The Kaiser Commission on Medicaid and the Uninsured
The Medicaid Resource Book
July 2002
By Andy Schneider, et al

In total, the states spent $6.6 billion (federal and state funds combined) on (Medicaid) program administration in FY 1997, representing $163 per enrollee and 3.9% of total Medicaid spending.

… these estimates do not include the administrative costs incurred by Medicaid managed care plans. In some states, administrative outlays are folded into capitation payments to MCOs (managed care organizations). These outlays reflect the costs attributable to activities such as utilization review, quality improvement, and data collection and reporting. Although these amounts are not included in the data states report to CMS, one study has reported that HMOs participating in Medicaid had administrative cost ratios of over fourteen percent in 1998. The same study found that HMOs that did not participate in Medicaid had administrative cost ratios of just under 16 percent for that same year.

A… point is made on the managed care side of the program. The increase in state contracting with MCOs on a risk basis, it is argued, creates the need for more, not fewer, administrative resources: “the movement by Medicaid officials to contract with large managed care companies does not, as many originally thought, mean that the staffs of state governments can easily be streamlined. To the contrary, the effective management of managed care puts pressures on state agencies to hire additional personnel. Failure to do so seriously threatens the access of Medicaid enrollees to health care of adequate quality. Whether state agencies will be able to build and sustain adequate staffs to deal with managed care in an era dominated by the dogma of downsizing remains an open question.”

For both states and the federal government, Medicaid is a challenging program to administer. Medicaid bears all of the administrative responsibilities of a traditional insurer, which range from determining the scope of benefits it offers to processing claims to monitoring the quality of services it purchases. In addition, Medicaid pays for a much broader array of benefits than private insurers or Medicare and must make income and resource eligibility determinations that those payers do not. Finally, states and the federal government must carry out these responsibilities in an environment of rapid change in the health care marketplace and ever-increasing fiscal stakes.

http://www.kff.org/content/2003/2236/

Comment: Publicly administered health insurance programs have much lower administrative costs than do private health plans. But it is important to realize that much of the efficiency of public programs is lost in our fragmented, duplicative method of funding health care. By using private managed care organizations, significant percentages of public funds are being diverted to private administrative costs. But what is not commonly realized is that the public administrative costs are also increased even more because of the requirement for additional state oversight of the managed care organizations. And this doesn’t even take into account the greater administrative burden and costs placed on the providers of health care.

Reform advocates who reject the single payer model because of lack of political feasibility usually support increases in public programs to fill in the voids in coverage. They must keep in mind the fact that advocacy for this model of reform comes at the very high cost of perpetuating and expanding the egregious administrative waste of our system.

Reasonable solutions can be achieved only after the problem is precisely defined. Administrative waste is one of the greatest and most serious problems of our current system. A satisfactory solution must reduce this waste. The single payer model is clearly the most administratively efficient system of funding health care. The burden should be on advocates of other models of reform to prove the superiority of their approach. Lacking that, we should move forward and enact a single payer system now.

The Providence Journal
1/21/03
Editorial
A National Health System

The United States already has a national health plan. It’s called Medicare. Medicare does not, of course, cover everyone, but it could. And perhaps someday it will.

The big advantage of a nonprofit, government-run insurer like Medicare is that it spends relatively little on administrative costs.

The problem with American health care… isn’t that we’re not spending enough. It’s that we’re wasting resources.

It is possible to have a medical system that delivers top-quality care for everyone without spending more money. It only requires the political courage to displease some powerful interests and an electorate demanding change. Granted, that is a tall order.

http://www.projo.com/opinion/editorials/content/projo_20030121_21edmed.cd19c.html

Los Angeles Times
January 17, 2003
The Unmanaging of Health-Care Costs
By Uwe E. Reinhardt

In referendum after referendum, Americans have shown their distaste for the single-payer approach, such as Canada’s, that can control health spending while protecting people from bankruptcy over medical bills with rationing of some high-tech care. Americans showed equal disdain for the Clinton health plan, which sought to control spending more gently with privately managed care, regulated by government.

