PNHP

Aetna perfects cream skimming for Medicare Advantage

Aetna perfects cream skimming for Medicare Advantage

Aetna Launches Employer Health Insurance Plans for Early Retirees

AISHealth.com
From Managed Care Week, Feb. 19, 2007

One objective of Aetna, Inc.’s launch of four new plans for early retirees targeting the 55-to-65 age group Feb. 8 is to create long-term relationships with pre-retirees that can continue as the members age in to Medicare.

Aetna’s new products will enable employers to reduce the benefits they pay for, while ensuring that retired employees have a level of coverage equal to, or slightly less than, what they had before.

The new plans will also enable Aetna to keep members after Medicare becomes their primary payer. Enrollees in an Aetna pre-65 product will be informed about 90 days before becoming eligible for Medicare that they need to convert to some form of post-65 coverage, and one option will be Aetna. Employers may assign beneficiaries to a post-65 Aetna plan, but they must give them notice, information about the plan and opportunity to opt out, (Aetna vice president Jay) Putterman says. The value of staying with Aetna is that “if we’re helping them pre-65 clinically, as they age, we think we’re in the most favorable position to continue to help them after 65.”

Aetna will guarantee issue of policies for people in the employer group, but employers’ rates will be subject to group underwriting.

http://www.aishealth.com/Bnow/022107a.html

Comment:

By Don McCanne, MD

Cream skimming? Well, let’s see.

Aetna has designed these plans to resemble their Medicare Advantage plans. By enrolling individuals in the decade before Medicare eligibility, presumably the patients will become comfortable with their Aetna physicians and want to continue with them under the Medicare Advantage version. Aetna makes the transition very easy by making enrollment essentially automatic unless the beneficiary specifically elects to opt out.

There is an element of cream skimming here since this over 55 group is still employed and comparatively healthy since those no longer employed because of their diasbilities have been removed from this risk pool. Targeting a healthier sector is cream skimming.

But this program is more nefarious than that. The over 55 population has a higher incidence of significant chronic disorders, though many may still be able to continue their employment. Aetna does not want those individuals to enroll in their Medicare Advantage program. So Aetna has established a separate risk pool for these employees over 55 that is subject to group underwriting. If they are healthy, great. But if that pool has an unacceptable level of chronic disorders, Aetna merely sets the premium at a level that is unaffordable so that the employer will decline this program. This is about as close as you can get to a program that is almost 100 percent effective in excluding those with health care needs from their Medicare Advantage plans.

Why do the policymakers continue to insist that the private insurers must be a part of our models of reform? How much more evidence do they need? Have the policymakers no decency?

Health care problem is rooted in insurance

Letter to the Editor
St. Petersburg Times
Friday, February 23, 2007

Our health care system is a national disgrace. We spend far too much money and get too little in return. John Podesta is absolutely right with his condemnation of our current system, but his proposed “fix” would just further complicate an already fragmented and overly complex system.

As a practicing family doctor in Clearwater, I see the increasing problems of our system every day. More of my patients have lost their insurance coverage and struggle to pay for even basic care. For the lucky ones who have coverage, insurers shift more cost to my patients, maintaining their profits while forcing people into difficult choices that can adversely affect their health.

The complex and onerous bureaucracy of our current system is the problem; having taxpayers pay for a carved out “Wellness Trust” just creates more of the administrative waste that already plagues our system. The American taxpayer already pays more than 65 percent of all health care spending in this country and takes on the disproportionate expense of caring for the oldest, the poorest and sickest patients.

The fundamental problem of our system is the enormously parasitic insurance industry that sucks billions of dollars out of our health care system every year, shuns the unhealthy and unwealthy. But what have we gotten in return? Substandard care compared to other nations, soaring costs, adversarial relationships with our providers, treatment and payment denials, “preauthorization” hassles and bureaucratic nightmares.

The problem with our system is for profit insurance companies. What we need is a single public trust to administer all health care in this country, not just for preventative care. That is why I, along with the over 14,000 doctors of the group, Physicians for a National Health Program (www.pnhp.org), advocate an efficient “Medicare for All” program like HR 676, a bill recently re-introduced in Congress.

Numerous polls show that the American people overwhelmingly support such a program. Our only barrier is that we continue to “look the other way” while allowing a self-serving industry to waste over 30 percent of our health care dollars on its own overhead and profits. That wasted money is badly needed to cover the 47 million of us without any insurance, those of us with threadbare coverage and to guarantee that all Americans get needed medical care without the threat of financial ruin or bankruptcy that is rampant today.

Greg M. Silver, M.D.
Board of Directors, Physicians for a National Health Program
Palm Harbor

Taking Back the FDA

by Marcia Angell
Boston Globe
Monday, February 26, 2007

It’s time to take the Food and Drug Administration back from the drug companies.

Before a prescription drug can be sold, the manufacturer must conduct clinical trials to prove to the FDA that the drug is safe and effective. Without that, doctors have no way of knowing how good or bad a drug is. Just trying it out would be not only risky, but unreliable, since individual experience can be misleading. The scrutiny that this agency exists to provide is vital to our health.

But in 1992, Congress put the fox in the chicken coop. It passed the Prescription Drug User Fee Act, which authorizes drug companies to pay “user fees” to the FDA for each brand-name drug considered for approval. Nearly all of the money generated by these fees has been earmarked to speed up the approval process.

In effect, the user fee act put the FDA on the payroll of the industry it regulates. Last year, the fees came to about $300 million, which the companies recoup many times over by getting their drugs to market faster.

But while it’s a small investment for drug companies, it’s a lot of money for the agency, and it has drastically changed the way it operates — creating a disproportionate emphasis on approving brand-name drugs in a hurry. Consequently, the part of the agency that reviews new drugs gets more than half its money from user fees, and it has grown rapidly. Meanwhile, the parts that monitor safety, ensure manufacturing standards, and check ads for accuracy have languished or even shrunk.

Most tellingly, the office that approves generic drugs is so small that approval time for generics is twice as long as for brand-name drugs. There is now a backlog of more than 800 generics. That delay is worth billions of dollars to the drug companies whose high prices depend on not having generic competition.

As part of the emphasis on speed, the FDA often approves brand-name drugs on the basis of less evidence than in the past. In these cases, approval may be contingent on companies conducting further safety studies after the drugs are on the market. But the companies usually don’t honor that commitment. Of the roughly 1,200 such studies outstanding — some for years — over 70 percent haven’t been started.

The FDA is strangely silent about this inexcusable dereliction. When questioned, it weakly protests that it doesn’t have the authority to compel the research. In fact, it has enormous leverage, since it can withdraw drugs from the market.

