PNHP

Bernanke on health care reform

Bernanke on health care reform

Hearing on the Economy, the Labor Market and Monetary Policy

Ben S. Bernanke, Chairman of the Board of Governors of the Federal Reserve System
U.S. House of Representatives
Committee on Financial Services
February 15, 2007

Rep. Deborah Pryce, R-Ohio: (excerpt) … the greatest problem is that people just can’t find health insurance that they afford. Therefore, they don’t get the medical treatment that they need.

And it occurs to me and many others that one of the reasons for this is because there’s really no consumer factor in health care in this country. We don’t shop for our benefits; we take what our insurance companies provide for us.

Market forces seem to work very well in all other aspects of our society. And is this what is wrong with our health care delivery system, this lack of market forces, so to speak, in it?

Chairman Ben Bernanke: Congresswoman, you’re correct in pointing out a very, very serious problem.

And I think you’re also correct that one of the main reasons why health care is so expensive in the United States has to do with the fact that we’re always buying with somebody’s money and not with our on money.

We have a system where technology is advancing rapidly, where our ability to do new and sophisticated tests, to provide new and sophisticated drugs through procedures is advancing rapidly

In most industries, new technologies save costs in medicine because — again, because of third-party payment. And the doctor and the patient are not making a cost-based decision. The cost-efficiency is not perhaps what it should be.

Now, one approach to this is to increase market forces in determination of what tests to order and what costs and how much to shop and so on. There are ways to do that. The health savings accounts, for example, create a catastrophic coverage — ask for a catastrophic coverage and ask people to save money within this account to buy coverage — to buy, sorry, medical care below the catastrophic level.

Some people may be uncomfortable with having to make those kinds of decisions. And so an alternative is to have competition between, say, HSA catastrophic plans and other types of medical management: HMOs, PPOs, traditional insurance and the like.

By creating more competition, I think there would be some benefits. But, again, it’s a complex subject.

There’s a lot of other things we could do. I think we could increase the transparency in terms, you know, of hospitals and doctors letting us know what they charge, what their quality is; improving information technology in health care, which would, I think, reduce errors and create more consistency across parts of the country.

We currently have very big differences in the costs of managing a certain kind of condition in different parts of the country. More uniformity and more best practice would help reduce costs as well.

So I think markets could have a useful role to help reduce and control — at least control costs.

Portability is a difficult question. One approach to portability is to have insurance companies insure workers rather than insure employers, so to speak. That would require somehow creating different kinds of pools, rather than employer-based pools, because you need pools in order to share risk. And there are some issues associated with that.

The main alternative would be to have people have the ability to take their policy from their current employer and then move over to another employer with the same policy.

These are all things we should be looking at, but none of them is a completely simple problem, because in each case you want to make sure that people are buying as part of a pool — a risk pool, rather than buying on an individual basis, where they might be, if they’re ill or a pre-existing condition, they won’t be able to afford insurance.

http://www.washingtonpost.com/wp-srv/content/article/2007/02/15/bernanke_021507.html

Comment:

By Don McCanne, MD

It is unfortunate that Federal Reserve Chairman Ben Bernanke used the framing of the conservatives to define the problems with our health care system, as he seemed to stumble through an explanation of why we need more market competition in health care. He might have been more convincing had he used the framing of his Princeton colleague, Paul Krugman.

There is a reassuring tone to his response. It is quite clear that he believes that the problems are much more complex than a mere lack of adequate market competition. His bottom line is that risk pooling is essential.

Markets dodge risk. Public policies distribute risk. If asked again, hopefully he will have prepared his answer better and start from the position of pooling risk. Paul Krugman could help him.

Excess administration of administrative excesses

Fights Over Health Claims Spawn a New Arms Race

By Vanessa Fuhrmans
The Wall Street Journal
February 14, 2007

Doctors increasingly complain that the insurance industry uses complex, opaque claims systems to confound their efforts to get paid fairly for their work. Insurers say their systems are designed to counter unnecessary charges and help keep down soaring health-care costs. Like many tug-of-wars over the health-care money pot, the tension has spawned a booming industry of intermediaries.

It’s called “denial management.” Doctors, clinics and hospitals are investing in software systems costing them each hundreds of thousands of dollars to help them navigate insurers’ systems and head off denials. They’re also hiring legions of firms that dig through past claims in search of shortchanged payments and tussle with insurers over rejected charges. “Turn denials into dollars,” promises one consultant’s online advertisement.

The imbroglio is costing medical providers and insurers around $20 billion — about $10 billion for each side — in unnecessary administrative expenses, according to a 2004 report by the Center for Information Technology Leadership, a nonprofit health-technology research group based in Boston.

Some companies are profiting from arming both sides. Ingenix, a unit of UnitedHealth Group Inc., the country’s second-biggest health insurer, sells insurers systems to screen doctor’s claims while promising doctors its software for them will “help you take a more assertive stance on fair and accurate payment.”

The denial-management industry’s rise shows how much of medical spending is consumed by propping up and doing battle over an arcane patchwork of claims systems. Roughly 30% of physicians’ claims are denied the first time around. Sales of physician-billing and practice-
management technology grew 25% to more than $7.5 billion last year, estimates Jewson Enterprises, a health information-technology research firm in Austin, Texas.

