PNHP

Bad Prescription: Why privatizing Medicare may be hazardous to your health

Bad Prescription: Why privatizing Medicare may be hazardous to your health

By Kip Sullivan
Washington Monthly
March, 1999

When the debate over the fate of Medicare heats up later this spring, you’ll hear a familiar battle cry: The retirement of the Baby Boomers is sending Medicare into “bankruptcy” and it can only be “saved” by privatization. This claim is nonsense, but Republicans have been making it ever since they took over Congress in 1995. By the time you read this, the Republican position may have been endorsed by the National Bipartisan Commission on the Future of Medicare, a committee established by Congress to examine the Medicare “crisis.” This commission was required to send its recommendations to Congress by March 1. Any recommendation must have the support of a supermajority of 11 of the commission’s 17 members. It was clear by January 1999 that the privatization of Medicare had the support of 10 members. At a two-day meeting held January 5 and 6, eight of the commission’s Republican appointees and two Democrats indicated their support for privatization.

At stake in the upcoming Medicare debate is not just the fairness and sufficiency of Medicare funding, but whether health care for America’s elderly will be turned over to the insurance industry which has made such a mess of health care for the non-elderly. To judge from the privatizers’ rhetoric, you would think that health care costs for the non-elderly were under control, that the number of uninsured Americans under 65 was falling, that quality of health care was improving, and that non-elderly Americans were thrilled with the restrictions imposed by the HMOs which have come to dominate the U.S. health care system. But the privatizers have it backwards: Medicare is more effective at controlling health care costs than the private sector is, and Medicare has achieved this level of efficiency without resorting to the private sector’s favorite cost-control technique – denying necessary services to patients.

The claim that Medicare is going “bankrupt” is extremely misleading for two reasons. First, it implies that the insurance companies that now insure the non-elderly are more efficient than Medicare. That implication is false. Second, the “bankruptcy” rhetoric obscures a fundamental problem: Medicare draws a substantial portion of its funding from a 2.9 percent payroll tax which is unfair to working people. This tax is unfair because it is regressive (a tax is regressive if it takes a rising percent of income as income falls). If current law governing Medicare remains unchanged, this tax will have to be raised in the near future because the ratio of retirees to workers will increase as the Boomers retire. America should be debating how quickly we can replace the regressive payroll tax with a progressive tax, not how quickly we can privatize Medicare.

It is precisely because Medicare relies for 60 percent of its funding on an earmarked payroll tax that Medicare is vulnerable to bankruptcy rumors. The 2.9 percent payroll tax pays for hospital services provided by Medicare. (The other 40 percent of Medicare funding, which pays for physician services, comes from general revenues and a monthly premium paid by the elderly.) The basis for the claim that Medicare is “going bankrupt” is the projection that revenue from the 2.9 percent payroll tax will drop below Medicare hospital expenditures in 2008, just two years before the leading edge of the Baby Boom turns 65. The projections are accurate. It’s the “bankruptcy” rhetoric that’s deceptive. If Medicare were funded by general revenues, as most government programs are, it would be more difficult for privatizers to argue that bankruptcy is the inevitable result of forces beyond congressional control. Can you imagine anyone arguing that the Pentagon is “going bankrupt”? Of course not. The Pentagon will “go bankrupt” only if Congress wants it to. The same is true of Medicare. Medicare will expire only if a Republican-controlled Congress says it should.

Republicans have never made their peace with Medicare, a popular program that covers 15 percent of the U.S. population and pays 20 percent of the U.S. health care bill. When Congress enacted Medicare in 1965, a majority of Republicans in Congress voted against it. Today, few Republicans are willing to call for the elimination of Medicare. (Newt Gingrich was an exception. In a speech to Blue Cross Blue Shield executives, he recommended letting Medicare “wither on the vine.”) But most Republicans do want to reduce the government’s share of health care expenditures for Medicare beneficiaries, and they want private insurance companies to have much more control over Medicare. They know the only way to get Americans to support the privatization of Medicare is to convince us that our choice is between a privatized Medicare and no Medicare at all. Hence the “bankruptcy” rhetoric.

Stealth Plan

Unlike those who seek to privatize Social Security, those who seek to privatize Medicare rarely use the word “privatize,” and they do not propose privatization overnight. They propose, rather, changes to Medicare that would render Medicare vulnerable to a gradual takeover by health insurance companies. The privatizers propose to take from seniors Medicare’s guarantee of medical services, and to replace that guarantee with a voucher – a set amount of money that seniors could use to buy health insurance, either from traditional Medicare or from HMOs or other types of health insurance companies.

It was this voucher proposal that 10 members of the National Bipartisan Commission on the Future of Medicare endorsed on January 6. Although voucher proponents have not said in so many words that they expect vouchers to force seniors to join HMOs, their high praise for HMOs and other insurance companies that use HMO cost-control tactics indicates that they expect vouchers to have that effect.

On the surface, the voucher proposal seems harmless. Seniors will not be compelled to leave Medicare if they do not want to. If the traditional Medicare program is indeed more efficient than private-sector insurers, then Medicare will offer a more attractive benefit package than the private insurers will, seniors will award their voucher to Medicare, and nothing will change. Or so goes the argument.

But this argument ignores the risk that the voucher experiment will be rigged in the private sector’s favor by giving health insurance companies subsidies – subsidies that permit insurance companies to offer lower premiums and/or better coverage than Medicare can. This advantage for the private sector may be further aggravated by setting the value of the vouchers just high enough to cover the cost of buying a (subsidized) private plan, but not high enough to cover the cost of remaining in Medicare. If the difference between the voucher and the cost of staying in Medicare is even a few hundred dollars, a large proportion of seniors would feel irresistible financial pressure to abandon Medicare in favor of the private sector.

How, you may ask, could the insurance industry possibly persuade Congress to fork over subsidies? Wouldn’t a request for subsidies destroy the industry’s claim that they are more efficient than traditional Medicare? To see how this trick might be accomplished, we need look no further than Medicare’s experience with HMOs.

