Data Updates, May 1998
Access to Care
+ 12.8 million American families (11.6% of families) experienced difficulty or delays in obtaining medical care or did not get the care they needed in 1996. Of the families facing barriers to care, only 3.3 million were completely uninsured; 5 million had insurance for every family member. Cost was the most common barrier to care; 7.6 million families reported this problem. In addition, 46 million Americans (18%) had no usual source of care (Agency for Health Care Policy and Research, 11/26/97).
+ More than two-thirds (68%) of primary care physicians report that they cannot "always" or "almost always" obtain needed high-quality outpatient mental health care for their patients, and an even higher proportion (72%) cannot obtain needed inpatient mental health care (Center for the Study of Health System Change, 1997).
The U.S. ranks 12th among industrialized countries in perinatal mortality, according to a study of 17 nations (Medical Care, 36;1:1998).
+ Insurance status has a profound affect on children’s access to medical, dental, and other health care. According to data on 49,000 children from the 1993-1994 National Health Interview Survey, 24.1% of uninsured children had no usual source of care, compared with 4.8% of insured kids, and 22.2% of uninsured children went without needed medical or dental care, compared with 6.1% of insured children (New England Journal of Medicine, 2/19/98 issue). However, the study may underestimate the problems of insured children. A California poll found that more than one-third (35%) of parents of insured children had difficulty accessing specific health care services for their kids (The California Wellness Foundation press release, 1/15/98).
+ Wyoming and Washington state legislatures have decided not to participate in the Children’s Health Insurance Plan because of the requirement for state matching funds (Caspar Star Tribune, 2/28/98, Seattle Times, 3/9/98).
+ Prenatal care for illegal immigrants is under siege in California. Gov. Pete Wilson is pushing to implement a ban on Medi-Cal assistance for residents lacking legal status. 70,000 currently pregnant women could be affected by the ban, as well as any new applicants for assistance (Los Angeles Times, 1/30/97).
The Rise and Decline of Employer-Sponsored Insurance
+ Eight million fewer adults and children had employer-sponsored insurance in 1996 than in 1989, according to a study by the Lewin Group. If the trend continues, up to 12.5 million more people will lose employer-based health coverage by 2002. The average premium paid by workers for family coverage increased 146% between 1988 and 1996, to $1,615 annually (AFL-CIO release, 2/19/98).
Three in four American adults who are uninsured or were uninsured recently are part of working families (i.e. either as full or part-time workers themselves or are married to such), according to a survey by the Commonwealth Fund. 51% of the working uninsured report that they cannot afford to buy insurance; 25% are uninsured because they lost their job or their job didn’t have health benefits; and 4% are uninsured because of poor health or denied health benefits. 41% of adults in low-wage working families (earning less than $20,00 per year) had problems paying medical bills or went without needed care last year (Commonwealth Fund press release, 12/8/97).
+ According to the U.S. General Accounting Office, the Kennedy-Kassebaum bill is having little effect on the number of uninsured because insurers are charging 140% to 600% of the standard premium to workers who want to retain coverage as individuals.
+ The proportion of workers in small businesses enrolled in their firm’s health plans decreased from 72% in 1989 to 66% in 1966. Why? Average monthly contributions for family coverage in small firms increased from $34 in 1988 to $175 in 1996, a 23% annual increase (Center for Studying Health System Change, Data Bulletin, Number 10, Winter, 1998).
+ GM retirees are appealing to the Supreme Court to restore health benefits that the company promised them when they retired. GM maintains it has the right to change or terminate retiree benefits, and a Cincinnati appeals Court ruled 11-3 in the company’s favor. 84,000 salaried employees who retired between 1974 and 1988 are affected by the ruling (Detroit Free Press, 1/8/98).
Health Care Costs
+ Health care cost increases are accelerating. Premiums are up an average of 8.5% in the Federal Employees Health Benefits Plan (FEHBP). Large employers are expecting premium increases of 5% to 10% in 1998, as they have largely exhausted savings from switching employees from indemnity to managed care, and HMOs are raising premiums to try to recoup profitability (Wall Street Journal, 1/20/98). For small companies, increases could be as much as 20% (New York Times, 10/17/97). Only 35% of HMOs were profitable in 1996, down from 90% in 1994 (Health Affairs, January 1998, p. 47).
