No Shelter from the Storm: America’s Uninsured Children

Campaign for Children’s Health Care
September 2006

Findings

There were more than 9 million uninsured children (ages 0-18 years) in the U.S. in 2005. One out of every nine children is uninsured.

The majority of uninsured children-88.3 percent-come from families where at least one parent works.

Among uninsured children living with a parent, more than half-59 percent-live in two-parent households.

In more than half of all two-parent families with uninsured children, both parents work.

Overall, uninsured children are nearly five times more likely than insured children to have at least one delayed or unmet health care need.

Over the past 10 years, the advent of the State Children’s Health Insurance Program (SCHIP) and the increased push for children’s coverage that the new program created have led to marked declines in the number of uninsured children. Nevertheless, a great deal of work remains to be done. The most recent Census data show that, for the first time since 1998, the rate of uninsured children increased, from 10.8 percent to 11.2 percent.

Failure to ensure that all children in this country have health coverage is shortsighted and harmful. Children are the future of this country, and the policy choices the nation makes now can have long-term effects on who today’s children grow up to be. At the very least, we must ensure that each child gets the best possible start, which includes high-quality, affordable health coverage.

http://www.childrenshealthcampaign.org/tools/reports/Uninsured-Kids-report.PDF

Comment:

By Don McCanne, MD

Incrementalists have been touting the one health care reform “success” of the past few decades: the State Children’s Health Insurance Program (SCHIP). Yet, after a decade under the program, 9 million children remain uninsured and the numbers are increasing, and those children have five times the amount of unmet health care needs as insured children. If this is the definition of success, then how would they define failure?

We will never have health care coverage for everyone until we establish policies that ensure that it is automatic, life long, and universal. Nothing short of national health insurance will do.

Health Benefits In 2006: Premium Increases Moderate, Enrollment In Consumer-Directed Health Plans Remains Modest

By Gary Claxton, Jon Gabel, Isadora Gil, Jeremy Pickreign, Heidi Whitmore, Benjamin Finder, Bianca DiJulio, Samantha Hawkins
Health Affairs
September 26, 2006

Abstract

Based on a survey of 2,122 randomly selected public and private employers, this paper reports on the state of employer-sponsored health insurance in spring 2006, including recent changes. Premiums increased 7.7 percent from spring 2005 to spring 2006 and have risen 68 percent since 2001. About 4 percent of workers are enrolled in high-deductible health plans with savings options. The percentage of workers covered by their own employer did not statistically change from 2005 to 2006.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.25.w476

Comment:

By Don McCanne, MD

Some reports of this study suggest that this is good news because employer-sponsored premium increases are now down to only twice the rate of inflation, as if a “down” isn’t an “up.”

Remember the magic of compounded interest? Modest amounts of funds, with time, grow to very large amounts not only because of the interest, but also because of the interest on the interest. With insurance premiums, not only are the rate increases high, but the rates are applied to prior high rate increases, compounding year after year. That has resulted in a rate increase of 68 percent since 2001.

Although this report is about increased costs of insurance premiums, the real issue is the increase in actual health care costs. Our current pseudo-market mechanisms of slowing spending increases have been ineffective. It is not as if we don’t know what can be done. Establishing a public monopsony would enable us to obtain value in health care purchasing though single payer mechanisms. What is astounding is that we continue to tolerate these outrageous cost increases with a complacency that the market will take care of it for us.

Same question as before: Are we a nation of dimwits?

Citizens’ Health Care Working Group

Bipartisan legislation created the Citizens’ Health Care Working Group to go to the American people, to explore their values and aspirations for the American health care system, and to bring their ideas and energy for health reform back to Washington.

Appointed by the Comptroller General of the United States, the Citizens’ Health Care Working Group is a nonpartisan body made up of 14 citizens plus the Secretary of Health and Human Services – all from very different backgrounds, experiences within the health care system, and communities across the nation.