Some doctors say they see insurers stepping up efforts to keep a lid on reimbursements. One increasingly popular tactic among health insurers is to hire “health-care claims recovery” teams or software to dig through claims, some as old as two years, to see if they overpaid and seek redress. That’s partly because more states have been adopting “prompt pay” laws that require health insurers to reimburse claims within 30 or 60 days, says UnitedHealth spokesman Tyler Mason, which sometimes doesn’t leave enough time to review them first. “We need to have a way to still thoroughly review whether a claim’s paid correctly or not,” Mr. Mason says. Some insurers demand the money back. More, though, simply deduct it from future claim payments. That forces doctors to appeal the claim all over again.

http://online.wsj.com/article/SB117141549626107896.html

Comment:

By Don McCanne, MD

Let’s see. Our health care system is plagued with highly burdensome, expensive, inefficient, wasteful administrative excesses due to our ineffective, fragmented system of financing health care.

So what is the response from the industry? They provide highly burdensome, expensive, inefficient, wasteful administrative services to administer the highly burdensome, expensive, inefficient, wasteful administrative services that they are already providing.

And our policymakers want to reform health care by mandating more of this? Get real!

The Health Care Racket

By PAUL KRUGMAN
Op-Ed Columnist
New York Times
Published: February 16, 2007

Is the health insurance business a racket? Yes, literally — or so say two New York hospitals, which have filed a racketeering lawsuit against UnitedHealth Group and several of its affiliates.

I don’t know how the case will turn out. But whatever happens in court, the lawsuit illustrates perfectly the dysfunctional nature of our health insurance system, a system in which resources that could have been used to pay for medical care are instead wasted in a zero-sum struggle over who ends up with the bill.

The two hospitals accuse UnitedHealth of operating a “rogue business plan” designed to avoid paying clients’ medical bills. For example, the suit alleges that patients were falsely told that Flushing Hospital was “not a network provider” so UnitedHealth did not pay the full network rate. UnitedHealth has already settled charges of misleading clients about providers’ status brought by New York’s attorney general: the company paid restitution to plan members, while attributing the problem to computer errors.

The legal outcome will presumably turn on whether there was deception as well as denial — on whether it can be proved that UnitedHealth deliberately misled plan members. But it’s a fact that insurers spend a lot of money looking for ways to reject insurance claims. And health care providers, in turn, spend billions on “denial management,” employing specialist firms — including Ingenix, a subsidiary of, yes, UnitedHealth — to fight the insurers.

So it’s an arms race between insurers, who deploy software and manpower trying to find claims they can reject, and doctors and hospitals, who deploy their own forces in an effort to outsmart or challenge the insurers. And the cost of this arms race ends up being borne by the public, in the form of higher health care prices and higher insurance premiums.

Of course, rejecting claims is a clumsy way to deny coverage. The best way for an insurer to avoid paying medical bills is to avoid selling insurance to people who really need it. An insurance company can accomplish this in two ways, through marketing that targets the healthy, and through underwriting: rejecting the sick or charging them higher premiums.

Like denial management, however, marketing and underwriting cost a lot of money. McKinsey & Company, the consulting firm, recently released an important report dissecting the reasons America spends so much more on health care than other wealthy nations. One major factor is that we spend $98 billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting — costs that don’t exist in single-payer systems.

And this is just part of the story. McKinsey’s estimate of excess administrative costs counts only the costs of insurers. It doesn’t, as the report concedes, include other “important consequences of the multipayor system,” like the extra costs imposed on providers. The sums doctors pay to denial management specialists are just one example.

Incidentally, while insurers are very good at saying no to doctors, hospitals and patients, they’re not very good at saying no to more powerful players. Drug companies, in particular, charge much higher prices in the United States than they do in countries like Canada, where the government health care system does the bargaining. McKinsey estimates that the United States pays $66 billion a year in excess drug costs, and overpays for medical devices like knee and hip implants, too.

To put these numbers in perspective: McKinsey estimates the cost of providing full medical care to all of America’s uninsured at $77 billion a year. Either eliminating the excess administrative costs of private health insurers, or paying what the rest of the world pays for drugs and medical devices, would by itself more or less pay the cost of covering all the uninsured. And that doesn’t count the many other costs imposed by the fragmentation of our health care system.

Which brings us back to the racketeering lawsuit. If UnitedHealth can be shown to have broken the law — and let’s just say that this company, which is America’s second-largest health insurer, has a reputation for playing even rougher than its competitors — by all means, let’s see justice done. But the larger problem isn’t the behavior of any individual company. It’s the ugly incentives provided by a system in which giving care is punished, while denying it is rewarded.

UnitedHealth's lab contract disruptive

Doctors Fear New UnitedHealth Policy

By Theresa Agovino
Houston Chronicle
February 14, 2007

Doctors say UnitedHealth Group Inc. is threatening to fine them over something they can’t control: patients’ behavior.

Beginning March 1, UnitedHealth said it could fine a doctor $50 if a patient has tests done in facilities besides Laboratory Corp. of America or other labs that the company has selected. Doctors with patients who go out of network could also be subject to lower reimbursement and to exclusion from United’s network.

