Speaker – Page 1061

Canada's Health IT Investments Outpace the United States

Originally published February 16, 2006

Canada Health Infoway by March will have invested $562 million in health IT projects, Richard Alvarez, CEO of the federally funded not-for-profit corporation leading e-health in Canada, said at the annual Healthcare Information and Management Systems Society conference, Government Health IT reports. Canada Health Infoway is a federally funded not-for-profit corporation leading health IT adoption in Canada.

Canada has invested $151 million in electronic health records systems and $130 million in diagnostic imaging systems development, investments that provincial, regional or local health care organizations have matched.

Alvarez estimates that the country’s health IT investments will save $6 billion annually in health care costs. Alvarez said Canada still has more than $500 million to invest in health IT projects, with the goal of providing 50% of Canadians with EHRs by 2009.

Canada, which has a population of 31 million, is outpacing the United States, which has a population of 295 million, in health IT investment, according to Government Health IT. The U.S. Office of the National Coordinator for Health IT, which was formed two years ago, has a budget of $111 million for fiscal year 2006. President Bush has asked for $169 million for health IT in the FY 2007 budget (Brewin, Government Health IT, 2/15).

iHealthBeat is published daily for California HealthCare Foundation by The Advisory Board Company.

Desperation over medical bills drives woman to crime

Online armor sales net prison, fine
By Steve Liewer
The San Diego Union-Tribune
February 23, 2006

A Vista woman was sentenced to prison yesterday for buying from Camp Pendleton Marines stolen body armor meant for Iraq-bound troops, then selling it to undercover agents posing as foreign arms dealers.

Erika Jardine, 47, was arrested in November 2004. Jardine pleaded guilty a year later in U.S. District Court in Philadelphia to charges of violating the Arms Control Export Act and selling stolen U.S. property, said Dean Boyd, a spokesman for U.S. Immigration and Customs Enforcement.

During her sentencing hearing yesterday, Jardine tearfully apologized to the government and to U.S. District Judge Michael M. Baylson. Jardine said she sold the vests to make money to buy health insurance that her multiple jobs, including one as a licensed real estate agent, did not provide.

Jardine worked several full-and part-time jobs in the Vista area, according to a court document. She experienced financial distress after suffering health problems that included thyroid, ulcer and knee troubles.

“She was apparently badly in need of money,” Boyd said.

http://www.signonsandiego.com/uniontrib/20060223/
news_7m23kevlar.html

Comment: By Don McCanne, M.D.

The opponents of single-payer national health insurance frequently use isolated anecdotes to “prove” that a government insurance program would lead to impaired health outcomes and financial ruin. If they were on our side of the debate, organizations such as The Fraser Institute, Pacific Research Institute, and the National Center for Policy Analysis might use this anecdote to prove that national health insurance would reduce crime in the United States. At Physicians for a National Health Program, our positions are based on solid policy science rather than isolated anecdotes, so we would never go there on this one.

Although anecdotes do not establish policy science, they do serve another purpose. They can illustrate a specific example of principles already firmly established in the policy literature.

We know that millions of Americans with significant medical problems are facing financial hardship because of an inability to pay their out-of-pocket medical expenses. Many of them are desperate. There is no acceptable excuse for Ms. Jardine’s criminal acts, but we can acknowledge that the failure of our health insurance system either created or compounded her desperation.

A national health insurance program will not solve all of society’s problems, but it would dramatically reduce the desperation caused by mounting medical bills, and without any additional spending over our current levels. Ms. Jardine’s desperation “proves” that we need a single-payer national health insurance program.

I guess I did “go there,” but on the issue of desperation rather than crime reduction. Maybe it’s time for a study on personal medical debt and crime, beginning with the portion of the policy community that supports shifting health care costs to those who have greater health care needs. Now that’s a crime!

Brailer implicitly supports Wygod's next big thing

WebMD Wants to Go Beyond Information
By Milt Freudenheim
The New York Times
February 23, 2006

Marty Wygod, the entrepreneurial deal maker who built WebMD Health into one of the most-visited medical information sites on the Internet, is promoting the site as the next big thing in health care.

By helping people enrolled in employer health plans compile personal health information online, Mr. Wygod wants to tap into the growing corporate trend of having employees pay more, if not all, of their own health costs.

WebMD says it has signed contracts with big health insurers and employers to operate private-access sites where employees can keep track of their medical records, look up information about diseases and compare costs and ratings for doctors and hospitals. Employers or their insurers pay licensing fees to WebMD, based on the services and number of health plan members.

… the company says it has signed multiyear licensing contracts with big health insurers that include Aetna, Cigna and the nation’s largest, Wellpoint, and with nearly three dozen of the nation’s biggest employers, including Bank of America, Cisco Systems, Dell Computer, I.B.M., Pfizer, Shell Oil and the state of North Carolina.

