mitchell Katz, director of the county Department of Health Services. Unless the healthcare system improves, he said, “if people have choice, they won’t choose us and the system will implode.”

Health workers began signing patients up for a program called Healthy Way L.A. in July and so far have enrolled 24,000, many of whom are receiving services. County residents are eligible if they are between the ages of 19 and 64, citizens or permanent residents of five years and earn less than 133% of the federal poverty level (about $14,500 for an individual and $29,700 for a family of four).

The coverage is not insurance and cannot be used outside of L.A. County, but it does give patients the ability to receive free primary and specialty care, mental health services, chronic disease management, medication and emergency treatment. Most of the enrollment is being done when patients go to the county’s network of hospitals and clinics.

Over the next two years, the county will pay half the cost for Healthy Way L.A. — or about $300 million — and the federal government will pay the other half. By 2014, when the patients become eligible for Medi-Cal, the federal government will pick up the entire tab, which will help bolster the financially strapped county’s health system.

http://www.latimes.com/health/la-me-health-reform-la-20111010,0,4242519.story

This admirable effort in Los Angeles County to include more uninsured adults in its health services programs demonstrates some of the complexities that arise in trying to coordinate health care financing and health care delivery under our current dysfunctional, fragmented system that is being expanded by the Affordable Care Act (ACA).

Traditionally, the county has been the health care provider of last resort. If we had a financing system that covered everyone, there would be no need to support separate financing of a welfare program for low-income individuals, though there would still be a need to be sure that adequate facilities were available in areas with high rates of poverty that might not attract private health care providers.

Between this need to ensure adequate capacity in underserved areas, and the anticipation that there will still be tens of millions of uninsured individuals, forward thinking county health administrators are wise to try to work within the current system, with the anticipated changes under the Affordable Care Act, to be sure that care will be available for these underserved populations. The efforts in Los Angeles County can serve as a model for other counties throughout the nation, though the task is difficult because of the budget constraints that states and counties now face.

So how is Los Angeles County going to finance the safety-net in an unstable environment during the health reform transition? The first phase is to expand the safety-net to cover uninsured low-income adults. This is not an insurance program, but it relies on a contribution of federal funds that would pay about half of the expansion in clinic services for this population. Thus it expands the traditional role of the county as the provider of last resort, with the addition of much needed federal funds.

By providing these patients with a primary care medical home now, the transition to a program financed completely by the expansion of Medicaid will be much smoother.

But then what? The 100 percent federal financing of the Medicaid program applies only to the expansion of coverage for these newly enrolled low-income adults, and it is only temporary, designed as an enticement to states to roll out their Medicaid expansions under ACA. States are already facing severe fiscal problems in trying to finance their Medicaid programs, so what will they do when the extra federal subsidies end for these state programs with greatly expanded enrollments?

This policy nightmare was created by our politicians who decided above all to protect the markets for the private insurance industry catering to all of the population sectors that are above poverty levels. For those in poverty, they decided to use chum money to get the states to expand their Medicaid programs, but then revert to the chronic underfunding that characterizes this program, but which would now be compounded by expanded enrollment.

What would have happened had our legislators instead enacted a single payer national health program? Full federal funding would have been provided for these low-income individuals on an equal basis as with everyone else. Income would play no role in a person’s ability to clear the financial barriers to health care. The safety-net facilities provided by the counties would be fully funded by the program.

Because of a lack of interest by the private health care sector in serving regions with high poverty levels, it is likely that the counties would continue as administrators of these institutions, but they would do so knowing that adequate federal funding would always be there through the single payer national health program.

Think of how much easier the task would be, under a single payer system, for Mitchell Katz, the director of the Los Angeles County Department of Health Services, to prevent the implosion of the county administered health facilities, which we will need regardless of whatever financing system we end up with. But then, Mitchell Katz isn’t looking for a way to make his job easier; he is looking for a way to be sure that health care will always be there for everyone who needs it.

Walgreen battle over drug prices will limit consumer choice

By David Lazarus
Los Angeles Times, October 7, 2011

Beginning Jan. 1, Walgreens will no longer fill prescriptions for Anthem Blue Cross members, meaning that they’ll have to switch to another drugstore if they want their insurance to keep covering their meds.

In this case, though, it’s not the insurance giant calling the shots. Instead, it’s Anthem’s pharmacy benefit manager, a St. Louis company called Express Scripts Inc.

The dispute between Walgreens and Express Scripts highlights how consumers can find their healthcare choices limited by the money-minded business decisions of big corporations.