Now Americans have defeated managed care by employers, virtually the only cost-effective quality approach left for employees.

What Americans want is really quite simple: all the health care they or their doctors can imagine, virtually free, without added taxes for health care and without higher out-of-pocket costs for their “employer-provided” health insurance. That’s all. Call it part of the American dream.

As the dreamers watch health care chewing up their paychecks, and as their out-of-pocket payments for health care rise inexorably, the dreamers will stomp their booties in despair and look for a culprit. They need not look beyond the mirror.

http://www.latimes.com/news/opinion/commentary/la-oe-reinhardt17jan17,0,6534 372.story?coll=la%2Dnews%2Dcomment%2Dopinions

Comment: Are the dreamers of their own personal health care utopia the real culprits?

Our message to them has been quite clear. Absolutely everyone can have affordable access to virtually all reasonable, beneficial health care services if only we replaced our flawed, wasteful system of funding care with a more efficient, publicly-administered, single insurance program. That is what they hear from us, but, from their perspective, what is really the truth?

They are intelligent. They know that you cannot add over 40 million individuals to the insurance pool without greatly increasing costs. And they know who will have to pay for that care since most of those without insurance cannot afford to pay their full share now. They also know that if you allow everyone to have all of the care they want, costs will skyrocket because people will automatically overutilize the health care system. Since the system would be publicly funded, people will be taxed to death. The economy will deep six because American businesses cannot afford the high taxes required by such an expensive health care system. Many understand that limiting costs would stifle technological innovation, threatening access to unknown but surely life-saving care at some vague time in the future. And, finally, the government can’t do anything right and would wreck our health care system with its burdensome and inefficient bureaucracy.

Any single payer advocate can refute each of these points. But most of us are totally ineffective in convincing individuals that their factual data base is corrupted, and that we have a new information data base that will replace their flawed knowledge with the “real” truth.

Whom do we blame? Is it the dreamers who want health and financial security based on inadequate and untruthful information but on the facts as they understand them? Is it the vested interests that profit from continuing their campaigns of misinformation? Is it the advocates of reform who have failed to communicate adequately the true facts made available to us through health policy science? Is it the politicians who do understand the issues but who are more driven by polls and elections than by policies that would benefit their constituencies? Though this list is incomplete, it seems that we are all culprits.

Is there any hope? The recent Romanow process in Canada revealed that a nation can have a very good grasp of rational health care policy and can maintain solid support of their system in spite of intense political efforts at sabotage. How did Canada manage to arrive at this level of support for their system? It’s really quite simple. They’ve lived with their system for decades, and, through personal experience, they know exactly what it is and how it works. They are not swayed by the vested interests and ideologues that disseminate untrue statements about their system.

Can we ever have that level of understanding in the United States? We can, but it will take a massive grassroots effort in which we all must participate. If we do our best, we will no longer have to accept a share of the blame. On the other hand, if we fail to be a part of the solution, then we will continue to be a part of the problem.

The New York Times
January 16, 2003
Frist and Health Care

To the Editor:

Re “Weapon in Health Wars: Frist’s Role as a Doctor” (Political Memo, Jan. 11):

I am a practicing pediatrician and emergency physician in a large urban hospital. Accepting Senator Bill Frist as a spokesman for health care reform is difficult for me. He is a businessman-physician who did transplant surgery and made a lot of money in corporatized medicine – not exactly a mainstream medical practitioner.

Most doctors in poll after poll favor a single payer system and are dismayed at the continuing privatization of medical care. It’s time for physicians and patients to have the courage to publicly support health care as a right; lacking this principle, our current nonsystem will continue to implode. Does anyone really believe anymore that the marketplace medicine that Dr. Frist represents is working?