“Corporate America is looking for a way to educate its employees about health care costs, and hopefully to move a substantial amount of those costs off their books,” Mr. Wygod said in a telephone interview. But for investors in WebMD Health, which will post its quarterly results today after the stock market’s close, the big question is how much of the potential upside might be theirs to share.

Mr. Wygod, who sold his earlier venture, the pharmacy benefits manager Medco Containment Services, to Merck for $6 billion in 1993… took charge of Healtheon in 2000…

Under the personalized WebMD service, employees go to private Web sites to fill out health status questionnaires. At some employers, like Pfizer and Dell and North Carolina, employees use WebMD programs to combine the answers with medical payment data from doctor visits and hospital stays to create personal health histories.

WebMD is also holding talks with banks and financial giants like Fidelity. The banks view the trend to so-called consumer-directed health care as a huge opportunity to manage tax-sheltered health savings accounts that many workers are now being offered in tandem with low-premium, high-deductible health insurance.

When WebMD posts its financial results later today, analysts are expecting quarterly earnings of 9 cents per share. What they are waiting to hear is the company’s guidance on the business prospects for Mr. Wygod’s next big thing.

http://www.nytimes.com/2006/02/23/business/23place.html?_r=1&oref=slogin

And…

Remarks by David Brailer, MD PhD, National Coordinator for Health Information Technology Healthcare Information and Management Systems Society (HIMSS)
2005 Keynote
United States Department of Health and Human Services

The Certification Commission for Health IT (CCHIT) is on track to develop a standard for EHRs in ambulatory settings by summer 2005. This is a multi-stakeholder group that exemplifies the very best of private sector leadership – broadly supported, transparent and deliberative, yet urgent and narrowly focused. The work of the Certification Commission is critical to physician and hospital buyers who want to know what product to buy, to established vendors who want to grow their markets, to new technology innovators who want to offer a module within a broader solution, to investors who want to know where to put their capital, and to policy-makers who want to make sure that public funds are invested wisely. About the only people who don’t benefit from the Certification Commission’s work are pro-regulatory zealots who would rather have the government make new rules for the industry.

http://www.hhs.gov/healthit/BrailerSpch05.html

And…

Brailer opens HIMSS06
2006 Keynote
HIMSS Daily News
February 13, 2006

“Only the marketplace can ensure that we have sustained innovation,” (David Brailer) said. “A marketplace approach will result in faster and bigger change because it aligns the key drivers. We have ensured that the federal government will not build, own or operate the infrastructure of America’s health information.”

http://www.healthimaging.com/content/view/3839/85/

Comment: By Don McCanne, M.D.

Does this really need a comment? Perhaps a few obligatory words…

At 16.5 percent of our GDP, our health care system is a logical target for entrepreneurs. The primitive state of our health care information systems offers a golden opportunity for entrepreneurs to move in and gain control of as much of our $2.1 trillion health care budget as they possibly can. Their obligation to their investors is, above all, to design health care information systems that will move the maximum number of dollars possible to their own corporations. Marty Wygod no doubt welcomes this opportunity to at least fantasize about becoming a trillionaire.

Other nations and our own government are already far ahead of the U.S. private sector in developing such systems. Some believe that the Veterans Administration’s system has contributed to the significant improvement in quality at the VA. Government owned and operated systems are designed to serve patients and their health care providers, while using health care dollars as efficiently as possible. Government goals have little in common with entrepreneurial goals.

When affordability of health care is the number one health concern of most Americans, it is unfortunate that, by rejecting public administration of the health information infrastructure, Brailer is supporting the transfer of more dollars away from health care and into private, administrative enterprises. Worse, 60 percent of health care is funded through the tax system, yet Brailer does not want pro-regulatory zealots to set up rules for the industry. Handing tax dollars over to private enterprises without regulatory oversight is public policy malpractice.

Woman Fences Stolen Goods to Pay for Health Insurance

The San Diego Union-Tribune
February 23, 2006

By Steve Liewer
STAFF WRITER

February 23, 2006

As part of her plea agreement, she has helped investigators gather evidence against 15 other people, including 12 Marines and three civilians, according to court documents. Besides the six-month prison sentence, Jardine must spend three years on probation, perform 750 hours of community service and pay a $6,500 fine.

Boyd said eight of the suspects were arrested in the past year at Camp Pendleton. He said he didn’t know the Marines’ names and ranks or the status of their cases.

Camp Pendleton’s public affairs office did not answer questions about the cases, but it issued a brief statement acknowledging that military authorities are investigating them.

“Evidence does not indicate that several Camp Pendleton Marines were part of a ring or organization that stole and resold ballistic vests and other controlled U.S. military items,” the statement said. “Rather, current evidence indicates that these were individual cases. In addition, many of the cases . . . were prosecuted months ago and resulted in courts-martial.”

