Shifting toward Defined Contributions — Predicting the Effects

By Kevin A. Schulman, M.D., Barak D. Richman, J.D., Ph.D., and Regina E. Herzlinger, D.B.A.
The New England Journal of Medicine, June 26, 2014

When Representative Paul Ryan (R-WI) attracted national attention by joining Senator Ron Wyden (D-OR) in proposing a sweeping privatization of Medicare, he was variously vilified and praised for suggesting that Medicare should be converted from a defined-benefit program to a defined-contribution program. Although there has been little congressional action to advance the Wyden–Ryan plan, defined-contribution programs are becoming increasingly prevalent in employer-sponsored health insurance and may ultimately bring about substantial changes in U.S. health care.

A defined-benefit program provides specific benefits to enrollees when those benefits are needed. For example, a defined-benefit pension program provides payments of specified amounts to retirees. Defined-benefit health insurance, such as Medicare and most private plans, pays for specific health care services when eligible beneficiaries demand such services. In contrast, a defined-contribution program — like most typical 401(k) retirement plans — provides certain financial support to beneficiaries before any benefits are consumed, and beneficiaries then spend those funds to meet their eventual expenses. In defined-contribution pension plans, only the financial contribution is defined, and the extracted benefits are determined by the payment and investment preferences of the beneficiary.

Economists have posited that defined-contribution health insurance plans offer two key benefits. First, enrollees in such plans receive more choice than they would in the one-size-fits-all plans typically offered by employers. They can thus consider the quality of plans and express their preferences for various features of benefits packages, such as open or limited provider networks and low or high deductibles. Second, defined-contribution plans can give employers greater certainty about costs, insulating them from unpredictable health care inflation. Such plans might also curb or reverse the trend toward employees’ passively shouldering the growing costs of employer-based defined-benefits plans. (Between 2003 and 2013, employer spending increased by 77%, while employees’ costs increased by 89%.1) In a competitive labor market, with the transparency of a defined-contribution plan, employers would have to compensate employees through higher wages for any shifting of additional health care costs, although increased compensation might only need to match employees’ perceptions of the value of the lost benefits.

One largely overlooked attraction of defined-benefit plans is related to the political economy of firms. Because the tax exemption for employer-provided health insurance often hides what employers pay for employees’ health insurance, many employees demand costly plans without realizing that the employer’s contribution ultimately reduces their own take-home pay. A defined-contribution plan, in contrast, makes insurance premiums more transparent, thereby inducing employees to demand more affordable health plans because they are aware of the full amount they pay. For example, when human resources consultancy Aon Hewitt helped companies implement insurance plans under a defined-contribution system in 2013, 42% of employees purchased less expensive plans, 32% purchased coverage similar to what they had previously had, and only 26% bought more expensive coverage.

The intellectual appeal of the Wyden–Ryan plan rested on this logic. Its supporters argued that because the risk of higher-than-expected health care inflation would be shifted onto Medicare enrollees, who would be empowered to exercise consumer choice, the market dynamics would change. On one hand, there would be greater cost consciousness behind consumer demand; on the other hand, supply would reflect greater competition for consumers’ premium dollars.

If Medicare reforms do not adequately address the excessive costs of health care, converting the program to a defined-contribution plan could leave many seniors uninsured or exposed to unaffordable health care bills, thereby undermining one of the fundamentals of the Medicare program — protection against financial risk — while leaving providers with major revenue shortfalls.

Although Medicare seems unlikely to be transformed into a defined-contribution program in the immediate future, the private insurance market is shifting toward defined contributions. Many large companies — including IBM, Duke Energy, and Time Warner — are now pursuing defined-contribution strategies for their retirees; others, including Walgreens, are doing so for current workers. Some companies have designed private insurance exchanges through which workers and retirees can purchase insurance plans, and others may encourage retirees to purchase insurance through private exchanges or the public exchanges established under the Affordable Care Act. A recent survey suggests that 58% of employers have confidence in private exchanges as a viable alternative to the plans they currently offer employees and that “employers are intrigued by the potential of private exchanges to control cost increases, reduce administrative burdens and provide greater value.”

Some observers have expressed legitimate concerns that employers could limit their payments for health benefits by increasing wages by amounts less than those of employees’ medical costs. In theory, a competitive labor market would ensure that total employee compensation remained at competitive levels, thereby preventing employers from using defined-contribution mechanisms in this way. But competitive labor markets require compensation to reflect productivity. In rigid sectors of the economy, defined-contribution strategies could burden employees disproportionately with the weight of medical inflation.

Yet the appeal of defined-contribution plans — whether as part of Medicare reform or in the form of changing benefits for retirees and workers — remains potent. Defined-contribution strategies reveal to employees and health insurance customers any cost increases that exceed the growth of wages, and individuals purchasing insurance on exchanges have shown a growing preference for lower-priced plans that increase cost sharing for health expenditures. In 2013, for example, Aon Hewitt found that the proportion of employees who selected high-deductible plans (most of which included a contribution to a health savings account) increased from 12% to 39%, while enrollment in preferred provider organizations decreased from 70% to 47%.