(Express Scripts) is spending about $29 billion to acquire rival Medco Health Solutions Inc. If the deal passes regulatory muster, it would give Express Scripts control over about a third of the market for pharmacy benefits. Nearly 4 billion prescriptions are dispensed in the U.S. annually.

Obviously steps should be taken to keep medical costs down. Both Express Scripts and Walgreen say that’s what they’re trying to do.

But it’s hard not to think all we’re really seeing here is two large, profit-hungry corporate behemoths fighting over as much of our healthcare dollars as they can get their hands on.

Inevitably, prices will go up for consumers and choices will be further limited.

http://www.latimes.com/business/la-fi-lazarus-20111007,0,2128189,full.column

Congress turned the Medicare prescription business over to private pharmacy benefit managers under the fiction that they would increase choices and reduce costs. What did we get? Reduced choices in drugs covered, reduced choices in pharmacies, and prices much higher than the government obtains for the Medicaid and the VA drug programs. It’s only going to get worse, unless we finally decide that we’re ready to take over the financing of health care in America by establishing our own public insurance program.

Essential Health Benefits: Balancing Coverage and Cost

Institute of Medicine
October 6, 2011

Abstract

The principle intent of the Patient Protection and Affordable Care Act (ACA) is to enable previously uninsured Americans to obtain health insurance. To accomplish this, in part, subsidized plans will be offered to low- and moderate-income individuals and small employers through health insurance exchanges. Plans qualified to be offered through exchanges must at minimum include “essential health benefits” (EHB). The ACA is not very specific on the definition of EHB except that such benefits shall include at least ten enumerated general categories and that the scope of the EHB shall be equal to the scope of benefits provided under a typical employer plan. The ACA requires the Secretary of the Department of Health and Human Services to define the essential health benefits.

The Institute of Medicine (IOM) was asked by the Secretary to make recommendations on the methods for determining and updating the essential health benefits. Notably, the request was to focus on criteria and policy foundations for the determination of the EHB, not to develop the list of benefits. The IOM formed a committee of volunteers with varied perspectives and professional backgrounds; the committee held four face-to-face meetings and numerous conference calls. Broad public input was obtained. In two open workshops, the committee heard from more than 50 witnesses, and 345 comments were received in response to questions posted on the web. The consensus report then underwent rigorous external review in accordance with procedures established by the Report Review Committee of the National Research Council.

As the committee examined its charge, it saw two main questions for the Secretary: (1) how to determine the initial EHB package and (2) how to update the EHB package.

Defining the initial EHB package. In considering how to determine the initial EHB package, the committee was struck by two compelling facts: (1) if the purpose of ACA was to provide access to health insurance coverage, that coverage had to be affordable; and (2) the more expansive the benefit package was, the more it was likely to cost and the less affordable it would be. How to balance the competing goals of comprehensiveness of coverage and affordability was key.

The committee concluded that it was best to begin simply by defining the EHB package as reflecting the scope and design of packages offered by small employers today, modified to include the ten required categories. This package would then be assessed by criteria and a defined cost target recommended by the committee. The committee considered how four policy domains – economics, ethics, population-based health, and evidence-based practice – could guide the Secretary in determining the EHB package in general. From these policy foundations, the committee recommends: criteria to guide the aggregate EHB package; criteria to guide specific EHB inclusions and exclusions; and criteria to guide methods for defining and updating the EHB.

To ensure affordability and protect the intent of the ACA, the committee concluded that costs must be considered both in the determination of the initial EHB package and in its updating. Thus, the cost of the initial EHB package resulting from the previous steps should be compared to a premium target defined by the committee as what small employers would have paid, on average, in 2014. Committee members believe that absent a premium target, there would be no capacity to acknowledge the realities of limited resources and the ongoing need for affordability of the package. The EHB package should be modified as necessary to meet this estimated premium, including using a structured public deliberative process. In addition, the committee recommends that states operating their own exchanges be able to design a variant of the EHB package if certain standards are met.

Updating the EHB package. Both medical science and our understanding of how best to design insurance products will change over time. Thus, the committee recommends creating a framework and infrastructure for collecting data and analyzing implementation of the initial EHB; a National Benefits Advisory Council is recommended to give the Secretary advice on the research plan and on updates to the EHB package. The committee believes that the EHB package should become more fully evidence-based, specific, and value-based over time. In addition, as with the initial package, costs must be taken into account such that any service added to the package should be offset by savings, through either medical management or the elimination of inappropriate or outmoded services.

