PNHP

It's time for healthcare for everyone

It's time for healthcare for everyone

By Frederick S. Mayer, R.Ph., MPH
Aug 7, 2006

The United States will spend more than $2 trillion on health care this year, which is more than enough to pay for comprehensive health care for everyone. That includes $200 billion (10%) on prescription drugs. Yet we will continue to see adverse health outcomes, including death, because millions are finding that health care is simply unaffordable. It is a national disgrace that people will die merely because they could not afford to purchase their prescriptions and other essential care, even though we are spending enough to provide for them.

The problem is not the affordability of drugs; the problem is the highly flawed and fragmented system with which we fund all health care, including drugs. We depend not only on public programs such as Medicare and Medicaid, but also on private plans, both employer-sponsored and individually purchased. Charity, intended or not, and public clinics and hospitals represent other major sources of funding.

Rather than the affordability of health care, much attention has been directed to the affordability of insurance plans. For tens of millions of Americans, insurance is simply unaffordable, and they go without coverage. For those who do have insurance, more costs are being shifted to the individual to control the prices of premiums. Some of this is in the form of reduced benefits, such as more restrictive formularies, but a greater portion of the shift is in the form of increased cost-sharing. Typical of these user fees that are applied at the time of accessing services are the high co-pays, out-of-pocket expenses, and step formularies required with upper-tier drugs.

The problem with these trends is that health care has become unaffordable for precisely those individuals with the greatest healthcare needs. Medical bills are a major cause of half of all bankruptcies in this country, and two-thirds of those individuals had insurance. Health plan innovation has slowed the rate of premium escalation, but it has done so at the expense of greatly diminishing the financial security that insurance should be providing.

Since we are spending enough to provide comprehensive care for everyone, and yet so many fail to receive the care they need, it is obvious that much of our health spending is not providing value. Where is the waste? One major source of waste is that our fragmented system of funding care is administratively complex for the payers, and it places an even greater administrative burden on the healthcare delivery system. Hundreds of formularies administered by innumerable PBMs are obviously much more burdensome than a single, comprehensive, national formulary for evidence-based Medicare (EBM), which would automatically include everyone and would use a single automated billing system.

Healthcare systems with a strong primary care infrastructure have been demonstrated to provide higher quality care at a lower cost. Yet primary care is in dramatic decline in the United States. A unified system of funding care would establish incentives to encourage expansion of the primary care infrastructure.

Many studies have confirmed that allocation of our healthcare resources is flawed. Some geographical regions are underserved, but others have excess capacity in high-tech services. It has been shown that this excess capacity results in a significant increase in the delivery of high-tech services without any commensurate improvement in health outcomesĆ¢ā‚¬ā€and frequently with lower quality and patient-satisfaction ratings. A single funding system would provide data that would identify these wasteful deviations, enabling the application of appropriate adjustments in resource allocation.

We spend more for health care here than in other countries. A single monopsonistic purchaser for the healthcare system could negotiate fair prices. For pharmaceuticals, negotiations would cover costs, fair profits, innovation, and research expenses but would exclude waste such as excessive marketing expenses. Physicians would be able to negotiate appropriate rates, and hospitals would negotiate global budgets. Americans want a first-class healthcare system, so they’d support the funding of legitimate costs and fair profits, just as they support the funding of schools, highways, and police and fire protection.

Several decades of reform efforts have demonstrated that building on our flawed system of funding health care has only increased costs while leaving too many without access to affordable care. We have enough money to pay for health care for everyone. We need only the political will to dismiss the incompetent insurance middlemen running the system and replace them with a single national health insurance program. With our own public system, we would finally be in a position to demand high-quality healthcare products and services for everyone.

THE AUTHOR is past president of the California Public Health Association and president of Pharmacists Planning Service Inc. (PPSI), San Rafael, Calif., ppsi@aol.com

Blue Cross comingles professional fees and business referralfees

Judge Denies Preliminary Injunction In CHA Lawsuit
Medical News Today
August 4, 2006

Los Angeles County Superior Court Judge Carl J. West has rejected a request from the California Hospital Association (CHA) to prohibit Blue Cross of California (Blue Cross) from paying differing fees to physicians who perform colonoscopies in hospitals and ambulatory surgical centers (ASCs).

The CHA filed suit against Blue Cross in June, claiming its practice of paying an additional fee to network physicians who perform colonoscopies at ASCs and less for those performed in hospitals amounted to an unfair business practice that could prove harmful to patients.

In denying a request for a preliminary injunction against Blue Cross, Judge West declared that the CHA has “provided no evidence demonstrating that the policy will interfere with a physician’s medical opinion as to what is best for his or her patient.”

According to Blue Cross, the price range for these procedures is dramatic.
Hospitals typically charge two to three times more for a colonoscopy compared to ambulatory surgery centers.

“Judge West’s ruling goes a long way toward recognizing that the CHA lawsuit is really a matter of potential lost revenue for hospitals, not about patient safety,” said Josh Valdez, senior vice president of health care management for Blue Cross of California. “We strive to ensure our more than
7 million enrollees statewide receive quality health care. This policy is intended to eliminate cost barriers for our members and create an environment where patients can receive this important procedure in as convenient a manner as possible. Encouraging procedures such as colonoscopies to be performed in an ASC is consistent with that mission.”

http://www.medicalnewstoday.com/medicalnews.php?newsid=48758

Comment:

By Don McCanne, MD

Advocates of universal public insurance often dismiss, or maybe even condemn, one of the attributes of private, for-profit insurers: they make excellent business decisions. Paying physicians a modest fee for agreeing to use a lower cost facility saves Blue Cross millions of dollars, part of which will be used to slow the rate of premium increases for Blue Cross members, and part to improve the return for their investors. In the amoral world of the business community, this is exactly what they should be doing.

