The Guardian
July 16, 2003
The oldest and still the best
By Malcolm Dean

In the battle between 10 and 11 Downing Street over the NHS (National Health Service), Gordon Brown has always pushed two arguments for continuing with the current structure: first, that it is even more important today than its launch in 1948 because of its capacity to do so much more; second, because of the spiraling cost of modern medicine, which requires a comprehensive national insurance, such as the NHS, to provide the necessary protection.

If the chancellor had been at an international conference of leading policy makers last week, he would have learned a third reason: the advantages a national health system enjoys over federal or fragmented health systems.

…there are the new initiatives Labour has introduced nationwide: inspectors, systematic assessment of new drugs and equipment, new standards and a modernisation agency. They were described by Sheila Leatherman, an American researcher, who has been looking at their impact as “the most ambitious, comprehensive and intentionally-funded national initiative to improve health care quality in the world”.

But the initiative that generated the most jealousy was the new IT (Information Technology) system that will link all parts of the NHS for the first time: an extra £2.5bn over three years on top of the £2.4bn already planned. Currently there is no coordination among thousands of different systems. This will be a major step towards a crucial goal: better integration of primary care and hospital services.

The US has been trying to do this for years, but has been thwarted by its multiple systems, special interest hospital and insurance lobbies, and deeply fragmented services.

http://politics.guardian.co.uk/comment/story/0,9115,998723,00.html

Comment: It is remarkable what can be accomplished in an integrated system, even with very modest funding. The United States has proven that no amount of funding can correct the dysfunction of a fragmented system designed to meet the needs of special interests such as insurance companies.

Just imagine what 15.2% of the GDP, our current level of health care spending, could do in a universal, integrated, publicly administered system. But then, let’s not merely sit around and contemplate such an altruistic system. Let’s enact it.

(Note: There will be no Quote of the Day messages for the next two weeks while we are in Canada contemplating their altruistic system.)

The Washington Post
July 17, 2003
Editorial
Medicare Robbery

… Medicare’s universality. Many Democrats and some Republicans consider this to be Medicare’s central attraction. It is a program, they say, that gives the same benefits to everybody, rich or poor, and therefore receives universal political support. To preserve this universality, many are fighting against a provision in the House bill, for example, that calls for people with incomes above $60,000 to pay a larger share of their drug bills. They object on the grounds that nobody should be treated differently.

This kind of thinking helps to illustrate what has gone so deeply wrong with the bill, a piece of legislation that seems to be oblivious to its long-term consequences. In practice, the refusal to countenance any means-testing will set in motion a vast transfer of wealth, from the pockets of America’s poorer children — who will eventually be working adults — to America’s wealthier elderly. The desire to maintain political support for Medicare is understandable, but the zealous opposition to any reform that would provide fewer benefits for the rich is profoundly misplaced. It guarantees the swindling of a generation that cannot vote in order to benefit a wealthy constituency that can.

http://www.washingtonpost.com/wp-dyn/articles/A3480-2003Jul16.html

Comment: The editorial staff of The Washington Post supports destroying Medicare as a program of social insurance. Introducing means testing would result in a mass exodus of affluent beneficiaries into the private sector. The traditional Medicare program then would undergo de facto conversion into a welfare-type Medicaid program, but with even fewer benefits, not to mention the inevitability of deficient funding.

The editors support means testing as a method of preventing “a vast transfer of wealth from the pockets of America’s poorer children.” But an equitable system of progressive funding is much more readily assured through the tax system rather than through a fragmented system of differential qualification for benefits. Measures as simple as exempting from the Medicare tax wages that are necessary to meet basic needs would go a long way toward establishing equity.

We cannot afford to abandon the concept of social insurance. In fact, we need to expand it to include all of us.