The FDA also refuses to release unfavorable research results in its possession without the sponsoring company’s permission. Here again, it contends not to have the authority to do so, but providing evidence of side-effects or negative results would seem to be an integral part of its job. It’s no wonder that serious safety concerns about drugs such as Vioxx, Paxil, and Zyprexa have emerged very late in the day — years after they were in widespread use.

The agency’s coziness with industry is underscored by the composition of its 18 advisory committees — outside experts who help evaluate drugs.

Incredibly, many of these advisers work as consultants for drug companies. Although they are supposed to recuse themselves if there is a direct conflict of interest, the FDA regularly grants exemptions from that requirement. Of the six members of the advisory committee that in 1999 recommended approving Vioxx — the arthritis drug pulled from the market in 2004 because it caused heart attacks — four had received waivers from the conflict-of-interest rule.

The FDA now behaves as though the pharmaceutical industry is its user, not the public. Fortunately, the user fee law is subject to renewal every five years, and this is one of those years.

Congress should let the law die this time around and substitute its own support — which ought to be increased. Other reforms recently proposed, such as administratively separating drug approval from safety surveillance, will not mean much as long as this law is in effect.

At $300 million to $400 million a year, the equivalent of about a day in Iraq, Congress can easily afford to buy this vital agency back for the public, and it should.

Dr. Marcia Angell, a senior lecturer at Harvard Medical School, is a guest columnist.

In Health Care Reform Debate, Single-Payer System is Labor's Only Clear Choice

Rose Ann DeMoro
Labor Notes
02/23/07

Summary:

Union members have a huge stake in the present debate on health care reform. At a time when employers routinely slash or eliminate health benefits for workers and their families or force union members on strike to preserve those benefits, when insurance plans routinely restrict workers’ choice of doctors and prescription drugs, and when more working families declare bankruptcy due to medical debt, only one reform can provide the health care security working people need: single-payer.

Story:

Union members have a huge stake in the present debate on health care reform.

At a time when employers routinely slash or eliminate health benefits for workers and their families or force union members on strike to preserve those benefits, when insurance plans routinely restrict workers’ choice of doctors and prescription drugs, and when more working families declare bankruptcy due to medical debt, only one reform can provide the health care security working people need: single-payer.

Under single-payer, you don’t face the loss of health benefits if you lose your job or are forced out on strike. You don’t face employers constantly shifting costs onto your back. You don’t have to worry about retiree health care if you are able to retire before age 65. And you are no longer at the mercy of the insurance industry predators who routinely deny care.

NOT A DREAM

Single-payer is not a dream. It’s legislation–House Resolution 676, introduced by Congressmen John Conyers and Dennis Kucinich, with dozens of co-authors. It also has the backing of 235 labor organizations in 40 states, including 17 AFL-CIO state federations and 60 county/regional central labor councils. Several states, including California and Illinois, also have single-payer bills in the hopper.

Does single-payer work? Every industrialized nation in the world except the U.S. has either a single-payer system, like Medicare, or a national health system, like our veterans health system. That’s why the U.S. stumbles along at 37th in the world in overall health care quality, according to the World Health Organization.

Under single-payer, all health care revenues go into one publicly administered pool of money that pays for all medically necessary services delivered by doctors, hospitals, and other providers.

Its guiding principles are:

* Universality: Everybody in, nobody out.

* Portability: Even if you lose your job or never had one, you still have health coverage, guaranteed.

* Comprehensive, uniform benefits: No Cadillac plans for the wealthy, no tricycle plans–with high deductibles, limited services, and caps on coverage–for everyone else.

* Choice of physician, hospital, clinic, and other caregivers: Most private plans restrict where you can go.

* Cost controls and cost savings: 30 percent of every dollar that currently goes to insurance companies pays for their administrative costs–and their profits. Under single-payer, savings accrue from eliminating this overhead.

* Public oversight: The public sets policies and administers the system, instead of high-priced CEOs meeting in secret and making decisions based on what inflates their compensation packages or company profits.

OBVIOUS SOLUTION

Single-payer is such an obvious solution that one might wonder why there is not overwhelming accord by labor, liberal, and progressive organizations and politicians to campaign for it.

One reason is the enormous economic and political clout of the health care industry. The 20 largest HMOs in the U.S., for example, made $10.8 billion in profits in 2005. Drug companies make even more; the world’s 13 biggest reported $62 billion in profits in 2004.

Health care corporations employ that wealth to block real reform in Washington and in state capitols. They promote “solutions” for the health care crisis that throw more money to the private marketers who created the present mess by putting revenues and profits ahead of the health and well-being of patients.

Thus, we’re presented with a series of market-based approaches masquerading as “universal” coverage, along with browbeating campaigns designed to lower public expectations and promote the conventional wisdom that only substandard solutions are feasible.

We’ve heard this before. From abolition of slavery to women’s suffrage to enacting Social Security and Medicare to ending legal segregation, our history is filled with achievements that the political “realists” repeatedly dismissed as unrealistic.

INADEQUATE REFORMS

Most of the alternatives offered instead are based on expanding the role of the insurance industry. Among the ideas now being touted by, among others, liberal advocacy groups and a few Presidential candidates, are mandates that everyone be required to buy insurance, tax deductions to encourage people to buy insurance, taxes on employers to pay for more insurance, and expansions to existing federal or state programs to buy insurance for the low income.

No wonder that Stephen Hemsley, chief executive of health care giant UnitedHealth Group, calls one such scheme, by California Governor Arnold Schwarzenegger, “an interesting set of proposals that represent real opportunities for our business.”

Both the Schwarzenegger plan and the Massachusetts law on which it is modeled have as their central premise the requirement that all state residents buy health insurance.

Yet neither places any limits on skyrocketing premiums, and in both states individuals and families will face huge deductibles with even the cut-rate plans the law will force them to buy. The result is that many will end up paying for virtually all their medical expenses or gamble with their health by avoiding most services.

On the other hand, the California and Massachusetts models are welcome news in the corporate boardrooms of the insurance industry. Insurers stand to make hundreds of millions more just in California.

Another favored scheme, especially by some in labor, is employer mandate “pay or play” plans that require businesses to provide health benefits or pay into a state pool to buy insurance for the uninsured.

But in addition to being another windfall for the insurers, a federal court ruling throwing out a Maryland law based on this approach cast doubt as to whether any employer mandate will withstand legal challenge.

The health care industry and conservative ideologues hardly need our help. It’s time for labor activists to unite behind the only health care reform that is universal, comprehensive, and assures one standard of quality care for all.

Rose Ann DeMoro is executive director of the California Nurses Association/National Nurses Organizing Committee.