What about the physician? Is accepting an explicit payment that is dependent on which competing facility you will use, and not related to the professional services rendered, an amoral act? If the physician also has a proprietary interest in that facility, is accepting profits for this self-serving referral also an amoral act?

Commingling business income with professional income is troubling. Many of us would insist that the physician fee be the same for the same service, and not dependent on the facility used. Some of us would insist that the competing facility be non-profit thereby avoiding the self-referral conflict of interest. Others would take the opposite view that, in this age of third party control of compensation, any additional business arrangement that can increase physician income should be acceptable.

Under a single payer system, during price and fee negotiation, it is difficult to know the extent to which an amoral business ethic would be interjected. But one thing is certain, the process would be based on what is in the best interests of the patients and what is fair for the health care providers, and not what is in the interests of the private insurers.

Doctor's Order: Tell It Like It Is

Seven Days – Vermont’s Alternative Newsweekly www.sevendaysvt.com
(published 08.09.06)

Republican two-term Lt. Gov. Brian Dubie has been leading a pretty charmed life as a GOP candidate in the anti-George W. Bush Green Mountains, and there’s no sign of his luck changing anytime soon.

In fact, same goes for that other guy on the GOP ticket, Gov. Jim Douglas. The Vermont Republican Party’s electoral success at the top ranks of state government in the post-Howard Dean age is one of the GOP’s greatest and most unheralded outside-the-Beltway success stories.

And many local pundits saw Doobie-Doo’s Lite-Gov reelection odds improve significantly with the surprise entry into the race of a particularly articulate and well-educated Progressive Party candidate. In fact, Marvin Malek, M.D., is a real-life doctor on the front lines of health care. He wears the hat of director of Barre Internal Medicine.

A doctor running for lieutenant governor? Hmm. That’s pretty rare. Let’s see, it happened once before — 20 years ago. A little guy from Burlington. Made house calls.

What ever became of him, anyway?

Seriously, folks, Candidate/Dr. Malek is not, like his medical predecessor, harboring secret dreams about one day calling 1600 Pennsylvania Avenue “home.” He does, however, intend to be around long enough to see the universal health-care system he dreams of come into existence in the land he loves. And the straight talk Doc Malek offers just might be medicine to everyone’s fears.

Look, yours truly has been writing about “health-care reform” since the 1980s. This “commission” here, that “task force” there.

But 20 years later, America still has the most bloated, expensive, complicated and wasteful health-care system on Earth. Only lately have a few brave souls decided they will no longer ignore the 800-pound gorilla in the corner of the room — the private health insurance industry that simply has to take its cut.

David Sirota, one of the leaders of a new generation of straight-talking political writers with Capitol Hill experience (he served on Bernie Sanders’ congressional staff), hit the ol’ health-care nail on the head in a Monday column in the Washington Times.

“Here’s an idea rarely discussed in our nation’s capital,” began David. “Health insurance should not be a for-profit industry.”

Sirota noted that study after study shows government-run health-care systems such as Medicare and the Veterans Administration deliver “better, more cost-efficient health care” than does the for-profit health-care industry. The patients are happier and healthier, too.

And poll after poll shows that’s the way Americans want to go. Everybody knows the for-profit insurance companies will always try to squeeze out the biggest profit possible. It’s the nature of the beast. As Sirota put it, “Follow the money.”

That explains why in the last six years the health insurance industry has donated more than $370 million to politicians. And Sirota points out that Pennsylvania Republican Sen. Rich Santorum was last year’s No.
1 recipient. Guess who was No. 2?

New York Democrat Hillary Clinton!

Obviously, folks, Big Health Insurance has had this game wired for a long, long time. But Sirota, a brave new voice himself, cites other new voices such as Sen. Byron Dorgan of North Dakota and Physicians for a National Health Care Program — www.pnhp.org.

“These and other leaders are breaking the silence and addressing the taboo subject of making health care off-limits to profiteers,” writes Sirota. “And the louder their voices get, the closer this country will be to getting the not-for-profit health-care system its citizens want and deserve.”

Dr. Malek, the rookie Progressive in the Gov-Lite contest, told us he is a member of Physicians for a National Health Care Program. Surprise, surprise! There are thousands more like him.

Malek is single and originally from the Buffalo, New York, area, a blue-collar kid who went to medical school. He moved to Vermont almost six years ago. Likes the people and the mountains. He calls it the “best decision of my whole life.”

Turns out Doc Malek has been asking the Sirota Question for quite some time. Why do we need this useless layer of bureaucracy jamming things up so that Big Insurance can profit from healing the sick?

Legalizing booze, you may recall, put bootleggers out of business.
Ending Prohibition in 1932 meant booze in America became available and affordable again.

Wouldn’t legalizing universal health care, making it a right of citizenship, do the same for the health insurance bootleggers, while making health care available and affordable to all Americans?

