PNHP

The reform movement gains more credibility

The reform movement gains more credibility

San Francisco Chronicle
April 27, 2003
The long road to a national health plan
By Kevin Grumbach and Philip R. Lee **

Most experts concede that the simplest way to guarantee coverage for all Americans is to make every resident automatically eligible for coverage under a single public plan, avoiding the chaos and transience of eligibility linked to specific employers or degrading and cumbersome “means testing” of family income. Single-payer systems also have appealing economic virtues, operating with far lower administrative overhead costs than private insurance and exercising greater care to rein in health care inflation.

California recently contracted with the Lewin Group, a private independent consulting firm, to analyze 10 alternative proposals to increase coverage. The firm concluded that pay-or-play models, which require employers to finance coverage, would increase state health care costs by $2 billion, while a single- payer plan could reduce overall costs by $7 billion — and provide comprehensive coverage to all Californians.

The single-payer plan would also trim $18 billion in unnecessary administrative costs and excessive prices for prescription drugs and medical supplies — more than enough to afford universal coverage.

But policy logic has never been sufficient to ensure political victory for single-payer proposals. Big Government and Big Taxes are not attractive brand labels in the current emporium of electable ideas.

The need for a universal health care program and health security for all Americans is rightfully returning to the forefront of policy debate.

A recent issue of the American Journal of Public Health proposed several benchmarks for judging reform proposals: universal and equitable coverage, comprehensive benefits and quality health care, affordable and equitable financing, simplified administration and sensibly organized work, accountability and a strong public health system.

The hard work ahead is to create the political change that can implement a universal health care plan that would achieve these goals.

**Dr. Kevin Grumbach is a professor of family and community medicine at UCSF and a founding member of the California Physicians Alliance. He practices family medicine at San Francisco General Hospital. Dr. Philip R. Lee, who served as assistant secretary of health in the Johnson and Clinton administrations, is the former chancellor of UCSF and was founding director of UCSF’s Institute for Health Policy Studies, where he is a senior scholar.

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/04/27 /IN105921.DTL

Comment: There is no more credible source on health policy than Dr. Grumbach and Dr. Lee. It is time for us to end the political stalemate that has allowed the perpetuation of profound health care injustices. Let’s now turn to leaders like Dr. Grumbach and Dr. Lee and get on with the very serious business of truly reforming our health care system.

Health Care Rally Protests Lack Of Support

By THOMAS D. WILLIAMS, Courant Staff Writer

At a rally of medical students, doctors and social activists near the steps of the state Capitol in Hartford on Sunday, the frustrated refrain was: political leaders have abandoned the poorest working-class families by failing to support universal health care.

In the past two decades, said Jean Rexford, a human rights activist, the conservative political right has successfully lobbied Democratic and Republican politicians to essentially gut health care funding for the poor.

And, she added, the state’s political climate has shifted so far to the conservative right, even today with a Democrat-controlled General Assembly, that health becomes a victim – especially for underprivileged children and pregnant women.

Dr. John R. Battista, president of the Connecticut Coalition for Universal Health Care, said the state’s health care system is discouraging its poorest residents from seeking care and few political leaders are doing anything to help them.

Battista ticked off figures about the state:

Those lacking basic health insurance include 29 percent of non-elderly residents making substantially less than the federal poverty guidelines – $12,120 for a household of two people – as well as 24 percent of non-elderly Hispanics and 17 percent of non-elderly blacks.

Health care costs are the No. 1 cause of personal bankruptcies.

And, 25 percent of state residents are locked into jobs they want to escape, simply because they would lose health care benefits if they changed employment.

Sunday’s rally attracted 50 to 60 people and was organized by the American Medical Student Association, which has 40,000 members nationwide and about 300 in Connecticut, mostly from Yale and the University of Connecticut’s medical schools.

Lauren Oshman, the association’s national president and a senior medical student at Baylor University, said medical students are more active in supporting universal health care than doctors and nurses. Doctors are generally more concerned with their rising medical malpractice insurance costs, she said.

In Hartford, said Dr. Bruce Gould, director of the Burgdorf Fleet Health Center, if conditions get worse, “people will be dying in the streets.” Communicable diseases like AIDS will intensify in the general population, he said.

