PNHP

Cost-sharing can increase health care spending

Cost-sharing can increase health care spending

When patients have to pay a share of drug costs: effects on frequency of physician visits, hospital admissions and filling of prescriptions
By Aslam H. Anis, Daphne P. Guh, Diane Lacaille, Carlo A. Marra, Amir A. Rashidi, Xin Li and John M. Esdaile
CMAJ
November 22, 2005

To accommodate continually rising prescription drug costs, various cost-containment policies have been implemented. One such policy, cost-sharing between patients and insurers, is common in developed countries. In addition to shifting expenditures from insurers (often governments) to consumers, this financing mechanism is appealing because it supposedly reduces expenditures for medically unnecessary treatments by making patients pay for a proportion of all expenditures and thus making them more cost-conscious.

The RAND Health Insurance Experiment was the first scientifically rigorous study that established the impact of cost-sharing for medical services. On completion of the RAND study, there was strong evidence to suggest that ill patients were less likely to seek treatment or be admitted to hospital if they had to pay a portion of the cost.

Health services researchers have been examining the effect of patient cost-sharing for more than 20 years. Costs can be shared for office visits, emergency department use and prescription drugs, among other things. In our study, we focused on the effect of cost-sharing of prescription drugs on overall health care utilization among elderly patients with existing rheumatoid arthritis. We found that these patients had fewer prescriptions filled but used more physician services during the period when they had to pay the dispensing fees for prescription drugs than during the period when all drug costs were covered.

Our findings indicate that physician visits and hospital services are economic substitutes for prescription drugs: during the period when patients have to pay part of all of their drug costs, the frequency of doctor visits and hospital admissions increases. Our results show that, in a predominantly publicly funded health care system, the implementation of piecemeal cost-containment strategies such as cost-sharing of prescription drugs might have the unintended effect of increasing overall health care utilization. As health system reform is being contemplated in Canada, and indeed worldwide, it may be wise to evaluate a policy that would apply to the whole system – first-dollar coverage for all services or cost-sharing for all services – as opposed to a hybrid or mixed policy.

http://www.cmaj.ca/cgi/content/full/173/11/1335

And… an important reminder of what we already know:

Adverse Events Associated With Prescription Drug Cost-Sharing Among Poor and Elderly Persons
By Robyn Tamblyn, PhD; Rejean Laprise, PhD; James A. Hanley, PhD, et al
JAMA
January 24, 2001

In our study, increased cost-sharing for prescription drugs in elderly persons and welfare recipients was followed by reductions in use of essential drugs and a higher rate of serious adverse events and ED visits associated with these reductions.

http://jama.ama-assn.org/cgi/content/abstract/285/4/421?ijkey=3a1c8e11000132544e3fc2fe101d2989234965aa&keytype2=tf_ipsecsha

Comment: Cost-sharing has been shown to decrease health care spending, but it does so at the cost of impaired health outcomes. This study adds another important element to that equation. Cost-sharing not only reduces access to products and services, it can also result in increased utilization of substitute products or services which might result in an increase in overall health care spending.

The advocates of consumer-directed health care (CDHC) would likely recommend that cost sharing be applied to the substitute products and services to prevent this shift to higher cost utilization. But that would further impair affordable access and compound the degree of adverse outcomes.

Cost-sharing, in the form of deductibles, co-payments and coinsurance, are widely supported in the United States as being absolutely essential to controlling costs. But we already have extensive cost-sharing, which is expanding even more, and there is no evidence that global spending is being brought under control. Funds spent on providing patient access to beneficial services are not the source of excess spending in the United States. Instead, cost excesses are due to profound administrative waste, over-utilization of non-beneficial high-tech care, lack of an adequate, efficient primary care infrastructure, excess pricing of pharmaceuticals and some specialized services, and other factors that simply are not corrected by cost-sharing.

It is no secret that the single payer model includes several mechanisms that would slow health care inflation by attacking the real drivers of health cost inflation, and it would do so while improving access and outcomes for everyone. Cost-sharing may have popular support, but it’s bad policy, and it should be rejected.

So you want the same insurance as members of Congress

Health insurance open season is opportunity to save
By Tim Kauffman
Federal Times
November 21, 2005

Federal employees and retirees can save hundreds, even thousands, of dollars next year by switching health care plans during the annual enrollment period.

Those enrolled in the most popular health care plan, Blue Cross and Blue Shield Association’s national standard plan, will see 15 percent rate hikes in January. Switching to Blue Cross’ basic option would save an employee more than $1,200 next year in premiums for family coverage. In the Washington area, the same employee could save nearly $1,900 by switching to Kaiser Foundation Health Plan’s standard option, which is reducing its rates by 16 percent.

Standard and basic plans have more restricted benefits than the more expensive high-option plans, so they might not be right for everyone. That’s why it’s important for enrollees to study their choices carefully so they select a plan that’s right for them, experts say.

http://federaltimes.com/index2.php?S=1300216

Federal Employees Health Benefits Program http://www.opm.gov/insure/health/index.asp

Comment: The Federal Employees Health Benefits Program (FEHBP) is the largest purchaser of private health plans in the nation. It provides health care coverage for federal employees, including members of Congress. It provides the national benchmark for health plan contracting, negotiating for the best plans at the best prices. It has often been recommended as the ideal model for universal health care coverage, using tax credits or vouchers and perhaps individual or employer mandates.

It is no surprise that the most popular plan selected by federal employees is the Blue Cross and Blue Shield Association’s national standard plan. Although these plans require more out-of-pocket spending, they offer greater choice within larger provider networks and with less managed care intrusion. Federal employees with higher incomes are quite willing to accept higher out-of-pocket costs in exchange for this greater freedom of choice. Although the information is confidential, it is believed that most members of Congress have selected this option (based on public statements made by some members).

But what has happened? The trend today is to shift more of the costs to individuals. This is being done by tiering the plans into basic, standard, and high-option, not to mention other innovative plans. Premium increases have been somewhat moderated by decreasing benefits and increasing cost sharing. As more move into the lower cost basic plans, the more traditional Blue Cross/Blue Shield standard plans are retaining those who have greater health care costs, driving premiums ever higher. It is ironic that the largest purchaser of private plans is not able to prevent the most popular plan from becoming a victim of the death spiral of accelerating increases in insurance premiums.

Suppose that you currently had the same insurance as members of Congress. What would you do now? The plan already has excessive deductibles, co-payments and coinsurance. Now you are being asked to pay 15 percent more in premiums. Do you reduce your coverage from standard to basic? And how much more will they trim the basic benefits in the future? Do you change to an HMO which is keeping premiums competitive by introducing more cost sharing? Maybe it’s time to gamble on your coverage and place your money in a retirement account that you’ll lose if you get sick (technically known as a health savings account).

Since it’s open season for enrollment in FEHBP, members of Congress now face these coverage decisions for themselves. They will be annoyed, but not enough to make the connection that our system of funding health care requires comprehensive reform. They will begrudgingly pay the 15 percent increase in premiums, and then return to their more pressing task of slashing the health care safety-net for the most vulnerable amongst us.

And for Thanksgiving, sadly we will have to look elsewhere for blessings for which we can give thanks.