Finally, the committee noted that even with the use of a premium target, the affordability of the EHB package is threatened by rising medical costs in the United States overall and recommends that the Secretary, in collaboration with others, develop a strategy to reduce health care spending growth across all sectors.

http://iom.edu/Reports/2011/Essential-Health-Benefits-Balancing-Coverage-and-Cost.aspx

And from the IOM Report Brief:

One way to think about the EHB package is to compare HHS’s task to going grocery shopping. One option is to go shopping, fill up your cart with the groceries you want, and then find out what it costs. The other option is to walk into store with a firm idea of what you can spend and to fill the cart carefully, with only enough food to fit within your budget. The committee recommends that HHS take the latter approach to developing the EHB package and to keep in mind what small employers and their employees can afford. Employers who offer insurance packages make such choices now.

http://iom.edu/~/media/Files/Report%20Files/2011/Essential-Health-Benefits-Balancing-Coverage-and-Cost/essentialhealthbenefitsreportbrief.pdf

From the start of the reform process it was understood that defining which essential benefits should be covered by the exchange plans would be controversial. What is no surprise is that, just as the process of writing the Affordable Care Act (ACA) was guided by the private insurance industry, this recommendation for establishing a process for determining essential benefits has the private insurance industry’s fingerprints all over it.

When ACA was developed, the large group employer health plans were functioning fairly well, so it was decided to include policies that would encourage the continuation of these plans. It was the market of small group and individual plans that was not functioning well. Benefits were quite skimpy, and underwriting practices prevented many from obtaining coverage in this market. Thus it was decided to establish state health insurance exchanges in which a market of better regulated and more standardized insurance products would be available.

When the Institute of Medicine tried to balance the essential health benefits package (EHB) with affordability what did they choose? They decided that affordability must come first, and then benefits selected to match the affordable premiums.

Wait a minute! What is being made affordable? Health care or health plans? Skimpy benefits equate with unaffordable health care since much of health care has to be paid out-of-pocket simply because it is not part of the benefit package. By establishing the current benefits of existing small group plans as the standard essential benefits in the plans offered by the exchanges, the IOM has made a deliberate choice of making private health insurance products affordable at the cost of making health care itself unaffordable for those purchasing their plans in the exchanges.

This is precisely what the private insurance industry wanted when it came to defining the essential health benefit packages. By making the austere small business packages the new standard, the insurers could keep their premiums low enough to ensure that they still had a market for their products. The insurers could care less what happens to patients when they actually need care, as long as their own market is protected.

It isn’t the insurers’ problem now since they have the prestigious Institute of Medicine telling the nation that we can’t have more than skimpy, spartan health care unless we are willing and able to pay for it out-of-pocket. Since most middle-income families can’t, they’ll just have to do without.

(Single payer systems do not cut benefits. They control spending through administrative efficiencies, global budgeting, price negotiations, elimination of coverage for detrimental services, and by planning and separate budgeting of capital expenditures.)

Undocumented Immigrants, Left Out Of Health Reform, Likely To Continue To Grow As Share Of The Uninsured

By Stephen Zuckerman, Timothy A. Waidmann and Emily Lawton
Health Affairs, October 2011

The increase in undocumented immigration between 1999 and 2007 contributed to an increase in the number of uninsured people in the United States. During this period, the number of undocumented immigrants increased from an estimated 8.5 million to 11.8 million, leading to an estimated additional 1.8 million uninsured. These uninsured and undocumented immigrants were estimated to represent 27 percent of the overall increase of 6.9 million uninsured people during this period. Undocumented immigrants accounted for one in seven of the uninsured in 2007, up from one in eight in 1999. These undocumented immigrants will not be eligible for public insurance or any type of private coverage obtained through exchanges under the Affordable Care Act of 2010. As a result, members of this group will eventually constitute a larger percentage of the uninsured population, unless other policy actions are taken to provide for their coverage, or their immigration status is changed.

http://content.healthaffairs.org/content/30/10/1997.abstract

Under a properly designed single payer national health program, the financing of the health care system and the delivery of care are totally separated. Everyone contributes funds to the system based on ability to pay, including undocumented immigrants. Everyone who needs health care receives health care, including undocumented immigrants.

During the national dialogue on health care reform, a vociferous component of our society opposed including health insurance coverage for undocumented immigrants, and Congress complied with their wishes. The reason often given was that they were “illegals” (an unfortunate pejorative term). They committed the crime of coming to this country illegally, so they shouldn’t receive the benefit of health care, so the argument goes.

