Managed competition lessons from the Netherlands

Managed Competition for Medicare? Sobering Lessons from the Netherlands

By Kieke G.H. Okma, Ph.D., Theodore R. Marmor, Ph.D., and Jonathan Oberlander, Ph.D
The New England Journal of Medicine, June 15, 2011

Discussions about U.S. health care reform are often parochial, with scant attention paid to other countries’ experiences. It is thus surprising that in the ongoing debate over Medicare, some U.S. commentators have turned to the Netherlands as a model of regulated competition among private insurance companies. The Dutch experience is particularly relevant given the proposal by Congressman Paul Ryan (R-WI) to eliminate traditional Medicare and instead provide beneficiaries with vouchers to purchase private insurance.

It is easy to understand why Dutch health care — which does rely on regulated private insurance — would appeal to advocates of Medicare vouchers. Indeed, U.S. ideas about managed competition helped to shape health care reform in the Netherlands. But careful examination of the Dutch experience shows that insurance competition has not produced the expected benefits and in fact has created new problems, calling into question the merits of this reform model and its suitability for Medicare.

Before 2006, the Netherlands had a mixed health insurance system, with more than 60% of the population covered by mandatory social insurance, administered by nonprofit sick funds. The remaining population had private insurance, voluntarily purchased, and the uninsured rate was about 1.5%.

In 2006, the Netherlands replaced this arrangement with a mandated private insurance system similar to Switzerland’s. Under this reform, all legal residents of the Netherlands are required to purchase basic insurance from private insurers. Private plans are heavily regulated. They cannot turn down applicants, regardless of health status, and must charge community-rated premiums. A risk-equalization scheme varies payment to health plans according to their enrolled populations’ risk profiles. The aim is to reduce plans’ incentives to select profitable patients and ensure that plans with sicker, higher-cost populations are not financially penalized. Insurance plans are expected to compete on the basis of price and quality by selectively contracting with networks of hospitals, physicians, and other medical care providers.

Advocates of this system argued that competition among private insurers would reduce health care spending, enhance consumer choice, and improve the quality of care and the health system’s responsiveness to patients — arguments that are being repeated in the U.S. debate over Medicare. The reality of managed competition in the Netherlands, however, has not matched the rhetoric.

Four key points emerge from the Dutch experience. First, competition has not sharply slowed the rate of growth in health care spending. Health care expenditures continue to outpace general inflation, having increased at an average annual rate of 5% since 2006. At the same time, the total costs of health insurance for Dutch families, including premiums and deductibles, increased by 41%.

Reforms aimed at increasing and managing competition also produced high administrative costs and complexity. Administering premium subsidies for low-income people has proven expensive.

Second, some Dutch people remain uninsured, and there has been a substantial increase in the number of insured persons failing to pay their insurance premiums.

Third, the expansion of consumer choice has not worked as envisioned. Since 2007, only about 4% of the Dutch population, on average, has changed plans each year. Moreover, accelerating consolidation of the health insurance market has restricted meaningful choice of insurance plan. Currently, four insurance conglomerates control about 90% of the Dutch health insurance market. Recent polls suggest public dissatisfaction with private insurers, with 65% of insured people reporting that they have low or very low levels of trust in private plans.

Fourth, notwithstanding the rhetoric of competition, the Netherlands still relies heavily on regulation. Indeed, the Dutch case shows that competitive systems that seek to escape supposedly centralized, bureaucratic control of medical care paradoxically require sophisticated regulation and government intervention in order to work.

The comprehensiveness of health insurance in the Netherlands provides a critical contrast to the Ryan Medicare plan, which would erode the U.S. government’s contribution to the point that 65-year-old beneficiaries would pay about two thirds of medical costs themselves.

The myth that competition has been key to cost containment in the Netherlands has obscured a crucial reality. Health care systems in Europe, Canada, Japan, and beyond, all of which spend much less than the United States on medical services, rely on regulation of prices, coordinated payment, budgets, and in some cases limits on selected expensive medical technologies, to contain health care spending. Systemwide regulation of spending, rather than competition among insurers, is the key to controlling health care costs. The Netherlands, after all, spent much less on medical care than the United States with virtually universal insurance coverage long before it began experimenting with managed competition in 2006.