“She was apparently badly in need of money,” Boyd said.

In late spring 2004, Jardine placed an ad in Camp Pendleton’s newspaper offering to buy surplus military gear, Boyd said.

It was a time when body armor, including protective inserts called SAPI plates, were in short supply. Several Marines offered to sell Jardine the ones they had been issued for use in Iraq, Boyd said. Then in June, Jardine put them up for sale on the online auction site eBay.

A man named “Patrick” from eastern Pennsylvania won the auction.

He actually was a government agent posing as an arms dealer, according to a court document. He contacted Jardine and suggested in an e-mail that they do business off of eBay because “the U.S. government does not look favorably on shipping these out of the country and the less attention we draw to our deals the better,” a court document said.

During the next several months, Jardine shipped several sets of SAPI plates to “Patrick” in Austria and Pennsylvania with the understanding that some of them would be shipped to Lithuania, court documents said. They frequently talked about the illegality of the shipments, and Jardine wrote on customs forms that they were ceramic plates or picture frames.

“Clearly, when she began selling these on eBay to us, she knew it was illegal,” Boyd said.

After her arrest, Jardine helped investigators for Immigration and Customs Enforcement and the Naval Criminal Investigative Service by placing fake newspaper ads and negotiating more sales. Several suspects remain at large, Boyd said, and some of the Marines who allegedly sold her goods are serving in Iraq.

Jardine has helped authorities recover other apparently stolen military goods, including 104 SAPI plates, 14 vests, seven Kevlar helmets and 74 M-16 rifle magazines.

She took an active role in her community and baby-sat neighborhood children in her home, a court document said. Several neighbors wrote letters to the court describing her as hard-working, conscientious and helpful.

At yesterday’s sentencing, the judge told Jardine that despite her cooperation and lack of a criminal record, she still deserved prison because she knew what she did was wrong.

“This was a serious crime that took SAPIs away from American soldiers fighting in Iraq and Afghanistan,” said Assistant U.S. Attorney Todd Schulman.

Knight-Ridder/Tribune News Service contributed to this report.

Health care spending in 2006

Health Spending Projections Through 2015: Changes On The Horizon
By Christine Borger, Sheila Smith, Christopher Truffer, Sean Keehan, Andrea Sisko, John Poisal, M. Kent Clemens (from the Office of the Actuary, Centers for Medicare and Medicaid Services)
Health Affairs
February 22, 2006

Projections for 2006

$2.164 trillion – National health expenditures (NHE)

$7,110 – NHE per capita

16.5% – NHE as percent of GDP

Health spending is expected to consistently outpace gross domestic product (GDP) over the coming decade, accounting for 20 percent of GDP by 2015.

Stable trends through 2015 likely mask important changes to the U.S. health care system across payers and types of care.

http://content.healthaffairs.org/cgi/content/full/hlthaff.25.w61/DC1

Comment: By Don McCanne, M.D.

These numbers should be downloaded since they represent our current level of health care spending and can be very useful in your advocacy work.

Current trends indicate that spending growth will continue well in excess of the rate of inflation. The greatest uncertainty is not how much we’ll be paying, but rather who will be paying it.

Health-care overhaul urged at rally

By Richard Halstead
Marin Independent Journal
February 19, 2006

Guy Esberg of San Anselmo said he recently traveled to Germany for an operation and is contemplating going to Thailand for a second operation because he can’t afford to have the procedures performed in the United States.Don Cohon of Sausalito said he received a $24,000 bill after he fell off his bike and was taken by ambulance to Marin General Hospital, where he received minimal treatment and was released less than three hours later.

David Brody, a Mill Valley psychiatrist, said he is seriously considering moving to Cambodia or New Zealand because the medical system in this country is “falling apart.”

These were just a few of the testimonials presented Saturday at the Marin Civic Center during a political rally for adopting a government-run health-care system.

The meeting was sponsored by Health Care for All-California, a statewide organization working toward a single, nonprofit health-insurance system that will cover all Californians equally.

More than 200 people turned out on a cold, rainy Saturday to listen to local health-care professionals, government officials, union representatives and others make the case for the change.

If attendance at Saturday’s rally is any indication, support in Marin for a government-managed system runs strong. Rep. Lynn Woolsey, D-Petaluma, kicked off the meeting, and Assemblyman Mark Leno, D- San Francisco, wrapped it up.

All five candidates competing in the June Democratic primary for the 6th District State Assembly seat were there. Each has expressed support for a government-run system.

Supervisor Cynthia Murray, who had voiced skepticism about government-managed health care, said Saturday that she had undergone something akin to a “religious conversion” on the issue.

An estimated 46 million Americans, one in every five Californians, lack health insurance, said Larry Meredith, director of Marin County’s Department of Health and Human Services. Meredith said health insurance premiums currently are rising 10 percent per year and are expected to double over the next decade.