Single-payer plan the only solution

By David McLanahan
Opinion
Seattle Post Intelligence
Friday, November 18, 2005

Hurricanes Katrina and Rita have focused the nation’s attention on our country’s disadvantaged. Our residents and politicians have indicated a national will to repair New Orleans and with it, some of the inequities in our social fabric. Now is an opportune time to begin reconstruction of a health care system that has become a threat to all of us regardless of social status.

The Seattle Post-Intelligencer/CodeBlueNow series of essays initiated by former Govs. Booth Gardner and Arne Carlson on the current state of the U.S. health care system is timely and appropriate. Everyone agrees that the system is broken and needs to be changed.

However, a fundamentally different solution, rather than adjusting our dangerously ineffective, market-based approach, is necessary. The current system has resulted in an increasing number of uninsured (currently 45.8 million, almost one-sixth of our citizens), deteriorating benefits for those with insurance and overall rising costs.

Unpayable bills for medical care is the No. 1 cause of personal bankruptcy in our country. We lag far behind other industrialized (and many emerging) countries in typical health care indicators such as infant mortality and life expectancy rates, despite spending 15 percent of our gross national product on health care and 40 percent more per capita than the next most expensive system. According to a study comparing primary care in the United States, Canada, Great Britain, New Zealand and Australia, the United States ranked last or next to last in almost every measure of care, including access, coordination and patient/physician relationship.

Every other industrialized country has some form of government-administered national health insurance. A single, non-profit insurance plan is the only way to counter our system’s duplication of administrative costs, overhead and the necessity for assuring investor profits that squander health care dollars. Innumerable studies, undertaken by both government and independent investigators, have concluded that savings from conversion to a single-payer insurance plan would readily fund current care as well as extending health coverage to the uninsured and the underinsured.

A single-payer plan that could work in the United States has been proposed by an organization of 13,000 physicians, Physicians for a National Health Program. This plan’s essential feature is the elimination of all financial barriers to health care. Every American, independent of employment status, income or medical circumstances, would be covered for all necessary health care, including provider and hospital services, diagnostics, drugs, mental health, dental services and long-term care. All insurance premiums, co-pays and deductibles would be removed. Choice of physician and hospital would be broader than under present insurance plan restrictions.

Our health care delivery system would remain in its current format — private physicians, group practices, community health centers, hospitals and drug companies. Only the paperwork and bills would be routed through and paid by a federal agency. Physicians would be paid by a simple fee schedule covering all patients or through an employer-based calculation.

Repeated surveys have indicated that a majority of Americans support government-guaranteed universal health insurance. Forty percent of physicians support some form of a single-payer program.

So why haven’t we moved in that direction? It’s because the entities controlling our for-profit health care system have been adept at guarding their turf. Insurance conglomerates, pharmaceutical companies and many provider organizations, all interested in protecting their profits and privileges, have convinced politicians that our system should not be changed fundamentally.

Scare tactics have been all too effective in deflecting the public’s attention from the abundant evidence that we would be vastly better served by national health insurance. Consider, for example, that the highest quality health care delivery in our country is provided by the government-administered Veterans Affairs system, now outperforming the very best private hospitals, including Johns Hopkins, the Mayo Clinic and Massachusetts General Hospital, in 17 categories of quality health care indicators.

We must capitalize on the current focus on the holes in our safety net so sadly exposed by suffering from the hurricanes. We must honestly define the problem and consider how to implement much-needed reform. As former governors Gardner and Carlson conclude, we have suffered from a lack of leadership. They note, “the citizens must take charge” and our political representatives must get the message. We look forward to participating in that discussion.

David McLanahan, M.D., was a surgeon at Pacific Medical Centers for 25 years. Also contributing to the column were doctors Hugh Foy and Erika Goldstein, Harborview Medical Center; Kaj Johansen, Vascular Institute of the Northwest; Richard Kovar, medical director, Country Doctor Community Health Centers; and Peter McGough, chief medical officer, UW Medicine Neighborhood Clinics.

Lessons for U.S. from China's health care privatization

Privatization and Its Discontents – The Evolving Chinese Health Care System
By David Blumenthal, M.D., M.P.P., and William Hsiao, Ph.D.
The New England Journal of Medicine
September 15, 2005

…the means of China’s ascendancy probably would have infuriated Mao.
Instead of adopting a socialist and collectivist strategy that relies on central governmental control and emphasizes social equality, the Chinese have privatized their economy and decentralized much governmental control to provincial and local authorities. And instead of putting the interests of China’s rural peasants first, as Mao advocated (his was a peasant revolution, starting in China’s vast countryside), China’s current leaders have poured money into its cities and let rural areas languish. The results have been huge and growing disparities in the well-being of populations in urban and rural areas and increasing social strife.

China faces huge health care problems that make those of the United States seem almost trivial by comparison and that constitute a major potential threat to China’s domestic tranquility. At the same time, with governmental coffers swollen by tax revenues from its booming economy, the Chinese have opportunities for health care improvement that Western policymakers can only envy. This combination of massive challenges and huge opportunities makes the Chinese health care system a unique laboratory that Western health care planners cannot afford to ignore.

From 1952 to 1982, the Chinese health care system achieved enormous
improvements in health and health care. Then, in the early 1980s, China virtually dismantled its apparently successful health care and public health system overnight, putting nothing in its place. In retrospect, this startling and almost inexplicable event seems to have been collateral damage from a much more carefully planned and successful policy strike: the privatization of China’s economy and a general effort to reduce the role of Beijing’s central government in China’s regional and local affairs. Only recently have Chinese authorities recognized the pain and the massive disruption in health care that they have caused.

Reduction in governmental support for the health care system had the effect of largely privatizing most Chinese health care facilities, forcing them to rely more on the sale of services in private markets to cover their expenses after allocations from public sources declined. Public hospitals came to function much like for-profit entities, focusing heavily on the bottom line. The Chinese government informally sanctioned this privatization of hospitals and clinics by ignoring it.

…the efficiency of the Chinese health care system has declined precipitously. With the growth of the private health care sector, the number of Chinese health care facilities and personnel have increased dramatically since 1980, but because of barriers to access, the use and thus productivity of the health care sector have declined. To many in the United States, this portrait of pockets of medical affluence in the midst of declining financial access and exploding costs and inefficiency will sound depressingly familiar.

Health expenses are a leading cause of poverty in rural areas and a major reason that peasants migrate to cities seeking proximity to better health care facilities and higher wages to pay for care.

The Government Responds

To its credit, the Chinese government has recognized and begun to address the huge health care problems that it created. It has done so with remarkable pragmatism, uninhibited by ideology and often importing (after careful examination) solutions pioneered in other countries. China also benefits at this time from a rare financial opportunity. Because of the rapid growth in its economy, national and local governments have sufficient tax revenues to make substantial health care investments without reducing spending for competing social services, such as housing and education, or for defense, which is now a priority for Chinese leaders.

Since China now seems to consist of two societies, urban and rural, the government has launched different strategies for ameliorating problems in these two locales. It has tried to recreate an urban health care safety net through a system that knits together a variety of devices that will be familiar to U.S. health care policymakers. The first is mandated employer insurance. In 1998, the central government required all private and state-owned enterprises to offer their workers medical savings accounts combined with catastrophic insurance. Imported from Singapore, the medical savings accounts require people to save their own money to pay for a portion of their personal medical expenses. The hope is that because medical savings accounts contain the patients’ own money, patients will be sensitive to the costs of care but will still have protection against those expenses.