Almost nine million families with health insurance spent more than 10% of their annual income for health care last year. The number of underinsured Americans -- those at risk of spending more than 10% of their incomes on medical bills -- has increased to 31 million (40%) since 1981. (Consumers Union report, 1/22/98).
+ The Congressional Budget Office predicts that health expenses will reach 15.5% of GDP by 2008, and that premiums will increase by 5.5% this year and by similar amounts over the next decade (New York Times, 1/22/98).
+ On average, Medicare beneficiaries spend 19% of their annual income on medical care, $2,149. However, the two million elderly who are poor but not covered by Medicaid spend an average of 54% of income on out-of-pocket health costs (American Association of Retired Persons release, 3/4/98). Premiums on Medigap policies sold by the American Association of Retired Persons (AARP) are going up 13%, the third consecutive large hike for three million affected seniors (Wall Street Journal, 12/19/97).
+ "Companies in this [HMO] business don’t control health-care costs anywhere near as well as most analysts once thought they did" according to Todd Richter, health analyst for the investment firm Morgan Stanley, Dean Witter (Wall Street Journal, 12/19/97).
+ Prescription drug costs rose over 14% between 1996 and 1997, to $94 billion, and are expected to rise between 13% and 17% this year (Wall Street Journal, 12/8/97, Bergen Record 2/8/98).
Hospitals, Inc.
+ Hospital profits jumped nearly 25% in 1996, to a record $21.3 billion, the highest in 16 years, according to a report by the American Hospital Association (Modern Healthcare, January 12). In addition, the percent of hospitals losing money dropped from 25% in 1993 to 19%. The median profit margin at teaching hospitals was 4.5%. (Washington Post, 2/7/98).
+ OrNda Healthcorp, a hospital chain recently acquired by Tenet, paid fines of $12.65 million to the government for kickbacks to physicians for referrals (Public Citizen Health Letter, December 1997).
Former OrNda chair Charles Martin is now chair, president, and CEO of Vanguard Health Systems, one of two new Nashville-based for-profit firms seeking to cash in on not-for-profit hospitals. Vanguard, which already has $1.5 billion in capitalization, just bought its first hospital, Maryvale Samaritan, in Phoenix, and is looking at MetroWest (now owned by Columbia/HCA) in Massachusetts. The other new for-profit hospital company is MissionHealth LLC (Wall Street Journal, 2/2/97).
+ "We are the savings-and-loan industry of the decade" said Columbia/HCA CEO Thomas Frist (American Health Line, 9/23/97). Columbia’s shares have plummeted nearly 50% since the federal government began its investigation into billing fraud (USA Today, 2/9/98). In addition to other allegations, government affidavits charge that Columbia billed the government for marketing and sales costs as "public education" and for the purchase price of the Olsten home health care agency as "administrative" costs related to provision of services (New York Times, 2/11/98).
Former Columbia/HCA CEO Rick Scott will receive $12.4 million in severance pay, 25% more than previously reported. His severance package includes $33,000 in health benefits for the next five years (Code Columbia, SEIU, 2/2/98).
+ George Washington University Hospital and its for-profit partner, Universal Health Services, plan to build a $90 million, 400-bed medical center, despite wide agreement that the D.C. area is already overbedded. The decision “reflects the quandary of the hospital industry, which is hurting from dwindling patient loads but believes the only way to survive in the increasingly competitive marketplace is to build the equivalent of patient palaces” (Wall Street Journal, 2/26/98, American Health Line, 2/27/98).
Religious Opposition to For-Profit Hospitals Grows
+ "Investors [making] a profit from health care is contrary to the Gospel call to heal the sick" according to Giuseppe Baldazo, Vatican undersecretary for Catholic education, speaking in opposition to the sale of Catholic-affiliate St. Louis University Hospital to the for-profit hospital giant Tenet for $310 million (St. Louis Post Dispatch, 11/30/97).
Father Michael Place, the new president and CEO of the Catholic Health Association, is also on record against investor-owned, for-profit hospitals: “Given its special status, health care’s primary end or essential purpose should be a cured patient, a comforted person and a healthier community, not earning a profit or return on capital for shareholders.” (St. Louis Post Dispatch, 12/7/99 and CHA release, 12/18/97).