Health Affairs
Web Exclusive
July 16, 2003
Which Way For Federalism And Health Policy?
What’s right, and what’s wrong, with the federal-state division of
responsibility for health care.
By John Holahan, Alan Weil, and Joshua M. Wiener

Abstract:

The current balance of responsibility between states and the federal government for low-income people’s health coverage has achieved a great deal. It covers many of the neediest people, supports the safety net, responds to emerging needs, and supports some experimentation. However, it leaves more than forty million people uninsured, allows excessive variation across states, places unsustainable pressure on state budgets, creates tension between the two levels of government, and yields too few benefits from experimentation. This mixed record argues for a significant simplification of and increase in eligibility for public programs, with the federal government either providing extra funds to states to meet these needs or assuming full responsibility for insuring the poor.

From the Conclusion:

The current balance of federal and state responsibilities for health insurance coverage has achieved a great deal. But it has failed to insure forty million Americans, it expands coverage in small steps only, and under it no state, much less the nation as a whole, has developed and implemented a comprehensive approach to covering the uninsured. The states are now largely playing defense against an eroding employer base of coverage and a fiscal future in which Medicaid expenditures are likely to grow faster than revenues. There is no reason to believe that the current federal structure will ever yield universal coverage or even come close. Indeed, the late 1990s may turn out to have been the high-water mark for health insurance coverage within the parameters of the current system.

Decades of experience show that major progress in covering the uninsured will require a substantial new investment by the federal government. Heavy reliance upon state financing, on top of large differences in employer coverage, is the primary reason for dramatic interstate variations in coverage and, ultimately, for the large gaps in coverage that remain. While states have substantial financial capacity, that capacity is more limited than that of the federal government; it falls with economic downturns, at precisely the same time that health care needs increase; and its funding sources are less progressive than the federal government’s are, making it harder to redistribute funds to services for low-income families.

The challenge for federalism is to devise a financing role for states that continues to prompt administrative innovation while minimizing the inequities that arise when they must bear an overwhelming fiscal burden. Our two approaches take different paths toward striking this balance. The first retains a large role for states; the second diminishes that role. Both would maximize the base of coverage and provide opportunities for moving beyond it while encouraging innovation and experimentation. Neither approach eliminates interstate variation or the inequities it implies. However, since both start from a higher coverage base, the inequities are more defensible than are those in the current system.

Proposals that require substantial new federal funding could be unrealistic in the current fiscal climate. However, without additional federal funds, the states are unlikely to sustain their current coverage levels, let alone increase them. Changing the balance of federalism involves risk. However, there is no other way to return stability and sustainability to our system so that we can build upon it to greatly reduce the number of uninsured Americans.

http://www.healthaffairs.org/WebExclusives/Holahan_Web_Excl_071603.htm

Comment: Although this article discusses federalism and health policy for low-income individuals, the general concept can apply to our entire health care system. Moderate-income individuals are now faced with inadequate benefits, excessive cost sharing, unaffordable premiums, uninsurability because of preexisting disorders, the burden of cost shifting, and all of the other inequities that characterize our system.

John Holahan and his colleagues explain why major federal funding is essential for state health care programs for low-income populations. The single payer model of reform calls for federal funding with state administration, but for everyone. The concept of federalism in health policy should be expanded to accommodate the single payer model which would address the inequities that we all currently face.

On July 20, “Federalism and Health Policy,” a book by these authors will be available from the Urban Institute Press:

http://www.uipress.org/Template.cfm?Section=Browse_by_Author&Template=/Ecommerce/ProductDisplay.cfm&ProductID=4263

The New York Times
July 14, 2003
Health Costs Soaring, Automakers Are to Begin Labor Talks
By Danny Hakim

Health costs have been soaring for many employers. In other industries, businesses have generally passed along more and more of the costs to workers and retirees, if they maintain benefits at all. Not so in the auto industry, where union leaders have negotiated some of the most substantial medical benefits in the country for their members.

The Big Three and their major suppliers spend some $9,000 and up per active worker annually, according to Mercer Human Resource Consulting…

G.M.’s medical cost is equivalent to about $1,200 a car in this country.

The absence of a national health system in the United States means that the Big Three take on social responsibilities that the governments in Japan and Germany bear. Gary Lapidus, a Goldman, Sachs analyst, referred in his recent report to the Big Three as “H.M.O.’s with wheels” that only happen to make cars.

Uwe Reinhardt, a Princeton University health care economist, calls the Big Three “a social insurance system that sells cars to finance itself.”