The Dutch experience provides a cautionary tale about the place of private insurance competition in health care reform. The Dutch reforms have fallen far short of expectations — a reminder that policy intentions should not be confused with outcomes and that managed competition is hardly a panacea. The idea that the Dutch reforms provide a successful model for U.S. Medicare to emulate is bizarre. The Dutch case in fact underscores the pitfalls of the casual use (and misuse) of international experience in U.S. health care reform debates.

http://healthpolicyandreform.nejm.org/?p=14712

The authors of this NEJM Perspective on lessons from the Netherlands – Kieke G.H. Okma, Ph.D., Theodore R. Marmor, Ph.D., and Jonathan Oberlander, Ph.D. – are highly credible authorities on comparative studies and the politics of health care reform. The facts they present are well documented, and the conclusion is so obvious that it is essentially a restatement of the facts: “Systemwide regulation of spending, rather than competition among insurers, is the key to controlling health care costs.”

To no surprise, some of the published responses in the NEJM have challenged the credibility of these noted authorities, and instead have chosen to reframe the discussion – presenting “free markets,” “competition” and “consumer choice” as if these were the facts. These critics dismiss the results in the Netherlands because their “managed competition” system failed to use free market principles.

Which is it? Do we adopt Netherlands-style managed competition because it allows private insurers to compete, even though that hasn’t been proven to be of benefit? Or do we reject all existing models and adopt a truly free market wherein patients pay for all health care with their own cash? Of course, that can’t work either because of the necessity of pooling funds, and as soon as you have introduced the insurance function, you have suppressed the “price-based signals” and distorted the market.

Of course, neither of these choices – framed in terms of “markets” – will work. What does work – framed in terms of thoroughly documented studies of functioning health systems – is “regulation of prices, coordinated payment, budgets, and in some cases limits on selected expensive medical technologies.” That requires a major role for government, as the Netherlands is rediscovering.

Although the authors present this as a lesson for Medicare, it is actually a lesson for our entire health care system. Perhaps they anticipate when Medicare will be improved and then expanded to cover everyone. Let’s hope so.

How Libby, Montana, Got Medicare for All

By Kay Tillow
Firedoglake, June 15, 2011

In 2009 when the Washington Beltway was tied up with the health care reform tussle, Montana Democratic Senator Max Baucus, chairman of the all powerful Senate Finance Committee, said everything was on the table — except for single payer. When doctors, nurses and others rose in his hearing to insist that single payer be included in the debate, Baucus had them arrested. As more stood up, Baucus could be heard on his open microphone saying, “We need more police.”

Yet when Senator Baucus needed a solution to a catastrophic health disaster in Libby, Montana, and surrounding Lincoln County, he turned to the nation’s single-payer health care system, Medicare, to solve the problem.

Baucus’ problem was caused by a vermiculite mine that had spread deadly airborne asbestos, killing hundreds and sickening thousands in Libby and northwest Montana. The W.R. Grace Company that owned the mine denied its connection to the massive levels of mesothelioma and asbestosis and dodged responsibility for this environmental and health disaster. When all lawsuits and legal avenues failed, Baucus turned to our country’s single-payer plan, Medicare.

The single-payer plan that Baucus kept off the table is now very much on the table in Libby. Unknown to most of the public, Baucus inserted a section into the health reform bill that covers the suffering people of Libby, not just the former miners but the whole community – all covered by Medicare.

They don’t have to be 65 years old or more. They don’t have to wait until 2014 for the state exchanges. No 10-year rollout – it’s immediate. They don’t have to purchase a plan – this is not a buy-in to Medicare – it’s free. They don’t have to be disabled for two years before they apply. They don’t have to go without care for three years until Medicaid expands. They don’t have to meet income tests. They don’t have to apply for a subsidy. They don’t have to pay a fine for failure to buy insurance. They don’t have to hope that the market will make a plan affordable. They don’t have to hide their pre-existing conditions. They don’t have to find a job that provides coverage.

Baucus inserted a clause in the Affordable Care Act to make special arrangements for them in Medicare, and he didn’t wait for any Congressional Budget Office scoring to do it.

Less than two months after the passage of the health reform bill on March 23, 2010, Nancy Berryhill of the Social Security Administration in Denver joined personally in setting up an office in Libby to sign up these newly eligible people.

“This is a new thing,” Berryhill told the Missoulian. “No other group like this has ever been selected to receive Medicare.” Berryhill issued a nationwide alert to inform anyone who had lived or stayed in Lincoln County of their eligibility. She opened a storefront in Libby at the old downtown city hall where she signed up 60 people on the first day. She plastered the towns of Whitefish and Eureka with pamphlets explaining the program and added three new staffers to the office in Kalispell.

Berryhill said she did not know how much the care would cost. That kind of analysis was beyond her directive to sign the people up. There have been no reports of competition from the private for-profit Medicare Advantage plans. The sick are not profitable.