Defining the contributions to health care expenditures before containing health care costs might be placing the cart before the horse. On the other hand, making such inflation visible and painful to consumers is one tool for bringing costs under control.

Whether or not providers and consumers are ready, defined-contribution benefit plans are growing in popularity. They will unquestionably have both short- and long-term consequences for providers. They will bring greater transparency to health care costs and health care inflation, and they will probably give insurance purchasers greater motivation to attend to insurance prices, stimulating the provision of lower-cost insurance.

Because insurance premiums are ultimately the primary source of revenue for providers, cost consciousness among consumers will impose new fiscal constraints on providers. For some highly leveraged providers — especially those who expanded costly infrastructures that relied on lucrative fee-for-service revenue models — even small changes in the private health insurance market could have substantial financial effects. In this world, providers’ future success will depend on their ability to sustain themselves on a flattening allowance.

Over the long term, greater consumer sensitivity to insurance premiums will affect all providers. It is a truism that the growth of health care costs — or, phrased differently, the growth of provider resources — will be bounded by the growth of health care revenue. A dramatic shift in the revenue available to providers will impose strong cost pressure. And such pressure, in turn, can be seen as a new opportunity for developing more cost-efficient delivery mechanisms.

http://www.nejm.org/doi/full/10.1056/NEJMp1314391

This article from the prestigious New England Journal of Medicine should alarm anyone who cares about ensuring that everyone has access to health care. We are now seeing a rapid conversion of health care financing from defined benefit (paying for appropriate health care) to defined contribution (paying a specific dollar amount while placing upon the beneficiary the responsibility of using those funds to find affordable care, if possible). This places the burden of health care inflation most heavily on those who have the greatest health care needs when these individuals and families are already over-burdened with our deficient system of health care financing.

Look at the explanation that these authors give as to why defined contribution is a superior method of financing health care:

• Patients would not be stuck with a one-size-fits-all plan of comprehensive benefits that covers their essential care but rather would be allowed to forgo crucial health care services that they could not afford (permitting them to accept suffering, disability and even death as a small price to pay for not selecting a plan that they couldn’t afford).
• They would have the right to plans that exclude from provider networks physicians and hospitals that they might need in the future but would not be able to afford.
• They would have the right to enroll in plans with high deductibles that have been proven to impair access and create greater personal financial hardships.
• They can rest assured that their employers will be insulated against future increases in health care costs, while graciously accepting for themselves the costs of unpredictable health care inflation.
• They can personally experience the ongoing deterioration in labor markets as employers decline to provide as wage increases the savings in the costs of their health benefit programs – a valuable lesson in the differences between market ideology and the actual application of market dynamics.
• They need not understand the value of their lost benefits (i.e., “increased compensation might only need to match employees’ perceptions of the value of the lost benefits” – the fools know not what they are deprived of).
• With greater transparency in premiums under defined contribution, employees would be in a position to demand only the lower premium plans that they could afford, even though that can be disastrous should health status change for the worse. (Employees choose low premium plans not because they want less coverage but rather because they cannot afford the higher premiums of more comprehensive plans.)
• Employees can be reassured by the fact that their “employers are intrigued by the potential of private exchanges to control cost increases, reduce administrative burdens and provide greater value” – for the employers that is. There is nothing like a work environment that takes good care of the employers.

Perhaps there is a limit to what the employee/patient/beneficiary/consumer may support in this transition to defined contribution financing of health care. According to these authors, “Defining the contributions to health care expenditures before containing health care costs might be placing the cart before the horse. On the other hand, making such inflation visible and painful to consumers is one tool for bringing costs under control.”

Ah ha! We need to switch to defined contribution financing because it will make health care inflation “visible and painful to consumers.” Clearly there had to be more advantages than just those listed above. There ain’t no gain if there ain’t no pain.

Regina Herzlinger is an icon in the consumer-directed policy community. They are winning the battle, and the people are losing. If you like the policies listed above, you don’t need to do anything. Regina and her friends will take care of it for you.

For the rest of you, get over the lousy satire and go out and fight the battle for health care justice for all.

Medical Cost Trend: Behind the Numbers 2015

PricewaterhouseCoopers
PwC Health Research Institute, June 2014

PwC’s Health Research Institute (HRI) projects 2015’s medical cost trend to be 6.8% — a modest increase over our 2014 projection of 6.5%. This projection is based on HRI’s analysis of medical costs in the large employer insurance market, which covers about 150 million Americans. By comparison, Medicare serves 52 million beneficiaries and a little over 8 million Americans enrolled in the public exchanges this year.

The net growth rate in 2015, after accounting for benefit design changes such as higher deductibles and narrow provider networks, is expected to be 4.8%. Benefit design changes typically hold down spending growth by shifting costs to consumers, who often choose less expensive healthcare options.