From 1972 until 1998, HMOs were the only type of health insurance company allowed to serve Medicare beneficiaries. But until 1985, very few seniors enrolled in HMOs. That changed in 1985 when the Health Care Financing Administration (HCFA, the agency that administers Medicare) altered the way it reimburses Medicare HMOs. Since 1985, HMOs have been overpaid by HCFA; HMOs have used their subsidies to offer coverage for drugs, hearing aids and other goods and services not covered by Medicare; and, as a consequence, enrollment in Medicare HMOs has soared. Today 17 percent of Medicare eligibles are enrolled in HMOs. Research indicates that seniors did not enroll in HMOs because they enjoy having their choice of doctor limited or because HMOs are known to offer superior or even equivalent health care. Seniors enrolled to get better coverage.

HCFA did not deliberately set the HMO reimbursement rate too high. On the basis of little more than HMO assertions that they were more efficient than Medicare, HCFA set the HMO reimbursement rate 5 percent below the rate at which HCFA reimburses doctors and hospitals in the traditional, fee-for-service Medicare program. But HCFA failed to anticipate that the seniors who would sign up with HMOs would be primarily healthy seniors, and that sicker seniors would refuse to leave classic Medicare. This problem, called “biased selection,” is due only in part to the advertising tactics of HMOs (you rarely see someone in a wheelchair in an HMO ad). The more important cause of biased selection in favor of HMOs is the greater reluctance of sicker seniors, as compared to healthier seniors, to give up their freedom to choose their doctors and to run the risk of being denied care. Research on biased selection suggests that Medicare should have set its HMO reimbursement rate as low as 55 percent of the rate it paid fee-for-service doctors (see sidebar), not 95 percent.

HCFA also failed to anticipate that HMOs would be more aggressive at denying health care than doctors paid under Medicare’s fee-for-service reimbursement system. A rapidly growing body of evidence indicates that HMO enrollees cost less than Medicare enrollees not just because the former are healthier, but because HMOs deny necessary medical services more frequently than Medicare does. A 1994 study of Medicare patients published in Health Care Financing Review reported that traditional Medicare patients received 18.8 home health care visits during the first 60 days after leaving the hospital compared to 12.7 for HMO patients, and that traditional Medicare patients recovered their health more quickly. A 1996 survey of Medicare beneficiaries conducted for the Physician Payment Review Commission (a congressional advisory committee) found that Medicare eligibles enrolled in HMOs were three times as likely as those in traditional Medicare to report problems getting medical care. A study published in the Journal of the American Medical Association in 1996 found that elderly patients were twice as likely to suffer deterioration in their health over a four-year period (not a decade or a lifetime) if they were enrolled in HMOs than if they were enrolled in traditional fee-for-service health insurance plans. Studies published in JAMA in the summer of 1997 indicated that HMOs perform far fewer cataract operations and provide fewer stroke rehabilitation services to Medicare beneficiaries. On the basis of studies like these, plus an ocean of anecdotal evidence, the October 1996 edition of Consumer Reports urged the nation’s Medicare eligibles not to enroll in HMOs “unless money is a very big consideration.”

In short, Medicare’s experience with HMOs demonstrates how easy it is for HMOs to extract subsidies from HCFA without asking for them without coming right out and saying, “We’re so unattractive that seniors won’t join us unless we offer better coverage than traditional Medicare, and, because we’re not more efficient than Medicare, we cannot finance the extra coverage unless the taxpayer subsidizes us.”

The HMO Shell Game

At this point you might be thinking that the HMO subsidy’s days are numbered now that the existence of the subsidy is known. You might be thinking that all these studies documenting biased selection, HMO rationing, and overpayments by Medicare will soon provoke Congress to eliminate the subsidy. If you’re thinking that, you’re wrong. Although some of the studies documenting the HMO subsidy received extensive publicity when they were released, the subsidy has never been eliminated. Congress did get brave in 1997 and ordered a cut of 2.8 percentage points to be phased in over five years. Beginning in 2002, the average Medicare HMO will be paid 92.2 percent of the average fee-for-service rate.

The HMO industry was not amused. It has just undertaken a national campaign to increase the subsidy. The campaign began last year with a wave of announcements by HMOs that they could no longer afford to offer better coverage to seniors and would be pulling out of the Medicare market. Between the spring and fall of 1998, 43 of the 347 HMOs that served Medicare beneficiaries told HCFA they would not renew their Medicare contracts, and another 54 announced plans to reduce the geographic areas they would serve. On January 1, 1999, over 400,000 Medicare beneficiaries in 29 states and the District of Columbia lost their HMO coverage. Of these, 50,000 have no choice but to return to traditional Medicare and either go without the coverage of drugs and other services they once had, or buy supplemental insurance at a premium far above the premium they paid to their HMO.

The HMOs want the public to believe that HCFA is the villain in this farce. For example, when United HealthCare, the nation’s second-largest health insurance company, announced last October that it was abandoning 59,000 Medicare beneficiaries in 12 states, United’s chief medical officer explained, “The revenue from HCFA was not high enough.” The news media has obediently passed this rationale on to the public without reminding us of the HMO subsidy. Nor are we being told that doctors in Medicare’s fee-for-service sector, who are not getting a handsome subsidy, are continuing to see Medicare patients all over the country including the regions from which Medicare HMOs have pulled out. Only the bloated, heavily subsidized HMOs are taking their marbles and going home.

In a rational world, the existence of the HMO subsidy, and the abandonment of the Medicare market by so many HMOs, would be interpreted as evidence that Medicare’s experiment with HMOs has failed – that HMOs are too inefficient to provide health care to the elderly and the disabled and should be ejected from the Medicare program. As Diane Archer of the Medicare Rights Center put it to The New York Times last August, “People seem to forget that Medicare was created because private insurers could not make money on the elderly population.” But despite the evidence that HMOs enroll healthier seniors and ration aggressively, and despite evidence that HMOs are incapable of attracting seniors and making money off of them without large subsidies, there is no movement in Congress to kick HMOs out of Medicare. It is more likely that Congress will increase the subsidy, at least for those HMOs that have announced they are bailing out.

