PNHP

Hearing on Health Insurance Credits

Hearing on Health Insurance Credits

House Ways and Means Subcommittee on Health

February 13, 2002

Excerpts from the written testimony of Jonathan Gruber, Ph.D., Professor of Economics at Massachusetts Institute of Technology:

“The results that I discuss below come from a very detailed microsimulation model of health insurance decisions… analyzing the President’s proposal for a health insurance tax credit in his FY 2003 budget.”

“… the tax credit does have its intended effect of significantly increasing the purchase of nongroup insurance by the uninsured. But it also has an unintended effect of slightly eroding the group insurance market, so that the net reduction in the uninsured is fewer than 2 million…”

“One of the key debating points about those modeling tax credits for health insurance is the extent to which individuals will find low cost nongroup plans on which they can use their tax credit. This is an important issue because the costs of nongroup insurance plans are so high. For a 40 year old male in excellent health, the average cost of nongroup insurance is roughly $2000 per year. But these costs rise dramatically with age and poor health status. Indeed, in my data, for the typical uninsured family the cost of a nongroup policy is estimated to be roughly $10,000.”

“The main disadvantage (of the President’s tax credit proposal) is that this policy has a very modest impact on the number of uninsured in the U.S. My central estimates suggest that the number of uninsured will be reduced by fewer than 2 million, or 5% of the existing number of uninsured. This amount equals roughly the rise in the uninsured estimated to be caused by the recent rise in unemployment, according to a recent analysis by myself and the Kaiser Family Foundation.”

“The other disadvantage of this approach is that it displaces, rather than supplementing, the group insurance market. The group insurance market remains the most effective way to deliver insurance benefits, through its use of large pools to minimize the variation in health risk to insurers. My estimates suggest that for every one person gaining insurance coverage, two persons will be leaving the group insurance market.”

“… I am quite skeptical of claims that low cost policies can raise the effectiveness of this tax credit for two reasons. First, if such low cost policies exist today, why are there still 40 million uninsured Americans? The answer is that most Americans do not want catastrophic-type coverage; they apparently would rather be uninsured than buy low-premium, high out-of-pocket-cost policies. The enormous out-of-pocket costs that are typically associated with these low cost policies make them unattractive to the uninsured. Second, the very reason that such policies can be low cost is that they are only purchased by the very healthiest individuals for whom they are affordable; in other words, there is ‘virtuous selection,’ as opposed to ‘adverse selection.’ If a credit allows less healthy persons to purchase these policies, they will have to raise their prices to adjust for this higher cost risk pool. In other words low prices on these policies today do not guarantee low prices in the world of a health insurance tax credit; it seems likely that those low price policies will increase in price once more ‘typical’ persons are buying them.”

“… raising the income limits (to increase eligibility for the tax credits) actually had pernicious effects on the insurance market on net: the reduction in the uninsured was unchanged, but there was a much larger net movement from group to nongroup insurance. As a result, the total cost of the policy rose by over one-third with no gain in insurance coverage. This finding highlights how important it is to keep tax policies tightly targeted.”

(The full written testimony of Professor Gruber will be posted on the House Ways and Means webpage in about two months. These results are part of an ongoing project with the Kaiser Foundation to estimate the effects of tax credits and public program expansions designed to expand coverage for the uninsured; the full results from that project will be publicly released soon.)

Comment: This tightly targeted tax policy proposal would reduce the numbers of uninsured by 5%. What about the other 95%?

By supporting tax credits for the uninsured, the administration is conceding that government intervention is warranted. Then why not adopt policies targeting 100% of the uninsured? And a single risk pool would eliminate the problem of high cost plans in the non-group market.

How much longer are we going to play with the numbers? Let’s adopt policies that, by their very design, will automatically solve our health care problems: global budgeting, single risk pool, universal coverage, and comprehensive benefits. We’ve repeatedly cranked the numbers for single payer reform, and they work. Let’s do it.

Medicare fix doubtful this year, experts say

The Orange County Register
February 22, 2002
By Bernard J. Wolfson

Serious political and financial obstacles stand in the way of congressional action this year to fix any of the myriad problems afflicting the Medicare program, according to analysts and legislative aides who spoke Thursday at a health policy conference hosted by UC Irvine’s graduate school of management.

Norman J. Ornstein, a political commentator and fellow at the American Enterprise Institute, raised the sobering possibility of yet another brake on Medicare action: a large-scale U.S. military attack against Iraq, which he said is in the planning stages and could happen this summer or early fall. At that point, all bets on domestic legislation would be off.

John E. McManus, Republican staff director on the House Ways and Means health subcommittee… said the interest of taxpayers must be respected in any Medicare legislation, and that costs can be held down more effectively if health-care consumers are required to shoulder a bigger share of the financial responsibility for their choices.

John McManus:

“Imagine if you had grocery insurance, and every time you went to the market your insurance paid 80 percent of it. You’d eat a whole lot differently -and so would your dog.”

http://www.ocregister.com/search/, click “Browse the past 7 days,” then “2-22-2002,” then under “Business” click “Medicare fix doubtful this year, experts say.”

Comment: This oft-repeated analogy of food insurance and health care coverage belittles the serious problems of hunger and health care access. The silliness of this argument is apparent when considering that none of those nations providing universal health care coverage also provide “grocery insurance,” but most of them have better programs to assure that hunger is eliminated.

McManus’ suggestion that Medicare beneficiaries should bear more costs (when they already bear half the costs of Medicare) will only result in greater financial barriers to health care access for the very large segment with only modest incomes. How can such an important public official support such cruel health policies and then glibly pass it off with a joke about dog food insurance? Ways and Means Chairman Bill Thomas should seriously consider replacing his staff director with someone who has at least a modicum of sensitivity for the needs of Medicare beneficiaries.