There is a particular urgency now because SB840, a bill that would create a state-run system in California, is wending its way through the state Legislature. Andrew McGuire, director of Health Care for All-California, said that in July, his organization will initiate a campaign to boost public awareness of the bill in 365 cities throughout the state.

Woolsey said she is supporting SB840, which was introduced by State Sen. Sheila Kuehl, D- Santa Monica, “because I think if it passes, it will create a momentum for national, single-payer solutions around the country.”

Woolsey also is supporting the United States National Health Insurance Act, which has been introduced by Rep. John Conyers, D-Michigan. The legislation would create a national system of universal single-payer health-care insurance.

Past efforts to reform the health-care system didn’t fail because Americans are disinterested in the issue, Woolsey said.

“It lost,” Woolsey said, “because the industry that profits from the current system launched a massive negative campaign unprecedented in both its cost and its level of deception.”

With more and more employers eliminating health-care benefits or boosting co-payments, the health-care system is caught in a vicious circle, said John Severson, director of Coastal Health Alliance, a clinic that serves mostly uninsured and underinsured West Marin residents.

People without health coverage get treated after their condition reaches a crisis, and that drives treatment costs up, Severson said. To pay for the treatment of these patients, often in hospital emergency rooms, insurance companies raise everyone’s rates.

“And all of that is a huge dead weight that is working its way straight down our health-care delivery system,” Severson said, “putting our hospitals, physicians and outpatient clinics under a tremendous amount of strain.”

Leno outlined how spiraling health-care costs trigger negative social effects. Health-care bills are the most common cause of personal bankruptcy, and new federal laws have made it more difficult to file for bankruptcy, he said.

“That means more families break up and we have more children in our foster-care system,” Leno said. Only half of all foster children finish high school, and many end up in prison, he said.

“Seventy-five percent of those in the Department of Corrections have come through a foster home,” Leno said.

Rising prison populations mean higher state costs. Gov. Arnold Schwarzenegger’s proposed budget would devote more than 8 percent of state discretionary spending to prisons, Leno said.

“That means the elderly, the indigent and the frail are relying more and more on health services at the local level,” Leno said. “Which means there are fewer dollars for libraries, parks and filling potholes.”

Leno said the health system was unlikely to collapse all at once.

“It is this slow drip, drip, drip,” he said, “as our quality of life slowly disappears.”

Insurers' Study Tries to Whitewash Truth that Skimpy Coverage Causes Medical Bankruptcy

EMBARGOED UNTIL 12:01 AM EDT
February 28, 2006

Contacts: David Himmelstein, M.D.
Steffie Woolhandler, M.D.
(617) 665-1032
Elizabeth Warren, J.D.
(617) 495-3101

Insurers’ Study Tries to Whitewash Fact that Skimpy Coverage Contributes to Medical Bankruptcy

Harvard Researchers Say Industry-Backed Critique Offers No New Data, and Ignores Millions who are Medically Bankrupt, Charge Effort to Defend Cutbacks in Coverage Under HSA Plans

Researchers from Harvard’s Medical and Law Schools note that none of the data in their 2005 study showing that medical problems contribute to half of all bankruptcies have been questioned, despite an attack on their work commissioned by America Health Insurance Plans (AHIP), an insurance industry trade organization. Both the AHIP article and the Harvard response appeared today in the on line edition of Health Affairs.

The Harvard group labeled the AHIP article an effort to distract from “too many ineffective products sold by . . . the insurance industry,” and the industry’s efforts to cut back further on coverage under the guise of Consumer Directed Health Plans and Health Savings Accounts. Several health insurance firms have recently chartered banks and plan to issue credit cards as part of their HSA offerings.

The 2005 study of medical bankruptcies was among the most widely cited health policy stories of the year. Based on interviews with debtors in bankruptcy courts across the nation, the study found illness contributed to over 700,000 families’ bankruptcies annually. Most of those driven to financial ruin by illness were solidly middle class, and three quarters of the families had insurance when they first got sick, although many lost coverage when the illness caused job loss. Many who managed to keep their private insurance found that gaps in coverage – co-payments, deductibles and uncovered services – left them unprotected.

The insurance industry-funded critique claimed to reinterpret the Harvard data, alleging that few debtors were really bankrupted by illness and that most of these were not middle class based on their incomes. The Harvard researchers replied that the critique understates the number of medical debtors by misinterpreting certain survey questions and completely ignoring many others. The insurance industry critique claims that few debtors were middle class rests entirely on debtors・incomes just before filing for bankruptcy ・a time when many had lost jobs or small businesses because of illness. But most of those filing for medical bankruptcy had attended college, owned homes, and had once good jobs, clear indicators of their middle class status before financial disaster struck.