The center handles 30,000 to 40,000 office visits a year at its clinic on Coventry Street in the city’s North End. Gould said staff members have to scrounge to get the money and the medicine to treat these patients’ critical illnesses.

Gould said he is troubled by politicians who insist the working poor exploit government funding for health care by overusing services or medications; or that cutting funding for preventive medicine is a sound way to control state or federal budgets.

In fact, he explained, many working poor are reluctant to use the health care system because they need what money they would spend on it for essentials like food and rent.

And, Gould added, if state and federal politicians ensure more funding is available for preventive medicine for the poor, millions of dollars can be saved in public subsidies for hospital emergency room visits and in worker productivity.

“Any way you look at it, either the saving the dollar way, or on the humanistic side of it,” Gould said, “a healthy population is a productive population.”


http://www.ctnow.com/news/local/hc-rally0428.artapr28,0,6504197.story?coll=hc-headlines-local

Universal care is nowhere to be found

Jeff Stryker
Sunday, April 27, 2003
©2003 San Francisco Chronicle

One in seven citizens in the world’s richest country is without health insurance.

The uninsured are not some wretched underclass, some marginalized group with whom policymakers and opinion leaders somehow find it impossible to identify.

They are, for the most part, middle class. More than 80 percent of the uninsured live in households with either a full-time or part-time worker. A third live in families with household incomes of $50,000 or more.

After a couple of years of improvement in the late 1990s, the number of the uninsured has begun to rise again, with a vengeance. Spurred by the sour economy, the ranks of the uninsured swelled to more than 41 million last year. They are neither old or disabled enough for Medicare nor poor enough to qualify for Medicaid.

The lack of universal insurance coverage is only the most evident flaw in a vastly complex, wildly inefficient health care system that would make Rube Goldberg proud.

“If we had set out to design the worst system we could imagine, we couldn’t have imagined one as bad as we have,” says Marcia Angell, former editor of the New England Journal of Medicine.

Perhaps the system’s most fundamental flaw involves the uneven structure of health insurance. Since World War II, when health insurance costs, designed to be routed through large employers, were exempted from wage controls, most private health insurance comes through a job.

Those who receive health insurance through the workplace enjoy a tax break to the tune of $141 billion a year. The unemployed and those who work for smaller employers who don’t provide coverage must pay for coverage out of their own after-tax income.

Even those with health coverage through the workplace are increasingly burdened by high copayments and coverage restrictions. Princeton health economist Uwe Reinhardt calls the coverage many workers now have “unsurance” because they are unsure what it covers today and unsure what it will cover next month.

With so many lacking insurance, and those lucky enough to have coverage worried they may be a mere pink slip away from losing it, why so little public agitation for universal access?

According to a survey conducted by National Public Radio, the Kaiser Family Foundation and the Kennedy School of Government at Harvard, when asked to name the two most important problems facing the nation, only 10 percent mentioned health care, ranking it behind problems such as the economy, terrorism, war and crime. Yet only 1 in 5 of those surveyed thinks the health care system works pretty well.

“However, it does not appear that people’s worries and experiences are causing them to push for sweeping change in the health care system,” the survey’s authors concluded.

The researchers asked respondents about a variety of measures to expand access. The survey results showed, “A majority of the public favors no single option. This fact, combined with the cost and winners and losers involved in any proposal, helps explain why consensus is often hard to reach dealing with issues of expanding health coverage.”

The reluctance to embrace proposals for wholesale change comes in part because the picture is so complicated. Lacking health insurance does not necessarily mean going without care entirely. Federal law prohibits hospital emergency rooms from turning away sick people, until they are stabilized. A variety of free and subsidized clinics helps fill in the gaps, along with heaps of uncompensated care. (A recent study by the Urban Institute, a Washington, D.C., think tank, put the price tag for uncompensated care in 2001 at $35 billion, 85 percent of which came from public sources.)

Well, if people are getting care anyway, why make a big fuss about who is insured or not and who pays? As it turns out, health insurance makes a huge difference in who gets care and the type of care they get.