+ In Los Angeles, Cardinal Roger Mahoney is battling the sale of Queen of Angels-Hollywood Presbyterian to Tenet. "As health care becomes more and more viewed as a commodity to be sold for profit than as a public good, the basic values and principles which have maintained the integrity of health care delivery have become compromised." (Los Angeles Times, 2/27/98).
+ The late Cardinal Joseph Bernadin, from Chicago, was also strongly opposed to profit-driven care.
HMO Woes
+ Oxford Health Plan stock dropped $3.3 billion, 62% of its market value, in one day last October. New York’s Attorney General is investigating charges of insider trading by Oxford executives who sold off their stock at peak prices just before the crash. A class-action lawsuit by shareholders is also in the works. Oxford reported losses of $284.7 million in the fourth quarter of 1997 and $291.2 million for the year.
+ Oxford is requesting premium increases of 50% to 69.4% on its individual policies, amounting to a hike in premiums of at least $100 a month for 55,000 New Yorkers (New York Times, 2/4/98). New Oxford CEO Dr. Norman Payson was the HMO industry’s highest-paid executive in 1994, with compensation of $15.5 million. At the end of 1995, he held nearly $150 million of stock in his old firm, Healthsource (New York Times, 4/11/95).
+ Ex-CEO and Oxford founder Steve Wiggins’ contract provides for severance pay of $9 million, not including stock options. Oxford will also continue to pay Wiggins’ country club membership in Darien, Connecticut, and the cost of preparing his tax returns (New York Times, 4/1/98).
+ Pacificare HMO lost $22 million on revenues of $9 billion in 1997, compared with an income of $76 million in 1996 (Los Angeles Times, 3/5/98), sending its stock down 21%. "PacifiCare medical directors...view a constantly updated, electronic ticker-tape of the company’s stock price that flashes on their office wall while they decide physician requests [for expensive drugs and treatment]." Pacificare bought FHP International early last year. FHP shareholders are suing former FHP officers, claiming they "purposely destroyed a viable and healthy company just to sell off its resources and make tens of millions of dollars for themselves." (San Diego Union Tribune, 11/19/97).
Kaiser Permanente, the nation’s largest, and one of the oldest, not-for-profit HMOs, reported its first loss ever, $270 million, in 1997. The HMO had 8.9 million members and $14.5 billion in revenues last year (New York Times, 2/14/98).
Galloping Towards Oligopoly
+ Managed mental health care giant Magellan Health Services is buying Merit Behavioral Health to create a $1.5 billion firm covering 60 million people. Magellan has also signed agreements that will give it majority control over Green Spring Health Services, Human Affairs International, CMG Health, and Vista Behavioral Health (State Health Watch, 11/97). FHC Health Systems of Norfolk, VA bought Columbia/HCA’s Value Behavioral Health Unit for $230 million. The combined firm is the nation’s second largest behavioral-health company with $580 million in revenues (Wall Street Journal, 1/30/97).
+ 64 health care mergers and acquisitions worth $200 million or more were announced or completed in 1997 for a total value of about $56.1 billion, up from 42 deals worth $43 billion in 1996 (Jenks Healthcare Business Report, 1/24/98).
+ The Illinois and Texas Blue Cross Blue Shield plans are seeking to merge, creating the second largest Blues plan in the country (Dallas Morning News, 2/16/98).
+ Columbia/HCA will lease and operate two Oklahoma teaching hospitals, University Hospital and Children’s Hospital, for 50 years under the terms of a $40 million “joint operating agreement” (Daily Oklahoman, 2/1/98).
+ 626 hospitals were involved in mergers and acquisitions in 1997, compared with 768 in 1996. 50 non-profit hospitals converted to for-profits last year (Modern Healthcare, 1/12/98). The number of for-profit hospitals in the U.S. rose by 21 to 1,331 last year. For-profits now control 183,416 beds (Federation of American Health Systems survey, Modern Healthcare, 1/19/98).