Schwarzenegger on Health Care: People or Profits?

Tuesday, February 27, 2007

Interviews Available

In his speech at the National Press Club yesterday emphasizing his health care proposals and “bipartisanship,” California Governor Arnold Schwarzenegger said: “Whether you’re Republican or Democrat, you don’t have to give up your principles at all. But isn’t the ultimate principle to serve the people? To do the things that are good for the people?” When asked about the role of big insurance and pharmaceutical companies, Schwarzenegger replied: “You must let everyone make their profits.”

The following health care specialists can assess the rhetoric and the substance of Schwarzenegger’s — and others’ — health care proposals:

DAVID HIMMELSTEIN, M.D., cell: (617) 312-0970, (617) 665-1032, david_himmelstein@hms.harvard.edu, https://pnhp.org
Himmelstein is associate professor of medicine at Harvard Medical School; his work was recently cited by Schwarzenegger. Himmelstein said today: “Governor Schwarzenegger’s proposal would make Californians pay tens of billions to insurance companies for defective coverage. And his plan would add to the more than $40 billion wasted annually on insurance bureaucracy and paperwork in California. …
“Only a single-payer system can reap the savings on bureaucracy needed to assure comprehensive coverage for all.
“Two weeks ago the governor cited my work on medical bankruptcy, saying: ‘To quote a Harvard medical professor who did the best study on the subject, “Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy.”‘ What he forgot to mention was that most people bankrupted by illness had exactly the kind of faulty coverage he wants to force Californians to buy. Three-quarters of medical debtors in our study had private insurance. The governor should get his facts right on medical bankruptcy. And he should get his facts right on single payer reform.” Himmelstein is co-founder of Physicians for a National Health Program.

JUDY DUGAN, (213) 280-0175, (310) 392-0522 ext 305, judy@consumerwatchdog.org, http://www.consumerwatchdog.org
Dugan is research director of the Foundation for Taxpayer and Consumer Rights, which puts out the ArnoldWatch.org blog. She said today: “During his news conference at the National Press Club in Washington Monday, Schwarzenegger fielded lots of softballs from the smitten D.C. press corps. He also dodged one hardball from the moderator, asking whether as part of his health reform he’d regulate health insurance rates in the same way that auto insurance rates are successfully regulated in California.
“His response: Well, maybe, ‘if there’s a big problem’ later. He said he believed that requiring everyone to buy insurance on the private market would reduce the cost of health insurance premiums, currently averaging about $11,500 a year for a family of four.
“Then, the tipoff: ‘You must let everyone make their profits,’ he declared.
“Come again? It’s insurance companies’ bloated overhead and record profits that are the biggest driver of health care cost increases. Of course, part of that bloat comes from the $3.5 million the health industry has contributed to Arnold’s political campaigns.” http://www.ArnoldWatch.org/blogs/blogs_000980.php3

DON McCANNE, M.D., (949) 493-3714, don@mccanne.org, https://pnhp.org/news/quote_of_the_day.php
Senior health policy fellow with the group Physicians for a National Health Program, McCanne writes a daily health policy update. He said today: “Governor Schwarzenegger, in his remarks before the National Press Club, touts his ‘post-partisan’ era of compromise in California. Yet, in health care reform, he is unwilling to compromise with his position that each individual be responsible for purchasing private health care coverage, even though the insurers have not been able to create a product that is both affordable and that provides enough coverage to prevent financial hardship for moderate-income individuals with significant health care needs.
“And for low-income individuals, he expects the federal government to increase funding for Medicaid and SCHIP (children’s insurance) at a time that the Bush administration is attempting to reduce income-eligibility levels and eliminate parents from coverage. He is emphatic about wanting health care coverage for everyone, yet he is obstructing reform by his uncompromising support of the private insurance industry that cannot deliver the effective, affordable product that we need, and by his dependence on federal funding that is not forthcoming. He could have reform simply by compromising in his opposition to single-payer insurance coverage, but he rejects that simply because of his own anti-government ideology. A spirit of post-partisanship requires compromise from everyone, including the governor. A compromise in ideology is a very small price to pay for achieving reform that would work for everyone — except the private insurance companies.”

For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020, (202) 421-6858; or David Zupan, (541) 484-9167

In Health Care Reform Debate, Single-Payer System is Labor’s Only Clear Choice

Rose Ann DeMoro
Labor Notes
02/23/07

Summary:

Union members have a huge stake in the present debate on health care reform. At a time when employers routinely slash or eliminate health benefits for workers and their families or force union members on strike to preserve those benefits, when insurance plans routinely restrict workers’ choice of doctors and prescription drugs, and when more working families declare bankruptcy due to medical debt, only one reform can provide the health care security working people need: single-payer.

Story:

Union members have a huge stake in the present debate on health care reform.

At a time when employers routinely slash or eliminate health benefits for workers and their families or force union members on strike to preserve those benefits, when insurance plans routinely restrict workers’ choice of doctors and prescription drugs, and when more working families declare bankruptcy due to medical debt, only one reform can provide the health care security working people need: single-payer.

Under single-payer, you don’t face the loss of health benefits if you lose your job or are forced out on strike. You don’t face employers constantly shifting costs onto your back. You don’t have to worry about retiree health care if you are able to retire before age 65. And you are no longer at the mercy of the insurance industry predators who routinely deny care.

NOT A DREAM

Single-payer is not a dream. It’s legislation–House Resolution 676, introduced by Congressmen John Conyers and Dennis Kucinich, with dozens of co-authors. It also has the backing of 235 labor organizations in 40 states, including 17 AFL-CIO state federations and 60 county/regional central labor councils. Several states, including California and Illinois, also have single-payer bills in the hopper.

Does single-payer work? Every industrialized nation in the world except the U.S. has either a single-payer system, like Medicare, or a national health system, like our veterans health system. That’s why the U.S. stumbles along at 37th in the world in overall health care quality, according to the World Health Organization.

Under single-payer, all health care revenues go into one publicly administered pool of money that pays for all medically necessary services delivered by doctors, hospitals, and other providers.

Its guiding principles are:

* Universality: Everybody in, nobody out.

* Portability: Even if you lose your job or never had one, you still have health coverage, guaranteed.

* Comprehensive, uniform benefits: No Cadillac plans for the wealthy, no tricycle plans–with high deductibles, limited services, and caps on coverage–for everyone else.

* Choice of physician, hospital, clinic, and other caregivers: Most private plans restrict where you can go.

* Cost controls and cost savings: 30 percent of every dollar that currently goes to insurance companies pays for their administrative costs–and their profits. Under single-payer, savings accrue from eliminating this overhead.