“The biggest source of waste in the health-care system that you can get rid of without anybody missing a doctor visit or anything is the waste in the insurance companies,” said Doc Malek. He mentioned all the “advertising” and “lobbying” they do.

And when they do “strategic planning,” the Progressive physician told us, “what they’re really doing is figuring out which people they don’t want to insure, which people they do want to insure because they’re better health risks, and whether to have a $10-thousand deductible or a $3-thousand deductible.”

Candidate Malek called the for-profit health insurance industry “a complete waste.” He told us of the extra cost, staff-wise, it adds to his medical practice and that of every doctor out there. Each insurance company has different forms, requirements and procedures.

A great system, eh?

Incidentally, the two Ds in the race, House Health Care Committee Chairman John Patrick Tracy of Burlington and State Sen. Matt Dunne of Windsor County, are not conceding defeat.

Tracy scoffed at the suggestion that Malek the Prog would be good for at least 10 percent of the popular vote in November.

“If you want determination, look at what I’ve done!” said Tracy, referring to the Catamount Health legislation that Gov. Douglas signed.
Tracy’s “damn proud” of it, though he readily concedes, “It’s not perfect.”

“We could have walked away from the table,” he said, “but it would have meant 20,000 uninsured Vermonters would not be getting insurance starting in October of next year.”

Sen. Dunne acknowledged he voted for the bill Tracy calls “landmark”
legislation on his website. But Dunne did not share John-John’s enthusiasm.

“I don’t think anyone believes it’s a solution to the health-care crisis we have,” said Dunne, “and I share many of Dr. Malek’s concerns that it’s not financially sustainable.” Dunne added, “No one should be putting up a banner that says, ‘Mission accomplished.'”

Interesting.

Union of Government Workers Seeks to Build Political Muscle

By STEVEN GREENHOUSE
The New York Times
August 11, 2006

The American Federation of State, County and Municipal Employees announced plans yesterday to spend $60 million more a year to campaign for universal health coverage, to unionize 70,000 workers annually and to register 280,000 union members to vote.

The union, the largest of the 53 unions in the A.F.L.-C.I.O., announced what it called a 21st Century Initiative, pledging to become one of the most aggressive unions in organizing and in politics.

With this initiative, the union appears to have taken to heart criticism that organized labor has been lackadaisical about seeking to reverse its decline.

“We looked at ourselves in the mirror and decided that we needed to change,” the union’s president, Gerald W. McEntee, said in a news conference in Chicago. He said the union planned to increase members’
dues by $12 million in 2007, $36 million in 2008 and $60 million in 2009. That would give it a far larger budget to build political power, increase public support for public services, expand the union, and intensify member involvement.

Mr. McEntee, who is chairman of the A.F.L.-C.I.O.’s political committee and has been one of labor’s foremost critics of President Bush, said his union would get 40,000 union volunteers to work in this fall’s campaign and to ensure that 90 percent of the union’s 1.4 million members were registered to vote. Currently, 70 percent are.

“The simple fact is workers are under attack by the most antiworker president and Congress in our history,” he said. “We face budget cuts, service cuts and benefit cuts.”

He said too many workers have had to forgo wage increases to maintain their health benefits. He also complained that Republican governors in Indiana and Missouri had stripped many government workers of their ability to bargain collectively.

The union is planning a campaign to tell the public and government leaders about the value of public employees and services. As a union of government employees, the state, county and municipal employees are especially hurt by budget cuts and the privatization of services.

To increase its political clout, Mr. McEntee said the union hoped to persuade a quarter of its members to donate at least $100 a year to the union’s political action committee, which would yield about $35 million a year.

Mr. McEntee said the union organized 33,000 workers last year, and in the past two years, tens of thousands of home health care workers and child care workers in California, Iowa, Oregon and other states.

The union took the lead among labor unions in beating back Mr. Bush’s plan for a partial privatization of Social Security. Mr. McEntee said his union would push for Canadian-style universal health coverage but acknowledged that the nation might not be ripe for such an idea.

HSA/HDHPs may actually reduce price sensitivity

How Much More Cost Sharing Will Health Savings Accounts Bring?
By Dahlia K. Remler and Sherry A. Glied
Health Affairs
July/August 2006

Proponents of health savings accounts (HSAs) contend that they will reduce medical expenditures. In practice, however, the effect of HSAs, and the high-deductible health plans that must accompany them, will depend on the actual provisions of those plans and of the plans they replace. We show that typical plans in the market today already contain substantial cost sharing.

We find that many HSA/high-deductible arrangements would actually reduce cost sharing for many groups. In particular, the group responsible for half of all medical spending would see no change or a decline in cost sharing at the margin and on average.

http://content.healthaffairs.org/cgi/content/abstract/25/4/1070

Comment:

By Don McCanne, MD

The rationale given for health savings accounts (HSAs) with HSA-qualified high deductible health plans (HDHPs) is that the HSA controls excess health care spending by making the patient sensitive to the costs while the HDHP simultaneously provides protection against catastrophic financial loss. Does it work?

This study demonstrates that insurance products have already evolved into models that create price sensitivity through deductibles and coinsurance.

For the 80 percent of individuals who use 20 percent of health care services, the HSA component provides about the same amount of financial disincentive to care as do our other current insurance products.

