The Washington Post
March 14, 2003
Editorial

Medicine for Medicare

DO NOT BE MISLED by the loud noises coming from congressional Democrats and health care activists. The Medicare modernization plan the president has finally presented to Congress, after much hemming and hawing, is not radical. It does not force anyone to leave the current system. It does not make anyone switch doctors. It adds $400 billion over the next 10 years to pay for extra drug benefits, a number far higher than some have mentioned. Unlike leaked versions of the administration’s proposal, this one does not even provide full details of what the reform would look like, instead leaving Congress to fill in many of the blanks. As a result, it’s difficult to say whether the proposal would produce much change.

In essence, it adds options, instead of removing them. For those who want it, traditional “fee-for-service” Medicare would be preserved more or less intact, with the addition of a prescription drug discount card as well as some catastrophic insurance. No extra payments would be required, it seems. At the same time, Medicare recipients would also be able to opt into a new program — “enhanced Medicare” — that would look a lot like the current federal employee health insurance plan. Those who chose this option would pay a part of the cost themselves. In return, they would get a private plan and better benefits.

Both the administration and its supporters in Congress seem to hope that over time more people (and particularly younger people, by now accustomed to a plethora of health care choices) would select this second option. If this happened, the costs of Medicare to the federal government might not come down dramatically — private insurance isn’t necessarily cheaper, particularly for the elderly — but at least Medicare recipients would have some incentive to choose plans more suited to their specific health needs. Because they pay for more than just emergency visits to the doctor, integrated plans could also care more sensibly for the chronically ill. As a recent report by the Progressive Policy Institute points out, Medicare currently will pay if you’ve been hospitalized for a stroke but will not pay for the anti-hypertension drugs to prevent it. This is the kind of absurdity that a plan designed specifically to meet the needs of older people could avoid.

“Could” and “might” are the operative words here, however. The president’s proposal is not a panacea but rather a set of suggestions that reflect the politics of the moment. Clearly, this president does not want to be accused of “abandoning” Medicare. On the contrary, he wants to be able to say that “Medicare will always be there, just how it’s always been, if you want it that way.” If Congress chooses to stick too closely to this mantra, and to keep benefits the same across the board, there will be little incentive for anyone to opt out of the current system or to contribute to the costs of his or her care. However politically difficult it appears to be, Congress must make it possible for Medicare to change with the times.

http://www.washingtonpost.com/wp-dyn/articles/A23255-2003Mar13.html

Comment: Neither of the “either-or” options behind this editorial can be good news. Either the editorial staff has failed to do its homework in understanding the fundamental principles of social insurance, or the editorial position of The Washington Post is to support a system that ensures comprehensive services for those able to afford them, but relegates lower-income beneficiaries to a program that falls short on basic health care needs. Have the editors demonstrated incompetence by failing to inform themselves adequately on the issues, or, worse, are they suggesting that personal wealth should determine whether Medicare beneficiaries should have access to all essential services?

Adding a drug discount card to the program would cost nothing, which is exactly what it is worth under this “budget-neutral” administration. And the $6000 deductible catastrophic drug coverage would benefit only the affluent. Prohibiting any other improvements in the benefit package of the traditional program would perpetuate the impaired access to care for those who are unable to afford essential services that are not currently a benefit of the program. The most immediate need is for a bona fide prescription benefit.

The Washington Post supports the FEHBP model of “enhanced Medicare,” making available a private plan, with BETTER BENEFITS, by PAYING A PART OF THE COST themselves, while still prohibiting coverage of the “better benefits” in the traditional program. This would end Medicare as an egalitarian program of social insurance.

The Washington Post is supporting the shift to “consumer-directed” Medicare, not only by shifting costs to beneficiaries when offering more plan options, but also by providing “incentive to choose plans more suited to their specific health needs.” But it is impossible to select a plan that will be the best choice for medical events that cannot possibly be predicted. Also, for those with chronic disorders, providing options creates all of the inequities characteristic of risk segmentation. Lower-income beneficiaries with chronic disorders would be locked into the traditional program. The Washington Post states that covering a stroke but not covering the medications that would prevent it is “the kind of absurdity that a plan designed specifically to meet the needs of older people could avoid.” Yet The Washington Post has endorsed precisely this type of absurdity.