The unwillingness of Congress to eliminate the HMO subsidy even after the subsidy has been documented suggests that any experiment with Medicare vouchers will be rigged. In such an experiment, the advantage to the private sector conferred by subsidies may be further enhanced by miserly voucher levels. An example will illustrate. Let us say that Medicare, which now spends about $5,500 per beneficiary, set the voucher level at $5,000 per beneficiary. Let us also say that the private sector, enjoying the advantages of biased selection and/or invisible rationing, can afford to set its premiums at $5,000 whereas traditional Medicare must continue to charge $5,500. Now all but wealthy seniors will have a strong incentive to leave Medicare and enroll with a health insurance company. Sicker seniors who want to stay in traditional Medicare will have to come up with an additional $500 payment.

If the voucher experiment is rigged well enough, that is, if biased selection and rationing permit health insurance companies to create a large gap between their premiums and Medicare’s, and if the voucher is not sufficient to cover Medicare’s premium, all but the wealthy sick will abandon Medicare. Privatization will have been achieved even though the word “privatization” may never have escaped the lips of its proponents. Proponents will assert that privatization occurred through the “free choice” of millions of seniors “voting with their feet.”

What is most galling about the recent debate about medicare – the “bankruptcy” rhetoric, the lionization of health insurance companies, and the call to substitute vouchers for guaranteed medical services is the failure of Medicare’s defenders and the media to counter the attack on Medicare by Republicans and conservative Democrats. There is nothing wrong with Medicare’s basic cost containment methods, certainly nothing so wrong as to warrant the herding of millions of enrollees into inefficient health insurance companies, many of which rely on rationing to control spending. Republican and insurance industry propaganda not withstanding, Medicare has been more successful at keeping its costs down than private-sector insurers have. According to a study by the Urban Institute, the growth rate of Medicare’s per capita costs between 1984 and 1993 was below that of the private sector for eight out of those 10 years. In the November/December 1998 edition of the journal Health Affairs, HCFA reported that Medicare’s spending per enrollee grew at a slower rate between 1969 and 1997 than the private sector’s (10.4 percent annually versus 11.4 percent, respectively). This track record would have been even better if Medicare had not been overpaying doctors, hospitals and HMOs. A recent federal investigation reported that Medicare is overpaying its traditional (fee-for-service) Medicare providers by about 14 percent, due in part to fraud by providers and incompetence on the part of the private-sector insurers that handle claims for Medicare. As I reported above, Medicare is also overpaying HMOs.

Medicare has been able to beat the private sector at cost containment because Medicare has very low overhead costs (Medicare spends a mere 2 percent of its revenues on overhead versus at least 13 to 15 percent for private-sector insurers), and because Medicare reimburses doctors and hospitals at rates below those paid by private-sector insurers. Medicare’s overhead is much lower than the private sector’s because it does not pay for marketing, utilization review (jargon for unsolicited insurance company advice to doctors about how to take care of patients), obscene salaries, and myriad costs associated with influencing public policy. Moreover, Medicare does not have to make a profit for stockholders.

Yet it’s also important to note the cost-control techniques Medicare does not use. Traditional Medicare does not use the techniques so beloved by the private sector that now threaten quality of care -restricting the freedom to choose one’s doctor, overturning physician-patient decisions, and exposing doctors to financial incentives to deny care.

The real problem with Medicare is not that it is inefficient but that it relies so heavily on regressive taxes. Medicare’s method of financing hospital services payroll taxes on working people is regressive and increasingly insufficient as the ratio of retirees to workers rises. The problem with Medicare’s method of financing physician services is that a fourth of the financing comes from monthly premiums paid by Medicare enrollees. These premiums are even more regressive than the payroll tax. The upcoming Medicare debate should include a discussion about whether to abandon payroll taxes and premiums in favor of a progressive, general tax.

However, a debate about the fairness of Medicare financing is unlikely in the near term. Judging from the lack of interest in this question shown by the National Bipartisan Commission on the Future of Medicare, it is a good bet that the fairness of Medicare taxes will not be a part of the upcoming debate. It appears, rather, that we will debate vouchers, or, in the lingo of the privatizers on the commission, “premium support.” We will debate vouchers despite the evidence that Medicare provides higher quality health care to our elderly and disabled at a lower cost than the nation’s insurance industry, and despite the crying need for a debate about whether Medicare should continue to rely on regressive taxes. We will debate vouchers because Republicans and their allies in the insurance industry have managed to fool a substantial portion of the nation’s opinion-making elite into thinking that Medicare’s problem is a cost-containment problem as opposed to a choice-of-financing problem, and that this problem can be ameliorated if health insurance companies are allowed to guard the Medicare chicken coop.

If the privatizers succeed in fooling a majority in Congress, and if the Medicare voucher experiment is rigged, Medicare will gradually be transformed from the most efficient insurance program in the country into a mere funnel of tax money into insurance company coffers. Classic Medicare will have been starved down to a small program for the very sick or killed off entirely. Those who committed this crime will deny their complicity. They will point their finger at all those seniors who “voted with their feet.”

Kip Sullivan is research director for Minnesota COACT (Citizens Organized Acting Together)

Doctor finds a Practice in Paradise

By Judith Zwolak
Argus Leader (South Dakota)
January 21, 2006

When family practice physician Vicki Walker took a year’s sabbatical from her Vermillion practice to work in Australia, she had to learn a new vocabulary for some common ailments.

“‘Crook with the wog’ means ‘sick with the flu,'” Walker explained. “I definitely had to ask some patients to clarify a few things for me when they told me about their symptoms.”

The Walkers began their adventure in December 2004, when Vicki took leave from her position at the Sioux Valley Vermillion Clinic to work for the Otway Division of Family Practice in Australia’s southeastern Victoria province. She filled in while the Aussie doctors took time off for vacation. She returned to work at Sioux Valley earlier this month.