David A. Poleski, M.D.
Grosse Ile, Mich.

http://www.nytimes.com/2003/01/16/opinion/L16FRIS.html

The New York Times
January 16, 2003
Frist and Health Care

To the Editor:

Re “Weapon in Health Wars: Frist’s Role as a Doctor” (Political Memo, Jan. 11):

I am a practicing pediatrician and emergency physician in a large urban hospital. Accepting Senator Bill Frist as a spokesman for health care reform is difficult for me. He is a businessman-physician who did transplant surgery and made a lot of money in corporatized medicine – not exactly a mainstream medical practitioner.

Most doctors in poll after poll favor a single payer system and are dismayed at the continuing privatization of medical care. It’s time for physicians and patients to have the courage to publicly support health care as a right; lacking this principle, our current nonsystem will continue to implode. Does anyone really believe anymore that the marketplace medicine that Dr. Frist represents is working?

David A. Poleski, M.D.
Grosse Ile, Mich.

http://www.nytimes.com/2003/01/16/opinion/L16FRIS.html

The New York Times
January 14, 2003
Most States Cutting Back on Medicaid, Survey Finds
By Robert Pear

Two-thirds of the states say they are cutting Medicaid benefits, increasing co-payments, restricting eligibility or removing poor people from the rolls because of soaring costs and plunging revenues.

The Bush administration has opposed any increase in the federal share of Medicaid, saying that the federal government has fiscal problems of its own.

http://www.nytimes.com/2003/01/14/politics/14MEDI.html

Comment: As long as we have a separate health care program for low-income individuals with little political voice, this program will be politically managed and funded as a “welfare program.” If we were all in a single, universal health care program, most of us would not tolerate a policy position that seriously underfunds our health care system while reducing taxes for those that will never feel a quality-of-life impact of the tax benefit.

How can a just society adopt policies that further impair access and outcomes for the most vulnerable individuals in our society? Continuing to tolerate this injustice does not speak well for the American ethic.

Dorothy Hong is a second year medical student at the University of Southern California. She was raised in mainland China, and her mother teaches at Beijing University. Michael Kennedy, M.D., who teaches at USC, asked her to comment on our prior dialogue on health care in mainland China.

Dorothy Hong:

Hi Dr. Kennedy:

Their arguments are very interesting (U. Reinhardt, E. Christiansen, with a further comment by R. Covell). Both opinions are correct in certain aspects.

As Dr. Christiansen stated: “Hospitals are exceedingly well staffed with an abundance of well-trained physicians and registered nurses.” The best hospitals in China are excellent. However, there are very few excellent hospitals. Only a small percentage of people have access to decent health care.

In terms of the health care system, both socialism and capitalism co-exist. It all depends on whom you work for. If you are an employee of a public institution (run by the government), like my father, you and your children (not your spouse) can be covered by the company’s health plan. You can go to any hospital in your local area. The government pays the health care expenses. My father had to pay a very reasonable fee to insure my brother and me. Therefore, some lucky citizens are protected by the socialist health care system. However, if you are self-employed or work for a private company the government will not pay for your health care. China does not even have hospitals like the LA County hospitals. Human lives are not very important in the eyes of the government. There are too many people for the government to handle.

The socialist health care in China is good for those who can benefit from it. Both of my parents have to spend a day to do their annual physical exam, and this day is considered as a working day. They do basic screening tests based on your age, and a CBC. During their yearly routine examination, my father found out that he had hypertension, my mother, borderline diabetes.

For the past fifty decades, the Chinese socialist health care system has managed its expenses because only a very small percentage of people can take advantage of it. However, things are changing. My parents are concerned about for how much longer they can have this benefit.

Overall, I agree more with Dr. Covell and Dr. Reinhardt. One of my motivations to study medicine is to take care of my family’s health care needs in the future.

Dorothy

The Commonwealth Fund
January 2003
Small but Significant Steps to Help the Uninsured
By Jeanne M. Lambrew and Arthur Garson, Jr.

This paper suggests a number of low-cost policies that could improve health coverage in this environment by providing discrete groups of people with access to private health insurance, public coverage, or both.