+ Not so fast: According to a new ruling by the IRS, not-for-profit hospitals must be the ones to "exert control" in any joint partnership arrangement with a for-profit if they wish to retain their tax-exempt status. Columbia/HCA has seven or eight joint partnerships, involving about 20 hospitals, that may violate the new rules (Wall Street Journal, 3/5/98).
+ Kessler Rehabilitation, the New Jersey facility that treated actor Christopher Reeves, converted to a for-profit in January (PR Newswire, January 3, 1998).
+ The Federal Trade Commission is blocking the proposed mergers of the four largest U.S. drug wholesalers into two companies. McKesson bid $1.79 billion for AmeriSource, and Cardinal Health was to pay $2.62 billion for Bergen Brunswig Corp. The firms involved control more than three-fourths of the $80 billion U.S. wholesale drug market (Wall Street Journal, 2/25/98).
The Final Frontier: Medicare HMOs
+ Disenrollment from Medicare HMO’s rose from 11.2% in 1995 to 13% in 1996. 17 of 158 Medicare HMOs in operation in 1996 had disenrollment rates over 20% and rapid disenrollment rates (within the first 3 months of joining) of 40%. Seven of the 10 HMOs with the highest disenrollment rates are for-profits, while nine of the ten with the lowest disenrollment rates are not- for-profit. The ten plans with the highest percent of seniors who dropped out had average disenrollment rates of 53.6%, compared with an average of 3.7% at the 10 plans with the lowest rates (Families USA, 12/4/97).
+ Bait and switch: 13,000 seniors who enrolled in First Option Health Plan, a New Jersey provider- sponsored HMO, received notice that their premiums are going up by $49 a month and that the plan will no longer cover prescription drugs, vision care, and dental care (Philadelphia Inquirer, 12/8/97). In Pennsylvania, Keystone Health Plan Central is increasing monthly premiums by as much as $35 and eliminating prescription drug coverage in some counties. Plans in California, Maryland, Arizona and other states are also increasing premiums and cutting benefits (New York Times, 12/22/97).
+ According to Congressional Budget Office estimates, one-quarter of Medicare beneficiaries, 11 million seniors, will be in HMOs by 2002 (National Journal, 8/16/97). There are currently 5.9 million seniors in HMOs, out of a total of 38 million beneficiaries.
Profits from Pain: Medicaid HMOs
+ Oregon’s Medicaid managed care program, which “prioritized” nearly 700 medical services based on cost-effectiveness, will now cover physician assisted suicide, leading opponents to charge that the poor may be forced to choose death as the cheapest option (Philadelphia Inquirer, 2/27/98).
+ In Connecticut, Oxford tried to sell its ailing 33,000 enrollee Medicaid business to HealthRight, an HMO cited for "numerous deficiencies." State officials balked at the deal, saying that it was akin to "selling people...and we gave that up 150 years ago." (Hartford Courant, 2/20/98, New York Times, 2/26). Oxford is also dumping 45,000 Medicaid enrollees in New Jersey, 42,200 in New York, and its members in Philadelphia. The HMO U.S. Healthcare has also announced that it is shedding its New York Medicaid enrollees, leading advocates for the "poor to question the stability of health care for low-income people in the city and the region in an era of privatization of health coverage." (New York Times, 2/26/98).
+ Since Montana pushed all its Medicaid recipients into managed mental health care on April 1, complaints about problems with care have been widespread. The Health Care Financing Administration has warned Montana that it will cancel its waiver if care does not "improve markedly" under its contract with CMG Health (now owned by Merit, which is being bought by Magellan) and Montana Community Partners (Billings Gazette, 12/16/97).
+ Two reports on Tennessee’s managed mental health program for Medicaid recipients, the $350 million TennCare Partners system, are highly critical. The reports show that the two firms involved, Premier Health Services (co-owned by Columbia/HCA) and Tennessee Behavioral Health, are in violation of state care standards and can arbitrarily deny care. Patients, providers, and mental health advocates have testified that under TennCare Partners, "the mentally ill are given inadequate help or no help at all." Premier canceled its contract with Tennessee Christian, a non-profit hospital that provides substance abuse and mental health care for more than 400 TennCare patients annually, to shift patients to Columbia/HCA owned facilities, where it acknowledges paying more for the same services (Memphis Commercial Appeal, 1/25/98).