Much more important is the maximum out-of-pocket (OOP) spending that is required before the HSA-qualified HDHP provides “100 percent coverage” of all remaining costs (though only theoretically). Once the maximum is reached, price sensitivity is removed from the 20 percent of people who use 80 percent of our health care services. Obviously then, under the HSA/HDHP model, price sensitivity has almost no impact on much of our health care spending. In fact, the coinsurance of current PPO-type coverage actually may provide greater cost sensitivity for the larger medical bills since the maximum OOP spending is frequently greater or even without limit.

So what would you have to do to create HSA/HDHP cost sensitivity for where the real spending occurs? You would have to establish a very high OOP spending maximum before 100 percent coverage kicks in. Even then, a sick person wants relief, not discounts. The problem is that anyone who needs a significant amount of health care would then be exposed to catastrophic losses. The model doesn’t work.

The good news is that the policy community understands the fatal flaws in the HSA/HDHP model. Now we need to get the politicians to quit flogging that dead horse and get on with real reform. Maybe we can convince them that we’re serious – this November.

SCHIP's success, and failure

Number of Uninsured Kids Declines as Enrollees in State Health Insurance Programs Increase
Robert Wood Johnson Foundation
Aug 9, 2006

Even though the total number of Americans without health insurance is on the rise, a new study analyzing government data suggests good news for the nation’s children. The percentage of uninsured kids in America has decreased by 20 percent since the government-funded State Children’s Health Insurance Program (SCHIP) was approved by Congress in 1997.

“The State of Kids’ Coverage” was released today by the Robert Wood Johnson Foundation (RWJF). The report shows that the number of uninsured children has decreased by 2 million since the creation of SCHIP and recent expansions in public programs. In the same period, the number of uninsured Americans has increased by nearly 5 million people.

The percentage of children who have private health insurance has fallen by five percent since 1997-98. That means 1.4 million fewer kids have private health insurance.

The report shows that even though the number of kids with private insurance is declining, public coverage programs have expanded, resulting in more kids being insured. The percentage of kids enrolled in public health coverage programs has increased by 31 percent since SCHIP programs began-meaning at least 5 million more kids now have public coverage.

Despite the success of public programs, millions of children remain uninsured. The latest Census data show that nearly 8.3 million children remain uninsured nationwide. Experts say that more than 70 percent of these children are likely eligible for low-cost or free health care coverage through SCHIP or Medicaid, but have not yet enrolled.

Additional findings show that being uninsured for all or part of the year can have serious consequences for kids:

* Uninsured kids are twice as likely not to receive any medical care in a given year, compared to children with insurance (12.3 percent insured vs.
25.6 percent uninsured).

* More than one in three (35.0 percent) uninsured children do not have a personal doctor or nurse-which is significantly higher than children who have health coverage (13.5 percent).

“This report confirms that uninsured children face a disadvantage in their ability to access health care, compared to children who have health coverage,” said Sarah Shuptrine, national program director for the Covering Kids & Families program. “When children do not make regular visits to the doctor, or receive medical attention when it is needed, they risk minor illnesses becoming major ones. Children need health coverage so that they receive all the care they need, when they need it, to grow and thrive.”

http://www.rwjf.org/newsroom/newsreleasesdetail.jsp?id=10424

Comment:

By Don McCanne, MD

Expanding health insurance coverage for children is good. Program design that results in over 8 million children being left without coverage is bad.

Some of the reasons that not all children are covered include the fact that the programs have a family income limit for eligibility, SCHIP usually requires the payment of a premium, and participation is voluntary and requires action on the part of the parents to enroll. Barriers such as these will always prevent 100 percent participation. In spite of greater efforts to expand enrollment, four-fifths of previously uninsured children remain without coverage.

All barriers should be removed. Health insurance enrollment should as automatic as the recording of a birth certificate, not only for all children, but for everyone.

San Francisco Mayor Signs Health Access Program Into Law

Coverage & Access | [Aug 09, 2006]

San Francisco Mayor Gavin Newsom (D) on Monday signed into law a program to expand health care access to the estimated 82,000 uninsured city residents, the San Francisco Chronicle reports (Vega, San Francisco Chronicle, 8/8). The San Francisco Health Access Program, proposed on June 20, would not provide health insurance but would give uninsured adults access to the same network of doctors and hospitals, as well as surgeries and drug benefits that other workers in the city have. The goal is to reduce health care costs by emphasizing primary and preventive care, according to Newsom. San Francisco’s Board of Supervisors will vote on the plan later this month, though Newsom said he does not need the board’s approval to proceed with the program’s implementation. The program would cost the city an estimated $200 million in the first year, much of which would be redistributed from existing city programs serving the uninsured and low-income residents. Newsom said he “assume[s] costs will increase” but hopes that the city will not “need to do this in five or six years” because the program will be “replaced by some rational national strategy” (Kaiser Daily Health Policy Report, 7/7). Newsom said implementing the program will be “the most complex” aspect of the plan (San Francisco Chronicle, 8/8).

Private insurance better than public for Colorado children?

PEDIATRICS
August 2006

ABSTRACT. Increased Rates of Morbidity, Mortality, and Charges for Hospitalized Children With Public or No Health Insurance as Compared With Children With Private Insurance in Colorado and the United States By James Todd, MD, Carl Armon, MSPH, Anne Griggs, MSPH, Steven Poole, MD and Stephen Berman, MD

BACKGROUND. There has been a gradual decrease in the proportion of children covered by private health insurance in Colorado and the United States with a commensurate increase in those with public insurance or having no insurance which may impact access to care and outcomes.