Last October, UnitedHealth announced that effective Jan. 1, 2007, its major national carrier would be Lab Corp. instead of Quest Diagnostics Inc. and began communicating with physicians about the switch. The fines don’t go into effect until next month to give both doctors and patients an opportunity to adjust to the change.

Some physicians say the size of the new network is too small.

The American Medical Association said this is the first time a doctor could be financially punished for a patient’s behavior. AMA trustee Dr. James Rohack said doctors can refer patients to in-network labs but patients may choose to go elsewhere because of convenience or preference.

Rohack remains skeptical about UnitedHealth’s pledge to work with doctors to avoid fines and other financial penalties. He said the current policy is more about saving UnitedHealth money than providing the best coverage for patients.

“They (United) always say they are going to play nice in the sandbox,” Rohack said. “But if the stock price starts to get shaky, they don’t place nice anymore.”

http://www.chron.com/disp/story.mpl/ap/fn/4554211.html

Comment:

By Don McCanne, MD

Except for single payer (Medicare for All), most of the leading proposals for reform would require individuals and/or employers to contract with this uncaring, wasteful, middleman insurance industry in order to gain access to health care.

Isn’t it long past time for us to take our health care system out of the insurers’ sandbox? How much sand in your face can you tolerate?

A Health Care Plan So Simple, Even Stephen Colbert Couldn't Simplify It

By ROBERT H. FRANK
New York Times
Published: February 15, 2007

In his State of the Union address, President Bush proposed tax cuts to make health insurance more affordable for the uninsured. The next day, Stephen Colbert had this to say on his show on Comedy Central: “It’s so simple. Most people who can’t afford health insurance also are too poor to owe taxes. But if you give them a deduction from the taxes they don’t owe, they can use the money they’re not getting back from what they haven’t given to buy the health care they can’t afford.”

Just so. As health economists have long known, market incentives induce private insurers to spend vast sums to avoid people who may actually require health care. This problem is mitigated (though not eliminated) by employer-provided group policies. Because Mr. Bush’s proposal would steer people toward individual policies, it would actually strengthen the incentive to shun unhealthy people. Such people can now keep their insurance by not changing jobs. But no private company would want them as individual policyholders at a price anyone could afford.

That Mr. Bush’s proposal will not shrink the ranks of the uninsured is not its most serious problem. Far more troubling is its embrace of a system under which we spend more than twice as much on health care, on average, as the 21 countries in which life expectancy exceeds ours. American costs are so high in part because the reliance on private insurance multiplies administrative expenses, currently about 31 percent of total outlays.

Most health economists agree that government-financed reimbursement is the only practical way to control these expenses, many of them stemming from insurers’ efforts to identify and avoid unhealthy people. Canada’s single-payer health system, which covers everyone, spends less than 17 percent on administrative expenses.

Annual health spending in the United States currently exceeds $2 trillion. A single-payer system that did nothing more than reduce administrative expenses to the levels of other countries would save roughly $300 billion annually.

Some critics worry that expensive but ineffective medical interventions may proliferate if health care becomes a federal responsibility. But Victor Fuchs, a respected health economist at Stanford University, and Dr. Ezekiel Emanuel, chairman of the department of clinical bioethics at the National Institutes of Health, have outlined a single-payer plan that would limit such interventions far more effectively than the current system. (A copy of their plan is on the links page of my Web site, www.robert-h-frank.com.)

If the single-payer system embraced by virtually all other developed countries is clearly the best solution, why doesn’t the United States adopt it? Some analysts concede its merits, but characterize it as either unaffordable or politically unrealistic. But why should a policy that promises better results for less money be considered a nonstarter?

There are two obstacles, which could both be overcome by intelligent political leadership. One is that the single-payer system would require additional tax revenue. In the current climate, that’s a tough political hurdle, to be sure. Yet how complicated would it be to explain to voters that because the single-payer plan would reduce costs substantially, every additional tax dollar would be offset by an even larger reduction in private insurance spending? Given that such a system is so much cheaper over all, calling it unaffordable makes no sense.

The second obstacle is opposition from private insurers, who would be understandably reluctant to abandon multibillion-dollar annual profit streams. Those who stand to lose from policy changes always battle harder than those who stand to gain — an asymmetry that is exaggerated when losses would be concentrated and gains diffuse. So, yes, the insurance industry would bitterly resist.

But intelligent leadership could overcome that resistance. Whenever a pie gets bigger, everyone can get a larger slice than before. Because moving to a single-payer system would make the economic pie bigger, it should be possible for everyone, including the insurance industry, to come out ahead.

The first step is to acknowledge that insurance companies are not evil, that they invested in good faith under tax laws that favored employer-provided private health insurance. To put them out of business with an overnight switch would be unjust.

Even so, they are not entitled to a permanent license to operate a system that has become economically unsustainable. The move to a single-payer plan would save far more than enough to compensate insurance companies for lost profits. Compensation for losses could start at 100 percent, then be gradually phased out as companies shifted investments elsewhere.

Selling this argument in an era of 15-second sound bites would be challenging, but hardly impossible. Indeed, forceful advocacy of the single-payer approach offers a golden opportunity for any serious presidential candidate. Voters are fed up with rising insurance costs and dwindling coverage. On the merits, single-payer coverage is an unassailable solution to both problems. Its rationale is simple enough to articulate clearly during a long campaign. And if the proposal were devised so that everyone stood to win, corporate interests would have little reason to attack it.