Is this editorial incompetence, or is it support for the concept that there is a “lower class” that is not entitled to all essential health care? Perhaps The Washington Post does not want them to have their “cake,” but, rather, “Let them have strokes.”

Seattle Post-Intelligencer
March 12, 2003
National solution best for health care
By Mary O. McWilliams

Here, in the midst of Cover the Uninsured Week, it is important that this be said: All Americans should be covered by health insurance.

To that end, I offer the following principles to guide the debate. These ideas center on the values of individual responsibility, collective accountability and equality.

* Coverage for all is a national public policy matter.

* We should focus on adding to the coverage that exists today.

* We must acknowledge that solutions will have a cost.

* We need a basic set of health benefits as the floor.

* This is a collective responsibility.

* Government-sponsored programs must be adequately funded.

* We must improve the current system.

* Consumers must have a direct relationship with the cost of care.

It is to be hoped that these concepts will further spark a meaningful debate, which must continue in earnest beyond the focus of this week.

Mary O. McWilliams is president of Regence BlueShield.

http://seattlepi.nwsource.com/opinion/112031_regence12.shtml

Comment: During Cover the Uninsured Week, there is a unified voice stating clearly that everyone should be covered by health insurance. Listening to the various interests, it almost sounds like we finally agree that we must have a universal, egalitarian system. But then there are always the details.

Ms. McWilliams believes in a national solution, as long as that solution protects her industry, funds it more generously, and allows it to shift the burden of actually funding health care to the individual patients, to “encourage cost- and quality-conscious purchasing.” What will her position be if it is decided to reduce expensive administrative excesses by eliminating middleman health plans and adopting a single public payer?

Cover the Uninsured Week should not only end with a resolve to cover everyone, but it should also end with a resolve to put the interests of patients above all others. Without such a resolve we will flounder and founder.

United States Senate Special Committee on Aging
March 10, 2003
Testimony of Karen Davis, President, The Commonwealth Fund

Time for Change: The Hidden Cost of a Fragmented Health Insurance System

Executive Summary

We have entered the 21st century encumbered by a health system that is not up to the challenge of ensuring a healthy and productive nation. Set in motion over 50 years ago, the system is costly, complex, and confusing. Most important, it is failing to achieve the twin objectives of health insurance: to ensure that people have access to needed medical care and to protect them from the financial burdens of costly medical bills.

There are five types of costs inflicted by our fragmented health insurance system:

* Costs of a growing number of uninsured

# 41 million Americans in 2001 fell through the cracks of the American health care system because they were not lucky enough to be covered by employer-based coverage, Medicare, Medicaid, or the Children’s Health Insurance Plan

* Health and economic consequences of gaps in health insurance coverage

# 18,000 deaths of adults ages 25 to 64 occur each year as a result of the absence of health insurance coverage – making it the sixth-leading cause of death in this age group, ahead of HIV/AIDS or diabetes

* Cost-shifting that occurs in a fragmented financing system, especially as health care costs accelerate

# 70 million American workers are covered by their own employer; 20 million by a family member’s or previous employer; 30 million are not covered by an employer

# Our “pass the buck” system of health insurance perpetually shifts costs from one employer to another, employers to workers, federal government to state governments and back, and to safety-net hospitals serving the uninsured

# Far more energy goes into shifting costs than enhancing efficiency or quality of health care; insurance companies are profitable by attracting favorable risks, not through innovative incentives to improve quality and efficiency

* Costs of churning in health insurance coverage, as people’s economic and personal circumstances change

# Churning results in frequent gaps in insurance. Sixty-two million – one of four – were uninsured during 2000; 75 million were uninsured in 2000 and 2001. These people were at high risk of not getting care when needed and facing unaffordable medical bills when care could not be postponed.

# The U.S. spent $111 billion in 2002 on private insurance and government administrative costs – not including administrative costs incurred by hospitals and other health care providers or by individuals as they enroll, disenroll, and re-enroll and change insurance coverage and plans.