The Harvard group noted that the paper garnered public attention because it resonated with the abuse that Americans suffer at the hands of our health finance system, abuse shared by the uninsured and middle class.

Study author Dr. David Himmelstein, a Harvard Associate Professor of Medicine commented: health insurance companies charge outrageous premiums for defective policies. Their executives and shareholders pocket vast sums, raking off money that should go for care. In 2004, insurance companies spent $95 billion on overhead and profits. Bill McGuire, CEO of UnitedHealth pocketed $124.8 million. Now they and the White House – want to cut coverage, pushing families into so called Consumer Directed Plans with huge deductibles. The inevitable result will be bigger profits for insurers and more families bankrupted by illness. Americans need comprehensive national health insurance, not the ever skimpier coverage pushed by AHIP.

According to Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard and a study author: The insurance industry boosts profits by telling American families that all is well: just keep paying your premiums and you will be safe. The reality is far scarier.

Copies of the article will be available after 12:01 AM February 28 at:
http://content.healthaffairs.org/webexclusives/index.dtl?year=2006

###

Physicians for a National Health Program is an organization of 14,000 physicians advocating for non-profit national health insurance. PNHP has chapters and spokespersons across the country. For contacts, call (312) 782-6006

Half of small business owners believe single payer is inevitable

SMC Business Councils Releases Health Care Survey Results
PR Newswire
February 20, 2006

(SMC Business Councils is a non-profit trade association representing 3,500 small business owners in western and central Pennsylvania.)

SMC Business Councils conducted an online survey last week of 150 local small business owners’ current thinking about issues related to skyrocketing health care costs.

According to SMC President Cliff Shannon, “Business owners’ frustrations with seemingly uncontrollable health insurance costs are mounting. Passing along more costs to their employees — or even dropping job-based coverage altogether — is seen by larger and larger numbers of entrepreneurs as a financial and competitive necessity. And although deep misgivings remain about the consequences and costs of a national, single-payer health care system, there is increasing agreement that this outcome may be inevitable.”

Nearly two-thirds of SMC respondents said they thought that a national, single-payer system was undesirable – but nearly one-half of all surveyed agreed that a national, single payer system is (politically) inevitable.

Comments from respondents included:

“American business is at a huge disadvantage due to high health care costs.”

“A universal standardized system that covers everybody would be fair and probably less expensive for each individual.”

“A national health care system is an absolute necessity to keep this country’s businesses competitive with the rest of the world.”

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/02-20-2006/0004285212&EDATE

Comment: By Don McCanne, M.D.

This small survey supports the findings of other larger surveys on the views of small business owners on health care financing. One additional item surveyed is noteworthy. Although small business owners remain quite uncomfortable with the concept of a national, single payer system, there is increasing agreement that a single payer system is politically inevitable. We may yet end up with single payer by default.

"National Health Access" isn't

Top firms’ plan for uninsured stumbles
By Bruce Japsen
Chicago Tribune
February 18, 2006

A landmark health-care plan offering benefits to millions of uninsured workers and initially sponsored by more than 50 blue-chip companies has failed to gain traction in the nearly two years since its lofty goals were announced.

In the National Health Access plan, three insurers–Cigna Corp., Humana Inc. and UnitedHealth Group–agreed to offer a range of benefits and discounts on medical care and prescription drugs.

Fewer than 9,000 workers and their dependents have enrolled in the National Health Access program since the plan got off the ground in the fall, which is far short of expectations, said officials connected with the plan.

Officials say several issues, notably the inability to offer a plan that’s affordable for most employees in the group, have been the biggest stumbling blocks.

“For this group, it’s a challenge to find almost any level of affordable coverage to give them what they are looking for,” said Marisa Milton, associate general counsel at the HR Policy Association, a Washington-based lobbying group composed of human resource executives. HR Policy Association helped create the program, which is administered in part by Hewitt Associates, a Lincolnshire-based employee benefits and human resources consultancy.

Initially the plan’s backers, which include Hoffman Estates-based Sears Holdings Corp. and Oak Brook-based McDonald’s Corp., were lauded for trying to find an innovative, private-sector initiative to help fix one of the country’s most expensive problems: providing affordable health coverage for more than 45 million uninsured Americans.

The member companies believed that if they could pool enough of their workers together they could entice health insurance companies into a bidding war to handle the business, thus keeping costs lower.

“There are valuable lessons to learn from this,” Milton said.

http://www.chicagotribune.com/news/nationworld/chi-0602180123feb18,1,7037576.story?coll=chi-newsnationworld-hed

Comment: By Don McCanne, M.D.

A landmark health plan sponsored by more than fifty blue-chip companies manages to insure fewer than 9,000 workers nationally. What a landmark! Marisa Milton from the HR Policy Association says that there are valuable lessons to learn from this, but you can imagine what their perceptions of the lessons are.