Critics of the single-payer plan have long railed against the specter of socialized medicine, suggesting that it means being treated by government functionaries. Yet people who have experienced single-payer coverage firsthand seem unconcerned. When one of my sons needed surgery for a broken arm during a sabbatical in Paris, for example, the medical system we encountered was just as professional as the American one and far less bureaucratic. And in France, which spends half as much on health care as the United States and has more doctors and hospital beds per capita, everyone is covered.

We live in challenging times. Does a candidate who couldn’t persuade voters to embrace the single-payer approach deserve to be president?

Robert H. Frank, an economist at the Johnson School of Cornell University, is the author of “The Economic Naturalist,” which will be published this spring. Contact: www.robert-h-frank.com

Note from PNHP: The Fuchs Plan is actually not a single-payer plan. It is a quite regressive proposal that involves vouchers and maintaining the private insurance industry. A side from this error, Frank’s article is right on.

"The Year of Health Reform" in California Gets Another Boost From New Group

Congress of California Seniors Joins New Coalition, "It's OUR Healthcare!"

By Gary Passmore
Director, Congress of California Seniors
February 14, 2007
CaliforniaProgressReport.com

At the instigation of our state political leadership, 2007 is shaping up to be the year of health reform in California. The central issue is how to provide quality, affordable coverage to more than six million Californians who are not covered by employer-based health insurance, public insurance programs (such as Medicare, Medi-Cal, or Healthy Families), or who purchase their own coverage.

In addition to expanded access, there are other key goals which are important to millions of Californians such as controlling costs that threaten the coverage of people with insurance, expanding prevention programs, and improving the quality and safety of health services.

Although most seniors are covered by Medicare, we have a huge stake in the reforms being advanced. Of course we care deeply about people under age 65, but we also recognize the need to control health inflation to preserve the level of benefits under Medicare…and we are vitally concerned about quality care and consumer protections. Because of these concerns, we will speak out in the public debate which lies ahead. That is why the Congress of California Seniors has joined a broad-based consumer coalition to speak out on the needs of California families. The group is called “It’s OUR Healthcare!” and we will engage in a vigorous advocacy campaign to educate people and push policymakers for an effective solution…not a band-aid approach.

Very different ideas for dealing with health reform have been advanced, ranging from Senator Sheila Kuehl’s expansive single-payer universal coverage proposal to Senate President pro Tem Don Perata’s plan to create a large state pool for the uninsured combined with employer and individual mandates, and House Speaker Fabian Nunez’s call for insuring all California children and creating a public insurance pool for the uninsured to the Governor’s broad proposal to force greater shared responsibility, place closer restrictions on private health insurers, and expand public coverage. There are other legislative proposals to fix specific pieces of the problem.

In this mix are some ideas that are bad. Health savings accounts don’t help the vast number of uninsured people…they only drain resources needed to fix the access problem. Cutting back on existing consumer protections (such as hospital safety and HMO regulation) to lower costs would be a setback rather than an advance. And high deductible coverage or individual mandates that shift responsibility to families that cannot afford coverage accomplishes nothing.

The goal is not to pretend to solve the problem, but rather to guarantee that everyone gets the health care they need when they need it and at a price they can afford.

Last November, voters made clear that they expect bipartisan problem solving in Sacramento, and health coverage reform will test the capacity of our system to find workable compromises. Ultimately, political leaders may have to turn to the voters to make some of the decisions.

Whatever happens, we believe that the effective, lasting reforms will recognize that we must eventually move from an employer-based health insurance model to a broader tax-based model to keep American business competitive, to allow people to move between jobs or to change careers, and to allow families to live with greater security and peace of mind.

Background Information on Where We Stand

Principles of Concern to the Congress of California Seniors in the Implementation of Health Care Reform

1. Avoid actions that may negatively impact on Medicare or MediCal…cost structure, access, or quality.
2. Encourage cost controls to rein in health care inflation that threatens benefits to people already insured, including Medicare recipients. Focus especially on overhead costs and excess profits.
3. If single payer, universal health insurance is not immediately achievable, develop a system which begins to blend coverage into a few options and marshals all possible financial resources so that a reformed model can eventually “morph” into broad-based Medicare type universal coverage system with less disruption in the future.
4. Recognize that, in the not too distant future, health insurance must shift from an employer-based model to some form of broad tax-based model if the United States is to remain economically competitive.
5. Use public insurance programs to promote information technology (electronic medical records) and to force standardization of forms and reports.
6. Do not further restrict access to the courts or the legal system as a means of reducing costs.
7. Avoid repeal or diminution of consumer protections in HMO regulations, hospital staffing ratios and the like.
8. Maximize federal funding for coverage expansion and improved services through Medicare, Medicaid and Healthy Families.
9. Recognize that solutions such as health savings accounts rarely help the majority of those who are uninsured because of income tax liability disparities, and they reduce public revenues needed to expand access for those who cannot afford health coverage.
10. Don’t simply “cherry pick” easy-to-cover populations such as children or healthy young adults.
11. Develop different coverage options which recognize that people with diagnosed chronic diseases need access to special plans providing more services and are unlikely to get coverage in the private market.
12. Make any coverage as inclusive as possible by including chronic disease management, health prevention, mental health, oral health and vision care.
13. Recognize that good nutrition and quality home and community-based care giving for elderly and dependent adults can lower costs by reducing reliance on high cost in-patient hospital care, doctor visits and remedial therapy.
14. Build incentives into the funding system to promote robust discharge planning and stronger transition to long term care.
15. Avoid creating the appearance of a solution with limited coverage or high deductible plans that technically give people insurance but do not provide them with needed health care.