“It’s insane to think that a company embedded in a fierce global competition can function as a social insurance system,” he said. “It is a crazy, anachronistic idea. It’s an idea that worked in the 60’s, but lost its validity beginning in the 70’s when the car market became global.”

http://www.nytimes.com/2003/07/15/business/15AUTO.html

Comment: Only the government has the capability of establishing an affordable, equitable, and universal system of social insurance.

For an explanation of why we must replace private health plans with a system of social insurance: https://pnhp.org/publications/private_health_plans_versus_social_insurance.php

The New York Times
July 14, 2003
Health Costs Soaring, Automakers Are to Begin Labor Talks
By Danny Hakim

Health costs have been soaring for many employers. In other industries, businesses have generally passed along more and more of the costs to workers and retirees, if they maintain benefits at all. Not so in the auto industry, where union leaders have negotiated some of the most substantial medical benefits in the country for their members.

The Big Three and their major suppliers spend some $9,000 and up per active worker annually, according to Mercer Human Resource Consulting…

G.M.’s medical cost is equivalent to about $1,200 a car in this country.

The absence of a national health system in the United States means that the Big Three take on social responsibilities that the governments in Japan and Germany bear. Gary Lapidus, a Goldman, Sachs analyst, referred in his recent report to the Big Three as “H.M.O.’s with wheels” that only happen to make cars.

Uwe Reinhardt, a Princeton University health care economist, calls the Big Three “a social insurance system that sells cars to finance itself.”

“It’s insane to think that a company embedded in a fierce global competition can function as a social insurance system,” he said. “It is a crazy, anachronistic idea. It’s an idea that worked in the 60’s, but lost its validity beginning in the 70’s when the car market became global.”

http://www.nytimes.com/2003/07/15/business/15AUTO.html

Comment: Only the government has the capability of establishing an affordable, equitable, and universal system of social insurance.

For an explanation of why we must replace private health plans with a system of social insurance: https://www.pnhp.org/publications/private_health_plans_versus_social_insurance.php

Health Affairs
July/August 2003
Increased Spending On Health Care: How Much Can The United States Afford
By Michael E. Chernew , Richard A. Hirth , & David M. Cutler

Abstract

Perceptions of whether health care cost growth is affordable contribute greatly to pressures for health system reform. In this paper we develop a framework for thinking about affordability, concluding that a one-percentage-point gap between real per capita growth in health care costs and growth in GDP would be affordable through 2075. A two-percentage-point gap would only be affordable through 2039. In either case, the share of income growth devoted to health care would exceed historical norms. The value of care, which determines willingness to pay, and distributional issues are more important than our ability as a society to pay for care.

From the Results:

Despite rapidly growing real (inflation adjusted) health care expenditures, both in absolute terms and as a percentage of GDP, income growth has been sufficient to allow substantial growth in non-health care spending as well.

This is a message that can easily be lost when examining time trends in the percentage of GDP devoted to health care. Such a measure masks the overall increase in GDP over time. In fact, in each decade a relatively small share of the increase in inflation-adjusted income was devoted to health care. For example, in the 1980s (the decade that saw the highest share of income growth spent on health care), real health care spending per capita rose by nearly 70 percent, but this growth consumed only about one-quarter of the increase in real income per capita. That is, the substantial growth in health spending during the 1980s did not prevent three-quarters of real income growth from being spent on goods other than health care.

From the Discussion:

Health care spending appears once again to be on an upward trajectory. The resulting concern has generated considerable debate. Our analysis suggests that the economy could sustain a differential of one percentage point between growth of real per capita health care costs and growth of GDP well into the future. However, we believe that it is important to distinguish between spending that we cannot afford to pay for and spending that we are unwilling to pay for – a difference between unsustainable and unwilling to sustain. The former approach emphasizes a need to curb spending, whereas the latter phrasing emphasizes the extent to which the extra spending can be justified by extra value received relative to the value of non-health care services that could otherwise be consumed.