There is one single lesson that stands out above all others. Many of the largest corporations in the nation and some of the largest insurers, working with the most influential human resources organizations, put this plan together and announced it with the fanfare of a full trumpet chorus. As we now listen to the distant, somber, solo trumpet playing taps, we realize that the best that the private sector has to offer is totally incapable of bringing us effective health care reform.

Who do we see heading back to the negotiation tables? The major corporations? The insurers? The human resource industry? Yes, yes and yes.

Where are the providers? The few that do show up are there with their very weak, me-first advocacies.

Where are the politicians? Too many of them are hiding behind the shredded curtains of political feasibility (but, fortunately, not all).

Perhaps the greatest tragedy is the fact that potentially the most powerful voice of all is not showing up: those of us who are relatively healthy and do not feel especially threatened by medical debt.

Let’s see, what is the prevailing rhetoric? I’ve taken good care of my health, and I’m insured against potential catastrophic losses. Everyone else should meet their own individual responsibilities by doing the same. Why should I have to pay for others who don’t take care of their own health?

Egalitarianism? Isn’t that a French word? Well, we’re certainly not French. We’re Americans.

Excuse me. I’m going bowling now… alone, thank you.

Projected increased public health spending in OECD nations

Projecting OECD health and long-term care expenditures: What are the main drivers?
Organisation for Economic Co-operation and Development (OECD)
ECO/WKP(2006)5
February 3, 2006

Rising expenditure on health and long-term care is putting pressure on government budgets in most OECD countries. Going forward, these pressures will add to those arising from insufficiently reformed retirement schemes. The question is how much health and long-term care spending could increase in the future and what policy can do about it. This paper presents a framework for thinking about that question and provides some quantitative illustrations. Both changing demography and non-demographic drivers of spending are taken into account.

The paper shows that spending on health and long-term care is a first-order policy issue. Between now and 2050, public spending on health and long-term care could almost double as a share of GDP in the average OECD country in the absence of policy action to break with past trends in this area. And that estimate takes into account that as people live longer, they also remain in good health for longer. Even with containment measures, public spending on health and long-term care could rise from the current average level of 6-7 % of GDP to around 10% by 2050. In some countries, the increase could be dramatic.

http://www.oecd.org/dataoecd/57/7/36085940.pdf

And…

Ask the White House
Al Hubbard, Director of the National Economic Council
The White House
February 14, 2006

The government provides a health care safety net for the poor, elderly, and disabled. Of the almost two trillion dollars of annual health care spending in the U.S., the government now pays for almost half. If the government were to take over financing another trillion dollars of health care for the non-poor who currently buy their own health care and insurance, there would have to be a massive tax increase. A tax increase of this size could significantly damage the economic growth that is so important for creating jobs and wealth for the American people.

http://www.whitehouse.gov/ask/20060214.html

Comment: By Don McCanne, M.D.

The OECD classifies the increase in government spending on health care as a “first-order policy issue.” They predict that, even with unspecified spending containment measures, demographic and non-demographic drivers of spending will result in average government costs of 10 percent of GDP in OECD nations. At least in this report, they do not seem to be concerned about increases in private spending.

Al Hubbard says that the $1 trillion in private funds that are being spent on health care would damage economic growth if that financing were to be administered by the government through the tax system. Even the OECD concedes that governments are more efficient administrators of health care funds. When total health care spending would remain the same, why should Mr. Hubbard believe that public health care spending would damage the economy whereas private health care spending is considered to be beneficial for the economy?

Maybe instead of relying on his logic, he was simply expressing the dogmatic ideology of this administration. A not so subtle hint of his views was expressed in his answer to a question as to whether he sees a time when America does have a universal health care system. His answer, “I certainly hope not.”

The Future of Medicare: Finishing What We Started

Bruce Vladeck, Ernst & Young LLP
July 2005

As Medicare approaches its 40th anniversary, it’s important to recognize that the program’s founders would have been profoundly ambivalent about its current success and popularity. They never intended that Medicare would stand alone as a unique example of national health insurance, nor that the elderly and disabled would be the only groups in the U.S. population with guaranteed access to health care.

Instead, Medicare was crafted as the first, incremental step towards universal health care. Just as the Social Security system, on which Medicare was modeled, had been improved and expanded upon many times in its first 30 years, so Medicare was supposed to be the seed from which future expansions—both vertical (incorporating more of the population) and horizontal (broadening the benefits)—would spring. At first, Medicare stayed on the expected track: The 1972 Social Security Amendments extended Medicare coverage to the disabled and patients with end-stage renal disease and provided some modest benefit improvements. Since then, however, we’ve stalled, if not regressed. The 2003 prescription drug legislation threw a lot of additional money into the program, but not in a way otherwise consistent with Medicare’s founding principles of universality and defined benefits.