The title of a report issued last year by the Institute of Medicine summed up the situation — “Care Without Coverage: Too Little, Too Late.” The summary of 130 research studies found that the uninsured are likely to be sicker and die sooner than their insured counterparts.

Even when admitted to the hospital, say after an auto accident or a heart attack, the uninsured receive fewer diagnostic and treatment services. The uninsured receive less frequent cancer screenings, resulting in delayed diagnoses and premature mortality. Professionally recommended standards for managing chronic diseases are often forgone with tragic consequences, such as the timely eye and foot exams that can help avert blindness and amputations in persons with diabetes.

The inefficiencies of the system reverberate in ways that have consequences,

not just for uninsured folks, but for the community at large. As Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, said in releasing the study on uncompensated care, “Uncompensated care is not a substitute for insurance. We are paying for a substantial amount of care for a large uninsured population without a guarantee of coverage. The implication is that we pay for care in the least efficient way possible — after people get sick and need emergency or hospital care.”

Emergency departments in many American cities are becoming so crowded that diversion — rerouting patients because an ER is full — is a perennial problem. As an article in the Annals of Emergency Medicine put it, “Unless the problem is solved in the near future, the general public may no longer be able to rely on emergency departments for quality and timely emergency care, placing the people of the country at risk.”

The Bush administration proposes implementing tax credits to help more people pay for health insurance, tinkering with Medicaid and offering seniors prescription drug benefits in exchange for enrolling in private Medicare plans.

Ron Pollack, executive director of Families USA, said the president’s health care proposal is “like throwing a 10-foot rope to a person in a 40-foot hole.”

Well, then, who has a 40-foot rope?

Quixotic advocates of single-payer, universal coverage schemes are still proposing wholesale reforms. More calls have been heard recently for employer coverage mandates.

Perhaps, for the first time since then-first lady Hillary Rodham Clinton took on the health care system (and met her match), universal coverage and access may truly be up for debate.

Jeff Stryker is a San Francisco writer specializing in medical ethics. He is working on a book about sperm banking.

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2003/04/27/IN96867.DTL

California Dreamin’

SFGate.com
April 26, 2003
Despite budget woes, lawmakers trying to deal with uninsured
By Steve Lawrence, Associated Press Writer

…California legislators have introduced at least five bills designed to reduce the number of uninsured.

They range from a measure to increase the number of people covered by the state’s Healthy Families program to a bill that would set up a state-run universal health care system with an elected commissioner.

In between are bills that would require all or most employers to offer their workers health coverage.

The bill that seems to have the best chance of passing is a measure by Senate President Pro Tem John Burton, D-San Francisco, and Sen. Jackie Speier, D-Daly City, who chairs the Senate Insurance Committee.

Not only is it co-authored by Burton, who is generally considered to be the Legislature’s most influential member, it has the support of labor leaders and the California Medical Association, a powerful physicians’ group. Art Pulaski, executive secretary-treasurer of the California Labor Federation, predicts it will also win some business support.

Commonly known as a “pay or play,” it would require employers to pay at least 80 percent of the cost of a health insurance policy for their employees, either by buying the policies themselves or contributing to a state fund that would provide coverage.

Sen. Sheila Kuehl, D-Santa Monica, says the ultimate solution is the so-called “single payer” approach in her bill, which would create one state fund to provide health insurance for all Californians.

It’s the only plan that would cover all Californians and actually cut health care spending by reducing administrative costs and eliminating health care profits, Kuehl says.

The Lewin Group, a consulting firm based in Falls Church, Va., looked at nine health insurance options for the state Health and Human Services Agency in 2002, including three single-payer proposals, and concluded the single-payer approach could save the average family up to $813 a year.

But single-payer proposals have been tough to enact. California voters rejected one in 1994.

Voters tend to oppose single payer plans because they take them from their current insurance to something unknown, says John Sheils, a vice president with the Lewin Group.

But Kuehl says she’ll keep bringing it back as many times as it takes. “It’s truly the only plan that makes sense for California.”