But is denying health care to those who commit crimes really our national policy? Hardly. Individuals who commit crimes severe enough to result in imprisonment are automatically granted health care. Anyone who shows up at an emergency room in need of urgent care is given that care, regardless of immigration status.

From a practical standpoint, in a microsimulation study that we did as part of the California Health Care Options Project, we showed that, under a single payer model, providing comprehensive care for absolutely everyone, including undocumented immigrants, would actually reduce our total health care spending. All immigrants, documented or not, would participate like everyone else – paying into the system and receiving care when needed.

Regardless of all this, what should be the overriding principle is the concept of social justice, specifically health care justice. No person in the community should be singled out for any reason whatsoever to be excluded from gaining access to the practitioners of the healing arts. A just society would guarantee that access for everyone, regardless of ability to pay or immigration status.

Although many may think today that we have always had employer-sponsored health insurance (ESI) in this country, that is not the case. While some companies offered coverage in the 1930s, the basic concept gained momentum only after the start of World War II. The war effort required a rapid buildup of industrial capacity in the face of a severe labor shortage as many men went off to war. Employers needed a healthy workforce, and needed to compete for workers. Federal wage and price controls made it difficult for them to offer higher pay, so that ESI became an important recruitment tool. Employers were helped by an IRS ruling that made their costs of ESI tax-deductible; these benefits also were not taxable for employees. (Somers, AR, Somers, HM. Health and Health Care: Policies in Perspectives. Germantown, MD. Aspen Systems Corporation, 1977, pp 109-11)

We have had about a 75-year experiment with ESI, but its track record is one of continued decline over the last 30 years—fewer people covered, less coverage for more costs, and less value of that coverage. ESI was more an accident of history than a well-planned financing system for health care. Today, rapidly accelerating costs are the Achilles heel for ESI, both for employers and employees, as they are for the entire market-based ‘system’ itself.

ESI arose at a very different time than today. Beyond the labor shortage, American business was dominant with little concern about foreign competition, and labor unions were strong. Many workers could reasonably expect to hold their jobs for their working life.

But those days are long gone. Most workers these days have multiple jobs, even careers, over their working years. By 2002, only about one-half of employed men or women could claim to have held their job for ten years. (Tejada, C. A special news report about life on the job—and trends taking shape there. Wall Street Journal, September 25, 2002: B5) Loyalty between employers and employees has dropped way off in recent years, part-time workers are not eligible for benefits, and union membership hovers around 10 percent of the workforce.

These markers show a long decline of ESI, as well as the decreasing benefits to enrollees:

• In 1980, more than 70 percent of employees working more than 20 hours a week were covered; that number fell to 56 percent by 2005, with coverage already unraveling as employers shifted from defined-benefits to defined-contributions. (Mishel, L, Bernstein, J, Allegretto, S. The State of Working America 2004/2005. Ithaca. Cornell University Press, 2005)

• Over the 13-year period that Kaiser Family Foundation has been tracking premiums for ESI, employee contributions have increased by 168 percent as compared to increased wages of 50 percent and inflation of 38 percent. One-half of employees of companies with fewer than 200 workers now have a deductible of $1,000 or more for single coverage as compared to 16 percent five years ago. (Altman, D. Rising health costs are not just a federal budget problem. Kaiser Family Foundation, September 27, 2011)

• Premiums for family plan ESI coverage have gone up by 9 percent this year, triple the increase in 2010; family premiums now total $15,073 on average, of which $4,129 is paid by employees (consider that these costs may have little to do with what employees end up paying for their health care, especially those who are older or have one or more chronic diseases!). (Appleby, J. Costs of employer insurance plans surge in 2011. Kaiser Health News, September 27, 2011)

• In 2012, average annual employee premiums for health insurance are expected to go up by another 10.6 percent. (Japsen, B. Companies pass on more of health costs to workers. New York Times, October 3, 2011: B3)

• Many of the so-called ESI plans cannot really be called insurance, since they now pass along so much of the costs of care to enrollees even as the extent of coverage withers away. Retiree and disability coverage are being cut by many companies, and their employees are increasingly being herded into lower-cost networks of providers with quality of care in question. As Dr. Don McCanne, Senior Health Policy Fellow for Physicians for a National Health Program, sums up: “The new national standard in health insurance is unaffordable under-insurance”. (McCanne, D. Quote-of-the-Day, September 13, 2011)