No one should begrudge the people of Lincoln County. The mine wastes were used as soil additives, home insulation, and even spread on the running tracks at local schools. Miners brought the carcinogens home on their clothes. The W.R. Grace Company dumped much of the cleanup costs onto the federal government. A June 17, 2009, order by the Environmental Protection Agency, the first of its kind, declared Lincoln County a public health disaster. The Libby Medicare provision in the health reform law is based on the area covered by that EPA order.

Baucus gave his reasons to The New York Times for its only story on this unique benefit: “The people of Libby have been poisoned and have been dying for a decade. New residents continue to get sick all the time. Public health tragedies like this could happen in any town in America. We need this type of mechanism to help people when they need it most.”

Health tragedies are happening in every town. Over 51 million have no insurance. Over 45,000 uninsured people die needlessly each year. Employers are cutting coverage and dropping plans. States in economic crisis are slashing both Medicaid and their employees’ plans. Nothing in last year’s reform law will mitigate the skyrocketing costs. Most insurance is threadbare and doesn’t cover. More than 50 percent of us now go without necessary care. As Baucus said of Medicare, “We need this mechanism to help people when they need it most.” We all need it now.

Bill Clinton recently stated that the U.S. could give coverage to all for $1 trillion a year less than we now pay if we adopted the system of any other advanced nation. (Unfortunately, he did not say this when it would have mattered most during the 1993 and 2009 health care reform debates.)

Other industrialized countries have found that to cover everyone for less they must remove the profit-making insurance companies. Congressman John Conyers has reintroduced H.R. 676, the Expanded and Improved Medicare for All Act, which does exactly that. There are 60 cosponsors. It would cover all medically necessary care for everyone including dental and drugs by cutting out the 30 percent waste and profits caused by the private insurers.

So as the Ryan Republicans try to destroy Medicare and far too many Democrats use the deficit excuse to suggest cuts in its benefits, let us counter with the Libby prescription to clean up the whole mess. Only a single payer, improved Medicare for All, can save and protect Medicare, rein in the costs, and give us universal coverage.

Medicare will celebrate its 46th birthday on July 30, 2011, and all are invited to join in the festivities. Medicare was passed in 1965 and implemented within less than a year. When we pass H.R. 676, this single-payer bill, we can all be enrolled in the twinkling of an eye.

Kay Tillow lives in Louisville, Ky., and is a leader of All Unions Committee for Single Payer Health Care – H.R. 676.

http://my.firedoglake.com/kaytillow/2011/06/15/how-libby-montana-got-medicare-for-all/

PNHP note: The following is a reply that Kay Tillow made to a reader in Libby, Mont., who questioned some of the assertions in her article. We reproduce her reply here (the reader’s name has been removed) because it sheds additional light on the situation there. Tillow also provides a number of useful citations.

Dear reader,

Your response to my article about Libby and Medicare was forwarded to me by the Physicians for a National Health Program.

The Medicare provision for Libby in the Affordable Care Act applies to the whole community not just the miners. Those who are eligible for Medicare immediately are defined by complex provisions in Amendment 1881 A made to the Social Security Act by the Affordable Care Act. That section lays out criteria for eligibility including the specifics diseases and conditions and the pilot programs that will provide additional benefits. Then this new law broadens that by stating that a person is eligible for Medicare who “is diagnosed with a medical condition caused by the exposure of the individual to a public health hazard to which an emergency declaration applies, based on such medical conditions, diagnostic standards, and other c
riteria as the Secretary specifies.”[1]

The law is complex. I wrote that the new provision “covers the suffering people of Libby” and linked that statement to the Social Security Administration’s (SSA) website for Libby[2] so that those who are interested can read the further detail.

Those in the Libby area who are diagnosed with an asbestos-related disease are immediately eligible, not just for asbestos-related symptoms, but for the full range of benefits that cover any Medicare recipient. The law includes a waiver of budget neutrality. This Medicare for Libby is an astounding provision, an amazing departure from any past practice of Medicare. There is no other instance of Medicare picking up coverage under any condition in a specific geographic region, and I do not understand any effort to minimize this benefit.

You assert that only 700 people so far have signed up for the benefit, but unfortunately the massive asbestos exposure of people in the region assures that many more will be diagnosed and become eligible. In the Washington Post of June 17, 2011, Tanis Hernandez of the Center for Asbestos Related Diseases asserted that more will sign up when the state-federal grant program ends this summer. Hernandez also stated that new cases are being diagnosed at the rate of four a week.