Polls and Politics
+ Less than half of Americans in HMOs (44%) believe their treatment would be covered if they became seriously ill, compared with 69% in fee-for-service plans (Kaiser Family Foundation survey, Washington Post, 11/17/97).
+ A Pew survey found that 80% of Americans think the government is doing only a "poor" or "fair" job of ensuring that health care is affordable. A majority (58%) support government ensuring access to care and 75% think the government should make this issue a "high" or "very high" priority (Pew Research Center for the People and the Press, release 3/10/98).
+ Americans don’t trust politicians, but they do like Federal workers and agencies. According to a recent Pew survey, the Post Office is the most-favored agency, viewed positively by 89% of people, up from 76% a decade ago (New York Times, 3/10/98).
A coalition of insurance and business groups is launching a $1 million advertising campaign against HMO-patient protection bills pending in Congress. The members of the so-called Health Benefits Coalition are the American Association of Health Plans, the Blue Cross and Blue Shield Association, the Health Insurance Association of America (sponsor of the Harry and Louise ad campaign), the Business Roundtable, the U.S. Chamber of Commerce, the National Federation of Independent Business, and the National Association of Manufacturers (Wall Street Journal, 1/16/98).
+ The brother of Columbia/HCA’s CEO, Sen. William Frist (R-TN) is a member of the President’s commission on Medicare. The Senate Ethics Committee failed to find a conflict of interest, despite the fact that Sen. Frist, his wife, and their children hold at least $9 million in investments in Columbia/HCA (Code Columbia, SEIU, January 12, 1998).
+ International Update
South Africa’s 1996 constitution states that: "Everyone has the right to have access to health care services, including reproductive health care, sufficient food and water, and social security." ("Update of Public Health in South Africa" by Dr. David Allen, CDC Medical Epidemiologist, APHA, 11/97) In 1996 and 1997, South Africa built more than 350 new health clinics, compared with less than 100 in the previous 5 years combined.
+ Japan passed legislation on December 9, 1997 providing universal long term care insurance. The program, called Kaigo Hoken, will be fully operational in 2000 (Lancet, December, 1997 and JAMA October 22, 1997).
+ What’s behind the oft-repeated myth that "Canada’s health system closed down for a week a few years ago when the government ran out of money?" Family practitioner and Toronto health policy analyst Dr. Michael Rachlis believes the myth originated in the early 1990’s when the province of British Columbia signed an agreement with some facilities in Washington state to provide up to 200 cardiac bypass surgeries due to complaints by surgeons that they didn’t have enough capacity. In fact, the surgeons referred very few of their patients out, but the myth took on national proportions in the U.S. and kept circulating.
The myth could also have arisen because some hospitals postpone elective surgeries over the Christmas holidays and into the next fiscal year to meet their budget targets. Once the new fiscal year starts, elective surgeries start up again. However, no parts of the system ever close down, and emergency surgery continues.
+ A third possible explanation is that at the end of the year, if physicians in the province of Ontario have billed the government more than their total budget, a "clawback" may go into effect. Thus, physicians may receive lower reimbursements for their bills late in the year, to keep total spending within limits. In 1996, physicians’ billings were running 10% over budget, so the province -- according to the agreement it had previously negotiated with the Ontario Medical Association -- wanted to implement a 10% clawback. However, due to vigorous protests by physicians, some of whom claimed it amounted to making them work an extra week at the end of the year for nothing, the government anted up an additional 7% for physician spending, reducing the clawback to just 3%. Despite all the controversy, again, no parts of the system, even in Ontario, ever shut down.
+ So, why is the myth so stubborn? In a recent radio appearance, Dr. Rachlis asked a woman who called in claiming "the Canadian system shut down for a week" how she knew, when she’d never even been to Canada. "My congressman told me" was her response.
+ Dr. Rachlis recommends a three-phase response to refuting myths about the Canadian system. First, rebut: "That’s totally false." Second, attack: "There’s a reason politicians tell these lies, and that’s money. Health insurance companies make billions of dollars every year by keeping the health system private." Three, explain: "No parts of the Canadian system have ever closed, although they may postpone elective surgeries over the holidays."