OBJECTIVE. The purpose of this work was to determine whether children with public or no health insurance have differences in hospital admission rates, morbidity, mortality, and/or charges that might be improved if standards of primary care comparable to those of children with private insurance could be achieved.

METHODS. We conducted a retrospective comparison of hospitalization-related outcomes for children <18 years of age in Colorado from 1995-2003 and in the United States in 2000. Population-based rates for hospital admission were determined stratified by age, race/ethnicity, disease grouping, and health insurance status. RESULTS. Compared with those with private insurance, children in Colorado and the United States with public or no insurance have significantly higher rates of total hospital admission, as well as admission for chronic illness, asthma, diabetes, vaccine-preventable disease, psychiatric disease, and ruptured appendix. These children have higher mortality rates, higher severity of illness, are more likely to be admitted through the emergency department and have significantly higher hospital charges per insured child. Higher hospitalization rates occur in children who are nonwhite and/or Hispanic and those who are younger. If children with public or no health insurance in the United States in 2000 had the same hospitalization outcomes as children with private insurance, $5.3 billion in hospital charges could have been saved. CONCLUSIONS. There is an opportunity to achieve improved health outcomes and decreased hospitalization costs for children with public or no health insurance if private insurance standards of health care could be achieved for all US children. http://pediatrics.aappublications.org/cgi/content/abstract/118/2/577

And…

Doctor visits save dollars, kids’ lives
DenverPost.com
08/07/2006

Regular visits to the doctor by children on Medicaid or with no insurance could prevent serious illnesses and hospitalizations – saving state taxpayers $46 million, according to a study by two Denver pediatricians.

The study found the death rate for those children was almost double that of children with private insurance.

“What this shows is, if you don’t give children a medical home, they end up in the emergency department or the hospital,” (coauthor James) Todd said.

“That costs more, in dollars and also in morbidity and mortality,” he said.

In 2004, the two doctors surveyed colleagues across the state and found the number of pediatricians willing to treat Medicaid patients had dropped by almost half, from 41.4 percent in 2000, to 23.9 percent in 2003.

At that time, 83 percent of the doctors surveyed said Medicaid payments don’t cover their costs of seeing patients.

http://www.denverpost.com/news/ci_4144600

Comment:

By Don McCanne, M.D.

Reading the entire Abstract leads you to one unmistakable conclusion: children covered by private insurance have lower death rates and lower costs than do children covered by public insurance, which is the equivalent of having no insurance at all.

Whoever wrote this Abstract must be on the dole from AHIP (America’s Health Insurance Plans) since it is tantamount to an endorsement of private insurance without providing a hint at the real issues involved. Whether the insurance is public or private has nothing to do with the tragic outcomes described.

Medicaid in Colorado (and many other states) is a disaster, not because it is a public program, but because it is a welfare program that is severely underfunded because it serves a population without a political voice. Asking physicians to not only donate their services but to also pay the deficit in overhead expenses is not realistic. The margin of profit for other patients has been squeezed to the point that cost shifting is no longer an adequate option. Physicians have no other choice but to limit their exposure to Medicaid losses.

This leads to the real reason that Colorado has tragic outcomes in its Medicaid program. These children lack a medical home. Primary care is very effective in improving outcomes and lowering costs, but Colorado’s Medicaid program is impairing access to pediatricians and family physicians. Impaired outcomes, including death, is the consequence of the neglect by the public stewards of the Medicaid program.

The private insurers cannot claim that they have some marketplace magic that saves lives and reduces costs. Private insurers waste money, diverting resources away from patient care. Worse, they make every effort to avoid covering those with the greatest needs, and they are making health care less affordable by shifting more costs to those with needs. It is absolutely outrageous that the conclusion in this Abstract implies that “private insurance standards” should be achieved for all children. The standards that really should be achieved are those of a well-funded public program: universal, comprehensive, high quality, efficient, accessible, and affordable.

The editors of PEDIATRICS are guilty of journalistic malpractice.

Band-aid Therapy

Problems with Medicare payments to physicians, rising health-care costs, and the increasing number of Americans without insurance show the need for reforms.

By Jeff Atkinson Published July/August 2006

The United States seems to be adept at alleviating the pain caused by the health-care system–taking just enough action to forestall a system-wide crisis, but not enough to provide long-term solutions. Two recent examples of this are the changes to the Medicare payment structure for physicians and proposed solutions for the growing number of Americans without health insurance.

Congress halts Medicare cuts

At the beginning of the year, Medicare reduced payments to physicians by 4.4 percent, part of a cost-cutting plan that the Medicare trustees said would reduce payments to physicians by approximately 26 percent over six years. The American Medical Association (AMA) and others protested, citing an AMA survey that indicated payment cuts for 2006 would cause 38 percent of physicians to accept fewer new Medicare patients.

In February, Congress passed the Deficit Reduction Act (S. 1932), which delayed implementation of payment reductions and froze payments at the 2005 level, subject to adjustments announced earlier. Medicare carriers were instructed to repay physicians for the fees that were lost in the first month of the year.