Guarantee Financial Protection Against Very High Health Care Costs

By establishing protection against very high medical costs for all, the Working Group’s Recommendation 2 responds to two major messages from the American people. First, people believe that no one should be financially ruined by health care costs. Further, there was overwhelming public support for a new dynamic in American health care where everyone is protected, not just select portions of the population. This Recommendation can be implemented in the short term and provide a basic level of financial protection to those who do not already possess this coverage. Building this system will provide some level of immediate protection for everyone, and also has the potential to stabilize existing employer-based health insurance markets and expand the private individual and small group health insurance markets to more Americans.

After listening to and analyzing the needs and ideas of the American people and discussing the topic with experts, the Working Group developed two possible frameworks that would meet the requirements of universal protection and guard against very high health care costs: The Market-Based and the Social Insurance models.

The Market-Based Model

The basics of the market-based model are as follows:

* All Americans would have to obtain coverage against high out-of-pocket costs.
* Individuals would be offered a choice of standardized high-cost insurance products, whose details would be easy to understand and easy to compare.
* The products would offer protection at different levels of out-of-pocket costs to individuals.
* Individuals would be free to purchase the policy that best suits their needs. Since individuals with the lowest incomes also face impoverishment with all but the most expensive plans, premium subsidies would be provided based on ability to pay, and would diminish with increasing income levels.
* Employers would retain a role in paying for or providing health plans.

The Market-Based Model: An Example

For illustrative purposes only, consider three policies covering the same set of services: (1) Policy A with a deductible of $4,000 in out-of-pocket expenses prior to full coverage of covered services, (2) Policy B with a deductible of $12,000, and (3) Policy C with a deductible of $30,000. These deductible levels are similar to policies currently offered in the individual insurance market. Based strictly on coverage offered, Policy A would have the highest premium, Policy C the lowest premium.

The Social Insurance Model

A second approach is based on a social insurance model:

* All Americans would be required to participate in a federal government program protecting against very high out-of-pocket costs.
* The program, like Medicare, would be administered by the federal government through private-sector contractors.
* The program would be funded through a combination of premiums and earmarked federal revenues. Premiums would be structured to be fair and affordable, based on a sliding scale or surcharges related to income.
* Federal subsidies, based on ability to pay, would be provided to pay premiums.

The Social Insurance Model: An Example

In an illustration of this coverage approach, protection would be provided against out-of-pocket costs for covered services that exceed some percentage of income-such as 20 percent of taxable income above the federal poverty level-or that exceed a fixed dollar amount of individual liability-such as $30,000-whichever is lower.

Final Recommendations (access page):
http://www.citizenshealthcare.gov/recommendations/finalrecs.php

Executive Summary:
http://www.citizenshealthcare.gov/finalrecs/ppd_execsumm.pdf

Recommendations report:
http://www.citizenshealthcare.gov/finalrecs/ppd_recommendations.pdf

Comment:

By Don McCanne, MD

I followed this process closely, and personally participated in it. One common theme I heard repeatedly was that comprehensive health care must be affordable for all Americans. At no time did I ever hear support for the concept that we only need to “guard against VERY HIGH health care costs” (emphasis mine). Even the few who supported high-deductible health plans also supported covering initial costs with health savings accounts. And never did I hear a suggestion that the deductible be in the range of $30,000. Although there was very strong support for single payer social insurance, none of the advocates suggested a deductible of 20 percent of income over the federal poverty level.

I am not surprised by this recommendation. At the start of the process I stated the following in a Quote of the Day:

“It is crucial that we closely observe this process that will result in a vote in Congress on systemic health care changes theoretically designed to bring quality care to every American. The current Comptroller General, David Walker, will appoint 14 of the 15 members and the Chairperson of the Working Group. Since David Walker will be able to control the ideological complexion of the Working Group, we should try to understand his views. Based on his health care forum presentation this month, it appears that he supports incremental reforms in the marketplace that place a greater emphasis on increasing price sensitivity for patients while decreasing the financial insulation provided by insurance.”