* Public oversight: The public sets policies and administers the system, instead of high-priced CEOs meeting in secret and making decisions based on what inflates their compensation packages or company profits.

OBVIOUS SOLUTION

Single-payer is such an obvious solution that one might wonder why there is not overwhelming accord by labor, liberal, and progressive organizations and politicians to campaign for it.

One reason is the enormous economic and political clout of the health care industry. The 20 largest HMOs in the U.S., for example, made $10.8 billion in profits in 2005. Drug companies make even more; the world’s 13 biggest reported $62 billion in profits in 2004.

Health care corporations employ that wealth to block real reform in Washington and in state capitols. They promote “solutions” for the health care crisis that throw more money to the private marketers who created the present mess by putting revenues and profits ahead of the health and well-being of patients.

Thus, we’re presented with a series of market-based approaches masquerading as “universal” coverage, along with browbeating campaigns designed to lower public expectations and promote the conventional wisdom that only substandard solutions are feasible.

We’ve heard this before. From abolition of slavery to women’s suffrage to enacting Social Security and Medicare to ending legal segregation, our history is filled with achievements that the political “realists” repeatedly dismissed as unrealistic.

INADEQUATE REFORMS

Most of the alternatives offered instead are based on expanding the role of the insurance industry. Among the ideas now being touted by, among others, liberal advocacy groups and a few Presidential candidates, are mandates that everyone be required to buy insurance, tax deductions to encourage people to buy insurance, taxes on employers to pay for more insurance, and expansions to existing federal or state programs to buy insurance for the low income.

No wonder that Stephen Hemsley, chief executive of health care giant UnitedHealth Group, calls one such scheme, by California Governor Arnold Schwarzenegger, “an interesting set of proposals that represent real opportunities for our business.”

Both the Schwarzenegger plan and the Massachusetts law on which it is modeled have as their central premise the requirement that all state residents buy health insurance.

Yet neither places any limits on skyrocketing premiums, and in both states individuals and families will face huge deductibles with even the cut-rate plans the law will force them to buy. The result is that many will end up paying for virtually all their medical expenses or gamble with their health by avoiding most services.

On the other hand, the California and Massachusetts models are welcome news in the corporate boardrooms of the insurance industry. Insurers stand to make hundreds of millions more just in California.

Another favored scheme, especially by some in labor, is employer mandate “pay or play” plans that require businesses to provide health benefits or pay into a state pool to buy insurance for the uninsured.

But in addition to being another windfall for the insurers, a federal court ruling throwing out a Maryland law based on this approach cast doubt as to whether any employer mandate will withstand legal challenge.

The health care industry and conservative ideologues hardly need our help. It’s time for labor activists to unite behind the only health care reform that is universal, comprehensive, and assures one standard of quality care for all.

Rose Ann DeMoro is executive director of the California Nurses Association/National Nurses Organizing Committee.

Is Medicaid Sustainable?

Spending Projections For The Program's Second Forty Years

By Richard Kronick and David Rousseau
Health Affairs
February 23, 2007

Medicaid is a special program in many ways–serving parts of the population that are ill served by the voluntary employer-based financing system. But despite fears about declines in employer-
sponsored insurance, increases in the number of disabled people, and the LTC needs of the baby boomers, it appears that there is little that is special about Medicaid spending: It is likely to increase with health spending more generally, neither much more quickly nor much more slowly.

Short of pushing beneficiaries into the ranks of the uninsured or greatly reducing Medicaid benefits, there is likely little that can be done to greatly reduce Medicaid spending growth in the medium term except to do something about reducing overall health spending growth. Medicaid is one purchaser in a larger health care market, and with payment rates already much lower than those of other payers and with an overall population far more costly than that covered by private insurance, the most effective way to control Medicaid spending growth is to pursue strategies to control overall health care cost growth. This is a problem much larger than Medicaid, and beyond the scope of our work here.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.26.2.w271v1

Comment:

By Don McCanne, MD

This study indicates that growth in government revenues will be adequate to sustain the Medicaid program for the coming decades. The immediate policy implication is that current political attacks on Medicaid as an “unsustainable” program are not warranted. Until we are ready to adopt a more efficient and effective health care financing system, it is important to protect Medicaid from efforts to further underfund the program.

The much more important policy implication is that Medicaid cannot serve as a vehicle for reform. Neither can any other segment of our fragmented system of health care funding. Instead, we must “pursue strategies to control overall health care cost growth.”

The reform options that build on our fragmented financing system fail to provide adequate mechanisms that would improve spending value. A single payer national health insurance program would. Once enacted, we could get rid of the chronically underfunded, high cost Medicaid risk pool, and have higher quality, affordable care for all of us.

Commentary on New Health Proposals

Commentary on New Health Proposals by PNHP Senior Health Policy Fellow Dr. Don McCanne, author “Health Policy Quote of the Day” – archived at www.pnhp.org

* Bush’s Health Plan
* The Healthy Americans Act – Sen. Ron Wyden
* Health Care Coverage for the Uninsured
* America’s Health Insurance Plans
* Massachusetts and California Plans
* Gov. Schwarzenegger’s Health Plan
* Federal Bill to Encourage State Reform

Bush’s Health Plan


Original Quote of the Day – January 22, 2007

By giving every family with health insurance a $15,000 deduction from their taxable income, the president provides incentives to buy less expensive plans, since the tax benefit is the same for the cheapest plan and every other plan up to a value of $15,000.

Why would the president want to provide tax incentives to encourage individuals to buy cheaper health plans? He claims that insurance causes patients to over-utilize health care, and that health care costs will not be controlled until we end this waste. The fact is that the savings achieved by having the healthy decline services of marginal value is only a minuscule portion of our total health care budget. Most health care is provided to sick or injured individuals who need the care. The cheaper plans that the president is encouraging will increase out-of-pocket costs, often making actual health care unaffordable for precisely those who really do need it.

A further potential impact is that employers who would like to terminate their health benefit programs would have less incentive to continue to provide coverage since the employee now would become eligible for the $15,000 deduction. This further advances the president’s goal of shifting responsibility to the individual through an expansion of the ownership society – wherein you own the right to pay for your medical care.

His proposal also is a regressive method of funding health care. Since every insured individual receives the same deduction, higher-income individuals receive a greater government subsidy because of our graduated tax schedule. Worse, for individuals with modest incomes, the tax subsidy is not enough to make insurance affordable, and they will continue to do without.

At a time when everyone agrees that major reform is essential, the president comes up with this proposal. Doesn’t he care about us?