“Not being part of the (British) Commonwealth, it was difficult for an American to get a job there,” Walker said. “But this area was considered underserved. One of the physicians told me that they had a difficult time recruiting people to the area because of the poor weather, and I thought he was kidding me.”

By Australian standards, temperatures that sometimes fall to near freezing in the winter seem nearly arctic compared to the country’s tropical northern coast.

For the South Dakota family, though, the relatively mild weather, along with stunning seashore vistas of the Indian Ocean, made the location a relative paradise.

Walker’s three children, Heather, 18, Alexa, 16, and Michael, 14, enrolled in public school there, just as their father, Lanny, had done when he was a youngster in 1979 and his father spent a year teaching in Australia through an exchange program.

“We had always talked about going to Australia and meeting my friends and visiting where our family lived,” Lanny said. “We always thought maybe we would take a three-week trip. When we looked into it, we were fortunate to find this opportunity with Vicki’s job.”

The Walkers rented a home with an ocean view in Warrnambool, a town of about 30,000 residents. While Vicki traveled to medical clinics in the region, Lanny taught as a substitute in local schools. On their free time, the family toured nearly every part of the country, from the dry, otherworldly outback to the lush Great Barrier Reef.

Although most of her patients came in with such familiar ailments as colds and stomach viruses, Vicki said she treated some exotic cases, including a swimmer with a seal bite.

“I also saw many cases of ‘surfer’s ear,’ … a bony growth in the ear caused by constant exposure to cold water,” she said.

Before her experience in Australia, Vicki said, she had never supported the idea of a single-payer health care system run by the government.

Taking part in Australia’s socialized medical system, however, changed her opinion.

“After working over there in that environment, I wholeheartedly think that socialized medicine can curb health care costs and that we should be going in that direction,” she said.

Deb Workman, a Vermillion resident whose five family members are patients of Walker’s, said she enjoyed reading dispatches about the Walkers’ experience in Australia, which the Vermillion Plain Talk newspaper ran periodically last year.

“We understood that this was an opportunity of a lifetime, and we are excited to hear about their adventures over there,” Workman said. “She’s a great doctor. We’re glad she’s back.”

Federal funding of high risk pools

H.R. 4519
The Library of Congress
THOMAS

2/3/2006 – Presented to President.

State High Risk Pool Funding Extension Act of 2006

Seed grants to states for creation and initial operation of a high risk pool for fiscal year 2006: $15,000,000.

Grants for operational losses plus bonus grants for supplemental consumer benefits for fiscal years 2006 through 2010: $75,000,000 for each fiscal year

http://thomas.loc.gov/ (enter HR 4519 as bill number)

And…

State High-Risk Health Insurance Pool Participation
Kaiser Family Foundation
statehealthfacts.org
December 31, 2004

United States: 182,381 participants

Number of states without pools: 17

http://www.statehealthfacts.org/cgi-bin/healthfacts.cgi?action=compare&category=Managed+Care+%26+Health+Insurance&subcategory=High+Risk+Pools&topic
=High+Risk+Pool+Participation

Comment: By Don McCanne, M.D.

A fundamental principle of health insurance is to share the costs of the few who are sick with the many who are healthy. This principle applies in all industrialized nations, except the United States.

The success of our private health plans is partly dependent on how effective they are in avoiding coverage of the high risk sector. Some of the tools they use include medical underwriting, selective marketing, unaffordable premiums, benefit exclusions, and cancellation of group plans with unfavorable experience ratings. Regardless of how they do it, they have been very successful. You probably have friends or family members, or perhaps even yourself, who have been unable to purchase insurance in the individual market.

Since markets never seek out losses, only public policies can solve this problem. Every other nation has provided coverage for everyone, but they have been able to do so only through the application of public policies.

How are we doing here in the United States? With the federal government willing to contribute only an average of $1.5 million per state, it is obvious that they have walked away from the problem. And the states? 17 of them don’t even have a program (and that doesn’t include Florida which closed theirs to enrollment in 1991). With a paltry 182,000 covered throughout the nation, it is obvious that the states also have refused to establish public policies which would seriously address this problem.

With health care systems that spend on average half of what we do, how have all other nations successfully addressed this problem? Well, it’s very simple. They’ve mandated, through public policy, that everyone will be covered.

(This message has been truncated to avoid a display of belligerence towards those who perpetuate our policies that result in personal financial ruin, physical misery and even death, in the face of the world’s greatest wealth.)

Economist bashes Bush HSA proposal

WASHINGTON, Feb. 6 (UPI) — President Bush’s health savings account (HSA)plan will mean income-based healthcare rationing, an economist said Tuesday.

“Should healthcare be cheaper for high-income people?” asked Princeton economics professor Uwe Reinhart at the National Health Policy Conference in Washington. “Is this a faithful reflection of America’s social ethic?”

Assuming a premium rise of 8 to 10 percent over the next 10 years, the cost of keeping an average family healthy–including insurance premiums, deductibles and co-payments–will be $21,000 per year, far more than low-income families can afford, he said.

And giving a tax break for HSAs will help the wealthy, who pay a relatively high tax rate, but do little to alleviate the problem of soaring healthcare costs for the poor, who will likely be forced to forego medical treatment.

Saving the maximum allowed by HSAs, which could be increased to as much as $10,000 per year, is “easy when you make $200,000, harder if you make $30,000,” he said.

It is also not clear if patients will be willing and able to gather information and make informed decisions about treatments, as they would be called on to do in a transition to a system of individually-based health savings accounts and high-deductible insurance, Reinhart added.

Finally, if paying for medical expenses out of pocket is really about consumers taking charge, he asked, why do corporate executives always negotiate for excellent insurance as part of their compensation packages?

“I propose that coronary bypasses for corporate executives cost $1 million,” he said, “so they can have skin in the game and be empowered.”