On the Net: Read the bills, SB2, AB30, SB921, AB1527, AB1528, at www.senate.ca.gov and www.assembly.ca.gov

http://www.sfgate.com/cgi-bin/article.cgi?f=/news/archive/2003/04/26/state14 13EDT0073.DTL

Lack of a single payer system kills patients

Los Angeles Times
April 23, 2003
County-USC Doctors Say Delays Fatal
By Tracy Weber and Charles Ornstein

Emergency room patients regularly wait as long as four days for a bed at Los Angeles County-USC Medical Center, and some die before receiving critical medical treatment, according to sworn declarations by the hospital’s own doctors.

…the case of a 40-year-old woman with an arterial blockage in her lungs who was kept in the emergency room for more than 30 hours because an intensive care unit bed was not available. She suffered cardiac arrest and died.

…another case, doctors couldn’t treat a patient with shortness of breath quickly enough. “This patient died before we were able to help him…”

…an ER in which as many as 156 patients were crowded into 43 treatment areas, exams were conducted in the hallways, and there was “no such thing” as patient privacy.

“Imagine trying to maintain your dignity while using a bedpan in a hallway lined with stretchers.”

“We often have to squeeze three patients, both men and women together, into one booth designed to hold two. The lights are never turned off, the noise level is high, there are no facilities to wash and there is no privacy.”

…noncritical patients are waiting 16 hours or more just to be treated by a doctor in County-USC’s emergency room. If they need a bed upstairs, some are forced to wait a day or longer.

According to the county Emergency Medical Services Agency, County-USC asked ambulances to stay away nearly 75% of the time last year because it had nowhere to place patients. Paramedics who nonetheless deliver patients often must sit and wait for hours to transfer the patient from their gurney to one at the hospital.

Those who need immediate treatment for a fractured pelvic bone can wait up to two weeks for care. And patients who need surgery for such injuries as repeated shoulder dislocations could wait years.

…a 75-year-old woman admitted with a broken hip had to wait a week for surgery because no bed was available. She developed a blood clot from lying prone for so long and died despite the surgery.

…a 30-year-old pregnant woman with gallstones was forced to wait 10 days for surgery. She developed an infection of the gall bladder, which spread to her blood. She lived; her baby died.

In January, the Los Angeles County Board of Supervisors voted to authorize the closure of the first 50 beds at County-USC, along with the closure of Rancho Los Amigos National Rehabilitation Center in Downey. The remaining 50 beds are scheduled to be cut next year.

http://www.latimes.com/news/printedition/front/la-me-usc23apr23002425,1,1172 782.story?coll=la%2Dheadlines%2Dfrontpage

Comment: We’ve all heard many times the following generic quote. “The United States has the greatest health care system in the world, and we don’t want any part of rationing like they have in Canada and England.”

Well we do have the greatest resources, far more than enough to prevent inhumane rationing of urgent care. But we have the worst system of funding care, which results in health care conditions far worse than those in nations with less health care spending but with greater equity in resource allocation.

If we had a single payer system in the United States the horror story above would never have been written.

Mandating private plans increases costs

The New York Times
April 24, 2003
Proposals Attach a Price to Universal Health Care
By Milt Freudenheim

…a foundation (Commonwealth Fund) proposed spending $90 billion a year to cover almost every uninsured American.

http://www.nytimes.com/2003/04/24/national/24CARE.html

Washington Post
April 24, 2003
Gephardt Health Plan to Cover All
By Dan Balz

Rep. Richard A. Gephardt (Mo.), in a bid to set the Democratic agenda for the 2004 presidential campaign, proposed today an ambitious plan to provide access to health insurance to all Americans, at an initial cost of about $210 billion a year…

http://www.washingtonpost.com/wp-dyn/articles/A27256-2003Apr23.html

Tri-Valley Herald
April 24, 2003
High cost burdens insurance proposal
By Rebecca Vesely

A plan hatched by Blue Shield of California requiring health benefits for all residents would cost taxpayers and employers an additional $7.8 billion (for California), according to a new study.

Bruce Bodaken, chairman and CEO of Blue Shield of California, announced the findings…

http://www.trivalleyherald.com/Stories/0,1413,86~10669~1347104,00.html

Comment: These proposals have helped to revive discussion of solutions for the problem of the uninsured. These proposals build on the current system which is highly dependent on private health plans. These proposals significantly increase costs, as do all proposals that perpetuate the role of private health plans.