AMA President J. Edward Hill, MD, said, “The current payment formula is tied to the ups and downs of the U.S. economy–not the growing health-care needs of America’s seniors. We must build on the momentum and awareness in 2005 to make 2006 the year Congress permanently repeals the broken Medicare physician payment formula.”

Without further action by Congress, Medicare payments to physicians for 2007 will be cut by 4.6 percent.

Uninsureds increase to 45.8 million

The bad news is that the number of people without health insurance in the United States has increased to 45.8 million–15.7 percent of the population and about 800,000 more people than the previous year. The good news is that the number of people with health insurance has increased as well to 245.3 million (84.3 percent of the population). These figures are from 2004, the most recent year for which the U.S. Census Bureau has reported data. The report is available on line at www.census.gov/prod/2005pubs/p60-229.pdf

For many people without health insurance, lack of health insurance is a crisis, but those who do have health insurance may not perceive such a need for major changes in the system. The government has worked on the issue of lack of health insurance through incremental changes, such as making health insurance more easily available for children through the State Children’s Health Insurance Program (SCHIP), which has insured more than 5 million children nationwide.

In addition, the Bush administration backs expansion of Health Savings Accounts (HSAs) by which Americans buy high-deductible insurance polices and place tax-free dollars in accounts to pay for health-care expenses. The deductible for an individual is at least $1,000 per year, and the deductible for a family is at least $2,000 per year. So far, about 3 million people have enrolled in HSAs. People with high incomes are most likely to benefit from and enroll in HSAs.

Although the incremental changes help certain segments of the population, the broader issues of a large number Americans without health insurance and the need for a stable, predictable reimbursement system remain.

Health spending up 7.9 percent

Meanwhile, health-care spending continues to grow faster than the general rate of inflation, although the growth of health-care spending is slower than in earlier years. According to figures released by the Centers for Medicare and Medicaid Services (CMS), national health expenditures rose 7.9 in 2004, which is lower than the 8.2 percent growth in 2003 and the 9.1 percent growth in 2002. (The 2004 figures were released in 2006.)

The 7.9 percent increase in 2004 is more than twice the general rate of inflation (3.3 percent) for the year. When health-care spending outstrips the general rate of inflation, the proportion of gross domestic product (GDP) devoted to health care rises. In 2004, health-care spending reached 16 percent of GDP. By comparison, the average industrialized country devotes about 8.6 percent of its GDP to health care. The CMS expects the proportion of GDP in the U.S. devoted to health care to grow to 20 percent by 2015.

Physicians’ piece of the pie

The total national health spending for 2004 was $1.878 trillion, which is $6,280 per person. Physicians received a slightly larger portion of the health-care spending pie in 2004 with total payment for physician services increasing by 9 percent. Spending for hospitals and for prescription drugs rose by slightly less amounts (8.6 percent and 8.2 percent, respectively).

The rate of increased spending for prescription drugs is down from double-digit increases of a few years ago. Reasons for the slower rate of increases in drug spending include more use of lower price generics, increased availability of over-the-counter (OTC) drugs, including anti-ulcerants and antihistamines, and more mail-order dispensing of drugs. For a comparison of health-care spending between 2000 and 2004, see the chart on page 11.

Conditions for reform

In a book review in Health Affairs, Professor Mark Peterson of UCLA comments, “None of the current policy alternatives seems to offer much hope of success, unless the health care system unravels so dramatically that it clears the political slate.” (Vol. 24, No. 6, Nov./Dec. 2005, p. 1682).

What could dramatically unravel the health-care system? A flu pandemic that wipes out a significant portion of the population and cripples the economy is one possibility. Another could be that enemies of the United States set off a few nuclear devices on U.S. soil. In such circumstances, with many of the country’s institutions crippled, the federal government would need to step in to maintain order and provide essential services, including health care.
Less dramatic, but also possible, would be steady erosion of the U.S. economy in which businesses, in larger numbers than is occurring already, conclude that they can no longer afford to provide health insurance to their workers. If that happens, political pressure from the business community and consumers could result in establishment of universal health care.

Another path to universal coverage (with or without a crisis) could be new leadership in the United States that would effectively convey a message of “We are in this together” and “There are certain essentials that all Americans should have, including health insurance.” Such leadership would move America away from an attitude of “Each person for himself” and more toward a Canadian view that universal health care is, in the words of Roy Romanow, former premier of Saskatchewan, an “expression of social cohesion.”

Models for universal health care

The simplest model for universal coverage would be to expand the Medicare system, dropping the age limit for eligibility, either all at once or gradually. Instead of covering the 42 million of the population over age 65, Medicare would cover all Americans. Increased funding would be required, obviously, either from a higher Medicare tax or from other taxes. However, this would in large part be merely a transfer of private-sector expenditures into the public system.

Another option is to mandate that all employers (or individuals) acquire health insurance and to provide subsidies to poor persons for insurance coverage. Most aspects of the current health-care system, including its administrative inefficiencies, would be maintained.

Alternatively, a system of vouchers for purchasing insurance could be adopted. The private insurance delivery system would still be in place, although there likely would be fewer insurance companies. Payment of the vouchers would come from the government and would be funded from general revenue or perhaps a value-added tax. The value of the vouchers would be risk-adjusted, and patients would have freedom to choose among health plans. For further discussion of different models of health-care reform, see the Nov./Dec. 2005 issue of Health Affairs (Vol. 24, No. 6), on line at www.healthaffairs.org/

Need for long-term solution

In the 1990s, Congress adopted a complex formula to set payments to physicians. The formula applies multiple variables, including the amount of utilization of services and the condition of the economy, as well as the Resource-Based Relative Value Scale. The goal of the formula is to ensure adequate payment to physicians and to promote high quality, efficient health care. For the last several years, the formula has not worked out well, and Congress has stepped in to provide a fix for the coming year, but without altering the underlying formula.