Budget blind to disaster in health care

York Dispatch
Editorial
February 9, 2006

President Bush’s 2007 budget, with its target of reducing Medicare spending by $36 billion over the next five years, could be the proverbial straw that breaks the back of the nation’s health care system. It also could drive states and their voters to the wall, forcing a new look at universal health care.

Squalls tearing through the current system — including the latest round of bureaucratic chaos, the messy Medicare Part D Prescription Drug Program — have the potential to form a political storm that the Republican-dominated Congress had best heed in their own interest.

No, the American Medical Association doesn’t like the concept, nor do most state medical associations, for-profit hospitals and institutions — especially the pharmaceutical industry.

But there comes a time in the history of any business when, through arrogance or favorable legislation, it gets priced out of business. The nation’s health-care industry is leaping to that precipice.

It seems the president’s budget advisors are slow to get the message about the nation’s health-care crisis. Witness the fiscal 2007 Budget that:

Cuts $36 billion in Medicare over the next five years and reduces funding for the National Institutes of Health, the Centers for Disease Control and Prevention — the folks responsible for seeing we don’t get avian flu — and slashes aid to children’s hospitals.

In an election year, every Republican member of the U.S. House and every GOP senator up for re-election (note here Rick Santorum) must be choking a bit on how this will play in the hustings.

Add to that the general unpopularity of the Medicare Prescription Drug Program — an excellent example of institutional confusion and a windfall for pharmaceutical companies — and you have a nightmare for any politician trying to sell such goods to senior voters or their children.

Time for universal health care? One would think. In Arizona last week, there was a hopeful ripple. Physicians gathered on the capitol lawn to urge state passage of a single-payer health care system covering every resident.

The plan would use funds from employers, Medicare and Medicaid for universal coverage in the state, regardless of age or income level.

In Arizona, in Pennsylvania and across the nation, the system is broken. And it’s obvious from the latest federal budget proposal that the government doesn’t know how to fix it.

To do so would require a sense of political will absent in a Congress clearly beholden to market interests instead of to the health care needs of the country as a whole.

The Bush administration’s health-care cuts are bottom-line economics in a system that cries out for drastic reform. It’s ill-advised and a further recipe for disaster.

Medicare: Rich HMOs, Sick Patients

FOR IMMEDIATE RELEASE
FEBRUARY 9, 2006
1:04 PM

CONTACT: Institute for Public Accuracy
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167

Medicare: Rich HMOs, Sick Patients

WASHINGTON – February 9 –

STEFFIE WOOLHANDLER
Associate professor of medicine at Harvard University, Woolhandler said today: “The Bush health agenda is to privatize Medicare — to shift the taxpapers’ money away from sick patients and toward the drug and insurance industries. The Medicare Part D bill included over $40 billion in excess payments to HMOs. Because the Medicare Part D bill prohibits the government from negotiating with the drug companies for lower prices, it will provide a windfall to the drug industry — a windfall worth at least another $40 billion. Now Bush announces major cutbacks to hospitals and home care agencies that actually provide care to Medicare patients, and plans to make poor Medicaid patients reach into their own pockets to pay for health care. Bush is determined to redistribute health care dollars upward — away from the sick and poor, and towards his friends in corporate America. We need real health reform, a non-profit national health insurance system covering everyone.” Woolhandler is co-director of the Harvard Medical School General Internal Medicine Fellowship Program and a co-founder of Physicians for a National Health Program.
More Information

REESE ERLICH
Freelance journalist Erlich investigated the Medicare drug program for The California Report, a statewide news program airing on National Public Radio stations. He said today: “Many people are aware of the bureaucratic problems with implementing Medicare Plan D. But even after those are settled, tremendous problems remain. Six million people in the U.S. are enrolled in both Medicare and Medicaid. They were forcibly enrolled into Plan D, and the vast majority now must pay more for their drugs. Co-payments may range from a few dollars to over one hundred dollars per month. People who are HIV-positive, receiving assistance through the AIDS Drugs Assistance Program, are hit even harder. I interviewed one woman who will have to pay over 40 percent of her monthly disability income for health expenses — which were free before Plan D.”

###

Group seeks health care remedies

By Hilary Corrigan
Coast Press Reporter
February 8, 2006

It’s an ambitious goal, Lewes resident Lloyd Mills admits.

Installing a long-term, universal health care coverage system in Delaware — probably with the state government collecting money through a new tax and serving as a single-payer entity — doesn’t sound like an easy project.

“We’re going to have to do it. There’s no choice,” Mills said, adding that health care has grown unaffordable for middle-class residents and such a cover-all approach remains possible. “There are countries that have done it.”

Mills is a committee member with the Delaware Health Care Commission, a state body seeking plans on designing a universal health care coverage system in Delaware. On Feb. 10, the group will consider proposalsfor such a blueprint and select an applicant to draft it by the end of summer.

“We’re embarking into relatively new territory,” said Paula Roy, the commission’s executive director.

But to Roy, it’s part of the stated mission to craft “basic, affordable health care for all Delawareans” that led the state’s general assembly to form the commission in 1990.

“Our job isn’t done until there are strategies in place to cover everyone,” Roy said.

The commission came up with a similar universal coverage idea a decade ago, but took a different action route, reviewing ways to tweak the existing health care system in order to cover more people.

“It’s come full-circle,” Mills said of a universal plan. “We’re tired of tinkering. Tinkering has gotten us nowhere.”

‘Same boat’

In Delaware, about 100,000 remain uninsured and just as many are under-insured, Mills said. That leads to emergency room visits after people who can’t afford pricey medical attention let health care problems fester. Most of those with insurance have it through luck, since their employers offer it, he said.

“We’re all in the same boat,” Mills said of health care coverage needs, but that stance hasn’t improved what he describes as a failing system. “I’ve given up the moral argument. It doesn’t get anywhere.”

Instead, he focuses on the current system’s costs, what he calls a “patchwork of revenue sources” made up of co-payments, deductibles, premiums and other charges.

“There’s no good reason why it should be as complicated as it is, except a lot of people get paid a lot of money for pushing paper around,” Mills said.