Beyond the increasing unaffordability of ESI for employees, employers—big and small—have the same problem with no end in sight. General Motors says it spends about $5 billion on health care expenses each year, adding between $1,500 and $2,000 to the sticker price of every car out the door. That burden is many times higher than what neighboring competitors just across the border in Canada pay for health care, rendering GM much less competitive in global markets. (Johnson, T. Healthcare costs and U.S. competitiveness. Council on Foreign Relations, March 23, 2010) Small business (with fewer than 100 employees), accounting for about 40 percent of the private U.S. workforce, cannot keep up with the growing cost of ESI coverage. The small employer market has been one of the most profitable for private insurers, with premiums climbing by 74 percent between 2001 and 2008.

The so-called health care reform legislation, the Affordable Care Act of 2010, will not fix this problem. Having handed over a combined employer and individual mandate to the private insurance industry, with minimal regulatory clout, the bill (if and when it is implemented) lacks any semblance of cost containment measures. Federal waivers already give employers whatever they want, as illustrated by a recent HHS ruling that allows McDonald’s Corp. to keep its very low limits of annual coverage of just $2,000 a year. (Adamy, J, Johnson, A. Rules eased for some health plans. Wall Street Journal, November 23, 2010: B1) Whereas President Obama promised that the average American family would save $2,500 a year on health insurance premiums, the Congressional Budget Office later projected that their cost would only increase. (Hemingway, M. Obama promised $2,500 health care savings; CBO says plan is $2,300 price increase. Washington Examiner on line, March 10, 2010)

M. Obama promised $2,500 health care savings; CBO says plan is $2,300 price increase. Washington Examiner

Adding all of this up, we can only conclude that employer-sponsored health insurance, and the overly expensive, wasteful private insurance industry upon which it is based, is in its death throes. As the Vice chairman of Ford Motor Co. said in 2004: “Right now the country is on an unsustainable track and it won’t get any better until we begin—business, labor and government in partnership—to make a pact for reform. A lot of people think a single-payer system is better.” (Downey, K. A heftier dose to swallow. The Washington Post, March 6, 2004). Some 50 years ago, Walter Reuther, as the national president of United Auto Workers, saw the future this way:

“When American corporations reached the point where they couldn’t make their business more efficient without making it less profitable, when their dependency ratios soared to unimaginable heights, when they got tens of billions behind in
their health-care obligations, when the cost of carrying thousands of retirees forced them to stare bankruptcy in the face, they would come around to the idea that the markets work best when the burdens of benefits are broadly shared.” (Reuther, W. as cited by Gladwell, M. The risk pool: What’s behind Ireland’s economic miracle and GM’s financial crisis? The New Yorker, August 28, 2006, p 35)

We have to move beyond denial of this problem, and rein in markets that fail the public interest. We can no longer afford ESI or the private insurance industry. Unless we move past political gridlock on this big issue toward a new partnership between labor, business and government, they can bankrupt us all!

There is an answer, of course, in plain sight—not-for-profit, improved Medicare for All, funded by broadly shared progressive taxes that cost patients, families and business less than they are now paying while assuring universal coverage in a less bureaucratic and more accountable system.

John Geyman, M.D.
Professor emeritus of Family Medicine
University of Washington

Author of Do Not Resuscitate: Why the Health Insurance Industry is Dying and How We Must Replace It and Hijacked! The Road to Single-Payer in the Aftermath of Stolen Health Care Reform (Common Courage Press, 2008 and 2010)

To buy books from John Geyman visit: http://www.copernicus-healthcare.org

New rankings make choosing health insurance easier

By Steven Findlay
Consumer Reports Health.org, October 4, 2011

When it comes to health insurance, a familiar name and lots of members don’t guarantee quality or customer satisfaction, according to new rankings of health-insurance plans from the National Committee for Quality Assurance that we published today.

Our analysis of the NCQA rankings found that the five largest national insurers—Aetna, Cigna, Humana, Kaiser Permanente, and United Healthcare, plus the mostly state-based Blue Cross Blue Shield plans—account for about 75 percent of the 390 ranked private plans, but only 36 percent of the top 50.