* Costs of complexity from a pluralistic system of health insurance without an integrating framework and consensus on basic principles

# Cost of large numbers of individuals eligible for but not enrolled in public programs

# Cost of lost productivity, health, anxiety, sick days, and valuable time of uninsured patients spent seeking care

# Cost of resources wasted on administration – jobs underwriting, screening, and verifying eligibility; new administrative apparatuses to cover narrow target groups of eligible individuals; costs of enrolling and disenrolling for public and private insurers and for individuals

# Costs of inefficient and low-quality care – high costs in emergency rooms for preventable conditions and hospitalizations; costs of differing standards of care depending on insurance status

# The U.S. spends twice as much per capita on health care as other industrialized OECD nations and is the only one to fail to cover everyone

There has to be a better way:

* Automatic and affordable coverage for all

(Truncated. See “Comment” for the solution suggested.)

http://www.cmwf.org/programs/insurance/davis_senatecommitteetestimony_622.pdf

Comment: Karen Davis has provided the rationale for ending our fragmented health insurance system. The obvious conclusion is that we need a single, publicly-funded and publicly-administered insurance program. But here is the solution that Karen Davis offers:

“We have built an incredibly complex, costly, and confusing health insurance system. We need a single guiding framework for coverage. It can include multiple sources of financing, multiple choices of public and private coverage, and multiple benefit packages, but it needs to be integrated within a single framework. Certainly, we should have a system that preserves innovation, flexibility, and choice, but some standardization will be required to cut through the maze of complexity in our current system. Reaching consensus on the parameters of choice versus standardization is an important part of public debate on this issue.”

It is astounding to see the efforts that are being made to avoid a program of social insurance but instead to build on our current fragmented system. To present compelling arguments on why the fragmented system does not and cannot work, and then to suggest that we build on it, defies all logic.

Although I had stated that I would limit postings on this list to health policy issues, because of the volume of responses received, I am unable to respond individually to your comments on my “weak apology” for the anti-war poetry. Thus this message.

Simply stated, my faith has been restored.

Although somewhat narrowly focused, I believe that the comment on a sign at peace demonstrations in Los Angeles, graciously forwarded to us by Anne Marie Staas Niedorf, expresses the sentiment and priorities of most of us:

SADDAM DIDN’T CLOSE MY HEALTH CLINIC

Economic and Social Research Institute February 2003 Issues in Coverage Expansion Design

Coping with Risk Segmentation: Challenges and Policy Options by Elliot K. Wicks, Ph. D.

A factor that complicates almost all proposals to extend health insurance coverage is how to cope with risk segmentation in the small-group and individual insurance markets. Experience in these markets shows that if market forces are left to operate unfettered, people seeking private health insurance will be segregated into small risk pools that reflect their expected risk of incurring medical expenses and charged premiums accordingly. Premiums will vary widely across the spectrum of expected risk, and risk will not be widely shared. These are problems that generally do not plague large employers, because they are large enough to form their own risk pools and self-insure; that is, costs are sufficiently spread among higher-risk and lower-risk employees within the group. So the discussion that follows applies to health insurance for small employers and individuals buying coverage on their own.

Risk segmentation and the consequent wide variation in premiums create at least two kinds of problems. First, some high-risk people are not able to afford coverage. Second, the wide premium spread requires some people to pay much more than others for identical coverage, which many would consider inequitable.

Alternative Ways to Deal with Risk Selection

Prevent Risk Selection

Approach 1: Require insurers, in setting premiums, to community rate everyone.

Approach 2: Require everyone in some subset of the population who purchases coverage to buy from a common source and have each insurer base premiums on the experience of all its enrollees in the pool – for example, require all small employers to buy from a purchasing cooperative or insurance exchange.

Approach 3: Instead of charging people premiums, use public financing, as with the Medicaid and Medicare systems.

Approach 4: Single payer without health plans that accept any risk.

A single-payer system that did not put health plans at risk – as with fee-for-service Medicare – would solve both sides of the risk segmentation problem. Enrollees would not pay premiums, and thus there would be no difference in cost associated with risk differences. And insurers would not bear risk – they would just administer the system – and thus there would be no reason to compensate them for differences in the risk of the people they enroll. There would be no risk segmentation because there would be only one insurer – government.

Allow but Offset Risk Selection

Approach 1: Allow wide (though perhaps not unlimited) variation of premium based on price, but provide subsidies to help high-risk enrollees pay the high price they will face.