There is virtually universal agreement that cost containment must be a goal of reform. The only proposals that promise cost containment while providing universal coverage are those which eliminate the wasteful private plans, replacing them with a single, publicly-administered program under a global budget.

We can understand the political reasons for Richard Gephardt’s proposal, the economic reasons for Bruce Bodaken’s proposal, and the reasons for Commonwealth Fund’s attempt to achieve consensus amongst all players with their diverse interests. But isn’t it time to concentrate instead on a model that would provide truly affordable health care coverage for everyone?

Health insurance underwriting cycle

MILLIMAN, USA
April 10, 2003
Health Insurance Underwriting Cycle Effect on Health Plan Premiums and
Profitability
By Richard Kipp, M.A.A.A., John P. Cookson, F.S.A., & Lisa L. Mattie, R.N.

Health care cost trends are not the only factor influencing the change in health insurance premiums. Competition, legislation, regulation and difficulty predicting future costs are all contributors to the phenomenon called the underwriting cycle-a repeating pattern of gains and losses within the insurance industry. As the cycle plays out, expected trends and the associated premium increases tend to go above or below the actual rate of change in underlying health care costs. Today, as the cycle approaches another highpoint, we see improved profitability of Plans as premium growth exceeds the growth in the costs of health care claims for Health Plan enrollees.

Today as premium growth again climbs into the double-digits, it is important to understand the role this cycle plays as we formulate a policy response to current trends.

This report first discusses the underwriting cycle in general terms, and then describes some of the actions and reactions that Health Plans’ typically exhibit at various points during a cycle. Lastly, the report discusses specific events of the 1990s that may have contributed to the pattern of insurance company profits and acted to exaggerate upward and downward swings in premium growth-swings that went well above or below the actual changes in underlying health care costs.

http://www.hospitalconnect.com/aha/press_room-info/content/MillimanReport030410.pdf

Comment: This report, prepared by a leading consulting firm for the health care industry, provides a clear description of the underwriting cycle. It is important to understand why we have intermittent periods of excessive premium increases interspersed with solvency issues that continue to threaten the stability of the health care system.

This is yet one more reason why we should abandon the use of “market forces” to control health care funding in the United States, and, instead, adopt a rational, single payer system of funding care.

Will the public ever understand the complexities of reform?

National Public Radio/Kaiser Family Foundation/Kennedy School of Government
National Survey of Americans’ Views on Taxes
April 2003

14. And now I want to read a brief list of terms that are related to taxes and the federal tax system. For each, please tell me if you have heard the term and know what it means, have heard the term but don’t know what it means, or have not heard the term.

a. Progressive taxes

21% – Heard the term and know what it means
23% – Heard the term but don’t know what it means
56% – Have not heard the term

http://www.kff.org/content/2003/3340/NPRTaxSurveyToplines.pdf

Comment: One of the advantages of a single payer system is that it would be equitably funded at least partially through progressive taxes. This is one of the many messages that we must deliver to the American public before we can expect a grassroots effort to provide political traction for our proposal. If the public doesn’t even understand the concept of progressive taxation, how can we ever expect them to understand the complexities of health care reform?

We have a lot of work to do.

Dr. Dean's Dr. Dynasaur

Brattleboro Reformer
April 19, 2003
Dr. Dynasaur cost hikes worry some
By Toby Henry

Local legislators on Friday voiced concerns about proposed increases to monthly premiums, as high as 400 percent in some cases, for families enrolled in the Dr. Dynasaur program.

Dr. Dynasaur, a Medicaid-based program introduced in 1989 to help extend preventive care to children under 18 and pregnant women, has monthly premiums ranging from $20 to a high of $50 for qualified families. According to the Office of Vermont Health Access, approximately 56,000 children and expectant mothers are enrolled in the program across the state.

Under the proposal, premiums for enrollment in the Dr. Dynasaur program would increase from $20 to $81 per month for families with incomes are between 185 and 225 percent of the federal poverty line.