(https://pnhp.org/news/2004/january/medicare_bill_calls_.php)

I think that it is safe to say that nothing in the process warranted the “very high costs” recommendation, but it is also safe to say that the Comptroller General achieved his goal of producing a report that places “a greater emphasis on increasing price sensitivity for patients while decreasing the financial insulation provided by insurance.”

This process had great potential. We could have seen the best of the American political process at work – a process expressing the will of the American people. Instead it turned out to be another partisan hack job.

Luring Customers From Medicare
By Milt Freudenheim
The New York Times
September 22, 2006

For years, private insurers have offered alternatives to the federal Medicare program that are meant to give patients lower-cost options than the government coverage provides.

But suddenly a type of private insurance plan is gaining ground that looks very similar to the basic coverage long available to anyone with a federally issued Medicare card.

And the government is paying the private insurance industry a subsidy of 11 percent per patient, on average, to provide it.

The fee-for-service plans, the focus of the current controversy, are in many ways similar to the government’s own Medicare. Under the industry version, patients have the right to choose their own doctors and hospitals – as they have long been able to do with their federally issued Medicare cards.

And as with the federal program, enrollees in the private fee-for-service plans typically pay a monthly $88.50 premium to the government.

Under the industry plans, moreover, the hospitals and doctors receive the same rates as when they are paid through the basic federal Medicare program.

Experts say that because the administrative costs of providing the private policies are minimal, they represent easy income for the insurance companies, with profit margins of 4 percent or so.

But many see the private fee-for-service Medicare plans as mainly a feeder program in which insurance companies hope to gradually convert members into even more complex, more profitable private Medicare offerings that the government also subsidizes.

The more lucrative plans, like Medicare health maintenance organizations or doctor-network managed care programs, which have been available longer, can yield profits in the 10 percent range, analysts say.

While insurers do run a risk of losing money on a patient if he or she has unexpectedly large health costs, the companies can consult county-by-county Medicare cost data and decide where to offer coverage and which high-cost areas to avoid.

Under Medicare’s complicated rules, though, the amount actually paid to a company for a patient can vary. Around the nation, depending on local medical costs and the health profile of Medicare-eligible residents, the monthly federal subsidy to the insurance company can range from $400 to $2,500, said Dr. Scott Latimer, a Humana executive based in Tampa, Fla.

Marilyn Moon, a longtime Medicare researcher who served as a public trustee of the program… said she was “unconvinced by the logic that says, ‘If we are overpaying the health plans now, they will save us money later.'”

It is a “back-door way of trying to privatize Medicare,” said Dr. Jack Lewin, the chief executive of the California Medical Association.

http://www.nytimes.com/2006/09/22/business/22medicare.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1158948710-wp9HSSVwV+nFHUNNWRwPiA&pagewanted=all

Comment:

By Don McCanne, MD

Why would Congress do this? They are paying more money to private insurers for the same fees as traditional Medicare and for the same providers (all willing physicians). They also allow them to market exclusively in more lucrative markets. In addition, patients currently in treatment programs will be less likely to change coverage, whereas less expensive, healthy patients may be attracted by potential incentives such as a single package which adds a Part D drug benefit.

Clearly Congress did not intend that the private plans would continue to receive higher rates and continue to indirectly avoid adverse risk. Their intent was to establish painless private Medicare insurance options even though it requires a subsidy. The next step is ominous. Congress will slash the funding of the “unsustainable” traditional program requiring a reduction in provider funding with a massive exit of providers from the program.

Once the traditional program can no longer float (except as an under-funded welfare program), the private insurers will be granted more leeway to keep their products affordable, but not with more government money. What does that mean? The insurance industry has defined affordability to mean higher deductibles and coinsurance, greater premiums, and innovative benefit programs that reduce services covered.