Generally, the policies outlined below would cost less than $1 billion per year-a small amount relative to total spending on Medicare and Medicaid ($260 billion and $270 billion, respectively). Even if all were enacted, they would neither significantly reduce the number of uninsured nor substitute for comprehensive health system reform.

* Extending COBRA continuation coverage to all workers who need it.
* Adding health insurance assistance to unemployment insurance.
* Testing a Federal Employees Health Benefits Program buy-in through a
demonstration.
* Testing an individual insurance tax credit through a demonstration.
* Gradually phasing in public coverage of poor adults.
* Extending private plans’ dependent coverage up to age 21.
* Extending Medicaid/CHIP options up to age 21.
* Extending COBRA continuation coverage for early retirees.
* Creating a Medicare buy-in for younger spouses of Medicare beneficiaries.
* Allowing Medicaid to act as a high-risk pool.
* Gradually phasing out Medicare’s 24-month waiting period.
* Creating a national health coverage advisory commission.

Conclusion

Small policies cannot cure the myriad problems in the health insurance system in the United States. Solutions will require both significant new funding, since affordability is a major problem, and insurance and delivery system reform, to remove the structural barriers to coverage. The ideas presented in this paper represent a sample of ideas that could be considered in addition to those that have been proposed in Congress and by state officials, researchers, providers, and consumers. They are not incompatible with larger visions for the health system, nor are they intended to substitute or delay action on major reforms. Instead, they aim to break the recent impasse on policy for the uninsured and to make some, albeit limited, progress on reducing the number of uninsured Americans. Success in passing and implementing incremental health policies may, rather than diverting attention away from systemic reform, instill confidence in public policy’s ability to take on the larger challenges in improving health insurance coverage in the United States.

http://www.cmwf.org/programs/insurance/lambrew_smallsignificant_585.pdf

Comment: The most important statement in this report: “Even if all were enacted, they would neither significantly reduce the number of uninsured nor substitute for comprehensive health system reform.”

The two major pathways to reform include (1) incremental measures, such as those listed, that improve access and equity, and (2) comprehensive reform that assures everyone full, affordable access to health care. To follow one pathway, while publicly opposing the other, constitutes health policy malpractice!

We all need to support modest but politically expedient measures which can be enacted now. But, of much greater importance, we are all ethically mandated to move forward, with all of the forces that we can muster, toward true, comprehensive reform. There can be absolutely no hesitancy nor compromise in this effort.

Those working on modest reforms must continue to do so. But, as we support their efforts, they need to publicly support, in the clearest terms possible, our efforts for comprehensive reform. By unifying our advocacy on behalf of our health care system, we can clarify the confused message that the public is receiving. The public must understand that there is absolutely no substitute for truly comprehensive reform.

The Commonwealth Fund
January 2003
Small but Significant Steps to Help the Uninsured
By Jeanne M. Lambrew and Arthur Garson, Jr.

This paper suggests a number of low-cost policies that could improve health coverage in this environment by providing discrete groups of people with access to private health insurance, public coverage, or both.

Generally, the policies outlined below would cost less than $1 billion per year-a small amount relative to total spending on Medicare and Medicaid ($260 billion and $270 billion, respectively). Even if all were enacted, they would neither significantly reduce the number of uninsured nor substitute for comprehensive health system reform.

* Extending COBRA continuation coverage to all workers who need it.
* Adding health insurance assistance to unemployment insurance.
* Testing a Federal Employees Health Benefits Program buy-in through a
demonstration.
* Testing an individual insurance tax credit through a demonstration.
* Gradually phasing in public coverage of poor adults.
* Extending private plans’ dependent coverage up to age 21.
* Extending Medicaid/CHIP options up to age 21.
* Extending COBRA continuation coverage for early retirees.
* Creating a Medicare buy-in for younger spouses of Medicare beneficiaries.
* Allowing Medicaid to act as a high-risk pool.
* Gradually phasing out Medicare’s 24-month waiting period.
* Creating a national health coverage advisory commission.