Approach 2: Make risk selection unprofitable by having a very good risk-adjustment process.

http://www.esresearch.org/newsletter/february03/risk_segmentation.pdf

Comment: This report describes the policy implications of various approaches to segmenting risk. It is worthwhile reading this nine page report because you will understand the problems that arise with each approach. Understanding risk segmentation makes it clear why it is so difficult, or, actually impossible, to ensure that everyone has equitable, affordable health care coverage. But the exception is the single payer approach which is unique because there would be no risk segmentation since there would be only one insurer – the government.

Why do we waste so much effort and expense on playing the risk segmentation game, perpetuating inevitable inequities, when we can save time and money and establish equity by dumping the health plans and establishing a single payer system? Do we have an aversion to logical solutions?

The Access Project, with other organizations February, 2003

The Consequences of Medical Debt

Summary of key findings:

* Having health insurance does not always protect individuals from out-of-pocket medical bills they cannot afford to pay. In our survey of low-income individuals in three communities, respondents with and without insurance were struggling with comparable levels of medical debt.

* Confusing and multiple bills, and the challenge of understanding what is owed and to whom, add to the problem.

* Provider practices – requiring cash payment upfront, flatly refusing care or suggesting people use other sources of care – made it harder for many respondents with medical debt to access care with any regularity. Patients often responded to these practices by not seeking care or filling prescriptions, or otherwise not complying with treatment regimens.

* Health care providers seem to be adopting more aggressive collection procedures, including turning over their accounts to collection agencies 30 to 60 days after a missed payment (instead of a more customary 150 to 210 days) and encouraging patients to pay off their medical bills with credit cards, a practice that burdens patients with not only large debts, but high interest payments as well.

* Many of the individuals we interviewed wanted to pay off their debt and had tried to negotiate payment plans, but found the terms of the plan very difficult to maintain given limited incomes and apparently inflexible hospital collection practices.

* Few respondents, in spite of very low incomes, were able to secure public assistance to defray the cost of their medical care. Many turned to family and friends for help, suggesting that communities may help relieve the burden of medical debt, but also share in it.

* Like other forms of debt, medical debt can have substantial financial consequences, including serious credit problems and, in extreme cases, personal bankruptcy. However, unlike other forms of debt, medical debt is often involuntary, the result of an event over which one has little or no control.

* Bankruptcy may offer a means to relief from medical debt and from the harassment of collection agencies and its attendant stress. This is particularly the case for the uninsured – people who are likely to have relatively fewer resources and be less able to make regular payments on their debt.

* Medical debt made it harder for respondents to achieve self-sufficiency; they were hindered in their ability to get a bank loan and other lines of credit, to save money, or to pay for basic goods and services.

* The effects of medical debt can be compounded if a health problem leaves a person unable to return to work. Because of the debt, people may be deterred from seeking the care needed to allow them to work. Job seeking may also be hindered by the fear of wage garnishments.

* Respondents told us that medical debt caused significant stress, anxiety and feelings of hopelessness. Medical debt can also be a source of embarrassment and shame, and many respondents were frustrated and angry that they were being financially punished for a medical event over which they had little control.

Health care is a business unlike most others. The customers are, by definition, in a vulnerable position by virtue of the medical problem for which they seek services. The providers of these services differ from sellers in most other markets because their product is essential and often life saving, and is governed by ethical responsibilities that exceed those that apply in typical commercial transactions. Purchases are often sudden and unplanned and, particularly for people without health insurance, may bring large financial burdens that are involuntary in the sense that they are not the result of a traditional consumer choice.

http://www.accessproject.org/downloads/med_consequences.pdf

Comment: Warning: this report is difficult to read. It is not a report of technical complexity. Rather it is a report that has a Dickensian quality, including the Tiny Tims whose suffering is compounded by medical debt, and the institutional and individual provider Scrooges with their passive automaticity when faced with the “need” to collect unpaid debts. The report is punctuated with quotations. If you cry easily, this may make you do so.

We are spending $1.66 trillion on health care this year. Our existing policies ensure that our administrative excesses will always be fully funded for the benefit of the insurers. But our policies are not designed to prevent medical debt for vulnerable patients. Yet only a very small portion of funds directed to the wasteful administrative excesses would be more than adequate to cover all medical debt. It is so tragic and so needless.

Let’s change our policies. Let’s reduce the waste by changing to an administratively efficient, public insurance program, and use the savings to provide everyone comprehensive coverage. Medical debt then could be relegated to the Dickensian novels where it belongs.