And please forgive me for being off topic by including the comment on the planning of the large scale U.S. military attack against Iraq. Personally, I’m in mourning for the soul of our nation. (I know that I will receive several requests to be removed from this list, but I had to speak up anyway.)

Don McCanne

Prof. Donald W. Light, on CalPERS and the Wennberg paper:

“This CalPERS announcement about its inability to hold down skyrocketing costs and the Wennberg paper on continued large disparities in funding reflect a systemic problem that the comments on Wennberg’s article do not address. Every other industrialized nation has been able and is largely able to manage overall expenditures and to reduce the large disparities that most of them inherited because they have one or another kind of universal health coverage and management system. Some of them have competition, or contestability, within their overall frameworks; but a voluntary, market-based system is unable to address issues of inequality, overpricing, or overutilization.”

Kaiser Family Foundation and Health Research and Educational Trust

California Employer Health Benefits Survey, 2001
February 2002

“…two-thirds (66%) of large employers (200 or more workers) and one-third (35%) of small businesses (fewer than 200 employees) say they are likely to increase what employees pay for health insurance in the next year.”

http://www.kff.org/content/2002/3205/CAEHBIChartpack.pdf

Comment: California has been a leader in innovative models of health care coverage. Now there is discussion of the trend to shifting more health care costs to individuals. This isn’t a trend; it’s a tectonic shift.

California health insurance premiums increased 9.9% in 2001, more than double the inflation rate of 4.2%. Our current market oriented system of controlling health care costs has failed. Employers are finding the increases in costs to be intolerable. They are looking for relief.

Ironically, the one model of health care reform that would work is being excluded from almost all current discussions of reform. A single payer system would use global budgeting to freeze health care expenditures at the current level as a percentage of the GDP (or a comparable index that adjusts only for inflation). Businesses would no longer have to be concerned about increasing health care costs, not to mention being relieved of the administrative task of contracting for or managing health benefit programs.

As businesses look at their options, they should place on the table the single payer proposal. It will shine brightly sitting next to the other options.

A conservative call for universal access to health care

By Donald W. Light, Ph.D.
Commonweal, February 22, 2002

The United States remains the only industrialized or second-tier country in the world that fails to guarantee its citizens access to medical services. This is a curious omission for a country based on rights and liberty. It is equally strange from an economic and business point of view. For while foreign competitors get full medical benefits at one-third less the cost, American employers are weighed down by ever-growing expense for health care. For Nokia, Volkswagen, and Siemens, this is an advantage worth billions over their American competitors, Motorola, Ford or GE.

Despite these consequences, U.S. conservatives continue to belittle universal access. They argue that health care should be private, with a public safety net only as a last resort. In so doing they diminish some of their most cherished principles. For universal access to needed medical services enhances individual freedoms, liberties, opportunities and ability to be productive. Illness and disability hobble them.

Conservatives in every other industrialize country support universal access to health services in one form or another. Only American conservatives hold the mistaken view that their values do not support it. Other countries provide universal access in a variety of ways. Many countries use insurance, even private insurance, coupled with firm rules that require everyone to contribute in equitable ways. Many rely on tax-based systems, which studies show are the most efficient means and holds down costs best. Often, medical services in these countries are private.[i]

A conservative argument for universal access to health care can be put quite simply: When people are ill, in pain, or disabled, they are less able to take care of themselves or others. In such circumstances, individual liberty and personal responsibility are quickly compromised. Even small disorders can turn liberty and responsibility into dependency. Needed medical care can be a great financial burden on the seriously and chronically ill. Losses in wages and earned income make matters even worse, particularly when able-bodied citizens can no longer care for themselves and their dependents.

Medical bankruptcy is quite common in the United States but unknown in the rest of the modern world where there is universal access. Costs totaling 10 percent of household income are not uncommon, and rise to 15 percent among the working class.[ii] Forty percent of all personal bankruptcies in the United States are attributed to medical bills people are unable to pay.[iii]

Voluntary insurance does not work

In the United States, voluntary private health insurance has traditionally been seen as the answer for covering medical expenses. Elsewhere, it was abandoned long ago as incapable of protecting individual liberty, fostering personal responsibility, and promoting economic opportunity. One problem is that nearly half of all employers choose not to offer health insurance to their employees. As a result, most of the 40 million Americans who lack health insurance are workers or their dependents. These Americans have attempted to act responsibly and to better themselves. But when illness compromises their liberties and abilities, health care is often not there to get them back on their feet.

Among the employers who continue to offer private voluntary insurance, most are thinning it out rapidly. Headlines appear weekly announcing forms of “disinsurance,” of less coverage and high co-payments. Today we have what Uwe Reinhardt calls unsurance, because we are unsure what it covers and unsure what it will cover next month.

The feature film “John Q” is about unsurance: Denzel Washington finds that his policy has been switched without notice and his coverage in the fine print greatly reduced. The goal of private insurers is to minimize coverage for those most in need of it, while the goal of a free society is to treat those who need medical assistance the most, to get them back on their feet, restore their liberties, and enable them to be productive.

The philosopher Paul Menzel has written that the anti-free-riding principle “is itself fundamentally a pro-individualist principle with libertarian senses of justice. In holding people responsible, not just for the effects of their voluntary actions on others, but also for the costs of the collective enterprises from which they benefit, the anti-free-riding principle keeps collective solutions to human needs in tow, tying them tightly to people’s ability and willingness to pay their costs.”[iv]

This principle is closely linked to another conservative tenet, the primacy of personal integrity: People ought to hold to the implications of their beliefs, values, and actions, for themselves and for others. Yet thousands of employers and insurers are free riders. They dump their medical problems on the public system and force overloaded physicians and hospitals into deciding how hard they want to work without pay.

The nightmare conservative is the motorcycle-gang rider: Live for the moment with free abandon and let others pay for the consequences. But there are many more nightmare conservative capitalists who do the same on a larger scale. Why are these enterprises and individuals not held responsible by their fellow conservatives?