Conclusion

Small policies cannot cure the myriad problems in the health insurance system in the United States. Solutions will require both significant new funding, since affordability is a major problem, and insurance and delivery system reform, to remove the structural barriers to coverage. The ideas presented in this paper represent a sample of ideas that could be considered in addition to those that have been proposed in Congress and by state officials, researchers, providers, and consumers. They are not incompatible with larger visions for the health system, nor are they intended to substitute or delay action on major reforms. Instead, they aim to break the recent impasse on policy for the uninsured and to make some, albeit limited, progress on reducing the number of uninsured Americans. Success in passing and implementing incremental health policies may, rather than diverting attention away from systemic reform, instill confidence in public policy’s ability to take on the larger challenges in improving health insurance coverage in the United States.

http://www.cmwf.org/programs/insurance/lambrew_smallsignificant_585.pdf

Comment: The most important statement in this report: “Even if all were enacted, they would neither significantly reduce the number of uninsured nor substitute for comprehensive health system reform.”

The two major pathways to reform include (1) incremental measures, such as those listed, that improve access and equity, and (2) comprehensive reform that assures everyone full, affordable access to health care. To follow one pathway, while publicly opposing the other, constitutes health policy malpractice!

We all need to support modest but politically expedient measures which can be enacted now. But, of much greater importance, we are all ethically mandated to move forward, with all of the forces that we can muster, toward true, comprehensive reform. There can be absolutely no hesitancy nor compromise in this effort.

Those working on modest reforms must continue to do so. But, as we support their efforts, they need to publicly support, in the clearest terms possible, our efforts for comprehensive reform. By unifying our advocacy on behalf of our health care system, we can clarify the confused message that the public is receiving. The public must understand that there is absolutely no substitute for truly comprehensive reform.

Health Affairs
Web Exclusive
January 8, 2003
Should Public Policy Seek To Control the Growth of Health Care Spending?
By Henry J. Aaron

Who makes the decisions?

Some observers believe that people can impose such budget constraints through their decisions about the purchase of insurance. This is the way most markets work, and normally they work quite well. In the case of health care, I believe that this view is simply wrong in practice. The inefficiencies of the individual health insurance market are insoluble. More importantly, the incentives and morality of providers and the wishes of patients will defeat private regulation every time because such regulation lacks legitimacy. In one way or another, private agents charged with the task of reining in costs will come a cropper for the same reason that the American public effectively fired managed care. I may-underscore may-join with my fellow citizens to support politically determined limits on care that I or my spouse or child may receive. That is how successful cost control works in other countries. But I will not-underscore not-authorize some corporate executive to do so.

Other countries have shown that government regulation can control the level of health care spending and the pay providers receive. They may have made a Faustian bargain. Clearly, most of them do not think so. Many have wisely begun to try to mobilize market incentives to promote efficient resource allocation. However, none has relied on market incentives to establish overall health care budget constraints. Whatever this means, the United States clearly has not yet found effective ways to hold down health care spending in ways that would not entail far more central government direction than Americans seem willing to accept.

http://www.healthaffairs.org/WebExclusives/Spending_Web_Excl_010803.htm

CBSNews.com
Jan. 9, 2003
When Cure Is Worse Than Disease
By Dick Meyer, Editorial Director of CBSNews.com

The Republicans know exactly what they want to do to control the growth of health care spending; they want to make Medicare and other public programs more like private, market systems. More like managed care. That’s what scares me most.

Get this: in 2001, spending by Medicare increased by 7.8 percent, less than the measures of private health care spending. Health insurance premiums went up 10.5 percent and benefits were up 10.1 percent in 2001.

So why would putting more “managed care” in Medicare help control costs when it doesn’t work in the private sector. And cost containment is the Republicans’ primary goal.

What managed care did bring us medical consumers in the real world was less choice, less personal attention, more bureaucracy and more confusion.

http://www.cbsnews.com/stories/2003/01/09/opinion/meyer/main535869.shtml