The intent of Congress is not really to encourage more of the abusive practices of the private insurance industry. They passively accept that as being the markets at work (though they will want to see options for comprehensive products in the private market that take care of themselves and their wealthy supporters). Their intent is simply to destroy political support for the traditional program so they can shrink it “down to the size where we can drown it in the bathtub.”

Evil, evil, evil!

Rewarding Provider Performance: Aligning Incentives in Medicare
Institute of Medicine
September 2006

The health of senior citizens in the United States is not as good as it should be, given the billions of dollars spent on health care each year. This raises concerns that Medicare is not getting the best value for the services it purchases. Medicare’s current payment system places no emphasis on whether the care delivered is of high or low clinical quality or is appropriate. The system provides few disincentives for overuse of often high cost medical services and does little to encourage coordinated, preventive and primary care that could save money and produce better health outcomes.

This study is the third in the IOM’s Pathways to Quality Health Care series, which offers tools for implementing the vision of improved health care delineated in the Quality Chasm report. The first report in the Pathways series, Performance Measurement: Accelerating Improvement, recommended a strategy for developing and implementing a comprehensive performance measurement system, including a national board to coordinate that effort.
The second report, Medicare’s Quality Improvement Organization Program: Maximizing Potential, recommended an emphasis on technical assistance to providers for quality improvement. The present report builds on those studies and offers an operational plan for introducing into Medicare payment incentives that would encourage and reward high-quality care. While alignment can occur in many areas, this report is limited to examining the link between payment incentives and provider performance.

Recommendation 1: The Secretary of the Department of Health and Human Services (DHHS) should implement pay for performance in Medicare using a phased approach as a stimulus to foster comprehensive and systemwide improvements in the quality of health care.

Recommendation 2: Congress should derive initial funding (over the next 3-5
years) for a pay-for-performance program from existing funds.
* Congress should create provider-specific pools from a reduction in the base Medicare payments for each class of providers (hospitals, skilled nursing facilities, Medicare Advantage plans, dialysis facilities, home health agencies, and physicians.
* Congress should ensure that these pools are large enough to create adequate motivation for improved performance on selected measures. Because of unique challenges of physician payment relating to the SGR, investment dollars may be necessary to create adequate resources to effect change.
* Initial funding should be budget conscious in taking into account the resources needed for both funding the pools and implementing the program.

Recommendation 3: Congress should give the Secretary of DHHS the authority to aggregate the pools for different care settings into one consolidated pool from which all providers would be rewarded when the development on new performance measures allows for shared accountability and more coordinated care across provider settings.

Recommendation 4: In designing a pay-for-performance program, the Secretary of DHHS should initially reward care that is of high clinical quality, patient centered, and efficient.

Recommendation 5: The Secretary of DHHS should design a pay-for-performance program that initially rewards both providers who improve performance significantly and those who achieve high performance.

Recommendation 6: Because public reporting of performance measures should be an integral component of a pay-for-performance program for Medicare, the Secretary of DHHS should offer incentives to providers for the submission of performance data, and ensure that information pertaining to provider performance is transparent and made public in ways that are both meaningful and understandable to consumers.

Recommendation 7: The Secretary of DHHS should develop and implement a strategy for ensuring that virtually all Medicare providers submit performance measures for public reporting and participate in pay for performance as soon as possible. Initially, measure sets may need to be narrow, but they should evolve over time to provide more longitudinal and comprehensive assessments of provider and system performance. For many institutional providers, participation in public reporting and pay for performance can and should begin immediately. For physicians, a voluntary approach should be pursued initially, relying on financial incentives sufficient to ensure broad participation and recognizing that the initial set of measures and the pace of expansion of measure sets will need to be sensitive to the operational challenges faced by providers in small practice settings. Three years after the release of this report, the Secretary of DHHS should determine whether progress toward universal participation is sufficient and whether stronger actions – such as mandating provider participation – are required.