Universal access to needed medical services is essential to achieve four traditional conservative moral principles: the anti-free-riding principle, the principle of personal integrity, the principle of equal opportunity, and the principle of just sharing. The question then becomes: How can conservatives refuse universal access to health care and remain consistent with their conservative values? Here are some guidelines:

1. Everyone is covered, and everyone contributes in proportion to his or her income.

2. Decisions about all matters are open and publicly debated. Accountability for costs, quality, and value of providers, suppliers, and administrators is public.

3. Contributions do not discriminate by type of illness or ability to pay.

4. Coverage does not discriminate by type of illness or ability to pay.

5. Coverage responds first to medical need and suffering.

6. Nonfinancial barriers by class, language, education, and geography are to be minimized.

7. Providers are paid fairly and equitably, taking into account their local circumstances.

8. Clinical waste is minimized through public health, self-care, prevention, strong primary care, and identification of unnecessary procedures.

9. Financial waste is minimized through simplified administrative arrangements and strong bargaining for good value.

10. Choice is maximized in a common playing field where 90-95 percent of payments go toward necessary and efficient health services and only 5-10 percent to administration.

The $350 billion, or 24 percent paid for managing, marketing and profiting from our fragmenting system could be cut in half and go to paying doctors and nurses for uncovered services.[v] But too many profit from the waste and inequities. Unfortunately, most of the “real remedies for the uninsured”[vi] lock in these wasted billions and lock out any efficient solution.

REFERENCES

[i] Mossialos E, LeGrand J, eds. Health Care and Cost containment in the European Union. Aldershot, UK: Ashgate, 1999.

[ii] Shearer G. Hidden from View: The Growing Burden of Health Care Costs. Washington DC: Consumers Union, 2000.

[iii] Gottleib S. Medical bills account for 40% of bankruptcies. BMJ 2000;320:1295.

[iv] Menzel, Paul “Justice and the Basic Structure of Health Care Systems.” Pacific Lutheran University, January 2001, typed.

[v] Woolhandler S, Himmelstein DU. The deteriorating administrative efficiency of the U.S. health care system. N
ew England Journal of Medicine 1991; 324:1253-58. See letter 1994;331:336. This figure rose steadily through at least the mid-1990s. See Woolhandler S, Himmelstein DU. Costs of care and administration at for-profit and other hospitals in the United State. NEJM 1997:336:769-74. Correspondence 1997;337:1779-80.

[vi] Meyer JA, Wicks EK, Covering America: Real Remedies for the Uninsured. Wash. DC: ESRI, June 2001.

Donald W. Light, Ph.D., is professor of social and behavioral medicine at the University of Medicine and Dentistry of New Jersey and a founding fellow of the Center for Bioethics at the University of Pennsylvania, focusing on issues of distributive justice. He is a co-author of “Benchmarks of Fairness for Health Care Reform” (Oxford University Press, 1996). This article was adapted from Light, DW, “Health Care for All: A Conservative Case,” Commonweal, Feb. 22, 2002:14-16.

Health plan crunch for CalPERS

The Sacramento Bee
February 21, 2002
By Lisa Rapaport

The California Public Employees’ Retirement System is exploring a radical overhaul of its health benefits program, admitting it can no longer use the market power of its 1.2 million members to hold down skyrocketing health care costs.

As HMO pullouts have forced members to enroll in CalPERS’ two self-insured PPO plans, PERS Care and PERS Choice, those plans have seen their reserves dip to dangerously low levels. Members in those plans, meanwhile, have seen their rates increase much faster than their counterparts in the HMO plans.

Allen Feezor, CalPERS health benefits administrator:

“HMOs are aggressively managing their risk at the expense of PERS enrollees. If the situation is not addressed, it will jeopardize our statutory requirement to provide affordable health care coverage to all, regardless of age or location,”

Barbara Adachi, a regional managing director for Deloitte & Touche:

“CalPERS needs to act now to avoid further deterioration in its plans. There’s an understanding that it will take time, but we already know that the market will not be able to solve the problems CalPERS faces.”

http://www.sacbee.com/content/business/story/1653915p-1729331c.html

Comment: CalPERS is the nation’s second largest provider of health benefit plans, surpassed only by the Federal Employees Health Benefits Program. And now there is general agreement that the market will not be able to solve the problems CalPERS faces. Why? The reasons are complex, but one important fact is that private health plans in the marketplace are mandated, based on “good” business practices, to avoid risk, shifting it elsewhere. Concentrating high-cost beneficiaries into CalPERS’ self-insured plans demonstrates that size alone will not contain costs when the market is able to siphon off low-cost beneficiaries.

Haven’t we had enough of these attempts to use the magic of the marketplace to control costs and provide comprehensive coverage for everyone. It is not as if we need to continue more real-life studies on the dynamics of the health care marketplace. The experiment has been completed with seemingly endless extensions that serve no other purpose than to prolong the life and profits of these failed marketplace health plans. It is time to end policies that prolong the viability of these parasitic middleman plans, and to enact policies that prolong the viability of patients!

A single, publicly administered, universal program of health insurance is precisely what we need. Let’s go for it!

1 in 8 Health Care Workers Lack Health Insurance

Contacts:
Brady Case (617) 308-7035
Quentin Young, MD (312) 782-6006
Don McCanne, MD (949) 493-3714

1 in 8 Health Care Workers Lack Health Insurance

Harvard Study Finds Coverage Falling Fast for Health Personnel and Their Children, Particularly in Private Health Sector

A study published in today’s American Journal of Public Health finds that one out of every 8 health care workers lacks medical insurance, far more than a decade ago. The children of health personnel also suffered declining health coverage over the decade and now account for one in ten uninsured children in the US.