Gary Passmore has been the Director of the Congress of California Seniors, a nonprofit advocacy/education organization with over 500,000 members, whose goal is to advance the interests of seniors and their families since January of 2003. He is retired from active employment. In the 1970’s and 80’s, before coming to California, he served as the Chief Executive Assistant to the Governor of Missouri and was the State Budget Director for Missouri.

UnitedHealth’s lab contract disruptive

Doctors Fear New UnitedHealth Policy

By Theresa Agovino
Houston Chronicle
February 14, 2007

Doctors say UnitedHealth Group Inc. is threatening to fine them over something they can’t control: patients’ behavior.

Beginning March 1, UnitedHealth said it could fine a doctor $50 if a patient has tests done in facilities besides Laboratory Corp. of America or other labs that the company has selected. Doctors with patients who go out of network could also be subject to lower reimbursement and to exclusion from United’s network.

Last October, UnitedHealth announced that effective Jan. 1, 2007, its major national carrier would be Lab Corp. instead of Quest Diagnostics Inc. and began communicating with physicians about the switch. The fines don’t go into effect until next month to give both doctors and patients an opportunity to adjust to the change.

Some physicians say the size of the new network is too small.

The American Medical Association said this is the first time a doctor could be financially punished for a patient’s behavior. AMA trustee Dr. James Rohack said doctors can refer patients to in-network labs but patients may choose to go elsewhere because of convenience or preference.

Rohack remains skeptical about UnitedHealth’s pledge to work with doctors to avoid fines and other financial penalties. He said the current policy is more about saving UnitedHealth money than providing the best coverage for patients.

“They (United) always say they are going to play nice in the sandbox,” Rohack said. “But if the stock price starts to get shaky, they don’t place nice anymore.”

http://www.chron.com/disp/story.mpl/ap/fn/4554211.html

Comment:

By Don McCanne, MD

Except for single payer (Medicare for All), most of the leading proposals for reform would require individuals and/or employers to contract with this uncaring, wasteful, middleman insurance industry in order to gain access to health care.

Isn’t it long past time for us to take our health care system out of the insurers’ sandbox? How much sand in your face can you tolerate?

A Health Care Plan So Simple, Even Stephen Colbert Couldn’t Simplify It

By ROBERT H. FRANK
New York Times
Published: February 15, 2007

In his State of the Union address, President Bush proposed tax cuts to make health insurance more affordable for the uninsured. The next day, Stephen Colbert had this to say on his show on Comedy Central: “It’s so simple. Most people who can’t afford health insurance also are too poor to owe taxes. But if you give them a deduction from the taxes they don’t owe, they can use the money they’re not getting back from what they haven’t given to buy the health care they can’t afford.”

Just so. As health economists have long known, market incentives induce private insurers to spend vast sums to avoid people who may actually require health care. This problem is mitigated (though not eliminated) by employer-provided group policies. Because Mr. Bush’s proposal would steer people toward individual policies, it would actually strengthen the incentive to shun unhealthy people. Such people can now keep their insurance by not changing jobs. But no private company would want them as individual policyholders at a price anyone could afford.

That Mr. Bush’s proposal will not shrink the ranks of the uninsured is not its most serious problem. Far more troubling is its embrace of a system under which we spend more than twice as much on health care, on average, as the 21 countries in which life expectancy exceeds ours. American costs are so high in part because the reliance on private insurance multiplies administrative expenses, currently about 31 percent of total outlays.

Most health economists agree that government-financed reimbursement is the only practical way to control these expenses, many of them stemming from insurers’ efforts to identify and avoid unhealthy people. Canada’s single-payer health system, which covers everyone, spends less than 17 percent on administrative expenses.

Annual health spending in the United States currently exceeds $2 trillion. A single-payer system that did nothing more than reduce administrative expenses to the levels of other countries would save roughly $300 billion annually.

Some critics worry that expensive but ineffective medical interventions may proliferate if health care becomes a federal responsibility. But Victor Fuchs, a respected health economist at Stanford University, and Dr. Ezekiel Emanuel, chairman of the department of clinical bioethics at the National Institutes of Health, have outlined a single-payer plan that would limit such interventions far more effectively than the current system. (A copy of their plan is on the links page of my Web site, www.robert-h-frank.com.)

If the single-payer system embraced by virtually all other developed countries is clearly the best solution, why doesn’t the United States adopt it? Some analysts concede its merits, but characterize it as either unaffordable or politically unrealistic. But why should a policy that promises better results for less money be considered a nonstarter?

There are two obstacles, which could both be overcome by intelligent political leadership. One is that the single-payer system would require additional tax revenue. In the current climate, that’s a tough political hurdle, to be sure. Yet how complicated would it be to explain to voters that because the single-payer plan would reduce costs substantially, every additional tax dollar would be offset by an even larger reduction in private insurance spending? Given that such a system is so much cheaper over all, calling it unaffordable makes no sense.