The system is far from perfect. Some employers have refused to comply with state mandates, claiming they cannot afford the contributions. Many urban dwellers do not work for organized employers. Companies form and disband rapidly to avoid paying benefits to workers. Dependents of workers may not be covered. An indigenous Chinese private health insurance industry has arisen to sell health insurance to a wealthy minority that can afford it, and China is considering permitting foreign insurance companies to sell health care coverage as well. Whether the Chinese government will be able to cover the 51 percent of urban residents who still lack protection against the cost of illness, and how it would do so, is far from clear at this point.

The central government was slower and more reluctant to address health care problems in rural areas, but it was forced to act because of evidence that health care expenses were undermining other government efforts to alleviate poverty among the peasantry. In 2002, officials launched experiments to create a very rudimentary financial safety net for health care. Under these schemes, the government provides the equivalent of $2.50 a year to help cover a basic insurance plan for peasants, who must match this with an annual $1.25 of their own. Because of their modest funding, these plans cover only inpatient care (with a very high deductible) and leave peasants without adequate primary care services and drugs.

Looking Back and Looking Forward

The recent history of the Chinese health care system offers a number of lessons for observers in the United States and elsewhere. It seems clear that the radical privatization of health care systems carries enormous risks for the health of citizens and for the stability of governments. The Chinese example further reveals that government involvement may be essential to ensure an effective health care safety net and that, regardless of their language, history, or culture, providers will confer the services they are rewarded for offering. When Chinese doctors and hospitals were rewarded for providing high-tech services, they did exactly what U.S. doctors and hospitals have been doing for decades, with the same effects on use and costs. In fact, an overriding lesson of the Chinese experience is a warning to the rest of the world: if leaders anywhere care to, they can mimic and even exceed the inequities and inefficiencies that the U.S. health care system has exemplified for so long.

At the same time, optimists can find reason for hope as China struggles with its self-inflicted health care wounds. China’s leaders have begun purposefully and soberly to tackle the enormous social engineering challenge of repairing past damage and shaping a new health care system that fits their unique social system and culture. It is hard to say precisely what that system will look like, but it will undoubtedly combine private and public provision of both insurance and services, and it will look very different in rural and urban areas. A major unaddressed challenge for China (and for the United States) is how to reform an inefficient, poorly organized health care delivery system that is bloated in urban areas and threadbare in rural sectors. A further challenge facing China will be instilling in health care professionals, and especially physicians, an ethic of professionalism that is essential to ensure that private health care systems protect the interests of patients and provide care of reasonable quality.

http://content.nejm.org/cgi/content/full/353/11/1165

Comment: China’s experience demonstrates once again the truism that private health care systems follow the money. We’ll never get it right until we agree that private health care systems need public stewards to ensure that the money trail leads to quality care for all.

Lessons for U.S. from China’s health care privatization

Privatization and Its Discontents – The Evolving Chinese Health Care System
By David Blumenthal, M.D., M.P.P., and William Hsiao, Ph.D.
The New England Journal of Medicine
September 15, 2005

…the means of China’s ascendancy probably would have infuriated Mao.
Instead of adopting a socialist and collectivist strategy that relies on central governmental control and emphasizes social equality, the Chinese have privatized their economy and decentralized much governmental control to provincial and local authorities. And instead of putting the interests of China’s rural peasants first, as Mao advocated (his was a peasant revolution, starting in China’s vast countryside), China’s current leaders have poured money into its cities and let rural areas languish. The results have been huge and growing disparities in the well-being of populations in urban and rural areas and increasing social strife.

China faces huge health care problems that make those of the United States seem almost trivial by comparison and that constitute a major potential threat to China’s domestic tranquility. At the same time, with governmental coffers swollen by tax revenues from its booming economy, the Chinese have opportunities for health care improvement that Western policymakers can only envy. This combination of massive challenges and huge opportunities makes the Chinese health care system a unique laboratory that Western health care planners cannot afford to ignore.

From 1952 to 1982, the Chinese health care system achieved enormous
improvements in health and health care. Then, in the early 1980s, China virtually dismantled its apparently successful health care and public health system overnight, putting nothing in its place. In retrospect, this startling and almost inexplicable event seems to have been collateral damage from a much more carefully planned and successful policy strike: the privatization of China’s economy and a general effort to reduce the role of Beijing’s central government in China’s regional and local affairs. Only recently have Chinese authorities recognized the pain and the massive disruption in health care that they have caused.

Reduction in governmental support for the health care system had the effect of largely privatizing most Chinese health care facilities, forcing them to rely more on the sale of services in private markets to cover their expenses after allocations from public sources declined. Public hospitals came to function much like for-profit entities, focusing heavily on the bottom line. The Chinese government informally sanctioned this privatization of hospitals and clinics by ignoring it.

…the efficiency of the Chinese health care system has declined precipitously. With the growth of the private health care sector, the number of Chinese health care facilities and personnel have increased dramatically since 1980, but because of barriers to access, the use and thus productivity of the health care sector have declined. To many in the United States, this portrait of pockets of medical affluence in the midst of declining financial access and exploding costs and inefficiency will sound depressingly familiar.

Health expenses are a leading cause of poverty in rural areas and a major reason that peasants migrate to cities seeking proximity to better health care facilities and higher wages to pay for care.

The Government Responds

To its credit, the Chinese government has recognized and begun to address the huge health care problems that it created. It has done so with remarkable pragmatism, uninhibited by ideology and often importing (after careful examination) solutions pioneered in other countries. China also benefits at this time from a rare financial opportunity. Because of the rapid growth in its economy, national and local governments have sufficient tax revenues to make substantial health care investments without reducing spending for competing social services, such as housing and education, or for defense, which is now a priority for Chinese leaders.

Since China now seems to consist of two societies, urban and rural, the government has launched different strategies for ameliorating problems in these two locales. It has tried to recreate an urban health care safety net through a system that knits together a variety of devices that will be familiar to U.S. health care policymakers. The first is mandated employer insurance. In 1998, the central government required all private and state-owned enterprises to offer their workers medical savings accounts combined with catastrophic insurance. Imported from Singapore, the medical savings accounts require people to save their own money to pay for a portion of their personal medical expenses. The hope is that because medical savings accounts contain the patients’ own money, patients will be sensitive to the costs of care but will still have protection against those expenses.

The system is far from perfect. Some employers have refused to comply with state mandates, claiming they cannot afford the contributions. Many urban dwellers do not work for organized employers. Companies form and disband rapidly to avoid paying benefits to workers. Dependents of workers may not be covered. An indigenous Chinese private health insurance industry has arisen to sell health insurance to a wealthy minority that can afford it, and China is considering permitting foreign insurance companies to sell health care coverage as well. Whether the Chinese government will be able to cover the 51 percent of urban residents who still lack protection against the cost of illness, and how it would do so, is far from clear at this point.