Although total US health spending will likely increase as more people gain insurance under the Affordable Care Act (ACA), it may have little effect on employer health spending. The increase in utilization under the ACA will likely drive up total national health expenditures without changing prices for those with employer coverage.

High-deductible plans will continue to tamp down use of services

The popularity of high-deductible health plans continues to rise as employers attempt to manage their benefit costs. According to PwC’s 2014 Touchstone Survey, 44% of employers across all industries are considering high-deductible plans as the only insurance option for their employees during the next three years. In addition, according to the same survey, 33% of employers are considering moving their active employees to a private exchange in the next three years, and this strategy tends to accelerate employee adoption of higher deductible plans.

Now more than ever, consumers are experiencing increased financial responsibility and are evaluating and rethinking how and when to spend. 

Consumers become cost-conscious healthcare shoppers

The ongoing growth in high-deductible plans ultimately influences consumer behavior on the number and type of health services purchased. Eighty-five percent of employers in PwC’s 2014 Touchstone Survey have already implemented or are considering an increase in employee cost-sharing through plan design changes over the next three years, and 44% of employers are considering offering high-deductible plans as the only insurance option for their employees over the next three years.

While increased cost sharing and high-deductibles do not affect medical inflation directly, consumer behavior does. Cost remains a top concern for consumers and affects the health choices they make. According to a December 2013 HRI survey, 40% of consumers said that healthcare expenses put a strain on their budget. And a recent study in the journal Health Affairs about families with high-deductible health plans observed deliberate changes in those families’ use of health services. Families enrolled in high-deductible plans used fewer brand name drugs, had fewer doctor visits, and spent less per visit.

Risk-based contracts are beginning to reduce costs

Insurers and employers are increasingly using risk-based payments in their physician and hospital contracts to reduce costs. Risk-based contracts can include quality bonuses and penalties, shared savings programs that encourage physicians to cut costs, and patient-centered medical homes (PCMH), which pay physicians to manage and coordinate care. Most health plan actuaries interviewed by HRI reported that these strategies are starting to reap cost savings.

Employers: What are they doing now?

Employers continue to pursue a range of cost-cutting strategies with a fresh emphasis on shifting more responsibility onto workers. According to PwC’s 2014 Touchstone survey, 26% of employers have a high-deductible health plan as their highest enrolled medical plan in 2014—the highest percentage ever. Controlling costs through high-deductible plans is not the only strategy employers are trying. Offering plans with narrow provider networks, investing in wellness programs, contracting directly with centers of excellence, or even participating in private exchanges, may save employers money. Consumer behavior is also beginning to impact the spending growth rate.

http://pwchealth.com/cgi-local/hregister.cgi/reg/pwc-hri-medical-cost-trend-2015.pdf

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Comment:

By Don McCanne, MD

This PwC medical cost trend applies to the large employer health insurance market, covering about 150 million Americans. The increase in costs for 2015 is anticipated to be 6.8%, again well in excess of the rate of inflation. Perhaps most alarming is the estimate of net growth – 4.8% – a reduction accomplished by “benefit design changes such as higher deductibles and narrow provider networks.”

We have discussed repeatedly the perversities of higher deductibles and narrower provider networks – reducing spending by impairing access and making health care less affordable for patients in need – yet that is the direction where the mainstay of health care coverage – employer-sponsored plans – is headed.

We need to remove employers and private insurers from the health care equation. A single payer national health program would eliminate the need for deductibles and would provide unlimited choice of health care professionals and institutions, while actually controlling health care spending. Its time is now.

Medical Cost Trend: Behind the Numbers 2015

PricewaterhouseCoopers
PwC Health Research Institute, June 2014

PwC’s Health Research Institute (HRI) projects 2015’s medical cost trend to be 6.8% — a modest increase over our 2014 projection of 6.5%. This projection is based on HRI’s analysis of medical costs in the large employer insurance market, which covers about 150 million Americans. By comparison, Medicare serves 52 million beneficiaries and a little over 8 million Americans enrolled in the public exchanges this year.

The net growth rate in 2015, after accounting for benefit design changes such as higher deductibles and narrow provider networks, is expected to be 4.8%. Benefit design changes typically hold down spending growth by shifting costs to consumers, who often choose less expensive healthcare options.

Although total US health spending will likely increase as more people gain insurance under the Affordable Care Act (ACA), it may have little effect on employer health spending. The increase in utilization under the ACA will likely drive up total national health expenditures without changing prices for those with employer coverage.

High-deductible plans will continue to tamp down use of services

The popularity of high-deductible health plans continues to rise as employers attempt to manage their benefit costs. According to PwC’s 2014 Touchstone Survey, 44% of employers across all industries are considering high-deductible plans as the only insurance option for their employees during the next three years. In addition, according to the same survey, 33% of employers are considering moving their active employees to a private exchange in the next three years, and this strategy tends to accelerate employee adoption of higher deductible plans.

Now more than ever, consumers are experiencing increased financial responsibility and are evaluating and rethinking how and when to spend.