The second obstacle is opposition from private insurers, who would be understandably reluctant to abandon multibillion-dollar annual profit streams. Those who stand to lose from policy changes always battle harder than those who stand to gain — an asymmetry that is exaggerated when losses would be concentrated and gains diffuse. So, yes, the insurance industry would bitterly resist.

But intelligent leadership could overcome that resistance. Whenever a pie gets bigger, everyone can get a larger slice than before. Because moving to a single-payer system would make the economic pie bigger, it should be possible for everyone, including the insurance industry, to come out ahead.

The first step is to acknowledge that insurance companies are not evil, that they invested in good faith under tax laws that favored employer-provided private health insurance. To put them out of business with an overnight switch would be unjust.

Even so, they are not entitled to a permanent license to operate a system that has become economically unsustainable. The move to a single-payer plan would save far more than enough to compensate insurance companies for lost profits. Compensation for losses could start at 100 percent, then be gradually phased out as companies shifted investments elsewhere.

Selling this argument in an era of 15-second sound bites would be challenging, but hardly impossible. Indeed, forceful advocacy of the single-payer approach offers a golden opportunity for any serious presidential candidate. Voters are fed up with rising insurance costs and dwindling coverage. On the merits, single-payer coverage is an unassailable solution to both problems. Its rationale is simple enough to articulate clearly during a long campaign. And if the proposal were devised so that everyone stood to win, corporate interests would have little reason to attack it.

Critics of the single-payer plan have long railed against the specter of socialized medicine, suggesting that it means being treated by government functionaries. Yet people who have experienced single-payer coverage firsthand seem unconcerned. When one of my sons needed surgery for a broken arm during a sabbatical in Paris, for example, the medical system we encountered was just as professional as the American one and far less bureaucratic. And in France, which spends half as much on health care as the United States and has more doctors and hospital beds per capita, everyone is covered.

We live in challenging times. Does a candidate who couldn’t persuade voters to embrace the single-payer approach deserve to be president?

Robert H. Frank, an economist at the Johnson School of Cornell University, is the author of “The Economic Naturalist,” which will be published this spring. Contact: www.robert-h-frank.com

Note from PNHP: The Fuchs Plan is actually not a single-payer plan. It is a quite regressive proposal that involves vouchers and maintaining the private insurance industry. A side from this error, Frank’s article is right on.

“The Year of Health Reform” in California Gets Another Boost From New Group

Congress of California Seniors Joins New Coalition, “It’s OUR Healthcare!”

By Gary Passmore
Director, Congress of California Seniors
February 14, 2007
CaliforniaProgressReport.com

At the instigation of our state political leadership, 2007 is shaping up to be the year of health reform in California. The central issue is how to provide quality, affordable coverage to more than six million Californians who are not covered by employer-based health insurance, public insurance programs (such as Medicare, Medi-Cal, or Healthy Families), or who purchase their own coverage.

In addition to expanded access, there are other key goals which are important to millions of Californians such as controlling costs that threaten the coverage of people with insurance, expanding prevention programs, and improving the quality and safety of health services.

Although most seniors are covered by Medicare, we have a huge stake in the reforms being advanced. Of course we care deeply about people under age 65, but we also recognize the need to control health inflation to preserve the level of benefits under Medicare…and we are vitally concerned about quality care and consumer protections. Because of these concerns, we will speak out in the public debate which lies ahead. That is why the Congress of California Seniors has joined a broad-based consumer coalition to speak out on the needs of California families. The group is called “It’s OUR Healthcare!” and we will engage in a vigorous advocacy campaign to educate people and push policymakers for an effective solution…not a band-aid approach.

Very different ideas for dealing with health reform have been advanced, ranging from Senator Sheila Kuehl’s expansive single-payer universal coverage proposal to Senate President pro Tem Don Perata’s plan to create a large state pool for the uninsured combined with employer and individual mandates, and House Speaker Fabian Nunez’s call for insuring all California children and creating a public insurance pool for the uninsured to the Governor’s broad proposal to force greater shared responsibility, place closer restrictions on private health insurers, and expand public coverage. There are other legislative proposals to fix specific pieces of the problem.

In this mix are some ideas that are bad. Health savings accounts don’t help the vast number of uninsured people…they only drain resources needed to fix the access problem. Cutting back on existing consumer protections (such as hospital safety and HMO regulation) to lower costs would be a setback rather than an advance. And high deductible coverage or individual mandates that shift responsibility to families that cannot afford coverage accomplishes nothing.

The goal is not to pretend to solve the problem, but rather to guarantee that everyone gets the health care they need when they need it and at a price they can afford.

Last November, voters made clear that they expect bipartisan problem solving in Sacramento, and health coverage reform will test the capacity of our system to find workable compromises. Ultimately, political leaders may have to turn to the voters to make some of the decisions.

Whatever happens, we believe that the effective, lasting reforms will recognize that we must eventually move from an employer-based health insurance model to a broader tax-based model to keep American business competitive, to allow people to move between jobs or to change careers, and to allow families to live with greater security and peace of mind.