Recommendation 8: CMS should design the Medicare pay-for-performance program to include components that promote, recognize, and reward improved coordination of care across providers and through entire episodes of illness. Thus, CMS should (1) encourage beneficiaries and providers to identify providers who would be considered their principle responsible source of care, and (2) pay for and reward successful care coordination that meets specified standards for providers who take on that role.

Recommendation 9: Because electronic health information technology will increase the probability of a successful pay-for-performance program, the Secretary of DHHS should explore a variety of approaches for assisting providers in implementation of electronic data collection and reporting systems to strengthen the use of consistent performance measures.

Recommendation 10: The Secretary of DHHS should implement a monitoring and evaluation system for the Medicare pay-for-performance program in order to:
* Assess early experiences with implementation so timely corrective action can be taken.
* Evaluate the overall impact of pay for performance on clinical quality, patient-centeredness and efficiency.
* Identify the best practices of high-performing delivery settings that should be shared with others to improve care throughout the nation.

Report brief (4 pages):
http://www.iom.edu/CMS/3809/19805/37232/37236.aspx

Rewarding Provider Performance (full text):
http://darwin.nap.edu/books/0309102162/html/R2.html

Comment:

By Don McCanne, MD

Until now, conceptualizations of pay for performance have not proffered much more than the introduction of additional administrative intrusions that might motivate minimal tweaking of a few practice parameters, but would have a negligible impact on overall health care outcomes.

This Institute of Medicine report sheds further light on the subject. In elaborating on the pay-for-performance concept, the Institute of Medicine makes it very clear that the administrative burden is significant and will divert time and resources away from patient care. But what will that effort attain for us? Sampling of performance will always provide a very incomplete picture of overall performance, and it will favor those who master gaming of the system. The IOM proposal would attempt to improve provider behavior through public humiliation and financial penalties as funds are shifted to those who play the games better. There are already enough pressures on health care professionals without adding this insult.

Pay for performance eventually may become a valuable tool to improve efficiency, quality, and health care outcomes, if anyone can figure out an effective model for doing that. Unfortunately, the gifted individuals at the Institute of Medicine have not yet provided us with that model. Until they do, we should proceed with reform that we know will dramatically improve resource allocation: single payer national health insurance.

by Cathy Schoen, Karen Davis, Sabrina K. H. How, and Stephen C. Schoenbaum
Health Affairs
September 20, 2006

This paper presents the findings of a new scorecard designed to assess and monitor multiple domains of U.S. health system performance. The scorecard uses national and international data to identify performance benchmarks and calculates simple ratio scores comparing U.S averages to benchmarks. Average ratio scores range from 51 to 71 across domains of health outcomes, quality, access, equity, and efficiency. The overall picture that emerges from the scorecard is one of missed opportunities and room for improvement. The findings underscore the importance of policies that take a coherent, whole-system approach to change and address the interaction of access, quality, and cost.

Access And Affordability

Studies repeatedly find that the single most important determinant of whether patients obtain essential health care is having health insurance. With insurance premiums rising at higher rates than wages and consumer cost sharing up sharply, the affordability of insurance and care is of increasing concern to middle- and low-income families and employers.

The insurance indicator tracks the percentage of adults who are adequately insured all year. Inadequate protection or being underinsured is defined as having expenses that exceed 10 percent of family income (5 percent for those with incomes below 200 percent of the federal poverty level) or being exposed to deductibles that alone constitute 5 percent of income. As of 2003, sixteen million U.S. adults (ages 19-64) were underinsured, and sixty-one million adults (35 percent) were either uninsured or underinsured. In 2004, 40 percent of U.S. adults reported that they went without care because of costs during the year, a rate four times higher than in the United Kingdom, the benchmark country.

Only 58 percent of the nonelderly population lives in a state where employer insurance premiums average less than 15 percent of this population’s median household income. One-third of nonelderly adults report having problems with medical bills, collection agencies, or medical debt. High out-of-pocket and premium costs compared to income affect 17 percent of all nonelderly families. Time trends on all three indicators have been moving toward less affordability.