Consumers become cost-conscious healthcare shoppers

The ongoing growth in high-deductible plans ultimately influences consumer behavior on the number and type of health services purchased. Eighty-five percent of employers in PwC’s 2014 Touchstone Survey have already implemented or are considering an increase in employee cost-sharing through plan design changes over the next three years, and 44% of employers are considering offering high-deductible plans as the only insurance option for their employees over the next three years.

While increased cost sharing and high-deductibles do not affect medical inflation directly, consumer behavior does. Cost remains a top concern for consumers and affects the health choices they make. According to a December 2013 HRI survey, 40% of consumers said that healthcare expenses put a strain on their budget. And a recent study in the journal Health Affairs about families with high-deductible health plans observed deliberate changes in those families’ use of health services. Families enrolled in high-deductible plans used fewer brand name drugs, had fewer doctor visits, and spent less per visit.

Risk-based contracts are beginning to reduce costs

Insurers and employers are increasingly using risk-based payments in their physician and hospital contracts to reduce costs. Risk-based contracts can include quality bonuses and penalties, shared savings programs that encourage physicians to cut costs, and patient-centered medical homes (PCMH), which pay physicians to manage and coordinate care. Most health plan actuaries interviewed by HRI reported that these strategies are starting to reap cost savings.

Employers: What are they doing now?

Employers continue to pursue a range of cost-cutting strategies with a fresh emphasis on shifting more responsibility onto workers. According to PwC’s 2014 Touchstone survey, 26% of employers have a high-deductible health plan as their highest enrolled medical plan in 2014—the highest percentage ever. Controlling costs through high-deductible plans is not the only strategy employers are trying. Offering plans with narrow provider networks, investing in wellness programs, contracting directly with centers of excellence, or even participating in private exchanges, may save employers money. Consumer behavior is also beginning to impact the spending growth rate.

http://pwchealth.com/cgi-local/hregister.cgi/reg/pwc-hri-medical-cost-tr…

This PwC medical cost trend applies to the large employer health insurance market, covering about 150 million Americans. The increase in costs for 2015 is anticipated to be 6.8%, again well in excess of the rate of inflation. Perhaps most alarming is the estimate of net growth – 4.8% – a reduction accomplished by “benefit design changes such as higher deductibles and narrow provider networks.”

We have discussed repeatedly the perversities of higher deductibles and narrower provider networks – reducing spending by impairing access and making health care less affordable for patients in need – yet that is the direction where the mainstay of health care coverage – employer-sponsored plans – is headed.

We need to remove employers and private insurers from the health care equation. A single payer national health program would eliminate the need for deductibles and would provide unlimited choice of health care professionals and institutions, while actually controlling health care spending. Its time is now.

Marital Disruption and Health Insurance

By H. Elizabeth Peters, Kosali Simon, and Jamie Rubenstein Taber
National Bureau of Economic Research, NBER Working Paper No. 20233, June 2014

Despite the high levels of marital disruption in the United States, and substantial reliance on family-based health insurance, little research is available on the consequences of marital disruption for insurance coverage among men, women, and children. We address this shortfall by examining patterns of coverage surrounding marital disruption. We find large differences in coverage across marital status groups in the cross-section. In longitudinal analyses that focus on within-person change, we find small overall coverage changes but large changes in type of coverage following marital disruption. Both men and women show increases in private coverage in their own names, but offsetting decreases in dependent coverage tend to be larger. Dependent coverage for children also declines after marital dissolution, even though children are still likely to be eligible for that coverage. Children and, to a lesser extent, women show increases in public coverage around the time of divorce or separation. The most vulnerable group appears to be lower-educated women with children because the increases in private, own-name, and public insurance are not large enough to offset the large decrease in dependent coverage.

New provisions in the Affordable Care Act (ACA) will increase availability of health insurance, especially through Medicaid expansions and subsidized exchange-based private coverage, and may mitigate some of the detrimental impacts of marital disruption. However, because employers are expected to remain the main source of coverage for the nonelderly population (Congressional Budget Office 2012) and because of lingering uncertainty regarding state compliance with expansions (Kaiser Family Foundation 2013), marital disruption is likely to remain a cause of instability in insurance coverage. 

http://www.nber.org/papers/w20233

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Comment:

By Don McCanne, MD

To no surprise, this study confirms that divorce is disruptive to health insurance coverage, especially for spouses and dependent children. That disruption is worse for more vulnerable lower-educated women with children. Since employer-sponsored coverage is expected to remain the most dominant form of insurance and most susceptible to changes due to divorce, and since many states are avoiding compliance with the intentions of improving coverage through the expansions authorized in the Affordable Care Act, and since many divorced individuals and their dependents will qualify for hardship exemptions allowing them to remain uninsured, marital disruption will remain a significant cause of being uninsured.