Background Information on Where We Stand

Principles of Concern to the Congress of California Seniors in the Implementation of Health Care Reform

1. Avoid actions that may negatively impact on Medicare or MediCal…cost structure, access, or quality.
2. Encourage cost controls to rein in health care inflation that threatens benefits to people already insured, including Medicare recipients. Focus especially on overhead costs and excess profits.
3. If single payer, universal health insurance is not immediately achievable, develop a system which begins to blend coverage into a few options and marshals all possible financial resources so that a reformed model can eventually “morph” into broad-based Medicare type universal coverage system with less disruption in the future.
4. Recognize that, in the not too distant future, health insurance must shift from an employer-based model to some form of broad tax-based model if the United States is to remain economically competitive.
5. Use public insurance programs to promote information technology (electronic medical records) and to force standardization of forms and reports.
6. Do not further restrict access to the courts or the legal system as a means of reducing costs.
7. Avoid repeal or diminution of consumer protections in HMO regulations, hospital staffing ratios and the like.
8. Maximize federal funding for coverage expansion and improved services through Medicare, Medicaid and Healthy Families.
9. Recognize that solutions such as health savings accounts rarely help the majority of those who are uninsured because of income tax liability disparities, and they reduce public revenues needed to expand access for those who cannot afford health coverage.
10. Don’t simply “cherry pick” easy-to-cover populations such as children or healthy young adults.
11. Develop different coverage options which recognize that people with diagnosed chronic diseases need access to special plans providing more services and are unlikely to get coverage in the private market.
12. Make any coverage as inclusive as possible by including chronic disease management, health prevention, mental health, oral health and vision care.
13. Recognize that good nutrition and quality home and community-based care giving for elderly and dependent adults can lower costs by reducing reliance on high cost in-patient hospital care, doctor visits and remedial therapy.
14. Build incentives into the funding system to promote robust discharge planning and stronger transition to long term care.
15. Avoid creating the appearance of a solution with limited coverage or high deductible plans that technically give people insurance but do not provide them with needed health care.

Gary Passmore has been the Director of the Congress of California Seniors, a nonprofit advocacy/education organization with over 500,000 members, whose goal is to advance the interests of seniors and their families since January of 2003. He is retired from active employment. In the 1970’s and 80’s, before coming to California, he served as the Chief Executive Assistant to the Governor of Missouri and was the State Budget Director for Missouri.

Instability of federal employees' premiums

Health fees pain federal workers

By Gilbert Chan
The Sacramento Bee
February 11, 2007

Wayne Forbess did a double take after seeing that his monthly premium for health insurance from Kaiser Permanente would shoot up by 50 percent this year.

The 78-year-old Folsom resident and thousands of other federal workers and retirees in Northern California are coping with double-digit increases in the monthly payments for HMO coverage. Federal workers enrolled in three other plans have seen their monthly payments increase by more than 20 percent.

The OPM administers 284 insurance choices for 8 million federal workers and retirees and their family members, spending more than $31 billion a year. About 25 percent of the members are signed up in one of the 209 health maintenance organization programs.

Most of the remaining 75 percent are enrolled in major national fee-for-service plans such as Blue Cross and Blue Shield, according to the Government Accountability Office.

Moving to turn around six straight years of increases in these PPO plans, the government opted to pull $500 million from reserves to reduce premiums. But the government did not make a similar buy-down with HMO rates.

Under the government premium formula, those who prefer richer benefits have to pay more. The formula is aimed at directing workers into the plans with less expensive rates. In general, these plans often offer smaller premiums but require larger co-payments or fewer benefits.

At the same time, the law limits how much of the premium the government will have to pick up. The employee’s share is at least 28 percent — and much more if the insurer’s rates take a leap, as Kaiser’s did this year in Northern California.

“The idea is to keep the government share the same from year to year. The enrollee is stuck paying the difference,” said Mark Merlis, a health-care consultant and expert on federal health benefits.

“There is a cap on what the government pays. But there’s no cap on what the employee pays. We pay a bigger share every year,” said Jacqueline Simon public policy director of the American Federation of Government Employees, the largest federal employee union, representing 600,000 members.

http://www.sacbee.com/103/story/121316.html

Comment:

By Don McCanne, MD

So you would like to have the health care coverage that members of Congress have – even if that means that your premium could increase 50 percent in one year?

It’s important to understand the Federal Employees Health Benefit Program (FEHBP) since many reform proposals recommend using similar private plans to expand coverage to everyone. The plans are mostly PPOs and HMOs. They do vary in their benefits and in their required cost sharing. Consequently, premiums vary considerably.

PPOs have had greater flexibility in keeping their premiums competitive by reducing benefits and increasing cost sharing, especially through large increases in the deductible. HMOs, such as Kaiser, have had less flexibility in that they are not only insurers but also health care delivery systems. As such, their benefits tend to be more comprehensive, now requiring higher premiums than the less comprehensive PPO plans. FEHBP requires the beneficiaries to pay much of the premium difference, allowing them to buy up to richer plans if they so desire.

But there is a political purpose that may not be so obvious at first glance. The administration wants federal employees to select plans with fewer benefits and with more of the costs shifted to the employees. Obviously that reduces the government’s funding of health care for federal employees.