People in Libby and Troy do not have to be 65 to be eligible for Medicare. They don’t have to wait until 2014 for the state exchanges. They do not have to buy in to Medicare–Medicare Part A is free. To quote the SSA, “The Affordable Care Act provides certain individuals who were exposed to asbestos in Lincoln County, Montana: Free Medicare Hospital insurance (Part A).”[3] The SSA states further, “To qualify, you do not need to be age 65 or receive disability benefits. In addition, there is no waiting period, and you do not need to have worked and paid into Social Security or Medicare.”[4]

Unlike for the rest of the country, people in Libby and Troy do not have to have paid into Social Security and Medicare for a minimum number of quarters nor to have qualified for disability benefits. So the provision that Senator Baucus inserted into the Affordable Care Act breaks down the barriers so that people can get the care they need. Yes, Libby residents are to pay, like every other Medicare recipient in the country, for Medicare parts B and D, but there are also more special grants and pilot programs to assist the people of Libby. And, yes, the people of Libby deserve all of the care and compassion that our nation can give them. Nothing can restore to them the health that was stolen from them as the mine owners exploited their labor and polluted their beautiful region for profit.

I did not assert that “New residents continue to get sick all the time.” I was simply stating that Senator Max Baucus was quoted in New York Times as saying that. But, all too sadly, I believe that he is correct in this. The asbestos remains in many houses and gardens of the region—so much so that even after the clean up, the Environmental Protection Agency recommends that people do not disturb either the walls of homes or the soil. Region 8 of the Environmental Protection Agency states on its website that, “While EPA’s cleanup efforts have greatly reduced exposure, past and future exposures of amphibole asbestos may remain a public health concern in the area.”[5] That website was last updated in May of 2011.

According to a scholarly article[6] published in the Journal of Environmental and Public Health in 2009 written by Julie F. Hart et al., the danger remains in the forests of the region. “This research demonstrates the potential for airborne exposure and transport of AA (Amphibole Asbestos) in the Kootenai National Forest. These findings are especially relevant to those that work in the area and to the general public who may conduct recreational activities,” the authors state.

My statement that “other industrialized countries have found that to cover everyone for less they must remove the profit-making insurance companies,” is indeed true. Nobel Laureate economist Joseph Stiglitz said it well:

“The U.S. model of private health insurers has been proven inefficient and expensive. Rather than provide better healthcare at lower costs, insurance companies innovate at finding better ways of discrimination. They are inefficient because they are trying to figure out how to insure people who don’t need the cover and keep out people who need it. With many companies, they also need to spend on marketing and advertising. The incentives are all wrong and the transaction costs are very high and you have to give them a high profit. In health, social and private incentives are totally disparate. Competition does not work in healthcare especially in the health insurance market. Several countries like the U.K., France and Sweden have a single payer system, differing only in the organisation of healthcare delivery.”[7]

England, or the United Kingdom, covers all its people with a national health service. Private health insurance covers only 1 percent of health expenditures and is limited to supplementary areas. You assert that England has unsustainable costs, but in relation to health care costs in the U.S. that country is doing remarkably well. In 2007, the U.K. spent $2,990 per capita for health care while the U.S. spent $7,290. That means the U.K., with a national health service and only a tiny very limited private health insurance, spent 41 percent of what the U.S. spent per person.[8] Yet the U.K. outpaced the U.S. in life expectancy in 2009 by a full year.

The 30 percent in administrative waste and profits in the U.S. health system is caused by the private health insurers. According to the Physicians for a National Health Program, “Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans’ health dollars.”[9]

The costs of administering the Medicare program have remained low over the years – less than 2 percent of program expenditures [10], according to research by the Kaiser Family Foundation. The private for-profit health insurers are fighting against the rules of the new Affordable Care Act that would limit them to 20 percent for some insurance, 15 percent for others, in administrative costs. In my state of Kentucky, the insurance commissioner asserts that the rate allowed for administrative costs is currently 35 percent and that any sudden shift to the 15 percent or 20 percent limit would cause undue hardship and force companies to leave the state. Clearly the private insurers are more costly, less efficient.

Contrary to your assertion that Medicare is unsustainable, it is the gigantic overhead of the private health insurers that is unsustainable. Research by the Physicians for a National Health Program shows that by moving
to a single payer system, our country could save $400 billion annually that could then be applied to expanding coverage for all of us and extending coverage to those who are uninsured. Such a program will be instituted when we pass Congressman John Conyers H.R. 676, Expanded and Improved Medicare for All Act.