We are now inundated with reports about how well the Affordable Care Act is working – the glass half-full argument. What about those who will be left out because their share is in the empty half of the glass? We need a full glass – a single payer national health program – but we didn’t get it. Many divorcees and their children will be victims of our mediocre, half-assed effort (excuse me, half-glass). Well, it was half-assed and it’s time we said it.

Marital Disruption and Health Insurance

By H. Elizabeth Peters, Kosali Simon, and Jamie Rubenstein Taber
National Bureau of Economic Research, NBER Working Paper No. 20233, June 2014

Despite the high levels of marital disruption in the United States, and substantial reliance on family-based health insurance, little research is available on the consequences of marital disruption for insurance coverage among men, women, and children. We address this shortfall by examining patterns of coverage surrounding marital disruption. We find large differences in coverage across marital status groups in the cross-section. In longitudinal analyses that focus on within-person change, we find small overall coverage changes but large changes in type of coverage following marital disruption. Both men and women show increases in private coverage in their own names, but offsetting decreases in dependent coverage tend to be larger. Dependent coverage for children also declines after marital dissolution, even though children are still likely to be eligible for that coverage. Children and, to a lesser extent, women show increases in public coverage around the time of divorce or separation. The most vulnerable group appears to be lower-educated women with children because the increases in private, own-name, and public insurance are not large enough to offset the large decrease in dependent coverage.

New provisions in the Affordable Care Act (ACA) will increase availability of health insurance, especially through Medicaid expansions and subsidized exchange-based private coverage, and may mitigate some of the detrimental impacts of marital disruption. However, because employers are expected to remain the main source of coverage for the nonelderly population (Congressional Budget Office 2012) and because of lingering uncertainty regarding state compliance with expansions (Kaiser Family Foundation 2013), marital disruption is likely to remain a cause of instability in insurance coverage.

http://www.nber.org/papers/w20233

To no surprise, this study confirms that divorce is disruptive to health insurance coverage, especially for spouses and dependent children. That disruption is worse for more vulnerable lower-educated women with children. Since employer-sponsored coverage is expected to remain the most dominant form of insurance and most susceptible to changes due to divorce, and since many states are avoiding compliance with the intentions of improving coverage through the expansions authorized in the Affordable Care Act, and since many divorced individuals and their dependents will qualify for hardship exemptions allowing them to remain uninsured, marital disruption will remain a significant cause of being uninsured.

We are now inundated with reports about how well the Affordable Care Act is working – the glass half-full argument. What about those who will be left out because their share is in the empty half of the glass? We need a full glass – a single payer national health program – but we didn’t get it. Many divorcees and their children will be victims of our mediocre, half-assed effort (excuse me, half-glass). Well, it was half-assed and it’s time we said it.

Dr. Arnold Relman, Outspoken Medical Editor, Dies at 91

By Douglas Martin
The New York Times, June 21, 2014

In a provocative essay in the New England journal on Oct. 23, 1980, Dr. Relman, the editor in chief, issued the clarion call that would resound through his career, assailing the American health care system as caring more about making money than curing the sick. He called it a “new medical-industrial complex.”

His targets were not the old-line drug companies and medical-equipment suppliers, but rather a new generation of health care and medical services — profit-driven hospitals and nursing homes, diagnostic laboratories, home-care services, kidney dialysis centers and other businesses that made up a multibillion-dollar industry.

“The private health care industry is primarily interested in selling services that are profitable, but patients are interested only in services that they need,” he wrote. In an editorial, The Times said he had “raised a timely warning.”

In 2012, asked how his prediction had turned out, Dr. Relman said medical profiteering had become even worse than he could have imagined.

His prescription was a single taxpayer-supported insurance system, like Medicare, to replace hundreds of private, high-overhead insurance companies, which he called “parasites.” To control costs, he advocated that doctors be paid a salary rather than a fee for each service performed.

Dr. Relman recognized that his recommendations for repairing the health care system might be politically impossible, but he insisted that it was imperative to keep trying. Though he said he was glad that the health care law signed by President Obama in 2010 enabled more people to get insurance, he saw the legislation as a partial reform at best.

The health care system, he said, was in need of a more aggressive solution to fundamental problems, which he had discussed, somewhat philosophically, in an interview with Technology Review in 1989.

“Many people think that doctors make their recommendations from a basis of scientific certainty, that the facts are very clear and there’s only one way to diagnose or treat an illness,” he told the review. “In reality, that’s not always the case. Many things are a matter of conjecture, tradition, convenience, habit. In this gray area, where the facts are not clear and one has to make certain assumptions, it is unfortunately very easy to do things primarily because they are economically attractive.”

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The Arnold Relman Memorial Fund

Physicians for a National Health Program (PNHP)
From “Physicians and Politics” by Arnold S. Relman, M.D., in JAMA Internal Medicine, June 2, 2014:

“A new health care system that provides universal access and is affordable and efficient will be difficult to achieve. The private insurers and all the other businesses that profit from the current commercial system will resist it. Major reform will need wide public support, which in turn will rely on advocacy by the medical profession. But I believe that reform will nevertheless be eventually enacted because it meets a widely shared and growing public desire for more fairness in an American society pervaded by inequality in access to good health care and many other social benefits.