This year they went one step further. They used reserves to minimize premium increases for low-cost PPO plans while allowing full premium increases for high-cost HMO plans. This advances the Bush “ownership society” agenda of having federal employees own more of their own medical debt.

The FEHBP program perpetuates inequitable access to health benefits, inequitable funding of health care, profound administrative waste, and, in so doing, takes away choice of health care providers, limiting access to the insurers’ network providers. And now the FEHBP program is increasing the financial burden of those who do need health care, limiting access because of the lack of affordability.

Why would we ever adopt the highly flawed FEHBP model for reform of our health care system when a single payer national health insurance program would dump this wasteful, middleman industry and provide all of us with affordable, comprehensive coverage?

The next congressperson who says that we should all have the same coverage that they now have, tell him or her that they can keep their lousy program for themselves, but let the rest of us have our own comprehensive national health insurance program that would let us access the care we need without creating unnecessary financial burdens.

Assessing a Plan for Universal Care

New York Times
Published: February 12, 2007

To the Editor:

Paul Krugman lauds former Senator John Edwards’s health care proposal, claiming that it would trim insurance bureaucracy. But Mr. Edwards’s plan forgoes at least 90 percent of the $350 billion in potential administrative savings available through single-payer reform.

Insurance overhead accounts for only a quarter of the bureaucratic waste. The rest is useless paperwork imposed on hospitals and physicians by insurers trying to avoid payment.

Moreover, marketing costs would not melt away as Mr. Krugman suggests. Medicare pays H.M.O.’s using Mr. Edwards’s proposed community rating system, but H.M.O.’s still market heavily to healthy, profitable seniors.

Finally, Mr. Edwards’s “Health Markets” (middlemen between enrollees and insurers) add bureaucracy. Under Massachusetts’ new reform, our health market imposes a 4 percent surcharge on premiums.

Mr. Edwards assumes that public plans and private insurers will compete on a level playing field. Yet Mr. Krugman has previously shown how H.M.O.’s undermine competition in Medicare, lobbying for and winning huge overpayments.

Absent savings, universal coverage won’t happen.

David U. Himmelstein, M.D.
Steffie Woolhandler, M.D.
Cambridge, Mass., Feb. 9, 2007

The writers are associate professors of medicine at Harvard Medical School and founders of Physicians for a National Health Program.

Supporters at forum push for state health-care system

The plan would attract business to the state, officials said.

By WILLIAM K. ALCORN
VINDICATOR STAFF WRITER
Friday, February 9, 2007

NORTH JACKSON — Supporters of a single-payer health-care system that would cover all Ohio residents say they hope it is adopted here and becomes a model for a national health-care system.

The Mahoning Valley Chapter of the Single-Payer Action Network Ohio, or SPAN-OHIO, conducted a health-care forum Thursday at United Autoworkers Local 1112’s hall to explain the plan and to get input from government officials and business representatives.

A single-payer system means that one fund, administered by a nonprofit government agency accountable to the public, would make payments for all medical services. In Ohio, it would be called the Ohio Health Care Fund.

Medicare, the federal health-care system for the elderly, is an example of a single-payer plan, says SPAN-OHIO literature.

The UAW has been fighting for 50 years for national health care, said Jim Graham, president of Local 1112 at General Motors in Lordstown and master of ceremonies for the forum.

“Just imagine how easy it would be for GM and other companies to locate in Ohio if they didn’t have to pay huge health insurance bills,” said Graham, emphasizing one of the selling points of the SPAN-OHIO plan.

Need for action

The health-care system in the United States is in such a mess that virtually everyone agrees something has to be done, and that everyone should have access to health care, said Dr. Johnathon Ross, forum moderator.

Ross is director of ambulatory internal medicine at St. Vincent Mercy Medical Center and associate clinical professor of internal medicine at the Toledo School of Medicine.

Where there is disagreement, he said, is on how to deliver the health care and how to fund it.

Ross said he knows the single-payer plan proposed for Ohio will work and not cost more money than is currently being spent on health care in the state because it has worked in other nations.

The doctor admitted that “we are going to soak the rich” to pay for the system “because we don’t think they are paying enough.”

SPAN-OHIO literature says Medicare operates with just 3 percent overhead, compared to 15 percent to 25 percent for the typical health maintenance organization.

Thomas M. Humphries, president and chief executive officer of the Regional Chamber, a business organization, agrees that something has to be done about the health-care system.

“Is this [single payer] the right plan. I don’t know yet,” Humphries said at the forum.

He said there are 1,340 people in the health insurance business in this region with a $43 million annual payroll.

“My concern … is what do we do with these people? How do we transition them. I suggest we don’t hurry” into a plan, Humphries said.

Ross said the Ohio plan would take care of workers employed by health insurance companies and others who lose jobs as a result of changes brought about by the Health Care For All Ohioans Act.

They would receive, at public expense, retraining and financial assistance for up to two years in an amount not to exceed $60,000 per year, he said.

The main question asked by panel members was about how the Ohio plan would guarantee accessibility to quality care.

Ross said the public commission that would design the benefits package would not only be accountable to the public, but would have the same insurance. “I think the benefits will be good,” he said.

The bottom line, Ross said, is that the Ohio plan includes public accountability, would not cost more money than currently is being spent and would attract business to the state.