The central government was slower and more reluctant to address health care problems in rural areas, but it was forced to act because of evidence that health care expenses were undermining other government efforts to alleviate poverty among the peasantry. In 2002, officials launched experiments to create a very rudimentary financial safety net for health care. Under these schemes, the government provides the equivalent of $2.50 a year to help cover a basic insurance plan for peasants, who must match this with an annual $1.25 of their own. Because of their modest funding, these plans cover only inpatient care (with a very high deductible) and leave peasants without adequate primary care services and drugs.

Looking Back and Looking Forward

The recent history of the Chinese health care system offers a number of lessons for observers in the United States and elsewhere. It seems clear that the radical privatization of health care systems carries enormous risks for the health of citizens and for the stability of governments. The Chinese example further reveals that government involvement may be essential to ensure an effective health care safety net and that, regardless of their language, history, or culture, providers will confer the services they are rewarded for offering. When Chinese doctors and hospitals were rewarded for providing high-tech services, they did exactly what U.S. doctors and hospitals have been doing for decades, with the same effects on use and costs. In fact, an overriding lesson of the Chinese experience is a warning to the rest of the world: if leaders anywhere care to, they can mimic and even exceed the inequities and inefficiencies that the U.S. health care system has exemplified for so long.

At the same time, optimists can find reason for hope as China struggles with its self-inflicted health care wounds. China’s leaders have begun purposefully and soberly to tackle the enormous social engineering challenge of repairing past damage and shaping a new health care system that fits their unique social system and culture. It is hard to say precisely what that system will look like, but it will undoubtedly combine private and public provision of both insurance and services, and it will look very different in rural and urban areas. A major unaddressed challenge for China (and for the United States) is how to reform an inefficient, poorly organized health care delivery system that is bloated in urban areas and threadbare in rural sectors. A further challenge facing China will be instilling in health care professionals, and especially physicians, an ethic of professionalism that is essential to ensure that private health care systems protect the interests of patients and provide care of reasonable quality.

http://content.nejm.org/cgi/content/full/353/11/1165

Comment: China’s experience demonstrates once again the truism that private health care systems follow the money. We’ll never get it right until we agree that private health care systems need public stewards to ensure that the money trail leads to quality care for all.

Mercer survey of employer-sponsored health plans

Health benefit cost slows for a third year, rising just 6.1% in 2005
Mercer Human Resource Consulting
November 21, 2005

When annual health benefit cost increases peaked three years ago at nearly 15%, employers responded with an unprecedented flurry of plan redesign. Increases have slowed each year since then, with cost rising just 6.1% in 2005 to an average of $7,089 per employee, with a similar increase – 6.7% – predicted for next year.

According to the National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer Health & Benefits LLC, employers predicted in
2004 that their health benefit cost would rise by an average of 10% in 2005 if they made no changes. But they expected to lower that increase to about 7% through a variety of initiatives, including cost-shifting and changing vendors. Mercer’s 2005 survey, released today, shows they succeeded.

A key tactic employers used to lower their 2005 cost increase was again cost-shifting. While the average employee contribution as a percent of premium was essentially unchanged, employers increased employee cost-sharing at the point of service. An individual deductible for in-network care is now required in 80% of PPO plans, up from 73% last year.

The use of coinsurance as a means of sharing the cost of office visits increased, from 5% to 9% of all PPO sponsors and from 18% to 22% of all large sponsors. Among jumbo employers (20,000 or more employees), the use of coinsurance jumped from 26% to 37%. This is a significant departure from the recent past, in which PPOs moved to copays to compete more effectively with HMOs for enrollment. Coinsurance reflects the actual cost of the service provided and thus is seen as a consumerist strategy. It also tends to shift more cost to employees than copays do.

Blaine Bos, a consultant with Mercer Health & Benefits and one of the study’s authors, notes that large employers shifted cost to employees by raising their out-of-pocket costs for care rather than by raising their premium contributions. “This signals their preference for keeping the cost of the plan down for all employees by shifting cost to those who use it most,” Mr.
Bos says.

Over a third of all employers (34%) said consumerism will be significant or very significant to their cost-management efforts over the next five years, while 32% said care management will be significant or very significant.

“Many employers see these strategies as two sides of the same coin. Care management programs require the active involvement of employees in improving their health, while consumerist strategies engage the employees in managing health care cost,” says Mr. Bos.

Many of the nation’s largest employers took the step of implementing a consumer-directed health plan (CDHP). Among jumbo employers (20,000 or more employees), CDHP offerings rose sharply, from 12% to 22%. Otherwise, CDHPs saw only modest growth. Only 2% of all employers with 10 or more employees offered CDHPs in 2005, and only 5% of large employers – those with at least 500 employees – offered them.

Enrollment in CDHPs also remained low. Nationally, just 1% of all covered employees are enrolled in CDHPs. When a CDHP was offered alongside other medical plans in 2005, on average 14% of employees chose to enroll. Among the jumbo employers offering CDHPs, enrollment averaged 8%.

Small employers’ lack of interest in CDHPs was a surprise. When Health Savings Accounts (HSAs) were created by the Medicare Modernization Act of 2003, proponents said HSAs would expand access to coverage by providing a less-expensive option for small employers who might not otherwise offer coverage. This theory hasn’t panned out: use of CDHPs by this group reached only 2% in 2005, while the percentage offering any form of health plan dropped from 66% to 63%.

“It seems the cost difference – about 13% lower than the average cost of HMO coverage, and 18% lower than the average PPO cost – just wasn’t enough to prevent some small employers from dropping coverage,” says Mr. Bos. “The more complex plan design may also be a deterrent given that most small employers don’t have a robust HR staff.”

He adds that many small employers instead lowered plan cost by raising deductibles (34% of small PPO sponsors require an individual deductible of $1,000 or more). “In 2005, a PPO with a $1,000-plus deductible was less costly than the average CDHP,” Mr. Bos says.

Mercer’s comprehensive report on the National Survey of Employer-Sponsored Health Plans 2005 will be available in early March for $500.

http://www.mercerhr.com/pressrelease/details.jhtml/dynamic/
idContent/1202305

Comment: This Mercer report seems to celebrate the slowing of the increase in the costs of employer-sponsored health plans to only 6.1%, even if that still is significantly above the rate of inflation. This trend might be good news for corporate human resource managers, but it is terrible news for patient advocates. The anticipated 10% increase in plan costs, reflecting true increases in actual health care costs, was reduced to 6.1%, primarily by shifting plan costs to employees “who use it most.” Erecting financial barriers to health care is bad health policy because it impairs health care access and outcomes.

It is interesting to note that the enthusiasm for health savings accounts (HSAs) is not nearly as great as the shift to high-deductible PPOs. Employers seem to recognize that the real benefit to them of consumer-directed health care (CDHC)has been in shifting costs to employees through the higher deductibles and greater coinsurance of PPOs. The HSA component of CDHC has been an irrational, administratively-complex hybrid of heath benefit and retirement programs. Only very large employers have had the human resources capacity to indulge their employees with these plans that appeal to the invincible who look upon these plans as an additional resource for their robust retirements.

When health plan cost increases continue in excess of inflation, and when patient access charges are increasing even more, it is clear that efforts to address the affordability of health care have been a dismal failure. Tinkering with plan structure is not getting us there. In contrast, the single payer model is designed specifically to ensure the affordability of comprehensive services for everyone. But then Mercer would lose its market for its annual $500 report.