At your suggestion I looked up information about Rulon Stacey and saw that in a news release about his new book “Over Our Heads,” he states, “Our current healthcare crisis was fueled by government intervention.”[11] The above data on Medicare versus private insurance show just the opposite—that the crisis is propelled by the domination of our system by private for profit insurance.

I agree that you live in a very beautiful area, and I do not seek in any way to deter the people of that region from finding the ways to reclaim a clean, healthful, environment in a new future. The courageous people who brought the problems to light are responsible for pointing a way forward. Clean up and health care are crucial to that.

It is informative for people in the country to know that Senator Max Baucus made certain that the people of Libby suffering from asbestos exposure did not have to buy into exchanges they could not afford nor wait endlessly. He chose the more efficient and effective single payer program, Medicare, to assure that they got care. He did that while ordering the arrest of single payer advocates for seeking to place improved Medicare for all on the table in the national health care debate, thereby denying the nation as a whole a chance to choose a vastly superior health plan that would cover us all while controlling the costs.

1. Sec. 1881A. [42 U.S.C. 1395rr-1] Medicare Coverage for Individuals Exposed to Environmental Health Hazards, (a) Deeming of Individuals as eligible for Medicare benefits. http://www.ssa.gov/OP_Home/ssact/title18/1881A.htm

2. http://www.ssa.gov/libby/

3. http://www.ssa.gov/libby/

4. http://www.ssa.gov/libby/

5. http://www.epa.gov/region8/superfund/libby/askepa.html

6. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2799270/

7. http://timesofindia.indiatimes.com/home/opinion/edit-page/The-US-model-of-private-health-insurers-is-inefficient-expensive/articleshow/6989634.cms

8. Organisation for Economic Co-operation and Development, 2007

9. https://pnhp.org/resource/administrative-waste-consumes-31-percent-of-health-spending, https://pnhp.org/facts/single-payer-resources

10. http://www.kff.org/medicare/7731.cfm

11. https://pnhp.org/facts/single-payer-resources

12. http://www.studergroup.com/fsp/associated_files/over_our_heads_press_release.pdf

Poor children denied specialty care

Auditing Access to Specialty Care for Children with Public Insurance

By Joanna Bisgaier, M.S.W., and Karin V. Rhodes, M.D.
The New England Journal of Medicine, June 15, 2011

Expansions of Medicaid and the Children’s Health Insurance Program (CHIP) are designed to extend access to high-quality medical care to all U.S. children. However, evidence suggests that the 37 million children covered by Medicaid–CHIP are less likely to receive specialty care than children covered by commercial insurance.

We designed an audit study in which research assistants posing as mothers made paired calls to the same clinic and attempted to schedule an appointment for a child needing specialty care. The calls were separated by 1 month and varied only by insurance status (private vs. Medicaid–CHIP insurance).

With the use of an experimental study design involving simulated requests for specialty care, we measured real-world scheduling behavior in an urban area with a high density of medical specialists. The results showed significant disparities in children’s access to needed outpatient specialty care, attributable to specialists’ reluctance to accept public health insurance. These results held across all audited specialties. (66% of the callers reporting Medicaid–CHIP coverage were denied an appointment for specialty care, as compared with 11% of the callers reporting Blue Cross Blue Shield insurance.) Moreover, even when children with Medicaid–CHIP were not denied appointments outright, the appointments were, on average, 22 days later than those obtained for privately insured children with identical health conditions (even though the clinical scenarios represented urgent situations).

Overall, we found considerable disparities in access to outpatient pediatric specialty care that were attributable to providers’ nonacceptance of public insurance.

http://healthpolicyandreform.nejm.org/?p=14707&query=TOC

Comment:

By Don McCanne, MD

A well functioning health care system removes barriers to the care that patients need. It is sad commentary that the United States has a program for the most needy that instead crates a barrier to care. As this study shows, merely being covered by Medicaid disqualifies many children from being able to access the specialized care that they need.

This doesn’t happen in other nations. If a person needs care, access is automatically provided without any thought given to the mechanism of payment.

In the United States, even though we have more than enough money already in the system to pay for all essential care, we have erected a wasteful, fragmented, dysfunctional financing system that creates barriers that must be negotiated before appropriate care can be obtained. It’s not the money; it’s the flawed financing system.

We need to cast aside these barriers and create an equitable financing system that is automatic – a single payer national health program. We have the money. Now all we need is the political will.