Sen. Ron Wyden of Oregon – The Healthy Americans Act

Original Quote of the Day – December 14, 2006

Sen. Wyden’s proposal is an individual mandate to purchase private health plans. Much has been written about the flaws of such models, and no attempt will be made to address most of those issues here. Rather only one serious fundamental flaw in the application of economic theory will be discussed.

The theory is that in competitive labor markets, total compensation is determined by the market, but the distribution between payroll and other benefits such as health plans and pensions does not influence the total compensation. Thus termination of a health benefit program results in an increase in wages that has the same monetary value.

In Sen. Wyden’s proposal, not only does it assume this theory to be true, it also provides back-up enforcement by requiring that employers increase wages by the same amount of the health benefit that will be terminated under this Act, but only for the first two years. After that, the competition of labor markets resumes, but without the complication of a health benefit program. Employees are on their own for accessing and funding their health plans.

Whether through union efforts or in the open job market, compensation is negotiated, at least theoretically. That includes wages and often health benefits and pensions. It does not include food. It does not include housing. It does not include transportation. It does not include any other basic needs. Those needs fall under the category of personal responsibility – use your wages wisely to meet those needs.

Now health care is shifted away from being considered as part of the compensation package, over into this realm of personal responsibility.

Have wages kept up with the costs of basic needs? There certainly has been a redistribution from wage earners to the wealthy. The minimum wage has not been increased for many years. Consumer debt continues to expand. Personal savings are now a negative. Personal insolvency continues to grow. Yet employers are not providing wage increases that are indexed to food, nor to housing, nor to transportation. Now that they are no longer in charge of health coverage, they will feel no obligation to index wages to health costs either.

The Lewin report contends that price competition between health plans, and greater administrative efficiencies will lower costs significantly. If the consolidated efforts of employers have been unable to control costs and waste, how can individual purchasers ever expect to exert market pressures to achieve these efficiencies?

The last section of the Act list many other potential sources of cost savings. Reading the list, the savings potential for many is simple rhetoric, not supported by fact. Some of them would actually increase costs. The Act excludes more effective cost measures such as those of the single payer model.

The point is that costs will continue to increase and wage earners will have to face those costs alone. Employers will have divorced themselves from the problem and will not make an exception for health care anymore than they already do for food, housing and transportation.

Wyden’s plan falls apart since it depends on price competition of health plans, which in turn depends on shifting more unaffordable costs directly to those who need care.

Health Care Coverage for the Uninsured (HCCU)

Original Quote of the Day – January 18, 2007

Signatory organizations:
AARP, America’s Health Insurance Plans, American Academy of Family Physicians, American Hospital Association, American Medical Association, American Public Health Association , BlueCross BlueShield Association, Catholic Health Association, Families USA, Federation of American Hospitals, Healthcare Leadership Council, Johnson & Johnson, Kaiser Permanente, Pfizer, UnitedHealth Group, U.S. Chamber of Commerce

A diverse group of 16 major national organizations with an abiding interest in accessibility to quality health care have reached a consensus on policy approaches to expand health coverage to as many people as possible as soon as possible.

Phase I: The “Kids First” Initiative and State Experimentation

Public Program Enrollment

…improve enrollment of children who are uninsured but currently eligible for SCHIP (State Children’s Health Insurance Program) and Medicaid.

Family Tax Credit

…creates a new family tax credit for the purchase of children’s health coverage…

State Demonstration Program

…establishes a state demonstration program giving states flexibility to experiment with new approaches that expand health coverage. Competitive grants would be provided to the states…

Phase II: Longer-Term Policy Recommendations

Public-Sector Proposals

…allow states to eliminate family status as an eligibility requirement and determine eligibility for Medicaid coverage based exclusively on financial need.

Private-Sector Proposals

Make… tax credits available for individuals and families with incomes between 100 and 300 percent of the federal poverty level for the purchase of health coverage. …graduated on a sliding scale based on income.

Provide federal grants to states in order to provide health coverage for high-risk populations.

Comment:

By Don McCanne, MD

What a tragedy. Health care coverage, affordability and access are rapidly deteriorating at an accelerated pace, and this is the best that this coalition of influential organizations can come up with.

They propose moving reform forward a couple of inches when we are sliding thousands of miles backwards.

You can cross this group off your list.

America’s Health Insurance Plans

Original Quote of the Day – November 17, 2006

AHIP, representing the nation’s private insurers, is currently being lauded for taking a leadership role in promoting policies encouraging universal access to affordable health care coverage. Are the accolades warranted?

The proposals do seem to meet what many consider to be the political common ground for reform. The expansion of coverage is incremental, beginning with children. The goal is universal coverage that is affordable for everyone.

The process builds on the current system rather than replacing it with a single, government-run program. Though politically expedient, is this the common ground where we really want to be?

AHIP’s primary mission is to protect the interests of the private insurers. They want to continue to market affordable plans to healthy populations that have a source to pay for the insurers’ products. Most employed individuals and their families are healthy and have, through their employment, the resources to purchase insurance. The insurance industry wants to retain that market. Many of the uninsured are also employed and healthy, but lack the resources to pay for coverage. The insurance industry also would like to have this market, and so they have proposed government subsidies to help pay for that coverage. They also propose subsidies for the higher-income uninsured in order to entice them as well to buy their products.

Individuals living in poverty have poor employment records and have a high incidence of chronic problems, especially socio-economic difficulties. The insurance industry does not want to cover this market since there is very little profit incentive in including these less fortunate individuals. Thus AHIP recommends turning these individuals over to a government welfare program, Medicaid, thereby sparing the industry of this burden.

What a great program for the insurers. They cover the healthy with well funded plans, and turn the problem sectors over to the government and the taxpayers.

Besides being extremely self-serving, there are serious deficiencies in their proposals. They are supporting affordable coverage, but not affordable health care. Reading the specifics of their proposals, it is clear that they have no mechanism for slowing health care inflation. Instead, they support proposals that shift more costs to individuals, making access less affordable. Rather than reducing the profound administrative waste in our system, they increase administrative inefficiencies, further adding to health care costs. They have no proposal to pay for the increased government spending, knowing that a massive tax increase, without an offset in reduced private spending, would blow a crater in a common ground on reform. Also, their program cannot possibly achieve 100 percent coverage since much of it requires voluntary participation.

The greatest flaw of all is that their plans are made affordable by increasing financially burdensome cost sharing, by reduction in benefits covered, and by excluding those with health care needs. If these patterns were reversed, then coverage would not be affordable. The private insurance model is an anachronism.

The political common ground for reform should be on policies that ensure that everyone has affordable access to comprehensive health care, rather than on policies that increase wasteful spending through a government program designed for the welfare of private plans. It’s time for taxpayer/patients, providers, and politicians to join together on a common ground to fix our system. But we do need to acknowledge that AHIP and the private insurers have disqualified themselves from being legitimate participants in that process.