Biggest isn’t best. United is the nation’s largest health-insurance company, but none of its private plans rank among the top 100, and most occupy the bottom half.

http://news.consumerreports.org/health/2011/10/new-rankings-make-choosing-health-insurance-easier.html

NCQA Health Plan Report Card
http://reportcard.ncqa.org/plan/external/plansearch.aspx

The big health insurers that are dominating most of the markets fall short on NCQA quality standards, except for Kaiser Permanente. No surprise. What is surprising is that we continue to tolerate this mediocrity merely because an improved Medicare for all is not politically feasible. How about changing the politics?

Just days after my blog posting about the disastrous pro-market reforms being pushed in England by, among others, the giant American insurer UnitedHealth Group, a coalition of U.S. health care corporations announced that they plan to export the U.S. “health ecosystem” around the globe.

It’s very telling that they try to hide their impact at home – the world’s highest costs, 50 million uninsured, 45,000 deaths a year due to lack of coverage, last or nearly last on every measure of quality, an epidemic of medical bankruptcy and adverse drug and device side effects – behind a green “ecosystem” disguise.

In a nod to the likelihood that other nations may not want to import our defective, overpriced insurance and other products and services, the Alliance for Healthcare Competitiveness is calling on the U.S. government to create a new “Ambassador-level Special Negotiator for Health Industries” to push new international trade rules eliminating tariffs and other forms of discrimination to the entry of American health care corporations abroad.

In other words, they want the Office of the U.S. Trade Representative – acting through the World Trade Organization (WTO) – to force other nations to open up their national health systems to U.S. for-profit insurers, hospitals, professionals, medical device makers, pharmaceutical firms, IT companies and other investor-owned firms, regardless of their impact on health, welfare, or other social goals.

Under AHC’s proposal, there would even be a “special focus for telemedicine, enabling providers to export services across borders.”

AHC’s main weapon at the WTO is the benign-sounding General Agreement on Trade in Services (GATS).  GATS is one of the most controversial WTO agreements, and beefing it up has long been an ambition of U.S. negotiators.

In the late 1990’s, according to Nicholas Skala, “U.S. negotiators were insistent on including services in the WTO treaty, but other nations perceived how far-reaching such an agreement could be.  Allowing service sectors to be bound in the same way as goods would dramatically extend the reach of commercial trade rules favoring markets and privatization into areas traditionally seen as essential to the public welfare:  education, social security, libraries, mail service, people and fire protection, water, energy, telecommunications, transportation, and health care.” (Skala, N. “The Potential Impact of the World Trade Organization’s General Agreement on Trade in Services on Health System Reform and Regulation in the United States” IJHS, 39:2 2009; posted on-line soon at www.pnhp.org).

Skala noted that GATS not only has the potential to undermine other nation’s health systems, it could also harm health system reform and regulation in the U.S., for example, by preventing a “monopoly” like a single payer insurance system, or barring regulation of investor-owned hospitals.

International instruments that recognize and protect the human and social value of health care like the Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural Rights are not binding on the WTO, which places commercial interests above nearly all other values.

Simon Stevens, UnitedHealth’s president of global affairs and a founder of the Alliance for Healthcare Competitiveness (AHC), has long been a key figure in promoting pro-market health reform in the U.K., even serving as health minister to former British Prime Minister Tony Blair.   His experience in the U.K. has no doubt fueled his interest in profiting from health systems around the world, but can only reach fruition if the U.S. government forces acceptance of our dysfunctional “health ecosystem” by both developed and developing nations.

It’s understandable that U.S. corporations are seeking new markets in the public and private sectors abroad.  Employer-sponsored health coverage in the U.S. is plummeting while public coverage is expanding.  Humana already makes nearly all its profits from its Medicare Advantage plans.

There is a growing movement to stop the privatization and corporate-takeover of health care in the U.K. and internationally.   PNHP member Dr. Matt Anderson from Montefiore medical center in the Bronx spoke recently at the International Association of Health Policy meeting in Ankara, Turkey, along with New Mexico PNHP member Dr. Howard Waitzkin.  Save our NHS’s Dr. Jacqueline Davis will be a featured speaker at the upcoming PNHP meeting in Washington, DC on Saturday October 29.

As U.S. corporations seek to change trade rules to privilege their profits over the health of people around the globe, PNHP’s work takes on a global urgency.

The Effects of Public Health Insurance Expansions

The National Bureau of Economic Research
NBER Digest OnLine, October 2011

In the United States, public health insurance programs cover over 90 million individuals. Changes in the scope of these programs, such as the Medicaid expansions under the recently passed Patient Protection and Affordable Care Act, or in the generosity of these programs, may affect physician behavior.