Donald Berwick speaks up

‘A Deficiency Of Will And Ambition’: A Conversation With Donald Berwick
By Robert Galvin
Health Affairs
January 12, 2005

Donald Berwick is president and chief executive officer of the Institute for Healthcare Improvement (IHI) in Boston, Massachusetts. Bob Galvin is director, Global Health Care, at the General Electric Company in Fairfield, Connecticut.

Excerpts

Galvin: I’m interested in your thoughts on the impact of the Leapfrog Group, an effort organized by the purchasers of health care, both private-sector employers and public purchasers. The Leapfrog agenda has focused on… benefit incentives that engage consumers and patients in the quality and cost of care…

Berwick: The one part of the (Leapfrog) plan that I am absolutely against at the moment is the shifting of burden to individual patients. I do not believe that making the individual American patient more “cost-sensitive” has any rationale in science, ethics, or evidence. It will fail, and it will fail miserably. It will result in a shifting of care away from the people who need it the most. It is a displacement of responsibility for changing the system. You know, if CalPERS or Xerox or GE can’t change care through using its purchasing power, then I absolutely promise you that Mrs. Jones can’t. The idea that she will now be more sensitive because she pays an extra ten bucks out of pocket is, to me, nearly stupid. So I really disagree with that element of the agenda.

Internationally, when one looks at high-performing systems around the world-and ours is nowhere near the highest-performing one-it is almost a routine characteristic of the best systems that they have first-dollar coverage, and there is no attempt to make patients pay more when they’re sick, which is a stupid thing to do.

****

Galvin: The conceptual basis of this is-as unsettling as it may be to “dangle money” to increase motivation-grounded in personality and motivation theory. In private industry, we would simply call it understanding what makes people tick. People respond to incentives. So part of the pay-for-performance movement is based on this idea that clinicians are really no different than other people and that they’ll respond to incentives.

Berwick: At the individual level, I don’t trust incentives at all. I do not think it’s true that the way to get better doctoring and better nursing is to put money on the table in front of doctors and nurses. I think that’s a fundamental misunderstanding of human motivation. I think people respond to joy and work and love and achievement and learning and appreciation and gratitude-and a sense of a job well done. I think that it feels good to be a good doctor and better to be a better doctor. When we begin to attach dollar amounts to throughputs and to individual pay, we are playing with fire. The first and most important effect of that may be to begin to dissociate people from their work. That’s really where we’ve come to, and we’ve done it by pay-for-performance in terms of throughput measurements and manipulating payment schemes.

****

Galvin: Let me move to another issue, and that is the explosion that’s about to play out in biomedical innovation. If you talk to patients… they are also interested in innovations that can cure them or their loved ones. They speak about it with pride and passion…

Berwick: I do think this: We have a learning disability in this country with respect to the difference between technologies that really do help and technologies that are only adding money to the margins of the companies that make them, without essentially paying their way in value. One of the drivers of low value in health care today is the continuous entrance of new technologies, devices, and drugs that add no value to care. If we had strong national policy, it would allow us to know the difference, and I would more fully support what I think you’re correctly proposing, which is an innovations value. We need to help the public know the difference. There’s a big agenda here, possibly for government, to help create a public awareness that more is not necessarily better. Frequently it’s worse. So we can be smart about what we buy and what we choose not to buy.

****

Galvin: Many of us on the purchaser side see radically improving the efficiency of the system as a way to free up capital to cover the uninsured and to fund innovation. How do you think efficiency fits into the quality agenda?

Berwick: Let’s define efficiency as making sure that every dollar you spend gets a dollar of value back, so that efficiency is the opposite of waste. Right from the start, it has been one of the great illusions in the reign of quality that quality and cost go in opposite directions. There remains very little evidence of that. There may be some innovations that raise cost while raising quality, but many, many improvements reduce costs.

What puzzles me is how to access efficiency as a social agenda in health care. There are couple of problems. The first is that a lot of people make a lot of money on inefficiency-on production of things that have no value. So the minute you try to become truly efficient, you’re going to run into stakeholders who are going to tell you that you’re harming care, and the knee-jerk reactions of doctors and others will be to reinforce that idea. And they include you. I mean, GE pays out of one pocket and then makes money on products and services that do not add real value.

****

Galvin: There’s a threshold issue with most purchasers when you talk about getting a patient financially engaged. That is that no one ends up paying more because they’re sick. The only option would be to pay less. Let me give you an example: Many employer-sponsored benefit plans across the country have hospital copays as part of their cost sharing. This means that there is a fee of a hundred or several hundred dollars when one is admitted to a hospital. In these benefit designs, while most people have pretty free choice of what hospital they go to, going to the one that objective data demonstrate is of superior quality and efficiency would result in a waiver of the copay.

Berwick: Well, I can be an empiricist about it. Go ahead and try it. I shudder to think about what may happen, because in the end, that sick patient arriving at that hospital is in the absolutely weakest position at that particular point to decide, “Aha, I’m going to save a hundred dollars and go elsewhere.” That person is more likely to be poor, more likely to be black, more likely to be a low-wage earner. I think it’s regressive social policy, and I predict that it won’t work. It’s a displacement of responsibility from the stewards who actually have the job of crafting systems to meet the needs of the people who come to them for help. I think it’s a bad, bad policy, and I don’t see it playing out productively in other countries, either.

http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.1/DC1

Comment: It’s really refreshing to see Donald Berwick clear the muddy waters of bad health policy.

Can we afford long-term care?

Developing a Better Long-Term Care Policy: A Vision and Strategy for America’s Future
Sheila P. Burke, Judith Feder, and Paul N. Van de Water (eds.)
National Academy of Social Insurance
November 2005

Two Promising Approaches

Transforming long-term care ultimately requires fundamental reform of its financing and a substantial commitment of federal resources. Because the need for long-term care is a risk, not a certainty, it should be handled like other unpredictable and potentially catastrophic events-that is, through insurance. Private long-term care insurance, while growing, is affordable for only 10 percent to 20 percent of the elderly. To assure access to long-term care without making families face impoverishment, federal involvement is therefore essential. Expanded federal financing could take one of two forms:

* Universal Approach. One option, modeled on Social Security, would provide everyone access to a basic, limited long-term care benefit, supplemented by private insurance for the better-off and enhanced public protection for the low-income population.

* Means-Tested Approach. Another option would establish a national floor of income and asset protection that would reform or replace Medicaid’s coverage of long-term care. People could purchase private long-term care insurance to protect a larger amount of assets.

Other countries have demonstrated that either approach – or a hybrid of the two – can target benefits to those in greatest need, retain personal responsibility through cost-sharing, and control costs.

Our analysis gives us reason to believe that the public does indeed perceive government action as not only appropriate but necessary to address long-term care financing concerns.

Our analysis of international experience shows that other nations, with far larger proportions of elderly citizens than we have in the U.S. today, have adopted a variety of policies that more fairly balance personal or family responsibility and public support. Adopting similar policies is a challenge not to our abilities but to our political will.

However, as advocates for improving the financing of long-term care, we cannot simply sit back and wait.