Massachusetts and California Plans


By Don McCanne
January 16, 2007
USA Today

Americans need more than affordable insurance; they need affordable health care. California Gov. Arnold Schwarzenegger plans to copy the Massachusetts reform in shrinking the numbers of uninsured people by forcing them to buy stripped down, bare-bones policies.

With premiums for family coverage now averaging $10,000 a year, the only way that states can make premiums affordable is to strip down the plans, which then forces policyholders to pay out of pocket when they get sick. High deductibles, co-payments and benefit reductions are destroying the financial protection that insurance should provide.

Half of U.S. bankruptcies are a result, in part, of medical illness or medical bills. Three-quarters of Americans who are forced into medical bankruptcy had health insurance at the onset of the illness that bankrupted them. Worse, suffering and death can occur when patients cannot afford the care that their private insurance does not cover.

The big winners in the Schwarzenegger and Massachusetts health plans are private health insurance firms. The new insurance mandates will hand them billions in wasteful administrative fees that do not occur in government insurance programs such as Medicare. Private insurers will continue their cream-skimming, enrolling primarily the low cost, healthy workforce and their families, while leaving the costs of the unprofitable sick and elderly to the taxpayers.

State health programs are interdependent on federal programs such as Medicare, Medicaid and the Veterans Affairs’ system, and are regulated by federal laws. The states alone cannot enact the structural changes that would be required to cover everyone and control costs. They are limited to building on the existing system by tweaking it to nominally expand coverage to the uninsured.

Money is not the problem. We already are spending enough on health care to provide high-quality, comprehensive services for everyone. But our inefficient, private-sector insurance bureaucracies have failed and need to be replaced with single-payer national health insurance. Every other developed nation has covered its citizens through some form of non-profit national health insurance.

Don McCanne, M.D., is a senior health policy fellow of Physicians for a National Health Program.

Gov. Schwarzenegger’s Health Plan

Original Quote of the Day – January 9, 2007

Gov. Schwarzenegger’s ten page proposal cannot be fully addressed here, but a brief discussion of the general concepts can give us a perspective as to whether this would achieve his stated goals of affordable health care for everyone. I’ll discuss the first and third building blocks first, and then his plan for coverage.

For prevention, health promotion and wellness, he recommends preventing diabetes and obesity, as if we really knew how to do that, and continuing our successful program to reduce the use of tobacco. He also recommends incentives/rewards to promote prevention, wellness, and healthy lifestyles. Although certainly we all agree that healthy lifestyles are important, as a public policy initiative, this building block will not add much to the foundation of a more effective and efficient health care system.

Affordability and cost containment are crucial to reform. But what does the governor offer? He would require that insurers and hospitals limit their administrative costs and profits to 15% of premiums paid. The current administrative waste is due to our fragmented system of financing health care, and he would do nothing to bring about the structural reform required. It will be very difficult to reduce the 31% spent on administration without an efficient system such as single payer. He recommends health savings accounts, which, if they do reduce spending, would do so by making beneficial health services unaffordable for many individuals with unfunded or depleted accounts. He states that health information technology will improve affordability, when there is already evidence that it will more likely increase costs. He suggests that pay-for-performance and reporting health plan performance will improve efficiency, though there is no real evidence for that. He maintains silence on important cost drivers such as lack of an adequate primary care infrastructure, an excess of non-beneficial high-tech services, and the highest prices of all nations. Without structural reform, this building block will not add much to our health care foundation.

The most important building block is his proposal to provide coverage for all Californians. He does this by expanding eligibility for Medi-Cal (Medicaid) and Healthy Families (SCHIP) for low-income individuals with means-tested premiums, providing subsidies for lower-income working uninsured to purchase coverage through a state pool, and enforcing an individual mandate for all others to purchase coverage. Specific proposals to cover the undocumented are also included.

Unfortunately, this block crumbles when you look at the mandated coverage. “The minimum health insurance benefit that must be maintained will be a $5,000 deductible plan with maximum out-of-pocket limits of $7,500 per person and $10,000 per family. For the majority of uninsured individuals, such coverage can be purchased today for $100 or less per month for an individual and $200 or less for two persons.” Considering that this proposal requires guaranteed issue and community rating, the premiums likely will be at least five or six times that much. And maximum-out-of-pocket limits are a fiction since they ignore non-covered and out-of-network services – often unavoidable. The total costs to individuals or families with significant health care needs can be in the tens of thousands of dollars. An insurance product that does not protect average-income Americans cannot serve as the foundation of an affordable, efficient health care system for all. This alone destroys the credibility of Gov. Schwarzenegger’s model.

There are a couple of other issues that should be mentioned. The 4% payroll tax for employers will likely result in crowd out – employers dropping their current plans because this payroll tax is much lower than the premiums paid for employer-sponsored plans. That tax will not be able to support adequate plans in the state-administered pool. Thus his budget-neutral funding breaks down.

Also the plan promises to significantly increase payment to Medi-Cal providers, at a cost to the state of $2.2 billion. The expanded eligibility under Medi-Cal will cost the state another $1.3 billion. With the mandate of budget neutrality, how do they intend to fund this $3.5 billion expansion? They are going to tax the gross revenues of hospitals at 4% and physicians at 2%, for a total of $3.5 billion. What is the net affect of this? Not only is the Medi-Cal rate increase confiscated by the state, but also the entire compensation for the new enrollees is confiscated. The fact that Schwarzenegger’s administration used a budget gimmick to require physicians and hospitals to provide free care to the expanded Medi-Cal population demonstrates the dishonesty that permeates this entire proposal.

Federal Bill to Encourage State Reform

Original Quote of the Day – November 27, 2006

Is covering everyone an idea that is only half right? Is funding health care equitably so that it is affordable for each individual an idea that is only half right? Is improving efficiency by reducing administrative waste an idea that is only half right? If the right solution means that we fix the financing of health care so that it works for everyone, then we really do understand how to do that.

Apparently the Next Big Thing in health care reform is for Congress to grant the states the opportunity to achieve universal coverage. It is not as if the states haven’t been actively involved in this process. In fact, the federal government already has been giving states budget-neutral permission slips to experiment with various reforms.

Of the fifty states, after a half century of efforts, how many of them have achieved universal, affordable health care coverage? None, of course. They are busy struggling with funding issues, high-risk pools, Medicaid, regulatory oversight of private insurers, and many other policy issues that inevitably fall short on reform goals. When we already know how to fix the system, why would we insist on continuing with fifty different state laboratories to experiment further with well understood health policy science?