In “The Doctor Might See You Now: the Supply Side Effects of Public Health Insurance Expansions” (NBER Working Paper No. 17070), Craig Garthwaite finds that after the 1990s implementation of the State Children’s Health Insurance Program (SCHIP) – a partnership between federal and state governments intended to increase insurance coverage for low-income Americans under the age of 19 – more physicians participated in the program, but their total number of hours spent with patients declined as a result of shorter office visits.

Garthwaite finds that there were fewer visits that lasted more than 10 minutes after this public program expansion. The evidence on shorter office visits is consistent with economic models of physician behavior in a system with both public and private payers.

The negative effects of reductions in physician labor supply, such those observed in this study, may be particularly important for Medicaid patients because they are covered by a program that is increasingly not accepted by physicians.

http://www.nber.org/digest/oct11/w17070.html

Most of us who support a single payer national health program do so primarily because it would provide high quality, comprehensive care for everyone. Although the Affordable Care Act will not cover everyone, much of the expansion in coverage that it does accomplish is through increased eligibility for the Medicaid and CHIP programs, chronically underfunded welfare programs. This study demonstrates that such an approach does result in a system with at least two tiers, the lower tier patients facing shorter visits and a decline in access to participating physicians.

There is already enough money in our health care system to provide a single level of comprehensive, high quality care for everyone. We should reject the concept of a separate, underfunded, lower tier program for low-income individuals and families, with a higher tier of great care for the rest of us (though the Affordable Care Act certainly doesn’t ensure that either).

The Consequences of Risk Adjustment in the Medicare Advantage Program

The National Bureau of Economic Research
NBER Digest OnLine, September 2011

Since the 1980s, people eligible for Medicare have been able to choose between the regular fee-for-service plan, under which the federal government pays a set fee to health care providers for each service provided, and Medicare Advantage (MA), whereby the government pays private health plans a fee for each individual they enroll. Almost one quarter of Medicare beneficiaries are currently enrolled in Medicare Advantage plans.

Paying the same amount for every person enrolled in a health plan encourages plans to enroll low-cost people and to avoid high-cost ones. Because of this, the federal government historically overpaid for MA enrollees relative to their costs in traditional Medicare. So, in 2004 the Medicare program began to adjust its payments to private plans for enrollees health status. As a result, a plan would, for example, receive a higher “risk-adjusted” payment for a recipient with diabetes or heart disease than for an otherwise identical person without these conditions.

In “How Does Risk Selection Respond to Risk Adjustment? Evidence for the Medicare Advantage Program” (NBER Working Paper No. 16977), Jason Brown, Mark Duggan, Ilyana Kuziemko, and William Wollston study individual-level data for 55,000 people in the Medicare Current Beneficiary Survey (MCBS) from the period 1994 to 2006. Prior to risk adjustment, insurers simply had an incentive to enroll individuals with low costs. After risk adjustment, insurers instead had an incentive to enroll individuals with low costs conditional on their medical conditions. The main reason for this is that the risk adjustment formula pays the plans the average cost of the average person in a particular risk category. The authors demonstrate that, because individuals with less costly cases of diabetes and other health conditions enrolled in MA plans after the move to risk adjustment, overpayments to these plans actually increased.

The risk adjustment formula that is used also explains only 11 percent of an individual’s fee-for-service costs in the year after risk is assessed. The formula systematically over-predicts costs for those with below average costs, and systematically under-predicts costs for those with above average costs. The authors find that individuals who are more expensive than the average person to insure are less likely to enroll in Medicare Advantage plans. So on balance, the government ends up paying the average cost for people who, had they stayed in fee-for-service Medicare, would have cost the government much less.

Before risk-adjustment began in 2004, switching from fee-for-service Medicare to Medicare Advantage increased average individual Medicare spending by $1,800. The authors calculate that using risk adjustment formulas on the population that enrolled before 2004 would have reduced Medicare Advantage overpayments by more than $800 a person. But when the reimbursement formula changed, so did the pattern of enrollment in Medicare Advantage plans. After 2004, switching from fee-for-service to Medicare Advantage increased Medicare spending by approximately $3,000 per person. Thus the shift to risk adjustment actually increased Medicare spending.