Based on a study from the Vermont Public Interest Research Group, an estimated 19,000 people could leave Dr. Dynasaur and other health-care programs if the premiums go up.

“That’s not what we should be doing if our goal is to provide Vermonters with accessible, quality, affordable health care,” (Rep. Michael) Obuchowski said.

“What’s happening now is that there’s so many profit centers (in the health-care system) and so many special interests protecting those profit centers that change is difficult,” he said.

“What is happening is that as our economy contracts, people who have health insurance from their employers have to pay more in status-quo situations. It’s a situation that, cost-wise, to everyone — employers and employees alike — is out of control. The system is broken, but we’re only treating the symptoms.”

A long-term solution to the health-care concerns of all Vermonters, Obuchowski said, is the passage of a statewide single-payer health care bill.

http://www.reformer.com/Stories/0,1413,102~8862~1336550,00.html

Comment: Vermont Gov. Howard Dean, in his campaign for the Democratic nomination for president, cites the “successful” Dr. Dynasaur program of his state as part of his proposal for health care coverage for everyone. As with other programs designed for low-income individuals, Dr. Dynasaur is vulnerable to policy changes that force beneficiaries out of the program and into the ranks of the uninsured.

Rep. Obuchowski is correct. Our broken system needs to be replaced with a single payer program if we wish to assure permanent, affordable access to comprehensive care for everyone.

Dr. Dean’s Dr. Dynasaur

Brattleboro Reformer
April 19, 2003
Dr. Dynasaur cost hikes worry some
By Toby Henry

Local legislators on Friday voiced concerns about proposed increases to monthly premiums, as high as 400 percent in some cases, for families enrolled in the Dr. Dynasaur program.

Dr. Dynasaur, a Medicaid-based program introduced in 1989 to help extend preventive care to children under 18 and pregnant women, has monthly premiums ranging from $20 to a high of $50 for qualified families. According to the Office of Vermont Health Access, approximately 56,000 children and expectant mothers are enrolled in the program across the state.

Under the proposal, premiums for enrollment in the Dr. Dynasaur program would increase from $20 to $81 per month for families with incomes are between 185 and 225 percent of the federal poverty line.

Based on a study from the Vermont Public Interest Research Group, an estimated 19,000 people could leave Dr. Dynasaur and other health-care programs if the premiums go up.

“That’s not what we should be doing if our goal is to provide Vermonters with accessible, quality, affordable health care,” (Rep. Michael) Obuchowski said.

“What’s happening now is that there’s so many profit centers (in the health-care system) and so many special interests protecting those profit centers that change is difficult,” he said.

“What is happening is that as our economy contracts, people who have health insurance from their employers have to pay more in status-quo situations. It’s a situation that, cost-wise, to everyone — employers and employees alike — is out of control. The system is broken, but we’re only treating the symptoms.”

A long-term solution to the health-care concerns of all Vermonters, Obuchowski said, is the passage of a statewide single-payer health care bill.

http://www.reformer.com/Stories/0,1413,102~8862~1336550,00.html

Comment: Vermont Gov. Howard Dean, in his campaign for the Democratic nomination for president, cites the “successful” Dr. Dynasaur program of his state as part of his proposal for health care coverage for everyone. As with other programs designed for low-income individuals, Dr. Dynasaur is vulnerable to policy changes that force beneficiaries out of the program and into the ranks of the uninsured.

Rep. Obuchowski is correct. Our broken system needs to be replaced with a single payer program if we wish to assure permanent, affordable access to comprehensive care for everyone.

Blue Cross of California – How much profit?

Knox-Keene Health Plan Expenditures Summary
FY 2001-02
Published by the California Medical Association

This is the tenth report published by the California Medical Association in regard to Knox-Keene Health Plan expenditures. The California Medical Association believes that the information provided in this report should be published annually by the Department of Managed Health Care, but, to date, they have chosen not to do so. Thus, we will continue to provide this information to the public.

This report is a compilation of expenditure data reported from managed care plans to the Department of Managed Health Care, and from reports provided by publicly traded plans to the U.S. Securities and Exchange Commission (10-K and Annual Reports).