The study, by Harvard researchers Drs. David Himmelstein, Steffie Woolhandler, and Harvard medical student Brady Case, analyzed data from a national survey of approximately 150,000 US residents conducted annually by the Census Bureau.

1.36 million health care personnel were uninsured in 1998, up 83.4% from 1988. The proportion uninsured rose from 8.4% to 12.2%. Declining coverage rates in the growing private-sector health care workforce—and falling health employment in the public-sector, which provided health benefits to more of its workers—accounted for the increases. The authors argue that the growth of for-profit medicine during the 90s, and price pressures from managed care, led many health institutions to cut workers’ benefits. In effect, investors and executives gained at the expense of health personnel and their children. In 1998, 1.12 million uninsured children lived in households with a health care worker, accounting for 10.1% of all uninsured children in the U.S.

The study analyzed all employees in physicians’ offices, hospitals, nursing homes and other health services settings. Physicians, nurses, managers, aides, food service, cleaning, building service, and laundry workers, and clerical and administrative support workers were among the groups examined.

Insurance coverage fell for virtually every health occupation in every type of institution, though some groups fared worse than others. The number of uninsured health workers in the private sector doubled over the decade while in the public sector the figure declined. In 1998, 20.0% of personnel in nursing homes were uninsured—more than in other health settings. Among occupational groups aides experienced the highest rate of uninsurance—23.8%. Even among physicians, more than 1 in 20 (5.4%) were uninsured. Black and Hispanic personnel were at least twice as likely as white health personnel to lack insurance. Geographic variations were considerable; Texas had the worst record.

The falling coverage over the past decade is particularly worrisome because it occurred during a record economic boom. An even steeper increase in uninsurance is likely in the current recession.

“Over the past decade we’ve learned that for-profit hospitals and dialysis clinics have high death rates; that for-profit HMOs and nursing homes score lower on quality; and that health care fraud is epidemic. Now we learn that market medicine means not only poor care and high prices for patients, but mistreatment of health workers.” said Brady Case, a medical student at Harvard and lead author of the study. “It’s perverse. The health care system, squeezed by Wall Street, is consigning its own workers and their families to the ranks of the uninsured.”

Dr. Don McCanne, President of Physicians for a National Health Program, commented: “In denying care to caregivers, our health system defies the Golden Rule. And it’s not only wrong, but dangerous. When a nurse with a cough or a kitchen worker with hepatitis can’t afford care, patients are at risk. It’s time for the U.S. to adopt a single payer national health insurance program.”

# # #

Physicians for a National Health Program (PNHP) is an organization of over 9,000 physicians that support universal access to health care. PNHP was founded in 1987 and has chapters across the U.S. For local contact information or copies of “No Care for the Caregivers: Declining Health Insurance Coverage for Health Care Personnel and Their Children, 1988-1998” (Am J Public Health. March 2002) call the PNHP headquarters in Chicago at (312) 782-6006.

Contacts:
– Brady Case is a medical student at Harvard.
– Dr. Quentin Young is an internist and former President of the American Public Health Association. He also serves as the National Coordinator of Physicians for a National Health Program
– Dr. Don McCanne is the National President of PNHP and a retired family physician.
– Drs. David Himmelstein and Steffie Woolhandler are currently on vacation. They may be reached at their clinical offices at (617) 665-1032 starting February 28.

Second Opinion: Is Health Insurance a Civil Right?

The Washington Post
February 19, 2002
By Abigail Trafford

“With pomp and circumstance and the glare of TV lights, representatives from 12 leading health, business and labor organizations signed a proclamation to ‘come together from diverse perspectives to seek solutions to one of America’s greatest problems.'”

“But the marching spirit of the summit conference started to sputter as soon as the health care moguls were asked about solutions. Out came the old buzzwords of stall, stall and stall: ‘Incremental,’ said one chieftain. There would be no one solution but a number of possible steps to chip away at the problem. ‘Public, private, incremental, long haul,’ agreed another. ‘Progress will be slow,’ said the consumer representative. ‘We have to keep the best we have and allocate resources,’ added another leader. ‘Incremental,’ echoed another.”

“To find solutions, each leader at the summit has to be willing to lose a little for the country to gain a lot. ‘Incremental’ is not a word that helps Potter, Hegdal or Henderson (examples of the plague of ‘uninsurance’). They’re not interested in ‘slow progress.’ They need coverage now. The uninsured have been waiting for decades for some relief.”

“So let’s give the chieftains 90 days to come up with a unified plan. After that, to return to the civil rights mode, it may be time for a march on Washington.”

http://www.washingtonpost.com/wp-dyn/articles/A18970-2002Feb15.html

For-Profit Health Care: Expensive, Inefficient and Inequitable

Dr. Arnold S. Relman, Professor Emeritus of Medicine and Social Medicine at Harvard Medical School and Emeritus Editor-in-Chief of the New England Journal of Medicine, Presentation to the Standing Senate Committee on Social Affairs, Science and Technology

Mr. Chairman, Honorable Members of the Standing Senate Committee on Social Affairs, Science and Technology :

My name is Dr. Arnold S. Relman. I am Professor Emeritus of Medicine and of Social Medicine at the Harvard Medical School and former Editor-in-Chief of the New England Journal of Medicine. I have been asked by the Canadian Health Coalition to appear before you today to testify about the U. S. experience with private, for-profit health care.

I have been studying and writing about this subject for over two decades. In 1985 and 1986 I served on a committee established by the Institute of Medicine of the U. S. National Academy of Sciences to report on “For-Profit Enterprise in Health Care.” During my editorship and afterwards, the New England Journal of Medicine published many articles in this field and, since I retired from that post, my own writings have continued to focus on this topic. I am now at work on a book that surveys the present unhappy condition of the U. S. health care system, with particular attention to the role of private enterprise.