Similarly, some government leaders have lamented the growing number of Americans without health insurance. A solution–or a solution that is better than the current system–will require sustained, focused effort. Less harm will come to the country if solutions can be developed without waiting for a crisis.

Jeff Atkinson teaches courses in health-care law and policy at DePaul University College of Law in Chicago, where he graduated summa cum laude. He writes on legal, medical, and ethical issues.

Callahan and Wasunna's Medicine and the Market

Equity v. Choice
By Daniel Callahan and Angela A. Wasunna
Medicine and the Market
(2006 – The Johns Hopkins University Press)

Some Soft Conclusions (on competition)

Our reading of the literature and data on competition in health care allows only a soft conclusion: it may work here and there in bringing an increase in efficiency and cost control, but most likely only if coupled with strong government regulation designed to make it work. There is no consistent evidence anywhere that an unregulated competitive market can achieve those goals, much less do so while maintaining reasonably equitable access.
Moreover, when looking at the European experience, many countries turned to various competitive strategies to control costs, with mixed success. The most effective means always turn out to be government-imposed supply-side restrictions – with the help of demand-side control imposed by government monopsonistic purchasing clout. To control the availability of expensive technologies, hospital capacity, physician supply, physician fees, or the cost of pharmaceuticals works wonders for cost control. Even relatively successful competition has nowhere had the comparative force of direct government interventions to contain costs.

Here are our summary conclusions (on private health insurance):

On equity. Private health insurance contributes to the regressivity of health care financing in the United States and Switzerland. In Germany and the Netherlands, however, mainly affluent people purchase private insurance, contributing to the progressivity of the financing system. On the delivery side, private health insurance creates access based on willingness and ability to pay, and typically discriminates against the poor, ill, and elderly. Equitable access has also been undermined as a result of greater sophistication in risk-rating, which enables insurers to select preferred risks. The philosopher Allen Buchanan has noted that the conditions necessary for private insurance to be economically viable for those who sell it contradict the necessary ingredients for equitable access, which requires regulation of competition and the availability of generous public funds to fill in gaps in access.

On efficiency. With private insurance, there are no criteria to determine access to care from willingness and ability to pay. In most countries, private insurers compete with or parallel the public system. Private health insurance may cover cost-effective services, which the public sector does not deliver because of mismanagement. Private health insurance may cover more rapid access to services or the costs of amenities, such as private hospital rooms, not covered in public insurance packages. Administrative costs may be systematically higher in a health system with competing private insurers than in a monopsonistic system, because of the costs associated with marketing, promotion, and underwriting. In addition, if private insurers operate on a for-profit basis, further revenue needs to be generated to pay shareholder dividends.

Careful regulation can limit the harm that is a potential result of private insurance, mainly by keeping it at a limited level and working hard to make certain the public system does not require private insurance to guarantee good health for the population. At the systems level, financing health care mainly through private insurance is neither equitable nor efficient, and the United States is a clear example of this. Insurance overheads and a competitive market have made the U.S. system the most costly in the world, yet it still fails to cover the health care needs of millions of its citizens. That much said, a modest degree of private insurance can satisfy some desires for expanded choice, as in the United Kingdom, without harm to the public system.

The Case for Government

One such ingredient (of effective strategies for the provision of health care in the face of growing costs) is that only universal health care systems, government run and financed, or at least governmentally managed and monitored, will be able to cope with those pressures. The market is too much of a wild card to be depended upon to control costs, and is congenitally prone to introduce unfettered efforts to expand choice beyond affordable boundaries and to let individual preferences, regardless of their social or economic implications, rule the day. There are several things that government, and only government, can do. The first is to keep a central eye on the entire health care system and to manage it in a way aiming at the public interest. A good federal government system will decentralize as much as possible, giving regions or states considerable control over their local and regional policy, but it will work to coordinate all of them toward a common end: equitable and high-quality care. A second role of government is that, through its political system, it can find ways to gain the contribution of all citizens in defining the goals of the system; argument and debate will be the rule, but that is as it should be in democratic societies. This will be all the more important if we are correct in projecting cost pressures that will, for earlier specified reasons, just get worse and worse, with little chance of turning back. Those pressures will necessitate rationing and priority setting, sometimes in ways that will deny people the kind and quality of health care they desire, and even on occasion need. It is well understood that unlimited space travel is not possible with limited budgets, and so finite goals are set. It is far less understood that unlimited medical goals will not be possible with finite budgets. But such budgets are necessary and, in the future, will probably allow far less managerial maneuvering than is now possible. The necessity for citizens’ active role in setting priorities and determining limits – their informed consent to being denied treatments they want – will be all the more imperative. But that is only possible with integrated national systems, not fragmented mixtures of public and private health care with no guiding – and visible – hand, which is government’s role.