Misconceptions About Medicare
Today, the proportion of the non-elderly population without health insurance is larger today than it was when Medicare was enacted, and many of those who nominally have health insurance coverage face higher out-of-pocket expenses and limited access to care. But instead of considering Medicare as a basis on which to expand coverage, Medicare’s critics increasingly describe it as an anachronism that lacks the flexibility and innovation available in managed care plans. They characterize it as something of a historic relic, in part because the coverage it provides, which 40 years ago was thought to be minimally adequate, now appears relatively generous.

In fact, Medicare achieves a higher level of satisfaction among covered beneficiaries than employer-based coverage, offers markedly improved access to care and financial protection for beneficiaries, and has much lower administrative costs than private coverage.

Health Care Costs
It’s true that in 1965, few could anticipate how dramatically health care costs would increase in the ensuing decades, nor could any but the most visionary have foreseen a society that includes thousands of 80-year-olds running around on artificial knees, sustained by implanted defibrillators. And it would have been almost impossible to envision the size, complexity, and sheer economic magnitude of the contemporary American health system. Over the last 40 years, the food, electronics, and computer industries have also grown at a remarkable rate, yet the real costs of agricultural commodities, televisions, and computing power have fallen. The same has not been seen in health care. One might therefore suspect that the problem of health care costs is as much one of political economy as of technology.

Whatever their source, rising health care costs are a real problem—and Medicare’s costs and the more general problem of health care cost inflation are one and the same. Medicare’s outlays track very closely (if often with a slight lag) the growth in total health care spending. So we can’t realistically expect to control the growth of Medicare spending without controlling the growth of health care costs generally.

The Next 40 Years
Because there’s little basis for optimism about controlling health care costs broadly, it’s likely that, as we Baby Boomers age, a growing share of total national resources will be required to provide the level of medical care to which Medicare beneficiaries have become accustomed—and even that may not be enough to meet the expectations of a generation far more demanding than current beneficiaries. Indeed, elderly beneficiaries, who now spend 22 percent of their income on health care, are expected to see that figure grow to 30 percent by 2025. The prevailing rhetoric contends that such a level of expenditure is “unsustainable,” and that implies that at some point we, as a society, will choose to deny medical care to at least some older people who really need it, just as we now so blithely accept the denial of care to millions of younger people.

I must confess that I have trouble getting my mind around that notion. But perhaps I am just trapped in an older way of thinking. In 1965, it was still possible to assume that a reasonable share of growing national wealth would be devoted to social benefits; that reductions in racial and socioeconomic inequality were a central part of a commitment to democracy; and that the notion of providing more freedom, in the United States and around the world, included providing freedom from want. In that very different era, one could just assume that universal health care would be an uncontroversial objective, and that a nation with so powerful a track record of getting things done would not be daunted by the very formidable difficulties inherent in achieving universal coverage.

But since then, we have become increasingly adept at finding excuses for why we can’t address important domestic problems, and for expressing pride in the fact that the United States is less generous in the provision of social benefits than any other industrial nation.

In that context, the daily reality of Medicare, in which millions of elderly and disabled people of modest means receive world-class medical care from the nation’s very finest providers, serves as a kind of constant reproach to the naysayers and prophets of budgetary doom. The track record is incontrovertible: Medicare has proven that, as a nation, we are capable of getting medical care to a particularly vulnerable part of the population, and of reducing mortality, morbidity, and human suffering in the process. We just need to be reminded of why, 40 years ago, people thought that doing that was such a good idea. And we need to remind ourselves that the founders of Medicare thought they were just getting things started, and that there’s a whole lot more work still to do.

Bruce Vladeck, East Coast director for Ernst & Young’s Academic Medical Center service group, is the former administrator (1993–1997) of the Health Care Financing Administration, now the Centers for Medicare and Medicaid Services. The views expressed by the author herein do not necessarily reflect the views of Ernst & Young LLP.

The views presented in this commentary are those of the author and should not be attributed to The Commonwealth Fund or its directors, officers, or staff.

Citation
Medicare’s Future: Finishing What We Started, Bruce Vladeck, The Commonwealth Fund, July 2005

Are $100,000 drugs a right?

British Clinic Is Allowed to Deny Medicine
By Sarah Lyall
The New York Times
February 16, 2006

When her local health service refused to treat her (early-stage) breast cancer with the drug Herceptin, 54-year-old Ann Marie Rogers sued. But on Wednesday, a High Court judge ruled against her.

In his decision the judge, David Bean, said that although he sympathized with Ms. Rogers’s predicament, the health service in Swindon, where she lives, had been justified in withholding the drug.

Herceptin, made by Roche, is currently licensed for use in late-stage breast cancer. Although some studies have shown that it is also effective in treating HER-2 early-stage breast cancer, it has not yet been licensed for such use. If it does receive a license, the drug will be appraised for potential countrywide use.