My conclusion from all of this study is that most of the current problems of the U. S. system – and they are numerous – result from the growing encroachment of private for-profit ownership and competitive markets on a sector of our economy that properly belongs in the public domain. No health care system in the industrialized world is as heavily commercialized as ours, and none is as expensive, inefficient, and inequitable — or as unpopular. Indeed, just about the only parts of U. S. society happy with our current market-driven health care system are the owners and investors in the for-profit industries now living off the system.

The U. S. may be a world leader in medical science and technology, and its major medical centers may provide some of the best and most sophisticated care available anywhere, but taken as a whole, our health care system is failing and will need major reform very soon. We have tried private for-profit markets, first in hospitals, in ambulatory care facilities and services, and in nursing homes, and then more recently, in the ownership of insurance plans – and the experiment has failed. Private health care businesses have certainly not achieved the benefits touted by their advocates. In fact, there is now much evidence that private businesses delivering health care for profit have greatly increased the total cost of health care and damaged – not helped – their public and private nonprofit competitors.

The U. S. experience enables students of health care policy to compare the performance of nonprofit and for-profit facilities as well as the performance of insurance systems, and the results are clear for all who want to examine the evidence. For-profit hospitals were much more expensive than their nonprofit counterparts when Medicare and private insurers simply reimbursed charges. That difference disappeared when the payers began to negotiate fixed prices, but there has never been any evidence that for-profit hospitals could provide similar services at lower prices than their nonprofit competitors. However, a recent study of Medicare per capita expenditures for all health services, including hospital care, found that they were much higher in regions served exclusively by for-profit hospitals than in regions where there were fewer or no for-profit hospitals.

There is no good evidence about the relative quality of hospital services in for-profit and nonprofit facilities, because such studies are difficult to do. Quality is easier to ensure in nursing homes and kidney dialysis centers. They are largely paid through fixed, negotiated prices by public insurance, and their products are more or less standardized. Studies that have looked at objective measures of quality of service show that public and private non-profit nursing and dialysis facilities provide significantly better and safer services to patients than their for-profit counterparts. This shows that when you fix the price and the services so that there is no wiggle room, non-profits clearly provide better care.

A little over a decade ago, for-profit investor-owned businesses took over the private insurance field, and now they cover more than half of our people – mainly through employers. More than a quarter of our population is covered by Medicare and Medicaid, which are largely financed by government. Comparisons of these private and public systems are instructive. The Medicare system has administrative costs of less than 3 percent, with all the remainder of expenditures going to physicians, hospitals and other providers. The private insurers, on the other hand, have corporate and administrative costs of 15 to 30 percent, and in addition outsource many other services they use to control costs by restricting the use of expensive resources. As a result, it can be estimated that only 50 to 60 percent of the premium dollar ends up with the providers, who themselves must pay additional administrative costs to deal with the regulations of the multiple insurers they must bill. And, while the private insurers at first held down premium prices by drastically cutting utilization, they have now run out of cost-cutting options and are meeting increasing resistance from providers and the public. Recently, premium prices of private for-profit insurers have again begun to increase at double-digit rates, more rapidly than the costs of Medicare and Medicaid.

A remarkable demonstration of the failure of the commercial, HMO insurance system was seen a few years ago when senior citizens covered by Medicare were encouraged to obtain their care from private, for-profit HMOs that would be paid by the government. It soon became obvious that the costs of care under the private system were much greater and that senior citizens were dissatisfied with the care they received. A wholesale exit of senior citizens from the private system ensued. They voted with their feet for the public system.

In short, the U. S. experience has shown that private markets and commercial competition have made things worse, not better, for our health care system. That could have been predicted, because health care is clearly a public concern and a personal right of all citizens. By its very nature, it is fundamentally different from most other good and services distributed in commercial markets. Markets simply are not designed to deal effectively with the delivery of medical care – which is a social function that needs to be addressed in the public sector.

We in the U. S. are belatedly learning this lesson and soon may be ready to try other options that will depend more on public action. Many of us south of the border have always believed that you Canadians had the right idea in deciding that the financing of health care is primarily a public responsibility. We still think you are right and that we ought to emulate you, rather than vice versa. I am surprised and disappointed in your Committee’s Interim Report, which seems to favor policy options dependent on private market involvement in Canadian health care. Before making your final recommendations, I hope you will look more closely at the U. S. experience – which ought to convince most evidence-driven observers that markets can’t solve public problems like health care – and in fact make them worse.

However, to make a publicly financed system work effectively, I believe both our countries need to begin reforming their medical care delivery systems. That is where we both ought to be looking for ways to optimize our use of resources and improve the quality of our health care.

I believe that splintering the delivery system into many different, highly specialized facilities, as has been proposed in both our countries, is not in general a sound option for improving quality and effectiveness. A much better approach would be to re-organize how physicians work together. Both our countries now depend largely on independent solo medical practitioners to provide ambulatory and hospital services on a fee-for-service basis. We should both begin to encourage physicians and other health care professionals to organize themselves into self-governing, multi-specialty and multi-disciplinary teams to deliver comprehensive care at prepaid, capitated rates. Physicians provide the best care when they work in teams, not as competitors. Furthermore, to discourage over service, they should be paid primarily for their time, and not on a piecework basis. That would reduce both fraud and the resources wasted on the processing of claims.

Finally, I want to say just a word about “consumer choice,” which is now being touted in the U. S., and I gather in Canada, too, by believers in the magic of the market as a mechanism for controlling costs and improving the quality of services. While there is much to be said for making more information available to people about their health care, it is a fundamental misconception to imagine that sick patients can or should behave like ordinary consumers in commercial transactions, selecting the services and prices they want. Health care is totally different from most goods and services, and that’s why we have medical insurance and why sick people need the professional and altruistic services of physicians and other providers.

I suspect most Canadians understand why health care is special and why it needs to be insured by a public system like the one you now have. I would be surprised if they want the fundamental fairness of their Medicare system to be changed by the introduction of market forces.