“Physicians have a unique power to reshape the medical care system. They are what makes it work and are best qualified to use and evaluate its resources. But if they never unite to press for major reform, the future of health care in the United States will indeed be bleak. We will end up either with a system controlled by blind market forces or with a system entangled in complicated and intrusive government regulations. In either case it would be impossible to practice good patient-centered medicine, and the quality and effectiveness of our health care system would sink even lower among the ranks of developed countries. It is up to the medical profession to see that this does not happen.”

Dr. Arnold S. Relman, professor emeritus of medicine and social medicine at Harvard Medical School, and past editor-in-chief of The New England Journal of Medicine, died on June 17, 2014. He was 91.

Dr. Relman was one of the most distinguished figures in U.S. medicine, and he leaves a rich legacy of research and writing on the economic, ethical, legal and social dimensions of health care.

An important part of this legacy is embodied in his influential book, “A Second Opinion: A Plan for Universal Coverage Serving Patients Over Profit,” in which he makes an impassioned case for establishing “a single-payer system sponsored by the federal government” coupled with “a reorganized medical care system based on independent multispecialty group practice with salaried physicians.”

Among Dr. Relman’s many achievements during his tenure as editor-in-chief at the NEJM, he oversaw the journal’s publication of “A National Health Program for the United States: A Physicians’ Proposal,” by Dr. David U. Himmelstein, Dr. Steffie Woolhandler, and 29 others. At the time, in 1989, the article’s appearance in the NEJM represented a major breakthrough for the mainstream discussion of single payer in the medical profession. It also served as a seminal article in the establishment of Physicians for a National Health Program.

In addition to Dr. Relman’s numerous awards and honors from professional societies, scientific academies, and universities, in November 2013 he was presented with PNHP’s Dr. Quentin D. Young Health Activist Award for his unswerving advocacy for a more just and equitable health care system in the United States.

Dr. Relman leaves his wife, Dr. Marcia Angell; two sons, Dr. David Relman and John Relman; a daughter, Margaret Batten; six granddaughters; and two stepdaughters, Lara and Eliza Goitein.

Shortly before his death, Dr. Relman asked that in lieu of flowers, donations in his memory be directed to PNHP.

Physicians for a National Health Program is honoring Dr. Relman’s legacy by establishing The Arnold Relman Memorial Fund, dedicated to expanding PNHP’s special outreach programs to the medical profession, including to medical residents and fellows, to advance the understanding and realization of Dr. Relman’s vision.

The Arnold Relman Memorial Fund: https://org.salsalabs.com/o/307/p/salsa/web/common/public/content?content_item_KEY=12729

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Comment:

By Don McCanne, MD

Although some have described Dr. Relman’s 1980 New England Journal of Medicine essay on the medical-industrial complex as controversial, it would better be described as a release of the medical profession from the shackles of the old conservative guard of organized medicine. Although always exercising editorial independence, the NEJM was a publication of the Massachusetts Medical Society – the state chapter of organized medicine. For those of us on the West Coast who were somewhat removed from Boston and Chicago medical politics, Dr. Relman became and remained a beacon of hope for the future of a health care system that would be wholly dedicated to the patient rather than to vested interests.

Perhaps the greatest breakthrough was in 1989 when he published in NEJM “A National Health Program for the United States: A Physicians’ Proposal,” by Dr. David U. Himmelstein, Dr. Steffie Woolhandler, and 29 others. That signaled the start of a movement coming from within the medical profession in support of health care justice for all.

Although Dr. Relman had requested that donations be made to PNHP in lieu of flowers, the paramount action that we should take is to honor his legacy by intensifying our efforts to transform our health care system from a medical-industrial complex into a nirvana of the healing arts. That does require that we become more thoroughly enmeshed in technical details such as enacting an Expanded and Improved Medicare for All. But Bud Relman wouldn’t have it any other way.

Dr. Arnold Relman, Outspoken Medical Editor, Dies at 91

By Douglas Martin
The New York Times, June 21, 2014

In a provocative essay in the New England journal on Oct. 23, 1980, Dr. Relman, the editor in chief, issued the clarion call that would resound through his career, assailing the American health care system as caring more about making money than curing the sick. He called it a “new medical-industrial complex.”

His targets were not the old-line drug companies and medical-equipment suppliers, but rather a new generation of health care and medical services — profit-driven hospitals and nursing homes, diagnostic laboratories, home-care services, kidney dialysis centers and other businesses that made up a multibillion-dollar industry.

“The private health care industry is primarily interested in selling services that are profitable, but patients are interested only in services that they need,” he wrote. In an editorial, The Times said he had “raised a timely warning.”

In 2012, asked how his prediction had turned out, Dr. Relman said medical profiteering had become even worse than he could have imagined.