But Herceptin is an expensive drug, costing $36,000 to $47,000 a year for each patient, and the health service has finite resources.

… the Swindon health service has a policy of allowing its use for early-stage breast cancer only in “exceptional circumstances,” and her doctor said that her case was no different from those of “the 20 or so other residents in the Swindon area in the same position.”

http://www.nytimes.com/2006/02/16/international/europe/
16cancer.html

A Cancer Drug Shows Promise, at a Price That Many Can’t Pay
By Alex Berenson
The New York Times
February 15, 2006

Doctors are excited about the prospect of Avastin, a drug already widely used for colon cancer, as a crucial new treatment for breast and lung cancer, too. But doctors are cringing at the price the maker, Genentech, plans to charge for it: about $100,000 a year.

Even some patients with insurance are thinking hard before agreeing to treatment, doctors say, because out-of-pocket co-payments for the drug could easily run $10,000 to $20,000 a year.

Until now, drug makers have typically defended high prices by noting the cost of developing new medicines. But executives at Genentech and its majority owner, Roche, are now using a separate argument – citing the inherent value of life-sustaining therapies.

If society wants the benefits, they say, it must be ready to spend more for treatments like Avastin and another of the company’s cancer drugs, Herceptin, which sells for $40,000 a year.

“As we look at Avastin and Herceptin pricing, right now the health economics hold up, and therefore I don’t see any reason to be touching them,” said William M. Burns, the chief executive of Roche’s pharmaceutical division and a member of Genentech’s board. “The pressure on society to use strong and good products is there.”

The high prices are especially discouraging for patients who have been told that the new drugs may have only marginal benefits for them.

Ellis Minrath, who has pancreatic cancer, said he had chosen not to take Tarceva, a drug from Genentech that is approved for lung cancer and has shown promise in pancreatic cancer.

But Dr. Desmond-Hellmann, the Genentech product development chief, said she would recommend that Mr. Minrath be treated with Tarceva. “I don’t think any patient should go without a Genentech drug for an inability to pay,” she said. “If this is about money, that would disturb me.”

Because the actual cost of producing Avastin is a fraction of what Genentech charges for it, some analysts and doctors had expected the company to lower Avastin’s price per milligram for use in lung and breast cancer.

Dr. Desmond-Hellmann said that Genentech was assuming that some cancer doctors might, in fact, use Avastin at the lower dosage to treat breast and lung cancer. That is a reason the company does not want to lower Avastin’s per-milligram price, she said, because doing so would cut too deeply into revenues if doctors do not prescribe the higher doses that were used in the breast and lung cancer trials.

http://www.nytimes.com/2006/02/15/business/15drug.html?pagewanted=all

Comment: By Don McCanne, M.D.

These are very sad stories, but, in a way, they represent both the best and the worst of the approaches of health care systems to very high priced innovative drugs.

It would seem reasonable to price drugs based on research costs, production costs, appropriate administrative costs and a fair profit. Traditionally, drugs were priced that way, perhaps with a nudge toward higher profits.

In the United States, we rely quite heavily on markets to set prices. What are we now hearing from the pharmaceutical industry? Forget costs. Don’t adjust prices based on the marginal costs of increasing manufacturing volume. Price the drugs based on “the inherent value of life-sustaining therapies.”

If a drug can extend life that has an actuarial value of maybe $300,000, then it is argued that the drug manufacturer is entitled to a transfer of a significant portion of that dollar value. By delaying death, the drug company has created a value of $300,000. The patient is $200,000 better off for a drug company fee of only one-third. They’re not really being greedy since they could claim that they have created that $300,000 value, and that they arguably could be entitled to all of it. But then Dr. Demond-Hellmann would be disturbed if this was really “about money.”

It would be interesting to see this same rationale applied to Gov. George Pataki’s appendectomy this morning. One-third of the actuarial value of the remaining life of a governor and potential presidential candidate might command a very handsome fee indeed.

So we see what represents perhaps the worst of our approaches to innovative drugs: blatant greed. What “best” could there be in this muddle?

The British have a health care system that is dedicated to providing the best care for the patient, within limits of their resources. An expensive drug, Herceptin, is currently available for the indication for which it is licensed: late-stage breast cancer. If it later becomes licensed for early-stage disease, the British will make every effort to see that it is available for any person who could benefit. Trying to make the health care system work for the benefit of the patient represents the best of the approaches to high-cost pharmaceuticals.

Should a $100,000 drug be a right for any individual who could benefit from it? That’s really the wrong question. The right question: Should policies of a health care system be designed so that they enable the highest possible return on investments in the health care marketplace, though sacrificing affordable access, or should they be designed so that they enhance patient access to beneficial health services, within the limits of available resources? The British and the Americans have different answers to this question.

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