This is simply a process designed to further fragment our public and private insurance systems, and prevent us from ever having a universal program of social insurance such as Medicare for All. It is not a process designed to establish trust so we can work together. Rather it is a process designed to deceive. It is a decoy set up by the conservative/libertarian faction that has lured the centrists and the progressive/liberal factions.

As long as those in the center and on the left, with a false sense of compromise, sing the praises of those on the right who would constrain and limit government at the cost of a modicum of egalitarianism, we will be unable to prove wrong Uwe Reinhardt’s prophecy.

Business Roundtable is ready?

Business will deal on health care

By David Lazarus
San Francisco Chronicle
February 18, 2007

(John Castellani, president of Business Roundtable, an association of chief executive officers of some of the biggest U.S. companies) was noncommittal when I asked what sort of remedy his group favors when it comes to addressing America’s health care woes.

“What we’re putting on the table is that this is something that needs to be addressed immediately,” he said. “We’re also putting on the table that there are no bad ideas here.”

So, I asked, would Business Roundtable, which includes among its members the heads of some of the country’s biggest insurers, get behind a government-run system similar to universal-coverage programs in place in every other industrialized democracy?

“Nothing is out of the question at this point,” Castellani replied. “Everything is under discussion.”

Really?

“All of our members face the same problem,” Castellani said. “Costs are going up dramatically and the quality of care is no better than in countries that pay a lot less. We recognize that we need a solution that works for everyone and we’re committed to finding it.”

While none of the private-sector forces advocating change is prepared yet to back a specific plan, much less acknowledge that a government-run (or single-payer) system presents considerable advantages from a cost-saving perspective, it’s important that they’re not ruling anything out.

Castellani said he’s held talks in recent days with House Speaker Nancy Pelosi and senior White House officials. So far, he said, everyone’s keeping an open mind.

“Within the next three or four months, you’re going to see some specifics about what can be done,” Castellani pledged. “These conversations are going on right now.”

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/02/18/BUGQ8O5NDE1.DTL

Comment:

By Don McCanne, MD

In spite of a flurry of new reform proposals, there are really only three basic options: (1) single payer national health insurance, (2) expansion of our public programs and private health plans, and (3) continued gridlock while tweaking the welfare programs.

The first option, single payer, is the solution that would “work for everyone” that the Business Roundtable is “committed to finding.” The second option, expanding the current system, cannot work since it dramatically increases the costs that everyone wants to control, while falling far short on the other goals of reform. The third option, gridlock, is unacceptable since the problems continue to compound.

Castellani says that the insider conversations are already in progress, and we will see specific legislative proposals within the next few months.

What will be proposed? SCHIP is due for reauthorization, and, at the moment, this seems to be the only avenue on which an agreement can be reached. So we’ll have two more years of the third model: gridlock, with minor tweaking.

But the conversations for comprehensive reform are already taking place. They should be studying the differences between the first two options: single payer and multi-payer. Instead, they are looking at several variations of the public and private multi-payer models.

They understand the clear superiority of the single payer model, but they continue to be driven by the belief that it is possible to design a multi-payer model that would please everyone, except the single payer supporters. Whereas the private insurers would never support single payer.

But aren’t the private insurers a major part of the problem? Why should they be a part of the solution?

Private Health Insurance Is Not the Answer

By Phil Mattera
Corporate Research Project
Posted on February 23, 2007, Printed on February 23, 2007
http://www.alternet.org/story/48371/

Healthcare reform is in the air.

Ideas for dealing with the 46 million Americans without medical insurance seem to be popping up faster than new cases of the winter flu. President Bush proposes to use tax deductions to help people buy individual plans. California Governor Arnold Schwarzenegger wants to make it mandatory for everyone in his state to obtain insurance and would force employers who don’t provide coverage to pay into a fund.

Democratic Presidential candidate John Edwards would raise taxes on the affluent to pay for subsidies to help those with low incomes obtain policies. Some members of Congress are promoting insurance purchasing pools for small businesses. An odd bedfellows coalition including the Business Roundtable, AARP, the Service Employees International Union and Wal-Mart is pushing for some kind of expansion of coverage but is not saying what form it should take.

What these varied plans have in common is the assumption that, at least for the foreseeable future, most of the working population (and their dependents) will continue to receive coverage through private insurance carriers. Public officials across the political spectrum are, in effect, seeking to expand the customer base for a highly profitable industry.

Surely, it is a good thing to provide coverage to the uninsured, but it is remarkable that almost everyone assumes that coverage has to come from for-profit (or, in some cases, private non-profit) providers. Despite the overwhelming evidence from other industrial countries — and even domestic programs such as Medicare — that government-run health plans are much more efficient, the U.S. political class seems to be on a mission to save private insurance.

A Paternalistic Reform?

To understand the current debate, it is helpful to recall some of the tortured history of health insurance in the United States. In the late 19th Century European countries began adopting government-funded social insurance plans, but the U.S. failed to follow suit. When progressives made a push in the 1910s there was opposition not only from corporate interests but also from organized labor. AFL President Samuel Gompers denounced national health insurance as a paternalistic reform, fearing that its adoption would weaken the role of unions in improving the living conditions of workers.

Consequently, Americans both rich and poor continued to pay the vast majority of medical costs out of pocket. That began to change in the 1930s. While the Roosevelt Administration focused on retirement benefits and unemployment insurance at the expense of health coverage, physicians and hospitals struggling to survive the Depression set up private group insurance plans to bolster demand for their services. The most successful of these were the non-profit multi-hospital plans that grew under the rubric of Blue Cross. These were later followed by Blue Shield plans, which covered outpatient physician services. Once the Blues paved the way, commercial insurers also entered the field, though their coverage tended to be more restricted.

After the end of World War II, there was great momentum toward expanding the portion of the population with some form of sickness insurance. In 1945 President Harry Truman proposed a national program establishing a right to medical care and protection from the “economic fears” of illness. But once again, opposition to government involvement in healthcare emerged, this time reinforced by a Cold War hysteria about “socialized medicine” stoked by groups such as the American Medical Association.

As Truman’s plan went down to defeat, what grew in its place was a system of employer-provided coverage, stimulated by aggressive bargaining on the part of unions that had come to regard improving employee benefits as a mission as important as increasing wages. This put pressure on non-union employers to follow suit, and by the mid-1950s, about two-thirds of the country was getting coverage through either their own jobs or those of spouses or parents. The Blues, which held the largest share of this booming market in the early postwar period, began to fall behind the commercial carriers by the late 1950s.