'Life, Death And Politics' Treating Chicago's Uninsured

By ‘Fresh Air’ from WHYY
NPR, June 15, 2011

The first time Dr. David Ansell went into the men’s room at Cook County Hospital in Chicago, he immediately ran out. “It was so bad, I couldn’t use it,” he says. “I ran across the street and had to use the bathroom there. It was quite an introduction to my first day at County.”

Ansell is now the vice president for clinical affairs and chief medical officer at Rush University Medical Center. But he began his medical career in 1978 at County, Chicago’s public hospital, where he worked as an attending physician for almost two decades. His social history of the hospital, “County: Life, Death and Politics at Chicago’s Public Hospital,” details his own time on the wards — and examines health care in America from the perspective of the uninsured.

Working at County, Ansell says, made him realize just how much the current payment system drives health care inequalities. “There’s a misunderstanding that if you just go to the [emergency room], that’s health care,” he says. “It’s not. … And I don’t think the public or politicians really understand that. I think the last health reform attempt which is being bandied about — we don’t know what’s going to happen — is likely to fall short with regards to equity.”

Doctors Within Borders

Cook County Hospital, where Ansell worked, was a public hospital, a place that treated people with nowhere else to go. Physicians and residents who worked at County, meanwhile, were entering an environment with underfunding, mismanagement, high patient demand, safety concerns and antiquated equipment.

“I went into medicine because I wanted to help people, and when I went to medical school, I found it very disillusioning,” Ansell says. “County was a place that many of us went because we believed that disease had social etiologies — the idea that disease just emanated from the individual and wasn’t somehow constrained or influenced by societal factors. Going to a place like Cook County Hospital was a place where we could live those beliefs out.”

Health care at County was very different from care at private or university hospitals. When Ansell first started treating patients, County had no air conditioning, poor sanitation and limited patient privacy. “The beds were lined up one after another, separated by curtains, but there was really no privacy,” he says. “Patients would roll in and they’d be lined up around the walls of this one room, and the middle was lined with stretchers and wheelchairs. You were forced to take histories and examine patients under these conditions.”

In 2002, a new hospital called the John H. Stroger Jr. Hospital opened in Chicago, replacing Cook County. The facility provides more dignified conditions for patients. But the new facility, Ansell says, cannot compensate for social inequalities and limited access to preventive health care.

“Just yesterday I had a conversation with a physician [who] says there’s a many-months wait to see the eye doctor,” he says. “There are 4,000 patients waiting to get a colonoscopy. This is not a screening colonoscopy — they’ve got blood in their stool. … The new hospital and the doctors and the nurses and the clinics are spectacular, [but] if you look at the whole system and you look at the outcomes we’re getting … people are going blind waiting to see the eye doctor, in a country where it doesn’t have to be.”

Health Inequalities

On the South Side of Chicago, the life expectancy of an African-American male is eight years lower than that of a Caucasian man, Ansell explains.

“When you look at the reasons for it, at least half of this is [because of] heart disease and cancer and things that could be treated,” he says. “One of the problems with our current system is segregating people by insurance status, which ends up limiting the options of care — especially when you get down to the specialty care that people need.”

During his 17 years at Cook County, few if any of Ansell’s patients could get their hips replaced — or other medically necessary but not trauma-related treatments.

“The only fair way to do this is where people have a card that gets them in, where that card is accepted widely and broadly by everyone, and [giving people] choice,” he says. “So you could go anywhere you want, you get the care you want, and choose your own doctors — and that would be some sort of universal plan — Medicare for all, single-payer. We need a system that really gives patients — poor or rich — adequate care.”

County: Life, Death and Politics at Chicago’s Public Hospital
By Dr. David Ansell
Hardcover, 256 pages
Academy Chicago Publishers
List price: $29.95

You can listen to the 19-minute broadcast here:
http://www.npr.org/2011/06/15/137109975/life-death-and-politics-treating-chicagos-uninsured

Doctor prescribes Medicare for all

Letters, South Bend (Ind.) Tribune, June 21, 2011

Medicare is fair and should be made available to all, said the medical doctor whose practice began years ago at the Cook County Hospital in Illinois. Medicaid should be phased out because it is not fair to everybody, he said.

Those were the closing remarks by Dr. David Ansell on a PBS “Fresh Air” radio program on June 15. The doctor had been interviewed by Terry Gross about his new book, “County: Life, Death and Politics at Chicago Public Hospital.”

I thought it a breakthrough to hear an experienced and seasoned medical doctor openly advise to simply extend Medicare to all.