His prescription was a single taxpayer-supported insurance system, like Medicare, to replace hundreds of private, high-overhead insurance companies, which he called “parasites.” To control costs, he advocated that doctors be paid a salary rather than a fee for each service performed.

Dr. Relman recognized that his recommendations for repairing the health care system might be politically impossible, but he insisted that it was imperative to keep trying. Though he said he was glad that the health care law signed by President Obama in 2010 enabled more people to get insurance, he saw the legislation as a partial reform at best.

The health care system, he said, was in need of a more aggressive solution to fundamental problems, which he had discussed, somewhat philosophically, in an interview with Technology Review in 1989.

“Many people think that doctors make their recommendations from a basis of scientific certainty, that the facts are very clear and there’s only one way to diagnose or treat an illness,” he told the review. “In reality, that’s not always the case. Many things are a matter of conjecture, tradition, convenience, habit. In this gray area, where the facts are not clear and one has to make certain assumptions, it is unfortunately very easy to do things primarily because they are economically attractive.”

http://www.nytimes.com/2014/06/22/us/dr-arnold-relman-outspoken-medical-…

****

The Arnold Relman Memorial Fund

Physicians for a National Health Program (PNHP)
From “Physicians and Politics” by Arnold S. Relman, M.D., in JAMA Internal Medicine, June 2, 2014:

“A new health care system that provides universal access and is affordable and efficient will be difficult to achieve. The private insurers and all the other businesses that profit from the current commercial system will resist it. Major reform will need wide public support, which in turn will rely on advocacy by the medical profession. But I believe that reform will nevertheless be eventually enacted because it meets a widely shared and growing public desire for more fairness in an American society pervaded by inequality in access to good health care and many other social benefits.

“Physicians have a unique power to reshape the medical care system. They are what makes it work and are best qualified to use and evaluate its resources. But if they never unite to press for major reform, the future of health care in the United States will indeed be bleak. We will end up either with a system controlled by blind market forces or with a system entangled in complicated and intrusive government regulations. In either case it would be impossible to practice good patient-centered medicine, and the quality and effectiveness of our health care system would sink even lower among the ranks of developed countries. It is up to the medical profession to see that this does not happen.”

Dr. Arnold S. Relman, professor emeritus of medicine and social medicine at Harvard Medical School, and past editor-in-chief of The New England Journal of Medicine, died on June 17, 2014. He was 91.

Dr. Relman was one of the most distinguished figures in U.S. medicine, and he leaves a rich legacy of research and writing on the economic, ethical, legal and social dimensions of health care.

An important part of this legacy is embodied in his influential book, “A Second Opinion: A Plan for Universal Coverage Serving Patients Over Profit,” in which he makes an impassioned case for establishing “a single-payer system sponsored by the federal government” coupled with “a reorganized medical care system based on independent multispecialty group practice with salaried physicians.”

Among Dr. Relman’s many achievements during his tenure as editor-in-chief at the NEJM, he oversaw the journal’s publication of “A National Health Program for the United States: A Physicians’ Proposal,” by Dr. David U. Himmelstein, Dr. Steffie Woolhandler, and 29 others. At the time, in 1989, the article’s appearance in the NEJM represented a major breakthrough for the mainstream discussion of single payer in the medical profession. It also served as a seminal article in the establishment of Physicians for a National Health Program.

In addition to Dr. Relman’s numerous awards and honors from professional societies, scientific academies, and universities, in November 2013 he was presented with PNHP’s Dr. Quentin D. Young Health Activist Award for his unswerving advocacy for a more just and equitable health care system in the United States.

Dr. Relman leaves his wife, Dr. Marcia Angell; two sons, Dr. David Relman and John Relman; a daughter, Margaret Batten; six granddaughters; and two stepdaughters, Lara and Eliza Goitein.

Shortly before his death, Dr. Relman asked that in lieu of flowers, donations in his memory be directed to PNHP.

Physicians for a National Health Program is honoring Dr. Relman’s legacy by establishing The Arnold Relman Memorial Fund, dedicated to expanding PNHP’s special outreach programs to the medical profession, including to medical residents and fellows, to advance the understanding and realization of Dr. Relman’s vision.

The Arnold Relman Memorial Fund:https://org.salsalabs.com/o/307/p/salsa/web/common/public/content?conten…

Although some have described Dr. Relman’s 1980 New England Journal of Medicine essay on the medical-industrial complex as controversial, it would better be described as a release of the medical profession from the shackles of the old conservative guard of organized medicine. Although always exercising editorial independence, the NEJM was a publication of the Massachusetts Medical Society – the state chapter of organized medicine. For those of us on the West Coast who were somewhat removed from Boston and Chicago medical politics, Dr. Relman became and remained a beacon of hope for the future of a health care system that would be wholly dedicated to the patient rather than to vested interests.

Perhaps the greatest breakthrough was in 1989 when he published in NEJM “A National Health Program for the United States: A Physicians’ Proposal,” by Dr. David U. Himmelstein, Dr. Steffie Woolhandler, and 29 others. That signaled the start of a movement coming from within the medical profession in support of health care justice for all.