He expects the draft plan to replace that with a new health services tax based on citizens’ ability to pay.

“Everybody in and everybody paying a fair share of the cost,” he said, adding that a single payer system would streamline financing. “One person paying and one person receiving all the bills.”

Mills expects that someone to be the state, possibly contracting an experienced insurance company to process claims and collections.

Such logistics present the problem, according to Beebe Medical Center President Jeffrey Fried.

“The devil is in the details,” Fried said.

Jim Bartle, Beebe’s vice president of finance, likes the idea of streamlining the hospital’s current administrative and financial burden associated with billing, insurance forms and claims to many different payers who all use different rules.

But crafting a single-payer system would need to include the federal government’s Medicare and Medicaid programs for senior citizens and those with low incomes. In an area full of retirees, more than half of Beebe’s business comes from those programs’ users, Fried said, and any new state plan would need to align federal plans for a fair process.

“What’s the role of the federal government?” Fried wondered. “That’s the big issue.”

He also wonders about Medicare’s financial future as the large baby-boomer generation retires and taps it.

“What are the alternatives?” Fried said, adding that he would support a universal coverage system, depending on details. “I think it’s good that people are looking at alternatives.”

Processing

Roy expects to receive most applications to the commission’s proposal request, advertised last month, on the Feb. 10 deadline.

“What we’re all really after is a way to cover everybody,” she said of the goal.

A federal grant allowed the commission to seek proposals outlining what such a system would resemble and how to install it.

“We will at least have a roadmap,” she said.

She finds more people willing to consider the possibility now than she found even five years ago. A 2004 report from the commission outlined a single-payer system possibility, but this approach takes a closer, more detailed look at it.

“The question is whether the challenges can be overcome,” she said. “Is it possible?”

Progs hit Dems over healthcare

By John Zicconi
Vermont Press Bureau
February 8, 2006

MONTPELIER — Vermont’s Progressive caucus on Tuesday harshly criticized the Democrat-controlled Legislature for not conducting studies that could show a single-payer, publicly-financed health care system is the most cost-effective way to provide universal health coverage for all Vermonters.

Led by radio talk show host Anthony Pollina — who is considering a run for lieutenant governor — Progressives accused Democrats of being too quick to compromise with Republican Gov. James Douglas, who last year vetoed a health care reform bill that called for broad public financing and raised taxes.

“What we are seeing is politics as usual,” Pollina said. “We want what is best for the people.”

Progressives are angry that legislative consultant Kenneth Thorpe was instructed not to do a cost analysis of a single-payer system.

Thorpe did a similar study for Massachusetts that concluded a universal health care system paid for through broad public financing would save that state billions more than other reforms, Progressives said.

“For some reason the Legislature has decided not to study that option,” Pollina said. “But we need that information. … We want that position put back on the table.”

House Speaker Gaye Symington, D-Jericho, said Thorpe was instructed not to pursue a single-payer system because it has no Republican support, which is needed to pass health care reform.

“We have a governor who will not move on a single payer health care bill,” Symington said. “We focused on areas that we thought were more useful.”

The House Health Care Committee is expected to propose a reform measure this week that calls on both public and private methods to provide health care.

The proposal is expected to call for those who are now insured through their employer to remain that way. A separate public system will likely be proposed to cover the 64,000 Vermonters who now lack coverage.

Symington said the Legislature’s joint Health Care Commission, which employs Thorpe, has a four-year charge. A single-payer study could be conducted in the future, but with no chance of such a system becoming law in 2006 the information was not a priority.

“First things first,” Symington said.

She then chided Progressives for calling a press conference to publicly complain rather than working with Democrats to reform Vermont’s health care system in a way that can gain broad political support.

“That shows there is a partisan agenda behind this rather than working constructively to get things done,” Symington said. “I’m hoping we can get back on track.”

Progressives said it is impossible to debate what is best for Vermont if information is purposely withheld. They encouraged Democrats to have Thorpe conduct a single-payer financial study, which they believe can be completed in a month.

“How will we know it won’t work if they won’t do the study?” Pollina said.

“The real issue with health care is cost,” he added. “Legislators should be focusing on ways to lower costs for families and employers and move to a rational system not tied to employment. That should be the center of debate.”

Contact John Zicconi at john.zicconi@rutlandherald.com

Reform languishes

Editorial
Times Argus (Barre-Montpelier, VT)
February 2, 2006

One of the leading advocates of health care reform has given members of the Legislature, Democrats and Republicans, a failing grade for addressing reform in a meaningful way.

Dr. Deborah Richter told a labor gathering in Barre on Sunday that plans proposed by Gov. James Douglas and by Democrats in the Legislature fail to take on the health care system as a system. Instead they are tinkering around the margins.

Richter is the co-author, along with former Human Services Secretary Cornelius Hogan, of a book called “At the Crossroads: The Future of Health Care in Vermont.” She and Hogan are leading advocates of an integrated, publicly financed health care system, and their thinking helped shape the health care debate as it got under way last year.

In her recent speech she was critical of Democratic legislators for accepting Douglas’ “reality” regarding health care. That reality is characterized mainly by a fear of new taxes. Democrats have backed away from plans for the use of broad-based taxes to pay for health care, knowing that Douglas would veto such a scheme.

Richter describes a different reality. She says that Vermonters presently pay a variety of taxes for health care — some visible, some invisible. We pay through property taxes, taxes for worker’s compensation, premiums paid by employees and employers, a higher cost of doing business, bankruptcies, and taxes that already go to government programs.

This system remains enormously costly and out of control because care remains separate from financing. Health care providers at present have little incentive for keeping people well. Insurance companies have little incentive for paying out money. Because providers and payers are separate, they work at cross-purposes.

Richter makes the point that most of what is paid out for health care is fixed costs — nurses’ salaries, hospital expenses, dialysis units. The nurse’s salary does not disappear if no one shows up at the emergency room on a given night. We pay her salary because we want her in the emergency room in case our spouse has a heart attack.