* As researchers, we must continue to demonstrate the extent of unmet needs for long-term care, the financial costs of care, and the burdens of caring on caregivers.

* As advocates, we must frame the problem of long-term care financing in terms that resonate with the public, building on the increasing sensitivity to retirement security and equal treatment for people with disabilities.

* As analysts, we must refine and disseminate specific policy proposals, assess their costs and benefits, encourage debate among stakeholders, and build confidence that policy action is not only desirable but feasible.

* As activists, we must muster the evidence on problem, policy, and politics to convince political leaders that long-term care is the cause they ought to champion and to identify the political arenas where their cause can take hold.

The study panel recognizes that obtaining political and fiscal support for a humane, equitable, and effective long-term care system will be daunting. But inaction means deterioration in already inadequate financing and care. The nations’ governors have declared that states cannot continue to be the nation’s primary funder for long-term care. The aging of the baby boom generation will only intensify the already substantial pressure states face.

As policymakers grapple with the budgetary concerns, the long-term care needs of the nation’s elderly and disabled citizens must be recognized, and our society must not shrink from providing the resources that will be required.

http://www.nasi.org/usr_doc/Developing_a_Better_Long-Term_Care_Policy.pdf

Comment: It’s simple. Long-term care needs to be included in the single-payer package.

John Wennberg is howling in the wind

Important notice: It is likely that you will read the abstract of this report, yawn, and then delete the message. Don’t delete it! This study addresses one of the most important issues in health care today. It is crucial that we understand the work of John Wennberg and his colleagues if we ever hope to achieve our goal of affordable, high quality health care for everyone.

Evaluating The Efficiency Of California Providers In Caring For Patients With Chronic Illnesses
By John E. Wennberg, Elliott S. Fisher, Laurence Baker, Sandra M. Sharp, Kristen K. Bronner
Health Affairs
November 16, 2005

Abstract

In this paper we compare the relative efficiency of health care providers in managing patients with severe chronic illnesses over fixed periods of time. To minimize the contribution of differences in severity of illness to differences in care management, we evaluate performance over fixed intervals prior to death for patients who died during a five-year period, 1999-2003. Medicare spending, hospital bed and full-time equivalent (FTE) physician inputs, and utilization varied extensively between regions, among hospitals located within a given region, and among hospitals belonging to a given hospital system. The data point to important opportunities to improve efficiency.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.526v1

This release from the California HealthCare Foundation places in perspective the significance of this report:

Amid debates over the long-term solvency of Medicare, questions about hospital bed capacity, and the rising cost of health care, a new study finds that care for patients with similar illnesses costs Medicare significantly more at some California hospitals but results in no better quality of care or patient satisfaction.

The study by researchers at Dartmouth Medical School looks at the performance of individual California hospitals in managing chronically ill patients over a five-year period that ended in 2003. The findings, along with a comparison of data from hospitals in five regions in California-Sacramento, San Francisco, Los Angeles, Orange County, and San Diego-are published in the online edition of the journal Health Affairs.

The study finds significant variation in Medicare spending for chronically ill patients in California. For example, hospitals in Los Angeles received an average of 60 percent more for inpatient reimbursement for Medicare patients during the last two years of life than Sacramento-area hospitals. In fact, Medicare paid some hospitals in the state as much as four times more than other hospitals to care for patients with similar conditions.

Yet the additional care provided did not improve medical outcomes or patient satisfaction. Rather, as the volume of care increased, the quality of care and patient satisfaction actually declined.

The comparisons suggest that savings could be achieved by improving efficiency with no impact on quality. For example, Medicare could have saved $1.7 billion in the Los Angeles area alone if medical practice patterns there, the most expensive region, resembled those of Sacramento, the least expensive.

http://www.chcf.org/topics/hospitals/index.cfm?itemID=115921

And…

Variations In California Hospital Regions: Another Wake-Up Call For Sleeping Policymakers How long must John Wennberg and colleagues howl in the wind before the policy community pays attention to their critical findings?
By Uwe E. Reinhardt
Health Affairs

The paper by John Wennberg and colleagues poses a renewed challenge to federal and state policymakers to handle the taxpayers’ hard-earned money responsibly-a task both have shunned for many decades. With the federal government’s deficit growing apace and California state’s budget, properly accounted for, in deep deficit as well, health policymakers can sustain the inefficiencies now apparent in our health care system only by pricing more and more low-income Americans out of health care. One could question the ethics of that approach.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.549v1

Comment: John Wennberg and his colleagues have significantly improved their model for identifying wasteful excesses in health care delivery. Their data describes specifically the care received by Medicare beneficiaries, and for a very good reason. Our Medicare social insurance program has robust data resources that enable analyses of variations in spending, inputs, utilization, and quality. These data simply are not available through the fragmented commercial insurance payers. So one more important advantage of a single payer system is that it makes it much easier to correlate variations with cost and quality outcomes.

Once we have valid information on system performance, then we can modify funding to reduce waste and promote more favorable outcomes. This sounds easy, but what would have to be done? This study demonstrates once again that excess services correlate with excess capacity. But could Medicare alone influence capacity when there are so many other payers in our fragmented system? Physicians who practice in a high-capacity environment sincerely believe that they are giving the best care possible. What would their response be when Medicare tells them to cut back on the services that they are providing? We had a taste of that at the peak of the managed care revolution.

What if we had a single social insurance program? Although there certainly would be turf issues, funding could be tuned to adjust capacities to more appropriate levels. An improved data base could identify better practice outcomes, and physicians are certainly amenable to changing practice patterns if solid data demonstrates that it would improve the health care of their patients.

Many believe that the public and private payers can work together to resolve these important issues. They’ve already had thirty years, but we don’t see any improvements yet. If we had a single, public system of funding care for everyone, we would be demanding change immediately.

There is hope. A few more words from Uwe Reinhardt:

“Wall Street’s financiers, ostensibly the vigilant and savvy guardians over efficient resource allocation in our economy, also have happily financed so far whatever added capacity health care leaders have wanted to put in place, needed or not, as long as those who pay for health care could be counted on to underwrite whatever inefficiency was put in place. An economist, of course, has little trouble understanding these financiers’ behavior.”

“In health care, efficiency also supports equity. The alternative, after all, is continued funding of relatively inefficient care in some parts of the health system, all the while cutting the fiscal lifeblood out of public programs intended to provide relief for the nation’s large, low-income population, which increasingly finds itself priced out of health care.

“Should financially pressed public policymakers ever respond constructively to Wennberg and colleagues’ research, Wall Street’s financiers might be in for a rude surprise. Given the federal government’s mounting deficits and California’s severe fiscal straits, such a surprise is now a distinct possibility.”

Krugman on free markets for health insurance

Health Economics 101
By Paul Krugman
The New York Times
November 14, 2005

Several readers have asked me a good question: we rely on free markets to deliver most goods and services, so why shouldn’t we do the same thing for health care? Some correspondents were belligerent, others honestly curious.
Either way, they deserve an answer.

It comes down to three things: risk, selection and social justice.

…about risk: in any given year, a small fraction of the population accounts for the bulk of medical expenses.

…private markets for health insurance suffer from a severe case of the economic problem known as “adverse selection,” in which bad risks drive out good.