Although Dr. Relman had requested that donations be made to PNHP in lieu of flowers, the paramount action that we should take is to honor his legacy by intensifying our efforts to transform our health care system from a medical-industrial complex into a nirvana of the healing arts. That does require that we become more thoroughly enmeshed in technical details such as enacting an Expanded and Improved Medicare for All. But Bud Relman wouldn’t have it any other way.

Survey of Non-Group Health Insurance Enrollees

By Liz Hamel, Mira Rao, Larry Levitt, Gary Claxton, Cynthia Cox, Karen Pollitz and Mollyann Brodie
Kaiser Family Foundation, June 19, 2014

The Kaiser Family Foundation Survey of Non-Group Health Insurance Enrollees is the first in a series of surveys taking a closer look at the entire non-group market. This first survey was conducted from early April to early May 2014, after the close of the first ACA open enrollment period. It reports the views and experience of all non-group enrollees, including those with coverage obtained both inside and outside the Exchanges, and those who were uninsured prior to the ACA as well as those who had a previous source of coverage (non-group or otherwise).

• The ACA motivated many non-group enrollees to get coverage, and nearly six in ten Exchange enrollees were previously uninsured
• Enrollees in ACA-compliant plans report somewhat worse health than those in pre-ACA plans
• Majority gives positive ratings to their new insurance plans and says they are a good value, though four in ten find it difficult to afford their monthly premium
• Among plan switchers, as many report paying less as paying more for their new plans, but survey shows some signs of a trend toward narrower provider networks
• Plan switchers are less likely to be satisfied with plan costs, maybe because half of them report having their previous plan cancelled
• Half got help with enrollment; most say the shopping process was easy, but a third say it was difficult to set up a Marketplace account
• In the non-group market, those most likely to feel they have benefited from the ACA are people getting subsidies, those most likely to feel negatively impacted are those who had their plans cancelled

As a whole, non-group enrollees are more likely than the public overall to have a favorable view of the ACA – they are roughly evenly split between positive and negative views (47 percent favorable, 43 percent unfavorable), while views among 18-64 year-olds nationally are more negative than positive (38 percent favorable, 46 percent unfavorable1. Like it is nationally, opinion of the ACA among non-group enrollees is strongly divided along party lines. About equal shares of non-group enrollees feel their families have benefited (34 percent) and been negatively affected (29 percent) by the ACA. However, these averages mask substantial differences within the non-group market. Those who are most likely to feel they have benefited from the law are people receiving government financial assistance for Exchange plan premiums (60 percent benefited), while those most likely to feel they have been negatively affected by the law are people who experienced a plan cancellation in the past year (57 percent negatively affected).

Survey of Non-Group Health Insurance Enrollees

Does the Affordable Care Act Cover the Uninsured?

By Drew Altman
The Wall Street Journal, June 19, 2014

Among the facts: 57% of those who bought coverage from the new marketplaces during the first ACA open-enrollment period were previously uninsured, and seven out of 10 of them had been uninsured for two years or more.

The number of uninsured people covered through the exchanges is far higher than critics of the ACA have suggested. On the other hand, the number is probably a little lower than supporters of the health-care law would like. As is typical in the highly polarized debate about the ACA, the facts are not what either side would want them to be.

http://blogs.wsj.com/washwire/2014/06/19/does-the-affordable-care-act-cover-the-uninsured/

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Comment:

By Don McCanne, MD

It is ironic that we have a health reform program that satisfies neither proponents nor opponents. On the question of how effective has the Affordable Care Act been in insuring those who were previously uninsured, supporters are concerned that it was not enough and critics are disappointed to see that more people became insured under the program than had been insured under prior plans (since that refutes their argument that the exchanges are ineffective because it only shifted previously insured individuals into the exchanges).

WSJ’s Drew Altman makes the point that “in the highly polarized debate about the ACA, the facts are not what either side would want them to be.”

So is this a balanced debate between two sides with legitimate views? Opponents would like to see much of the Act repealed, but the few recommendations they do have, they can’t even agree on. Besides, most of their recommendations would not repair the flaws in our health care system, and some would make them worse.

Supporters at least want to see improvements in coverage, access and affordability, not to mention quality, but they realize that ACA is falling far short of goals (though they may not want to admit it) and has actually had a negative impact in lowering the actuarial value of plans – making health care less affordable for many by increasing out-of-pocket costs – while also reducing access by paring down the numbers of physicians and hospitals in the insurers’ provider networks.

We can reject the views of those polarized against reform as not being responsive to our overpriced and underperforming health care system.

Although we support the views of those who would repair the flaws, we can reject the policies they have selected as being cruelly inadequate. Those who really do want reform should join us in supporting single payer – a model that would be truly universal, accessible, affordable, and, properly designed, would improve the quality of health care in the United States. In fact, many of the current opponents might consider supporting a program that actually would work, especially if they see that it would not increase overall spending. We should tell them about it.