Thank you for your attention.

Humana Medical Reviewer Admits to Denying Heart Transplant

Contacts:
Linda Peeno MD (502) 895-9761
Joanne Landy (212) 666-4001
Don McCanne MD (949) 493-3714

Showtime contacts:
Michele Morris (310) 234-5222
Joan Ziff (212) 808-1590

Humana Medical Reviewer Admits to Denying Heart Transplant
Second “John Q” Movie – Starring Laura Dern – Coming out in May

Louisville – Former Humana Medical Reviewer Dr. Linda Peeno was so disturbed by what she experienced working for the giant HMO – including denying a young patient’s heart transplant – that she went into medical ethics and is now a vocal advocate for a national health insurance program.

A movie based on Dr. Peeno’s experiences, called “Damaged Care” and including a scene showing her denying a patient’s heart transplant, is coming out on Showtime in May. Laura Dern (“Jurassic Park”) plays Dr. Peeno. Dern also co-produced the film. Dr. Peeno testified before Congress in May of 1996 about her heart transplant case and has been outspoken about the right to health care ever since.

“As a physician working for Humana, I denied a young man a heart transplant that would have saved his life, and thus caused his death,” testified Dr. Peeno. “No person or group has held me accountable for this, because, in fact, what I did was I saved a company a half a million dollars.”

“Humana’s only concern was costs,” says Dr. Peeno. “The young man fit all the criteria, a donor had been found, his doctor was ready to do the operation. Meanwhile, behind the scenes Humana employees scrambled to find a loophole in the patient’s contract. When they did, I was the one who had to tell the surgeon that the operation would not be covered.”

“The doctor asked me if I knew that the patient would likely die of his condition without the surgery, and I said I knew.” says Dr. Peeno. “When I hung up the phone my colleagues at Humana were thrilled, even joyful. I was sickened.”

The movie “Damaged Care” stars, in addition to Laura Dern, James LeGros, Adam Arkin, and Michelle Clunie, and features Regina King and Dianne Ladd. It is being distributed by Paramount Network Television. It was directed by Harry Winer.

Dr. Peeno recalls that shortly after denying the patient their heart transplant, a gigantic piece of sculpture was purchased for Humana’s headquarters – costing about the same amount as the heart transplant she had denied.

“When HMO’s came on the scene, we were told that they would eliminate only the “inappropriate care” and they would reduce costs so everyone could have insurance. Exactly the opposite has happened. They deny and delay needed care with sophisticated techniques, consume enormous resources for overhead costs and profits, and health care costs are rising dramatically.”

“Our health care funding system is sick,” says Dr. Don McCanne, a retired family physician and President of Physicians for a National Health Program. “If people only understood that we are already paying enough to provide comprehensive coverage for everyone – including heart transplants – if we only cut out the insurance middlemen and adopted a national health insurance program.”

The New York Chapter of PNHP leafleted outside a movie theater at the premier of John Q in New York City. “Everyone we spoke to agreed that we need health care reform,” says Joanne Landy, Executive Director of NYC-PNHP. “The public is overwhelmingly in favor of getting rid of the HMO’s and adopting a national health program.”

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Physicians for a National Health Program (PNHP) is an organization of over 10,000 physicians that supports a single payer national health insurance program. PNHP is based in Chicago with chapters across the US. For local contact information, call (312) 782-6006. www.pnhp.org

Dr. Linda Peeno is a family physician, medical ethicist and medical-legal consultant in Kentucky. She was the recipient of the 2001 “Dr. Quentin Young Health Activist Award”.

Hearing on Health Tax Credits to Decrease the Number of Uninsured

United States House of Representatives
Committee on Ways and Means
February 13, 2002

(Dr. Stuart Butler, Vice President of the Heritage Foundation, and others provided extensive testimony on the use of tax credits to assist with the purchase of health insurance in the private market.)

The testimony continues:

Chairman Bill Thomas (R-CA): Mr. Stark? We only have about four minutes.

Rep. Pete Stark (D-CA): … I’m gonna guess that we could provide Medicare for the under 65 population for probably 3,000 bucks a year. It was 4,000 for the 55 to 65 for the buy-in, so I’m extrapolating. Kids are only about 1,000 bucks, so you can fuss with me about the 3,000. But, I’m pretty close. If you add a maximum co-pay of 1,000 bucks, one day in the–one exposure to the hospital and 100 bucks for the doctor, you’re talking about, at most, $4,000 for a plan that–I handed out this list of benefits that I got off the e-group–that’s probably just as good as that, and if you–most of those had a $3,000 premium and a $1,000 co-pay. So, you could have Medicare with completely open enrollment and community rating, and why would anyone, therefore, object if using this tax credit, we allow people to purchase Medicare as an alternative? That’s all we’d need to keep the insurance companies honest. If they want to compete, let ’em compete. And we already have it for the seniors where, obviously, the private insurance didn’t want to compete. And so, I’d be perfectly willing to say, “Okay, let’s do it,” but just let Medicare offer a plan at budget net–cost as we do now with the subsidy for Part B, no higher, and provide it that way? Who’d object to that?

Dr. Stuart Butler (V.P. – Heritage Foundation): Well, I think you’d immediately see, of course, the adverse selection against Medicare, which is one of the big concerns with that. The people who would quickly and immediately take that option would be the people with the highest cost–.

Rep. Stark: Yeah, but adverse concern is the guy who doesn’t get any insurance through the private market.

Dr. Butler: Well, I understand that. But, I’m just trying to point out that the cost of providing that coverage is–.

Rep. Stark: It’s interesting how the (inaudible) is always worried about the poor people and the sick people first, as they’re jamming it to us rich, healthy people? I like that, Stuart. You’re true to form, always worrying about the rich people, never give a hoot for the poor.

Dr. Butler: Well, I–.

Rep. Stark: –At least you’re consistent.