Gunnar Jenson
South Bend

Poor children denied specialty care

Auditing Access to Specialty Care for Children with Public Insurance

By Joanna Bisgaier, M.S.W., and Karin V. Rhodes, M.D.
The New England Journal of Medicine, June 15, 2011

Expansions of Medicaid and the Children’s Health Insurance Program (CHIP) are designed to extend access to high-quality medical care to all U.S. children. However, evidence suggests that the 37 million children covered by Medicaid–CHIP are less likely to receive specialty care than children covered by commercial insurance.

We designed an audit study in which research assistants posing as mothers made paired calls to the same clinic and attempted to schedule an appointment for a child needing specialty care. The calls were separated by 1 month and varied only by insurance status (private vs. Medicaid–CHIP insurance).

With the use of an experimental study design involving simulated requests for specialty care, we measured real-world scheduling behavior in an urban area with a high density of medical specialists. The results showed significant disparities in children’s access to needed outpatient specialty care, attributable to specialists’ reluctance to accept public health insurance. These results held across all audited specialties. (66% of the callers reporting Medicaid–CHIP coverage were denied an appointment for specialty care, as compared with 11% of the callers reporting Blue Cross Blue Shield insurance.) Moreover, even when children with Medicaid–CHIP were not denied appointments outright, the appointments were, on average, 22 days later than those obtained for privately insured children with identical health conditions (even though the clinical scenarios represented urgent situations).

Overall, we found considerable disparities in access to outpatient pediatric specialty care that were attributable to providers’ nonacceptance of public insurance.

http://healthpolicyandreform.nejm.org/?p=14707&query=TOC

This doesn’t happen in other nations. If a person needs care, access is automatically provided without any thought given to the mechanism of payment.

We need to cast aside these barriers and create an equitable financing system that is automatic – a single payer national health program. We have the money. Now all we need is the political will.

Health Insurers Pump Your Premiums Into a Financial Black Hole

By Wendell Potter
PR Watch, June 10, 2011

Ever wonder what happens to the premiums you pay for your health insurance?

You might be surprised to learn that more and more of the dollars you pay for coverage are being sucked into a kind of black hole.

It doesn’t really disappear, of course. It just doesn’t do you a bit of good — unless, of course, you believe it is to your advantage that it ultimately winds up in the bank accounts of a few investors and insurance company executives, including those who have to power to deny coverage for potentially life-saving care.

If you’ve been paying attention to what health insurance company CEOs have been saying to Wall Street over the past several months, you will know that they are spending more and more of their firms’ cash — which comes from you, of course — to “repurchase” their firms’ stock. And Wall Street absolutely loves that.

I once handled financial communications for CIGNA. So I knew that whenever the company could tell its shareholders that the amount of money it earned on a per share basis during the preceding three months was more than expected, those shareholders and other investors would likely show their appreciation by offering to buy even more shares of the company’s stock. When more investors are buying stock in your company than are selling it, the stock price will go up. And when that happens, everybody who owns stock or can cash in a bunch of stock options — including you, if you are a senior manager or a health plan medical director — will suddenly be richer.

Being very familiar with how and why this happens, your company’s top executives will do whatever they can make sure the earnings per share (EPS) exceeds Wall Street’s expectations. One of the ways they do this is by joining the investors in buying shares of the company’s stock.

They are actually repurchasing or buying back those shares because it was the company that initially put the shares on the market in the first place.

When CIGNA announced on May 5 that its adjusted income from operations for the first quarter of 2011 was $1.37 per share compared to $1.01 per share during the same quarter in 2010, the company’s stock price hit a 52-week high. The EPS was way more than investors had expected.

You had to read all the way to the bottom of page two of CIGNA’s earnings release, however, to learn that one of the ways the company was able to achieve such an impressive increase in the EPS was by buying back a whole lot of the company’s shares.

CIGNA’s net income for the first quarter of this year was $429 million. So what did the company do with its wealth? Well, between January 1 and May 4, the company repurchased approximately 4.9 million shares of its own stock for $210 million.

Abracadabra, Poof! Instant Profit Boost, and Richer Executives

The magic works like this: when you buy back shares of your own stock, those shares are “retired,” meaning that there are fewer shares outstanding. Reducing the number of shares available for purchase changes the mathematical equation used to determine the EPS. The reduction gives the EPS a boost. The more shares you buy back, the bigger the boost.

All of the big for-profit insurers have been on a buyback binge lately. Humana executives announced a few weeks ago that it would be buying back $1 billion of its own shares between now and June 2013. That’s a lot of money, of course, but nothing compared to what UnitedHealth said it plans to do. UnitedHealth’s executives said the company plans to repurchase up to 110 million shares in the coming months. If UnitedHealth were to buy all those shares today, while the stock price is trading at around $50 per share, it would be spending $5.5 billion (of money that came from you, if you are a UnitedHealth policyholder) to make all those shares of stock go poof.