Around that same time, there was growing concern about the large number of retired workers who were left out of this workplace-oriented system. This eventually led to the 1965 creation of the federal Medicare program for seniors, along with the federal-state Medicaid program for the poor, but most of those with insurance continued to get it from the private sector.

In the wake of these significant expansions of coverage, liberals renewed calls for comprehensive national health insurance. These efforts, however, were drowned out by a rising chorus of concern about escalating health costs — a problem that was greatly exacerbated by the growth of for-profit hospital chains. During the 1980s, Congress created a cost-control system for Medicare, while growing numbers of employers transferred their workers from traditional plans into health maintenance organizations (HMOs) — both non-profit and for-profit. The Clinton Administration tried to reach the goal of universal coverage through a complex system that preserved the role of HMOs and other private insurers, but it was crushed by business interests and the medical establishment.

Awash In cash

The failure once again to create a system of universal care left the American people at the mercy of the market. The ranks of the uninsured swelled as many employers solved their health finance problems by eliminating coverage or by shifting premium and co-payment costs to workers to such an extent that they opted out. Many of those who tried to obtain individual coverage found themselves priced out of the market or rejected because of a pre-existing condition. Those workers who retained workplace coverage increasingly had to confront HMOs and other purveyors of “managed care,” whose business plan depended on restricting the use of medical services. A 1994 Wall Street Journal article stated: “Health maintenance organizations are all about penny pinching, yet they are so awash in cash that they don’t know what to do with it all.”

At the forefront of these service (non)providers was U.S. Healthcare, which grew out of the first for-profit HMOs in the 1970s. By the early 1990s, it was the largest publicly traded HMO, with annual revenues of more than $1 billion. The company — a notorious proponent of gag clauses in physician contracts that prevented doctors from giving patients a thorough description of their treatment options — took on the mission of revolutionizing the insurance industry. In a 1992 interview with Business Week , U.S. Healthcare founder and chairman Leonard Abramson expressed scorn for traditional carriers, calling them “dinosaurs” and saying they operated in “a dying world.”

Four years later, U.S. Healthcare agreed to be acquired by one of those dinosaurs, Aetna Inc., for $9 billion. It was clear from the start that Aetna was going to be adopting the style of U.S. Healthcare and not vice versa. “Strong forms of managed care, gated managed care, is really coming into its own,” said Aetna chief executive Ronald Compton, who also announced that Abramson would join the board of the parent company.

Aetna’s marriage with U.S. Healthcare was part of a larger consolidation of the industry and a shrinkage of the non-profit portion. Aetna itself went on to acquire healthcare operations from New York Life and Prudential Insurance, while rivals such as United Healthcare (later UnitedHealth Group) also bought various competitors to rise rapidly in the field. For-profit hospital chains such as Columbia-HCA gobbled up insurers. Even the Blues were abandoning all pretenses that their main mission was to serve the community. Some set up their own HMO subsidiaries, and by the late 1990s a bunch were preparing to take the next step: abandoning their non-profit status and becoming for-profit enterprises. A few such as Anthem Inc., formerly Blue Cross and Blue Shield of Indiana, went yet further, becoming publicly traded companies.

Meanwhile, there was a growing effort to tame HMOs through the courts. In 1999 several of the country’s leading trial lawyers announced plans to bring a wave of racketeering lawsuits to pressure companies to provide better coverage. Some physician groups also sued managed-care firms over restrictions on their members. The legal assault was counting on the fact that HMOs had become the most reviled industry in the United States, but the judiciary was a harder sell.

In 2002 a federal judge in Miami hearing the consolidated cases granted class-action status to claims that managed-care plans systematically denied and delayed payments to more than 600,000 doctors, but he rejected that status on behalf of some 145 million members of the plans. Five companies ended up paying nearly $650 million in settlements with the doctors and their lawyers, while two others (including UnitedHealth) went to court and had the charges against them dismissed.

What ails private insurance

These lawsuits may have shaken the industry somewhat, but they did not put an end to the abuses that characterize managed care. Here are some of the key remaining issues that surround the business:

Consolidation has continued unabated. There are now two superproviders that increasingly dominate the for-profit healthcare field. One is UnitedHealth, which capped a long series of acquisitions with the 2005 purchase of Pacificare for some $8 billion. In 2006 United’s health services revenues reached an astounding $64 billion, and its medical enrollment rose to about 28 million individuals.

The other giant is Wellpoint Inc., created through the blockbuster 2004 merger of Anthem Inc. and Wellpoint Health Network, formerly Blue Cross of California. Wellpoint later spent $6.5 billion to acquire WellChoice, the publicly traded parent of New York’s Empire Blue Cross Blue Shield. By 2006 Wellpoint controlled the Blues in 14 states, had some 34 million members and took in annual revenues of about $52 billion.

The second tier consists of Aetna (2006 revenues and members, respectively: $25 billion and 15 million), Humana ($21 billion and 11 million), Cigna ($16 billion and 9 million) and Health Net ($13 billion and 7 million). The non-profit wing of the industry also has big players, led by Kaiser Permanente with 8.6 million members.

There is no evidence that the consolidation has enhanced efficiency or improved the quality of coverage. Instead, the big carriers simply accumulate more power over healthcare providers and patients, using it to their own advantage.

While millions remain uninsured or underinsured, the industry’s profits swell. Last year, the top six health insurance companies had combined profits of more than $10 billion. What’s amazing is that they netted so much after spending prodigious amounts on marketing and administration. In 2006 Wellpoint alone burned up nearly $9 billion in such costs — nearly one quarter of what it paid out in actual benefits. By contrast, in Canada’s government-run single-payer system, administration accounts for only about 3 percent of total costs.

Legal controversies continue to plague the industry. Lawsuits over the denial of care are still being filed against the big insurers. For example, two hospitals in Queens, NY recently sued UnitedHealth, alleging a “pattern of racketeering activity.” At the same time, UnitedHealth has been the subject of a federal investigation following reports last year that the company was routinely backdating stock options awarded to executives, especially long-time chief executive William McGuire, who — on top of annual salary and bonuses totaling $10 million — had accumulated some 29 million shares through option awards. Thanks to the backdating scheme, McGuire had racked up paper gains of more than $1 billion on those shares. In October McGuire was forced to resign and to give up an undisclosed portion of those gains.

McGuire’s excesses are emblematic of the fundamental conflict in the industry — the clash between maximizing gains for executives and shareholders, and the need of its customers for services that are often a matter of life and death. Public officials should abandon the mission of saving commercial insurance and devote themselves instead to creating a healthcare system that substitutes the public interest for private profit.

Philip Mattera heads the Corporate Research Project, an affiliate of Good Jobs First.
(c) 2007 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/48371/