Citizens of advanced countries – the United States included – don’t believe that their fellow citizens should be denied essential health care because they can’t afford it. And this belief in social justice gets translated into action, however imperfectly. …we have a huge private health care bureaucracy whose main purpose is, in effect, to pass the buck to taxpayers.

I’m not an opponent of markets. On the contrary, I’ve spent a lot of my career defending their virtues. But the fact is that the free market doesn’t work for health insurance, and never did. All we ever had was a patchwork, semiprivate system supported by large government subsidies.

That system is now failing. And a rigid belief that markets are always superior to government programs – a belief that ignores basic economics as well as experience – stands in the way of rational thinking about what should replace it.

http://select.nytimes.com/2005/11/14/opinion/14krugman.html?hp

Comment: When 60% of health care in the United States is already funded through the tax system, how can we even pretend that we have a free market in health care? Much of the free market rhetoric is directed toward our employer-sponsored plans, but these plans fund only one-fifth of health care in America, and employer selected plans don’t manifest the characteristics of free markets anyway.

Now the advocates of consumer-directed health care are foisting off on us the “free market choices” rhetoric. But there is no choice with the 80% of health care that is consumed by 20% of our population. People who need a lot of care don’t have the option of shopping for plans with low premiums since those plans won’t begin to provide them with financial security.

By pretending that we have a free market in health care, we tolerate the perpetuation of the tragic inequities that characterize our system. As one small example of these inequities, only in the United States would Wal-Mart employees without health insurance be forced to help purchase coverage for retired millionaires (through Medicare payroll taxes).

Bon fide risk pooling, elimination of adverse selection, and health care justice will never be products of the free market. We need our own public national health insurance program; but that won’t happen until we decide that the people who we choose to run our government are people who actually believe in government.

Health Economics 101

By Paul Krugman
The New York Times
November 14, 2005

Several readers have asked me a good question: we rely on free markets to deliver most goods and services, so why shouldn’t we do the same thing for health care? Some correspondents were belligerent, others honestly curious. Either way, they deserve an answer.

It comes down to three things: risk, selection and social justice.

First, about risk: in any given year, a small fraction of the population accounts for the bulk of medical expenses. In 2002 a mere 5 percent of Americans incurred almost half of U.S. medical costs. If you find yourself one of the unlucky 5 percent, your medical expenses will be crushing, unless you’re very wealthy – or you have good insurance.

But good insurance is hard to come by, because private markets for health insurance suffer from a severe case of the economic problem known as “adverse selection,” in which bad risks drive out good.

To understand adverse selection, imagine what would happen if there were only one health insurance company, and everyone was required to buy the same insurance policy. In that case, the insurance company could charge a price reflecting the medical costs of the average American, plus a small extra charge for administrative expenses.

But in the real insurance market, a company that offered such a policy to anyone who wanted it would lose money hand over fist. Healthy people, who don’t expect to face high medical bills, would go elsewhere, or go without insurance. Meanwhile, those who bought the policy would be a self-selected group of people likely to have high medical costs. And if the company responded to this selection bias by charging a higher price for insurance, it would drive away even more healthy people.

That’s why insurance companies don’t offer a standard health insurance policy, available to anyone willing to buy it. Instead, they devote a lot of effort and money to screening applicants, selling insurance only to those considered unlikely to have high costs, while rejecting those with pre-existing conditions or other indicators of high future expenses.

This screening process is the main reason private health insurers spend a much higher share of their revenue on administrative costs than do government insurance programs like Medicare, which doesn’t try to screen anyone out. That is, private insurance companies spend large sums not on providing medical care, but on denying insurance to those who need it most.

What happens to those denied coverage? Citizens of advanced countries – the United States included – don’t believe that their fellow citizens should be denied essential health care because they can’t afford it. And this belief in social justice gets translated into action, however imperfectly. Some of those unable to get private health insurance are covered by Medicaid. Others receive “uncompensated” treatment, which ends up being paid for either by the government or by higher medical bills for the insured. So we have a huge private health care bureaucracy whose main purpose is, in effect, to pass the buck to taxpayers.

At this point some readers may object that I’m painting too dark a picture. After all, most Americans too young to receive Medicare do have private health insurance. So does the free market work better than I’ve suggested? No: to the extent that we do have a working system of private health insurance, it’s the result of huge though hidden subsidies.

Private health insurance in America comes almost entirely in the form of employment-based coverage: insurance provided by corporations as part of their pay packages. The key to this coverage is the fact that compensation in the form of health benefits, as opposed to wages, isn’t taxed. One recent study suggests that this tax subsidy may be as large as $190 billion per year. And even with this subsidy, employment-based coverage is in rapid decline.

I’m not an opponent of markets. On the contrary, I’ve spent a lot of my career defending their virtues. But the fact is that the free market doesn’t work for health insurance, and never did. All we ever had was a patchwork, semiprivate system supported by large government subsidies.

That system is now failing. And a rigid belief that markets are always superior to government programs – a belief that ignores basic economics as well as experience – stands in the way of rational thinking about what should replace it.

Q and A with Paul Krugman, from The New York Times.com

On “Pride, Prejudice, Insurance”: Health Care Crisis in the U.S.
Nov. 8, 2005

Nell Farr, Elk Grove, Calif.: Your fine column contained this line: “. . . Americans too young to receive Medicare and insufficiently destitute to receive Medicaid . . .” This implies that those under 65 receive Medicaid if only they are poor enough. Many people believe this is true. It is not. Only if a person under 65 is on some Federal aid program such as AFDC or a disability program is he/she eligible for Medicaid. Others have an option of a free clinic, if available, or an E.R. for an emergency condition. However, E.R.’s only stabilize a person if further care or diagnostic work is indicated, such as a mammogram or even chemo for cancer, usually such a person is totally out of luck. They die.

Your columns are usually 100 percent factually correct, and I was disappointed to see this line that reinforces the mistaken belief of most Americans.

Paul Krugman: It’s a bit more complicated than that. As I understand it Medicaid covers many children even if the parents aren’t on AFDC, and in some cases covers parents too. But you’re right that an American can easily be ineligible for Medicaid no matter how desperate his or her financial straits. In fact, that’s a big part of the awfulness of how the government is responding to the aftermath of Katrina. But I didn’t have space to go into all of that. Remember, 700 words.

Michael Pistorio, Des Plaines, Ill.: While I completely agree that it is a travesty for Americans to be devoid of a national health care solution, I question the rationale of comparing the costs of an American system to that of a foreign system. My reasoning lies behind the simple fact that the U.S. has a population considerably larger than the most populated country that you mentioned, and with this said, I would think that the reason other countries have lower costs is due to the smaller number of prospective participants. Please help me understand.

Paul Krugman: All of these comparisons are per capita: spending per person. So population is taken into account. Or, if you prefer, add up total spending by Western European countries, which have about the same combined population as the United States; you’ll find that they spend only about 60 percent as much on health care, but that everyone is insured, life expectancy is higher, and infant mortality is lower.