… although the rise in health care costs may be affordable at the national level, it is important to recognize the distributional consequences of rising health care costs. What is affordable on average may not be affordable to all segments of society. Rising health care costs may contribute to falling rates of health insurance coverage and reductions in access to care. The appropriate response requires discussion about the ramifications of the lack of coverage and the merits of subsidizing insurance or care for various segments of the population. Discussion of society’s willingness to pay must recognize that, in part, this will reflect the willingness of some people to pay for care used by others.

http://www.healthaffairs.org/1130_abstract_c.php?ID=http://www.healthaffairs.org/Library/v22n4/s9.pdf

Comment: Do we have the capability of increasing funding for health care? This study demonstrates that significant increases in health care funding are sustainable while still allowing substantial growth in non-health care spending as well. Yes, we can afford to increase health care spending dramatically.

The real questions are whether we value health care enough to be willing to pay for it, and whether we value health care not only for ourselves and our families but also for our fellow citizens. If we do, then distributional issues become paramount since we would have to establish an equitable system of funding care.

As a society, we can afford comprehensive health care for everyone. That is no longer in dispute. But are we ready to end the distributional barriers to care by establishing an equitable system of social insurance?

The New York Times
July 8, 2003
Plans Improve Federal Workers’ Drug Benefits
By Robert Pear

The House is expected this week to pass legislation ensuring that federal employees, including members of Congress, will have prescription drug benefits better than those available through Medicare when they retire.

The new House bill says drug benefits for civilian federal retirees, who already have drug coverage, cannot be reduced to the level proposed for Medicare. An identical bill has been introduced in the Senate.

http://www.nytimes.com/2003/07/08/politics/08MEDI.html

The Washington Post July 6, 2003 Medicare Bills Don’t Mimic Model Coverage Not as Comprehensive as Federal Employees’ By Ceci Connolly

In the recent debate over Medicare drug coverage, Sen. Mark Dayton (D-Minn.) challenged senators to match their words with deeds. He offered an amendment requiring lawmakers to lower their drug coverage to the level provided in the final Medicare legislation.

“I would rather bring everyone else up,” he said, “but what is fair for them is fair for us.”

The Senate approved his amendment 93 to 3. But within a day, several senators told the newspaper Roll Call it was a symbolic vote that would be overturned in negotiations with the House.

Explained Sen. Rick Santorum (R-Pa.): “Most members saw this as demagoguery. And we weren’t going to condone it publicly by taking it seriously. So we all voted for it.”

http://www.washingtonpost.com/wp-dyn/articles/A13558-2003Jul5.html

Comment: Sometimes it is embarrassing to see how obscene democracy-in-action can be. Shouldn’t we seriously consider replacing many of our current politicians with true advocates of democracy?

The Washington Post
July 6, 2003
Four Steps to Better Health Care
By Henry J. Aaron and Stuart M. Butler

For at least 20 years, commentators have bewailed the lack of adequate health insurance among growing numbers of Americans. For an even longer time, analysts and experts have warned that health care costs were rising unsustainably. Yet no consensus has formed on what to do about these twin adversities. Conservatives propose encouraging individuals to buy private health insurance and placing more reliance on market forces. Liberals continue a struggle initiated during the New Deal to provide publicly financed health coverage. Neither has persuaded the other.

The result: a political standoff that has blocked an honest evaluation of any major approach and has left everyone frustrated. Meanwhile, the ranks of the uninsured swell, health costs soar, and states and businesses cut benefits.

It seems clear to us that the political logjam in Washington will continue unless we take a different approach. We believe that approach involves exploiting the unique strength of American federalism. Specifically, we urge Congress to authorize individual states to carry out any of a broad range of strategies to reduce the number of uninsured people within their borders. And Congress ought to reward states with grants sized according to their progress toward agreed targets.

… we are certain that health policy cannot improve unless it moves off dead center, where it has been stuck for a generation as more Americans have lost coverage and costs have exploded.

Henry J. Aaron is senior fellow in economic studies at the Brookings Institution. Stuart M. Butler is vice president for domestic policy studies at the Heritage Foundation.

http://www.washingtonpost.com/wp-dyn/articles/A10659-2003Jul4.html

Comment: Using American federalism as a model of reform is certainly not a new concept. In recent years it has been supported by members of the academic community, including Theodore Marmor and Jonathan Oberlander, and by politicians, including Paul Wellstone and John Tierney.