Dr. Butler: I think my record’s very clear on that, Congressman.

Rep. Stark: Yes, your record is very clear. You don’t give a rat’s behind for the poor and the indigent. All you worry about is rich people getting their tax breaks.

Dr. Butler: Well, Congressman, I’ve actually–.

Rep. Stark: –Your career is outstanding in that regard.

Dr. Butler: If you look at the proposal–actually–.

Rep. Stark: –God bless you. Keep it up.

http://www.kaisernetwork.org/health_cast/uploaded_files/hwa021302.pdf

Comment: Mr. Stark, in his mastery of the eloquence of the lay language, has left no doubt as to the fundamental issue that lies behind the debate on health care reform. Maybe we should proceed with this debate. Let’s decide once and for all whether we, as a nation, give a rat’s behind. If we don’t, let’s not waste more time and effort on health care reform. But, if we do, let’s quit wasting our time trying to incrementally create a system that can be accepted by those that don’t give a rat’s behind. There is no such system. The enemies of reform will always try to silence the hoot that we want to give to the poor. If you doubt this, then ask yourself why a few decades of incremental reform have resulted in more uninsured, higher costs, and greater impairment of access to health care. The collectors of rat’s behinds have silenced almost every hoot of each reform measure.

Single payer reform would provide comprehensive care for everyone and effectively address the cost issue. Let’s leave the enemies of reform in their vaults, counting their rat’s behinds, while we move on with real reform. Let’s fix the damn thing now. Let’s enact a single payer system.

Joshua Freeman, M.D., Professor and Chair, Department of Family Medicine, University of Kansas Medical Center, responds to Kip Sullivan on the Wennberg proposal:

I agree pretty much with Sullivan. Two comments:

1. The biggest problem with Wennberg, Ellwood and others is that the ownership of the care providers by private, corporate, for profit entities precludes not only privacy, but true cost-effectiveness, as it inescapably alters the motivation for everything that such providers do. This, not prospective payment, large groups, etc., is the problem with HMOs-in-their-current-form.

2. Sullivan is correct of course about prospective studies. My concern is that new IRB regulations, with the intention of protecting privacy of patients, will preclude a lot of people-based (as opposed to lab-based) research. Thus, it will not hurt those currently most NIH funded whose work is least likely and with the longest time lag to benefit people (but has the highest status, since it isn’t susceptible to as much variation as studies involving actual people, with their undisciplined habits of variation!) but will be a real threat to clinical and in particular social science research on things that may be of greater immediate benefit (this has nothing to do with Wennberg or really Sullivan, but is a thought I had on reading Sullivan).

Uwe Reinhardt, Ph.D., responds to the Pete Stark – Stuart Butler exchange during the House Ways and Means hearing:

I do understand Pete’s frustration and anger, and I share the sentiment. Pete has been a constant champion of the poor over the years and he must be deeply saddened at the 1990s. But I do not think that he was being fair to Stuart Butler.

To be sure, Stuart has a strong bias in favor of private market solutions–he, like Mark Pauly, has a deep-seated belief that government solutions invariably breed inefficiency and corruption, just as others have a deep-seated belief that private, for -profit enterprise is inherently anti-social. On the other hand, I know that both Mark and Stuart do care deeply about the welfare of low-income people, would very much like to see them all insured, and have worked hard over the years to work out politically feasible proposals to achieve that goal–proposals that have varied with the political temper of the times. They are not callous people. There really is such a thing as a compassionate conservative, and these two fall into that class (as President Bush does not–for he lacks the first of the “c’s”).

In fact, none other than former New Republic editor Michael Kinsley (recently retired from Slate) called Stuart Butler’s original proposal (JAMA, around 1992) the most liberal proposal at the time, measured by the ultimate incidence of the fiscal burden and the degree of protection it offered. It may be recalled that the Urban Institute judged the financing of the Clinton Plan regressive in its incidence.

It is worth re-reading that old Heritage Foundation proposal to appreciate just how far we have sunk in terms of social ethics. Today it would be dead on arrival. Even Al Gore would have decried Stuart’s proposal as “reckless spending.”

Uwe

John Q.

Hundreds of thousands of Americans watched this weekend as a desperate father held a hospital emergency room at gunpoint and demanded a heart transplant for his dying son. Fortunately for everyone, it all happened in a movie, ‘John Q,’ which opened Friday

Los Angeles Times
February 18, 2002
‘John Q.’s’ Public Warning By Benedict Carey

Hillel Laks, M.D., Professor and Chief, Division of Cardiothoracic Surgery, UCLA Medical Center, Los Angeles:

“It’s very important for people to know what their insurance pays for, and to know they can do something about it. John Q. could have gone to the company and said, ‘I don’t like this policy. I want to spend $100 more and get better insurance.’ If he’s willing to go shoot people to save his son, why can’t he pay a little extra a month to make sure he’s covered?”

http://www.latimes.com/features/health/la-000012439feb18.story?coll=la%2Dheadlines%2Dhealth

Comment: Professor Laks is a noted and respected expert on heart transplants. However, before he ventures further into expressing public opinions on health policy, I would emphatically recommend that he become more versed in the basic fundamentals of this discipline. He might begin by reading “Understanding Health Policy” by Thomas Bodenheimer and Kevin Grumbach.

Importunely, Dr. Laks’ response represents the prevailing view of the leadership of the medical associations, of many business leaders, and the conservatives and many moderates who now control the political agenda. Their rhetoric is that control of health care should be shifted to the consumer, and this is done by defining the contribution of either the employer or the government and then allowing the beneficiary-patient to have “choice” of the type of coverage by contributing the balance of the premium. That “choice” for those with very limited income and assets, such as John Q and another 100,000,000 or so in the United States, either requires an often unaffordable premium, or requires that the individual select options with unaffordable out-of-pocket expenses. For the benefit of Dr. Laks and others that don’t seem to quite get it, in health policy terms, this is called “defined contribution” and “shifting risk to the beneficiary.”