(Closing comment)

The market is not the way to go as a general panacea for health care, even if it works well in other sectors of society. But possibly it can contribute something. We want to leave that door open, looking carefully before entering.

http://www.press.jhu.edu/books/title_pages/3375.html

For a recent Quote of the Day message on Porter and Teisberg’s Redefining Health Care:
https://pnhp.org/news/2006/june/porter_and_teisberg.php

Comment:

By Don McCanne, M.D.

Callahan and Wasunna, in “Medicine and the Market,” confirm what Porter and Teisberg expressed in “Redefining Health Care”: market competition has failed to provide equity and efficiency in health care. They both acknowledge that the government must play a major role in financing health care, but their concepts of how market principles should be applied are quite different.

Porter and Teisberg, in their unwavering belief that market competition will always provide greater quality at lower cost than would government control, would radically contort the health care delivery system to make it more amenable to market forces. They would shove competition down the gullet of the health care system merely because it’s good for you, even if empirically it makes you regurgitate, threatening your ability to thrive.

In contrast, Callahan and Wasunna demonstrate that government-run universal programs are effective in ensuring equity and efficiency whereas reliance on markets inevitably fall far short. (In their book, they demonstrate that
purer market-based models in the proving grounds of developing nations may be effective as business entities, but a disaster for health care equity.)

Although Callahan and Wasunna make it very clear that universal health care systems must be “government run and financed, or at least governmentally managed and monitored,” they suggest that we should continue looking for
possible contributions that the market might be able to make.

That should lead us to a consideration of how the policy community should allocate its efforts. Do we engage in an intensive, expensive, time-consuming effort to identify market manipulations that might produce a slightly favorable tweak to the system, merely to placate the market ideologues? Or do we move forward immediately with enacting a proven, equitable and efficient system for all?

Every half hour we delay, another person dies for lack of insurance! That’s 3000 every two months (the same number as the tragic one-time loss of 9/11, except that this is repeated over and over). We can let the entrepreneurs work on the periphery with their market solutions. If they can show us something that will improve the system then we’ll take a serious look at it. In the meantime, let’s get busy with adopting a system that immediately will begin to save tens of thousands of lives.

Milton Friedman on U.S. medical care

“Free to Choose: A Conversation with Milton Friedman”
Hillsdale College
Imprimis
July 2006

Question: Is there an area here in the United States in which we have not been as aggressive as we should in promoting property rights and free markets?

Milton Friedman: Yes, in the field of medical care. We have a socialist-communist system of distributing medical care. Instead of letting people hire their own physicians and pay them, no one pays his or her own medical bills. Instead, there’s a third party payment system. It is a communist system and it has a communist result.

http://www.hillsdale.edu/imprimis/2006/07/

Comment:

Don McCanne, M.D.

So, outrageous health care cost escalation, impaired access, and impaired health outcomes (including tens of thousands of deaths) are a “communist result” of a “socialist-communist system.”

The way you frame the problem is very important since logical conclusions derive from that framing. Based on Professor Friedman’s observation, we should ferret out and expel all of the communists that have permeated our private insurance industry and our government agencies.

Of course that’s nonsense, but there is a point here. Using an ideological abstraction to frame the problems of our health care system not only defeats consensus, it can never lead to rational reform. A political, social and moral Utopia will always be a fiction.

However the dialogue on reform is framed, it is absolutely essential that every effort be made to objectively define the problems. Then every effort must be made to describe the potential options for reform along with the anticipated outcomes of each option and its variations.

Much of that important work has already been done. We know what the problems are, the options for reform, and the likely results of the various options. If the goals are affordable, high quality, comprehensive health care for everyone, then it is clear that either a national health service model or a single payer national health insurance model would be the most effective means of achieving those goals. The American preference is for the insurance model.

It is difficult to understand why so many are opposed to reform. But many of those who are opposed dump the framing of the problems in objective terms, and substitute the framing as an ideological abstraction of personal
freedom: I’ll take care of my needs and everyone else can take care of theirs. As mentioned, that type of framing prevents consensus and automatically achieves the opponents’ goal of obstructing reform efforts.

But does this ideology of personal freedom or self-interest mean that we should not join together for the common good (something which governments do very well)? Let’s see what Milton Friedman has to say about self-interest:

Question: Do you define self-interest as what the individual wants?

Milton Friedman: Yes, self-interest is what the individual wants. Mother Teresa, to take one example, operated on a completely self-interested basis. Self-interest does not mean narrow self-interest. Self-interest does not mean monetary self-interest. Self-interest means pursuing those things that are valuable to you but which you can also persuade others to value. Such things very often go beyond immediate material interest.

Question: Does that mean self-interest is a synonym for self-sacrifice?

Milton Freidman: If you want to see how pervasive this sort of self-interest is that I’m describing, look at the enormous amount of money contributed after Hurricane Katrina. That was a tremendous display ofself-interest: The self-interest of people in that case was to help others. Self-interest, rightly understood, works for the benefit of society as a whole.

(Professor Friedman seems to prefer Utopia, even if it is a fiction. Charity, as health policy, has been studied extensively. Unfortunately, it is the least effective method of addressing our health care financing problems, having almost no impact at all. 300 million people, each acting as an independent agent, would never contribute the $7000 apiece required to fund our health care system. On the other hand, as reluctant taxpayers, they would collectively fund the $2 trillion health care system, secure in the knowledge that everyone else is paying their equitable portion. Framing this objectively, only government policies can ensure an equitably funded system for everyone.)