Blue Cross of California:
% Revenue – Medical Care: 78.9%
% Revenue – Administration: 13.8%
% Revenue – Profit/Income: 7.3%

http://www.calphys.org/assets/applets/0102_knox_keene_report.pdf

Comment: Although this is a report of health plan performance in California, WellPoint, the parent company of Blue Cross of California, has been attempting to acquire significant market presence in other states. Also, the business success of Blue Cross of California has led other insurers to attempt to emulate its performance by adopting some of its innovative approaches to health care coverage. All of us should be concerned about the activities of Blue Cross/WellPoint.

Of the major insurers in California, Blue Cross has the lowest medical loss ratio. Since this means that they spent the least on patient care, it is very good news for Wall Street, but not so good for those paying the premiums and for those receiving health care services. Compared to participants in other plans, Blue Cross purchasers and beneficiaries are paying more and/or receiving fewer benefits.

The Blue Cross profit is listed as 7.3%, but does this really represent their true profit? A more accurate assessment of profit can be determined if we look at their actual business model. They administer the pooled funds designated for health care. These are not their funds, but they belong to the payers and beneficiaries. Since their business model is administration, their funds (revenues) are the administrative costs plus the profits that they assess for managing the risk pool.

The funding of Blue Cross’ administration is quite high when compared to public programs. 13.8% of the risk pool is much more than Medicare’s ~3%. But Blue Cross is a for-profit corporation, and, from a business perspective, they should be doing all they can to increase the size of their own entity. Growth is a fundamental goal in any business, and more growth in administration equates with the growth of Blue Cross’ business model. As long as expanding their administrative business can increase profits, they should make every effort to do so.

The size of their business then equates with 13.8% of the risk pool. But the 7.3% profit is not the profit on the size of their business but it is a “profit” expressed as a percentage of the entire risk pool, 78.9% of which is not their funds. That 7.3% profit, when expressed as a percent of their administrative revenues (13.8% of the pool), is actually a return of 52.9% on their net administrative revenues (which is 34.4% of their gross revenues, administrative costs and profits combined). No wonder WellPoint is the darling of Wall Street.

The way we fund health care is irrational. We select an industry that concentrates on its own growth of administrative functions, and reaps a handsome profit in doing so. This diverts tremendous resources from the actual health care delivery system, which is particularly tragic considering that the unmet need is so great.

Should we blame the insurance industry for this waste? Of course not. They are doing precisely what any business should be doing – growing in size, maximizing revenues, and minimizing expenditures that do not increase their revenues, thereby creating maximal profit. For any business to do less would be irresponsible.

The blame lies with the policymakers. Why are they perpetuating policies that are designed to protect this industry that wastes so much in resources, when they should be developing policies that optimize the use of our resources for patient care? Not only does this industry waste resources, but it also failing in its primary responsibility to pool risk, as it shifts risk to others, thereby perpetuating the inequities in our system, leaving high-risk and low-income individuals without adequate protection. We are paying far, far too much for a very lousy job.

We need to communicate to our policymakers the fact that we need to dismiss this egregiously wasteful, private bureaucratic goliath and replace it with an equitable, affordable, publicly-administered system of comprehensive coverage for everyone. Should our policymakers remain unresponsive, then it would be our obligation to replace them with individuals that will act in the interests of patients. To do less would be to fail in our own responsibilities to make every effort to ensure the best health care for our families, friends, neighbors, and ourselves.

Emily Friedman

Health Forum Journal
Spring, 2003
Rocket Science
By Emily Friedman

The health care system makes patients feel powerless, and it makes many of those who work within it feel exactly the same way. But until we change the infrastructure and the corporate culture of health care, until the fiefdoms and the turfs and the lust for money and the competition and the power positions are broken down, until teamwork replaces individual arrogance and patients replace power mongers as the focus of the system, innocent people will continue to be terrified, humiliated, injured and killed unnecessarily–not because of any individual wrongdoing, but because the system does not and cannot serve them well. One might say the same of a dictatorship or a prison system, but we cannot allow it to be said about our work, our hopes, our goals. We can do better than that, and we must.

http://www.hospitalconnect.com/healthforumjournal/jsp/voices.jsp?voicepic=emily_pic