Overall picture

Within the United States, there is often a substantial spread between the top and bottom groups of states, hospitals, or health plans as well as wide gaps between the national average and top rates. As a result, the U.S.
performance relative to benchmarks averages near 50 for efficiency to 70 for healthy lives, quality, access, and equity, for an overall average score of 66 across the main domains of performance. On multiple indicators, the United States would need to improve its performance by 50 percent or more to reach benchmark countries, regions, states, hospitals, health plans, or targets.

Interrelatedness of deficits

The results provide evidence of the potential net gain from strategies focused simultaneously on improving access, quality, and efficiency. Policies are needed that address the interaction of access, quality, and cost and take a coherent, whole-system view rather than a fragmented approach to change. Universal coverage and participation are essential to improving health care quality and cost performance. High and rising rates of the population that is under- and uninsured destabilize the delivery system, fuel inefficient use of resources, and put families and the nation at risk of losing ground on past gains in health and workforce productivity.

Fragmented and unstable coverage not only increases insurance overhead costs, it also undermines the nation’s ability to assess outcomes or costs over time. Medicare is often the only national program with the stability to track outcomes and costs over episodes of care and follow patients over multiple years.

In sum, the scorecard indicates that the United States has broad opportunities to improve. It can do better, given the level of resources it has committed to health care. There is also much risk in failing to act: Cost and coverage vital signs are moving in the wrong direction. To assure a healthy, productive nation, transformation of the health system is of great urgency.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.25.w457

For the release and helpful links from The Commonwealth Fund:
http://www.cmwf.org/publications/publications_show.htm?doc_id=401577

Comment:

By Don McCanne, MD

For the next two weeks, the article about this important new scorecard can be downloaded for free from the Health Affairs website. You should do so now. Also keep the link to The Commonwealth Fund’s page that provides important scorecard resources.

The first annual scores are now in. They’re not good. We need to address immediately the “single most important determinant” by eliminating the scourge of uninsurance and underinsurance.

Early Enrollee Experiences with Health Savings Accounts (HSA) and Eligible Health Plans (HDHP)
Consumer-Directed Health Plans
Government Accountability Office (GAO)
August 2006

GAO estimated that HSA-eligible plan enrollees would incur higher annual costs than PPO plan enrollees for extensive use of health care, but would incur lower annual costs than PPO plan enrollees for low to moderate use of health care.

HSA-eligible plan enrollees generally had higher incomes than comparison groups. Fifty-one percent of tax filers reporting HSA contributions had an adjusted gross income of $75,000 or more, compared with 18 percent for all tax filers under age 65 in 2004.

Most participants said they would recommend HSA-eligible plans to healthy consumers. Some participants said they enrolled in the HSA-eligible plan specifically because they did not anticipate getting sick, and many said they considered themselves and their families as being fairly healthy.
However, participants would not recommend these plans to people who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible.

http://www.gao.gov/new.items/d06798.pdf

Comment:

By Don McCanne, MD

Advocates of health savings accounts (HSA) with their HSA-eligible high-deductible plans (HDHP) refute the challenge that the plans primarily benefit the healthy and wealthy. They claim that they are suitable for everyone, including low-income individuals with greater health care needs.

The claim of opponents of HSAs that they benefit the healthy and wealthy is based specifically on the design of the plans. These plans use regressive tax policies that benefit the wealthy but not the poor. They also provide an additional retirement benefit, but only for those who remain healthy and are able to fund the accounts.

This GAO study confirms that the healthy-wealthy benefit of the plans is recognized by the participants. Not only do they understand the benefit for themselves, but they also understand the disadvantages for those with greater health care needs. The healthy and wealthy do not recommend these plans for the sick and poor. This GAO report should put an end to that debate.

Health policies that take good care of the healthy but not the sick are irrational. It’s time to abandon these policies and to become serious about adopting policies that would ensure that the sick will always have affordable access to the health care that they need. It’s time for national health insurance.