Philip Lohman, Lakewood, Calif.: You missed making your best argument: the huge difference between levels of overhead in health systems. Somewhere around 30 percent of all expenditures on health care in the U.S. are for administration. This money buys hundreds of millions of pieces of paper and phone calls, plus the salaries of the legions of employees of insurance companies, H.M.O.’s, P.B.M.’s and all the others who are required to make the whole creaky, maddeningly complex mess function. What it doesn’t buy is a single office visit or prescription.

Similar administrative costs in other countries are around a third of this. Compared to private insurance, Medicare, perpetually described as a boondoggle by conservatives, is a model of efficiency. I was managememt consultant in healthcare for twenty years. Some days I couldn’t bring myself to believe the lunacy of the whole system.

Paul Krugman: I agree, but I’m puzzled that you think I missed your point. The column clearly identifies administrative costs as a key problem with the U.S. system.

Carol Bouville, Gaithersburg, Md.: Why is the obvious so hard for us Americans to accept? We used to not want any government-sponsored child care either because it was too socialistic. I suspect that has a lot to do with not getting government involved in universal health coverage. After all, our leaders are my age and came of age when anything that mimicked socialism was verboten. I lived in France for 18 years. Yes, it was cumbersome sometimes to get around in the health care system, but at least it was very cheap and available – and good, too. We never had to worry about losing our coverage or about not being able to pay for necessary treatment or meds. I argue that because of that peace of mind, we had a better quality of life than most Americans. Why don’t people demand access to health coverage and refuse to vote for anyone who doesn’t pledge to make the single-payer system a reality? What do we have to do to make that happen?

Neeta Moonka, MD, Demarest, N.J.: Thank you for this column. I am a physician who has been convinced of the need for a single-payer plan in this country since before I went to medical school in 1981. Please know the patchwork of employer based insurance, Medicare, Medicaid, not to mention the uninsured, takes its toll on doctors as well.

Bill Hess, Wasilla, Alaska: Your comments on nationalized insurance resonate with me. I am sitting here, feeling a notable amount of pain, thinking it would be good to go see a doctor and ask about it, but I dare not – I can’t afford to. Not because I don’t have insurance, but largely because I do. I am 55 years old and when I first got my insurance over a decade ago, it was a good deal. In the time since, my insurers have continually forced me to pay more for less, to drop my dental care altogether, to increase my deductible while still cutting back on my medical benefits. Yet the rate I pay has more than doubled to over $600 a month – that’s just for me. Fortunately, my wife and grown children receive care under the U.S. Indian Health Service.

I have a prostate problem for which I take three medications, all of which I must purchase myself along with any other medications I might find myself needing at any time. Last spring, my urologist ordered up a cat scan to double check a few things, which turned out okay. Two weeks later, I was struck by some intense abdominal pain. The physician who saw me felt it necessary to order up still another cat scan, which revealed nothing that wasn’t on the original, but did add several thousand to the medical bills I was already facing, bills denied by my insurance company.

So I have been trying to pay off this big debt and now I dare not go see a doctor again, as long as I am able to function and move around. I simply cannot afford to. An older brother recently had part of his colon removed due to cancer and another brother suffers a variety of often severe colon ailments. My father has had part of his colon removed as well. This puts me in the group of at-risk people who are advised to get a colonoscopy, but I checked into it and, even with my insurance, I would be facing a few more thousand in additional medical debt that would be uncovered by my insurance.

I know what happens when my insurance company receives one of my medical bills – they do not say, “Let’s see what we can do to help this guy and keep him healthy for as long as we can.” They say, “Let’s see if we can deny all of this, or as much as possible, and lets keep raising his rate dramatically every few months so that, hopefully, by the time he really needs care and we would have to put out some bucks we will already have forced him to drop our coverage.”

They may not actually vocalize it in those terms, but I sincerely believe both scenarios to be an accurate reflection of their policy.

Mark Sengel , Banglamung, Thailand: Thanks for your focus on health care. I am 50 and teach in Thailand. The hospitals here are excellent and tens if not hundreds of thousands of foreigners are coming here from all over the world to have root canals, colonoscopies, and back surgery. Meanwhile, everyone I know in America feels their choices are limited. They choose to stay in jobs they don’t like, they don’t start businesses, and they live in places they don’t really want to in order to get health care. Most have no idea how they are going to retire, estimating they need hundreds of thousand dollars just for health care if they are going to retire in their early 60’s. And these are people that are way ahead of the average American. What is the endgame?

Lynne Koester, Yuba City, Calif.: Would it be feasible to convert Medicare into a national health insurance system? I realize that its present per-patient cost is high because of the age of those who qualify for Medicare, but if the pool were enlarged by including most all Americans, wouldn’t the per-patient cost decrease? By eliminating the profits built into private health insurance companies, we could save even more money. Plus, when ill, many uninsured people presently use a hospital emergency room because they do not have medical insurance, but if they were covered by a national health insurance, they could be treated in a doctor’s office, which is less costly than a hospital.

Paul Krugman: Yes, indeed. One way to implement national health care would simply be to expand Medicare to everyone.

Of course, doing that would require additional funds, probably in the form of an increase in the payroll tax. And that would elicit howls from the right. But the apparent rise in tax rates would be an illusion: it would simply substitute an explicit tax for the implicit tax that companies and workers pay in the form of insurance premiums. Given international experience, I have no doubt that overall spending on health care would actually fall, and that job creation would actually rise, after the supposed tax increase.

It’s a simple solution, building on a program that we already know works. It would make the vast majority of Americans better off. And it’s considered a complete non-starter politically. Now why is that?

Notes on International Comparisons of Health Care
Nov. 7, 2005

Some readers may want to follow up on my Nov. 7 column on international comparisons of health care. Here are a few useful links.

Trends in employer-based insurance: The underlying data come from the Census. Here is a shorter, useful summary of the data.

International comparisons of health spending: The Factbook of the Organization for Economic Cooperation and Development, an international research organization supported by member governments, is available at www.sourceoecd.org. It provides comparative data on many economic, environmental, and social trends. Data on health care spending per capita are measured using “purchasing power parities” – that is, they are adjusted for international differences in the cost of living.

Two things stand out. First, the United States is off the scale in terms of the amount we spend per person. Second, the U.S. system is unique in its reliance on private spending.

Quality of Health Care: “Taking the Pulse of Health Care Systems: Experiences of Patients With Health Problems in Six Countries,” is a new study published in Health Affairs. Check out Exhibits 6 and 7, in particular.

Taiwan: A very interesting study, also [in Health Affairs], is “Does Universal Health Insurance Make Health Care Unaffordable? Lessons from Taiwan.” Since it’s predictable that some of the usual suspects will attack my column by citing newspaper articles about runaway costs in Taiwan, it’s particularly interesting to read the paper’s discussion of how “political theater” – overstating the quite mild financial difficulties of the Taiwanese system – was used to sell a modest increase in premiums.

Comparing Total Annual Drug Costs Among Medicare Advantage Plans

Comparing Total Annual Drug Costs Among Several Managed Care Plans
Washington Post
November 15, 2005

Premiums for Medicare Advantage drug plans, shown in parentheses below, range from zero to $85 a month. Premiums aside, total out-of-pocket costs can vary widely, based in part on whether a person is basically healthy, needs only episodic drug treatment or has chronic medication needs.

Please click here for the full chartpack (MS Excel)