Like every other political solution, details matter. Can this serve as an avenue for reform which would truly bring together individuals with views as diverse as Brookings’ Henry Aaron and Heritage’s Stuart Butler? Is their concept of a state-federal approach a model of consensus on which most of us can agree, or is it just another “strange bedfellows” attempt to twist rhetoric into creating the appearance of an acceptable compromise? Well, let’s look at the four steps that they propose.

(1) Congress would specify goals, which would include reducing the number of uninsured people over several years. … Congress would have to define a minimum level of coverage to classify a person as “insured.” … such standards should sustain the Medicaid entitlement… Defining what constitutes insurance for others — those not entitled to Medicaid and lacking private or public health coverage — would be controversial and difficult, because reasonable people disagree passionately on whether good insurance must provide comprehensive coverage or simply less-expensive catastrophic protection, with individuals being subject to price incentives for other costs. … One way of avoiding a political impasse on this issue might be to allow some variation in basic benefits among states, provided the plans are of equivalent value.

(2) … Congress would pass a “federal policy toolbox” of options that would be available to states. This menu would include tax credits to individuals for the purchase of group insurance or to businesses for mandatory employment-based coverage; Medicaid or other public program expansions; individual mandates; plans that focus on children or the near-elderly; so-called association plans; or an expansion of the Federal Employees Health Benefits Program to nonfederal workers.

(3) … states willing to participate could choose one or more items from this menu or propose their own strategies that they found suitable to the needs and preferences of state voters, within the minimum federal standards. Single-payer plans could be tested on a limited scale, avoiding a clash over the law governing large corporate plans.

(4) Congress would commit in advance to provide grants to each participating state in addition to current federal funding, based on the state’s progress toward the agreed goals.

So is this a consensus or a compromise? Unfortunately, it is neither. It is a capitulation to the conservative policymakers who are currently in charge of the nation’s policy agenda.

First, allowing “variation in basic benefits” would result in both financial insecurity and impaired access for those with the greatest needs, defeating the very purpose of insurance.

Second, the “federal policy toolbox” contains primarily a list of options strongly supported by conservative organizations such as the Heritage Foundation. They are mechanisms that perpetuate inequities in health care and fail to control the administrative excesses and other waste in our system.

Third, the token acknowledgement that a single payer plan could be tested is an empty promise since the restrictions (limited scale testing, and exempting ERISA-protected plans) do not meet, in any way, the definition of a single payer plan. Testing the model proposed would certainly result in a failed experiment. But then applying the false label of “single payer,” and then dismissing the single payer concept forever, would certainly help to advance the agenda of the conservatives.

Even the fourth element of their proposal, federal funding, risks underfunding of health care if the concept of “grants” were to be interpreted as “block grants,” allowing the federal government to reduce its participation to a defined contribution model.

Just because Aaron is willing to use the federalist model to let the conservatives take control of the reform process, does this mean that Marmor, Oberlander, Wellstone, and Tierney are wrong? Absolutely not! Single payer reform may very well be initiated on the state level, just as Canada established the first single payer program in a single province (Saskatchewan). Any state that decides to adopt a single payer system would require, at a minimum, that federal tax funds already dedicated to health care would need to be folded into the state health care budget. That would require enabling federal legislation, a federalist approach.

Two pathways to single payer reform are possible. Much preferred would be a single, national program that would provide everyone with affordable, comprehensive care. Even though we have been at a political impasse for decades, we must not let up on our efforts for real reform. In fact, we must intensify them. But in the meantime, we can also continue our efforts to establish single payer systems within individual states. We will need a federal-state partnership, and even the conservatives support the concept that states should have control over their own matters, including health care.

Legislation supporting a federal-state partnership should require that federal funds be used appropriately to ensure universal coverage with an adequate benefit package, but it should not prohibit the state from allocating those funds in a manner that reduces administrative waste and improves equity. A bona fide single payer program must be allowed as an option for the individual states, if not a mandate.