Although Medicare Advantage plans did enroll people with higher “risk scores” after risk adjustment was instituted, those people still tended to be significantly below the average cost in their risk category. Furthermore, both before and after risk adjustment, MA enrollees in poor health expressed greater dissatisfaction with their medical care relative to their counterparts in traditional Medicare. This pattern suggests that MA plans invest more resources in their relatively healthy enrollees, perhaps to differentially retain them. Thus the authors conclude that the Medicare Advantage program both increased total Medicare spending and transferred Medicare resources from the relatively sick to the relatively healthy, and that risk-adjustment was not able to address either of these problems.

http://www.nber.org/digest/sep11/w16977.html

And…

How does Risk Selection Respond to Risk Adjustment? Evidence from the Medicare Advantage Program

By Jason Brown, Mark Duggan, Ilyana Kuziemko, William Woolston
NBER Working Paper No. 16977, April 2011

We close by returning to the potential distributional consequences of our results. Regardless of how the surplus described above is split, the MA program appears to expand the cost of Medicare while also transferring relative expenditures from the FFS population toward the financing of care for the MA population. As those switching into MA have, throughout the sample period, lower baseline costs and better self-reported health than do those remaining in FFS, the MA program transfers Medicare expenditure to those who likely have less need for it.

Moreover, as we show in Section 7, the gradient of satisfaction with one’s health care is a more positive function of self-reported health for MA enrollees than FFS enrollees, consistent with MA plans treating their healthier (and thus more profitable) enrollees better so as to differentially retain them. Indeed, exit rates out of MA plans are differentially higher among those in poor health. Therefore, the MA program appears not only to transfer aggregate Medicare expenditures from the relatively higher-cost FFS population to the relatively lower-cost MA population, but it seems to effect a similar transfer within the MA population.

These results suggest that governments may wish to take special care in “contracting out” social insurance. Imperfect pricing – whereby the government overpays a private firm relative to the cost and quality of in-house production – is, of course, a potential concern every time governments contract with a private party and has received great attention in the literature (see, for example, Hart et al. 1997). In the case of, say, paving a road, the consequences of imperfect pricing would seem limited to whatever amount the government overpaid. With social insurance programs, however, imperfect pricing can induce private firms to cream-skim, exacerbating the utility consequences of the underlying inequality the program was initially intended to mitigate. At least in the case of Medicare, we find little evidence that risk adjustment has solved this problem.

http://www.nber.org/papers/w16977

Never underestimate the ability of the private insurance industry to stick it to us. This shocking study on risk adjustment in the Medicare Advantage program should have been a front page story across the nation. It shows us how the private insurers have used risk adjustment – designed to correct their cheating through favorable selection – to further reap their own rewards by upending the adjustments so that they steal even more funds from us!

How could this be? Some history.

Congress was sold on the concept that private insurers could provide higher quality at lower costs than could the traditional, government-run Medicare program. The Medicare + Choice program was established to do this. Even though the plans were able to selectively enroll healthier, lower-cost patients (favorable selection), the concept still was a failure and plans began withdrawing from the markets. They could not fulfill their promise of lower costs for comparable care.

The conservatives would not give up. It was essential that a robust market for private Medicare plans be established as an initial step toward privatizing the entire Medicare program (a concept still very much alive in the Paul Ryan proposal which was approved in the House of Representatives). They were successful in passing legislation that gave private Medicare plans (now Medicare Advantage) a new life by paying them about 13 percent more per beneficiary than it costs to provide care for them in the traditional fee-for-service program.

As is that weren’t enough, the plans continued to selectively enroll healthier, less expensive patients, further expanding their margins. To counter this, risk adjustment was applied to the payment rates. If the plans’ beneficiaries were healthier than average, they would be paid less. If they were subject to adverse selection – enrolling a greater portion of sicker patients – they would be paid more.

Enter this study. Although it is 55 pages of a very heavy read, seriously testing your math skills, the conclusions can be gleaned from the summary and excerpts above. The plans continued to favorably select their patients, not only by enrolling the healthy, but even more by selecting fairly healthy patients that had just a touch of illness that would allow the insurers to move them into intensified diagnostic groups that increased their payments much more than the level of illness would warrant.

The authors explain that firms have been able to decrease “extensive-margin” selection and increase “intensive-margin” selection. These terms might be obscure to us, but what isn’t obscure is that this chicanery on the part of the insurers allowed them to escape the risk adjustments that would have reduced their overpayments from $1,800 to $800 per beneficiary (still an overpayment), and replace it with a $3,000 per person overpayment!

The authors conclude that “governments may wish to take special care in ‘contracting out’ social insurance.” They are far too kind. We need to throw the damn crooks out, fix our traditional Medicare program, and then provide it for everyone.