These fixed costs can be budgeted, Richter says, and doing so is the best way of containing costs. No other sector of the economy — certainly, no major business — operates without a budget. But the health care sector does.

Douglas opposes a broad-based tax, saying it would hurt the economy. Richter counters that Douglas portrays a broad-based tax for health care as a new tax. Instead, she views it as a replacement tax. It would replace a host of visible and invisible taxes that we are already paying but over which we have no control.

She says the Democrats in the Legislature have failed to come through with the studies that they promised on the financing of health care reform and its effect on the economy. She urges the Democrats to pursue these studies in order to provide a base line for discussion of meaningful reform.

The Legislature and governor have talked about a variety of constructive measures, such as improvements to the care of chronic illnesses and more sophisticated information technology. We are still waiting for information about whether broader reform would be possible. There are many questions about whether it would be, but there is no hope for progress until we have some answers.

Catching the health-reform bug

By Lance Dickie
The Seattle Times
February 10, 2006

The nation’s health-care system has not gotten bad enough yet for real change to occur. Just wait.

An increasingly anxious middle class is seeing skimpy insurance coverage, higher costs, diminished quality, fragmented service and the choking feeling no one is in charge. Those frustrations eventually will build enough pressure for change.

Seemingly ages ago, President Clinton banged a drum for a national health-care overhaul, and the state Legislature passed a bold package of reforms. The efforts went nowhere. Hillary Clinton was pilloried and local changes were repealed in a stampede. A smug, comfortable swath of citizens did not believe they had a stake in the debate.

In 2006, people are paying attention as their health insurance erodes with higher premiums, growing copayments, soaring deductibles and unstoppable medical costs. Health-savings accounts and tax sheltering cash for medical coverage? They sound like a cruel joke.

Big corporations bitterly complain about the legacy expense of health care for retired workers. They are potential allies with the middle class for national changes. Yet, other employers watch to see if the brazen parsimony of retail giant Wal-Mart becomes the new operating model.

A frightened middle class makes things happen.

Legislators in Olympia, disgusted by Wal-Mart’s cynical willingness to point its employees toward tax-supported health coverage, want a bill that sets a “fair share” minimum health-care contribution for large employers. If employers do not spend a required percentage on health care, they would pay into the state’s health-service account.

“In a sense, they’ve figured out that they can outsource their benefits (at no cost) to government and the taxpayer,” Craig W. Cole told legislators last month. “And, by so doing, they have created a very low competitive cost structure that punishes ‘good’ employers.”

Who is this troublemaker? His Bellingham-area supermarket chain was founded in 1909 and has 1,500 employees. He is also a University of Washington regent.

But even solid citizens such as Cole sound too radical for skittish legislators who recall the health-care upheavals of a dozen years ago. Fair share is not likely to get a fair shake this session. Even state Senate legislation to study access to insurance and health costs and develop a five-year plan has been pulled in favor of an under-the-radar budget proviso to accomplish the same thing. A list of recommendations would be due back by December before the next session.

Health-care reform is not going away in Olympia.

Pressure builds from another direction. King County Executive Ron Sims heads the Puget Sound Health Alliance, which has attracted national attention with efforts to improve health-care quality and lower costs.

Sims leads a five-county, independent, nonprofit, nonpartisan effort to identify the best medical practices in five initial priority areas: diabetes, heart disease, low back pain, depression and pharmacy issues. This ambitious consortium of providers, consumers and insurers wants to learn how to get medical care done right the first time.

More pressure for change. U.S. Rep. Jim McDermott, D-Seattle, has steadfastly introduced legislation in Congress to create a single-payer health system financed with a broad national tax. Health care stays private and local, but Uncle Sam does the paperwork and pays the bills.

The tenacity and ideas of this lawmaker and physician stirred a rousing ovation from doctors and medical students at a standing-room-only inaugural meeting of the Seattle chapter of Chicago-based Physicians for a National Health Program. Hundreds braved a Sunday-night downpour to hear McDermott and a panel discuss reforms.

Physicians across the country see the system not serving their patients. Health-care providers are driven to distraction by the time and expense of working with 1,200 insurance companies.

Good people with a commitment to the local delivery of health care are leading efforts to find solutions very close to home.

Put it all together. Legislative stirrings. Nation-leading explorations of evidence-based medical savings. Leadership for a national single-payer insurance plan. Pressure builds as middle-class confidence and coverage erode.

Lance Dickie’s column appears regularly on editorial pages of The Times. His e-mail address is ldickie@seattletimes.com

Change health care for uninsured

By Kay Lapp James
Portage Daily Register
November 9, 2005

Monday’s e-mail contained a surprising press release from Attorney General Peg Lautenschlager. She announced that her office was taking actions against two Milwaukee-area hospitals for unfair trade practices.

The complaints, which are to be filed with the Department of Agriculture, Trade and Consumer Protection, say the hospitals charged uninsured patients higher prices than they charged the vast majority of patients who have either Medicare or private insurance. The complaints, according to the press release, seek orders prohibiting hospitals from continuing to charge excessive prices to uninsured patients.

One complaint involves a man who had a stent implanted in his heart and stayed less than 24 hours in the hospital. He supposedly received a 20 percent discount because he did not have insurance. His bill was $33,646. Medicare would pay $15,000 for the same procedure.

In the other case, a woman had emergency gallbladder surgery and was billed $31,614. Medicare would have paid $5,000 for the operation, and the hospital would give an insurance company an average discount of 37 percent.

The difference in prices, or that uninsured people pay the highest prices for medical care, did not surprise me. I heard similar figures when I covered a talk by Drs. Linda and Gene Farley. The Farleys spoke of the need for a national single-payer health plan and discussed the costs and inequities in the current system.

The Farleys spoke at a meeting of the Dells Progressive Voices and their talk was greeted enthusiastically. Most politicians, businesses and the health care establishment have not greeted talk of a single payer or national health care system enthusiastically.