In fact, everyone who is going to take a stand on issues of health policy should read “Understanding Health Policy.” If individuals are going to support cruel and inhumane health policies, they should understand exactly what they are doing. In this age, they should not be allowed the intellectual laziness and the “Let them eat cake” insensitivity of proclaiming, “Let them have choice,” and then walking away from the problem.

Understanding Health Policy: http://shop.mcgraw-hill.com/cgi-bin/pbg/0071378154.html?id=aaHGHsD3

Kip Sullivan, responding to the Wennberg et al proposal for Medicare reform:

I agree with your statement that Wennberg et al. have presented a compelling argument that Americans are exposed too often to overuse and underuse of medical services. And I agree as well that Wennberg is wrong to promote HMOs as the mechanism best suited to reduce overuse and underuse. However, I want to call attention to a proposal Wennberg makes that you didn’t discuss which I believe is dangerous and doomed to fail.

Wennberg, like all managed-care advocates, believes quality (overuse, underuse, and misuse) can only be improved if the structure of the health-care system is changed, and if patient privacy is destroyed (or, at best, placed at grave risk). Wennberg shares two beliefs with Paul Ellwood and other managed-care advocates: (1) quality cannot be improved unless doctors are herded into large entities — preferably HMOs — that have enough power over doctors to force, cajole, and/or educate them into changing their practice style, and (2) patient medical files are dumped into large information depots, preferably national depots, and these depots are used by researchers to determine “best practice.” Both beliefs, casually and frequently expressed by the managed-care crowd, have never been elaborated, and certainly never proven. I think both beliefs are nonsense. A thorough refutation of this nonsense would take up more time than I have today. I comment on just two issues.

The notion that doctors can improve their understanding of the massive medical-science literature only if they leave solo practices and join large networks of docs or HMOs makes several bogus assumptions, the most important of which is that the bureaucrats who head up the network or HMO do have plenty of time to keep up with the medical literature, and, given their superior knowledge and their managed-care tools (utilization review, financial incentives, etc.), are capable of forcing or inducing the army of doctors under their command to weed out the “bad practices” and nourish the “best practices.” Just saying this seems to me proof enough of the silliness of this proposal, but if there are people on this list who would like to question this statement, please do. This is a complex issue and I’d be happy to expound.

The second premise I want to quarrel with is Wennberg’s assumption that medical research has been shackled, lo these many centuries, by the absence of national or regional information depots containing all information on all patients. (To my knowledge, Paul Ellwood was the first person to make a big splash promoting this nonsense. He did so in a 1988 article for the New England J Med.) The problems with this proposal are numerous and mind-boggling.

The most serious problem with the notion that advances in medical science depend on researchers trolling through millions of patient files is that it pretends, without saying so, that the historic methods of advancing medical science were never any good, or were terribly inefficient. The gold standard in scientific research is, of course, the prospective, controlled trial. Trolling through patient files after patients have received medical care is, by definition, a retrospective methodology. You can do your best to control for variables that could affect outcomes, but as a rule you’ll never control for all relevant variables with a retrospective methodology as well as you will with a prospective methodology. I’m not saying retrospective research is useless. I’m merely calling attention to an obvious fact — medical science, excuse me, “identification of best practices” will advance faster if we rely primarily on prospective methods, and that increasing the number of retrospective studies based on huge information depots (as opposed to the old-fashioned technique of asking a sample of patients for consent and then reviewing their files) will accomplish relatively little. To put it another way, if we never create gigantic information depots, medical science will continue to advance by the same route it always has — by basic research, by randomized (prospectively designed) clinical trials, by retrospective research using relatively small patients samples, by clinical experience, and by serendipity.

Note the advantage to patients in the old-fashioned methods of advancing medical science — our records are used with our consent. Under the Wennberg proposal, all records (not just that portion relevant to the study) on all patients (not just a sample of patients) are routinely dumped into the depot and kept there till the end of time (which is a much longer violation of patient privacy than the period of time required by the typical old-fashioned prospective or retrospective study).

And I haven’t even discussed the cost of the Wennberg-Ellwood boondoggle.

I think single-payer advocates should state clearly that one of the advantages of a single-payer system is that patient privacy will not be destroyed. To make that promise, we have to reject the HMO advocates’ claim that quality of care can only be maintained or improved if patient files are routinely inspected by researchers. We should instead promote much more old-fashioned research, and more education of doctors and patients about the results of that research.

Medicare cut seen raising labour costs

The Globe and Mail (Toronto)
February 12, 2002
By Virginia Galt

“Labour costs could shoot up, jeopardizing one of Canada’s key competitive advantages, if universal health care is eroded and unions go after employers for private coverage, industrial relations specialists say.”

The Conference Board of Canada, in a recent briefing paper on corporate health care costs in Canada and the United States:

“Any policy debate on the future of the health care system of Canada should recognize not only medicare’s symbolic value to individual Canadians, but also its economic contribution to the competitiveness of Canadian businesses vis-à-vis the United States.”

http://www.globeandmail.com, and under Search” and “This site” enter “Medicare cut” and click “Go”

Beth Capell, Ph.D., responding to the Urban Institute report on the safety net:

The only “safety-net system” proposals that would give the uninsured the same access to care as the insured require that the safety net is as well funded as insurance coverage and as readily accessible. None of these so-called safety net proposals mentioned by Holahan and Spillman, much less the Bush proposal, approach that level of funding and accessibility, to the best of my knowledge. In California, we would need to spend an additional $8-$10 billion a year to fund care for the uninsured comparable to the cost of coverage. Short of that, the safety net will always be inadequate. Even with that, given the well-established correlation of poverty and ill health, funding for the uninsured may not be sufficient–but it would be much closer.