The plight of the uninsured has been ignored since the Clinton administration’s national health care plan got a decidedly chilly reception and defeat. People, corporations and even unions complain of health care’s increasing costs, but like the weather, nobody does anything.

The Farleys said a bill establishing a single payer system in Wisconsin had been introduced, but I doubt it will pass. It has been introduced several times in the past.

My surprise at the press release stems from seeing a politician taking aim at the healthcare establishment. I also learned 22 states have initiated similar moves.

Whether or not Lautenschlager is successful with the complaints, I wonder what the effect will be. Will this bring attention to the problem of not having insurance? Will it focus attention on the mishmash that constitutes the healthcare payment system?

I know people who live without health insurance who fear being sick or having an accident. The Farleys said people die because they don’t have insurance. I know at least one person who declared bankruptcy because of medical bills — common for the uninsured.

The uninsured are not the only ones concerned with the cost of healthcare. Wal-Mart announced new insurance plans for its employees and then an internal memo surfaced. The memo suggests the company hire only healthy, young people and get rid of workers who have health problems. This is from a company that has a large percentage of workers receiving Badger Care.

Wal-Mart is not unique. Other companies may have plans for cutting health care costs. They don’t put them in writing. Because of healthcare costs, I may live in an environment in which those who are not being perfectly healthy won’t be able to work.

Insurance, or the lack there of, concerns more than the uninsured. Employed people do not dare change jobs because a spouse or child has a chronic health concern. I wonder how many people don’t start a business because they cannot start one and afford insurance.

Health care in this country is a mess, and we need changes. Maybe our state can be a leader and start changing the system before it consumes us.

Kay Lapp James is editor of the Dells Events. She can be reached at kjames@capitalnewspapers.com or (608) 745-3567.

Bush's Rx for insurance: Buy your own

By John McCarron
Chicago Tribune
February 10, 2006
Additional material published Feb. 11, 2006

CORRECTIONS AND CLARIFICATIONS
In his Commentary column Friday, John McCarron stated that General Motors recently announced it will cap spending on health insurance premiums for salaried employees at 2006 levels. In fact, the announced cap applies only to retired salaried employees.

Say good-bye to your group health insurance.

OK, maybe not right away. Your employer may stick with your plan for a few more years. Don’t toss out that health-care card just yet.

But if you’ve been following the business news lately, and if you paid close attention–very close attention–to President Bush’s State of the Union address, you may hear a distant knell for the way most Americans get their health insurance.

General Motors, which spends more on health care for its workers than on steel, announced that it will cap spending on health insurance for salaried employees. Any future cost increases–and costs have been rising by double digits–will be borne by paying higher premiums, deductibles and co-pays.

That’s not so drastic, really, when you consider big outfits like GM, where labor contracts set a high standard, have offered employees some of the nation’s best benefits. But it does signal that the cost-sharing arrangement between employers and employees–you pay half, we pay half (or some such split)–is going the way of the defined-benefit pension. Remember the defined-benefit pension?

Then again, GM had little choice but to unhook from the great medical money machine here in Viagra Nation. The company must compete globally, as must all U.S. manufacturers. Compete for investors, too, in a world where you can buy the stock of Honda or Toyota as easily as Ford or GM.

So the race is on to limit corporate exposure to runaway health insurance costs. And sure enough, President Bush has a plan.

In his address, the president said government has a responsibility to “help people afford the insurance coverage they need.” The way to do that, his aides later explained, is to “level the playing field” so folks who buy their own insurance get as good a deal as folks who join their company’s plan.

Sounds reasonable. But details of the proposal, released by the Treasury Department, are causing quite a stir among the fraternity of insurance wonks who understand the implications.

Bush proposes a supercharged version of the health savings accounts, or HSAs, that Congress first authorized in 2003. Think of HSAs as an individual retirement account for health-care expenses. The way it works now, workers who choose “high-deductible” plans–plans that require patients to pay the first $1,500 or more out-of-pocket–are eligible to make tax-deductible contributions–up to $5,450 a year in a family plan–to an HSA and later use that money to pay uncovered medical expenses.

Bush would let that family sock away $10,500 per year tax-free. Moreover, they could claim a tax credit equal to 15.3 percent of the amount they deposited. But it gets sweeter. If the worker buys his own high-deductible insurance policy, rather than one offered at work, the premiums he pays would be fully tax-deductible and eligible for the 15.3 percent tax credit.

It’s all very complicated, but the bottom line is that relatively healthy people who can afford to set aside 10 grand a year would come out ahead by opening an HSA and buying their own insurance. After all, most employees cannot deduct the premiums they pay for their group plans, much less claim a refundable credit.

So what’s wrong with this picture? What’s wrong with encouraging workers, and their employers, to opt out of group insurance and go it alone … with large amounts of help from Uncle Sam?

Plenty, according to the Center on Budget and Policy Priorities, a Washington-based think tank. You can read its analysis online (www.cbpp.org), but an abbreviated list of horribles goes like this:

– If, as expected, the healthiest and wealthiest leave the group insurance pool, premiums will shoot up for the not-so-healthy and not-so-wealthy. That’s if they can find a plan that will take them. What insurance company is going to want your diabetic wife or disabled child?

– If, as expected, small-business owners, many of whom earn too much to qualify for a tax-deductible IRA, opt for the Bush HSA, which has no income limits, won’t many owners simply do away with their company’s group plan altogether? What’s good for the boss must be good for the workers, right?

– If, as the free-market theorists predict, people with high deductibles “shop around” for bargain health care and forgo “unnecessary” care, how are folks to decide what and when care is necessary, much less where they’ll get the most for their money? Surf the Internet? Thumb the Yellow Pages? So much for your primary-care physician and his or her trusted referral network of specialists.

No, what we have here is another Texas “two-fer,” a combo better than $3 gasoline and lower taxes on capital gains. What we have here is the fig leaf behind which corporate America will walk away from group health insurance, along with the sweetest tax shelter ever invented for the fortunate few with six-figure incomes.

RIP, group health insurance.

John McCarron writes, teaches and consults on urban affairs.