Stock options increase in value as long as the price per share goes up. Inflating the EPS by reducing the number of shares outstanding is almost always a sure-fire way to make sure executives have stock options with considerable value.

U.S. executives are as rich as they are primarily because of stock grants and stock options they are awarded by their companies. They love buybacks because, even though the cash deployed that way cannot be used for purposes that might be of greater value to the company as a whole and its customers, buybacks can increase their net worth dramatically.

In 2007, American companies spent 12 percent more on repurchases than they spent to improve their businesses, according to Fortuna Advisors, a financial consulting firm. The buybacks slowed after that year as a result of the economic downturn but are back in favor. According to data from Standard & Poors, U.S. companies bought about $86 billion of their own stock in the fourth quarter of last year, compared to $47.8 billion in the same quarter in 2009.

Buybacks Don’t Help Customers, Just Increase Profits

The advocacy group Health Care for America Now (HCAN) discovered while compiling data of health insurers’ earnings that between 2003 and 2010, the five largest for-profit insurance firms spent $64.1 billion on share buybacks.

As HCAN president Ethan Rome testified earlier this month before the House Energy and Commerce Subcommittee on Health: “Buybacks don’t improve operations, make the health system run more efficiently or reduce premiums. Their sole purpose is to boost stock prices” for the benefit of investors and executives.

Meanwhile, 51 million Americans are uninsured and another 25 million are underinsured, largely because of the actions insurance company executives take to enhance their firms’ bottom lines, and to line their own pockets.

Wendell Potter is a senior fellow on health care at the Center for Media and Democracy. His former positions include serving as director of corporate communications at the gian health insurer CIGNA.

http://prwatch.org/news/2011/06/10821/health-insurers-pump-your-premiums-financial-black-hole

Medicaid Managed Care Plans Owned by For-Profits Have Higher Costs, Lower Quality

Assessing the Financial Health of Medicaid Managed Care Plans and the Quality of Patient Care They Provide

By Michael J. McCue, D.B.A., and Michael H. Bailit, M.M.
The Commonwealth Fund, June 15, 2011

In many states, Medicaid programs have contracted out the delivery of health care services to publicly traded health plans that are focused on managing the care of Medicaid members. Under the health reform law, states will be expanding the enrollment of their Medicaid programs and these publicly traded companies are expected to capitalize on this growing market. This study examined how publicly traded health plans differ from non–publicly traded ones in terms of administrative expenses, quality of care, and financial stability and found publicly traded plans that focused primarily on Medicaid enrollees paid out the lowest percentage of their Medicaid premium revenues in medical expenses and reported the highest percentage in administrative expenses across different types of health plans. The publicly traded plans also received lower scores for quality-of-care measures related to preventive care, treatment of chronic conditions, members’ access to care, and customer service.

Under health care reform, the Medicaid market is expected to increase by 16 million members by 2019. Given recent patterns in state contract awards to managed care plans, it is reasonable to anticipate that plans operated by publicly traded companies will enroll the majority of the expanded Medicaid population.

Overview:
http://www.commonwealthfund.org/Content/Publications/Issue-Briefs/2011/Jun/Financial-Health-Medicaid-Managed-Care.aspx?omnicid=20

Issue Brief (18 pages):
http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2011/Jun/1511_McCue_assessing_financial_hlt_Medicaid_managed_care_plans_ib_FINAL.pdf

Comment:

By Don McCanne, MD

How many times does it have to be said? Publicly traded, investor owned, for-profit health plans pay out a lower percentage of revenues for medical care, waste more on administrative excesses, and provide lower quality care. This study confirms that this is true as well for publicly traded Medicaid managed care plans. Under the Affordable Care Act, this flawed Medicaid model will be expanded to include another 16 million individuals. Since it is our tax funds paying for these programs, we should all be communicating our outrage in the most obtrusive manner that is tenable. Wait. Forget tenable. Let’s start a rampage!

Rep. Paul Ryan Questioned on Medicare-for-All

By Sam Husseini
The Washington Stakeout blog, June 13, 2011

Rep. Paul Ryan (R-Wis.) is chairman of the House Budget Committee and has put forward a plan that would end Medicare. He was telling another reporter that he was concerned about providing poor people with a safety net when we had this exchange:

Sam Husseini: If you’re a fiscal conservative and you want to provide a safety net, why wouldn’t you be for something like a single-payer health care system?

Paul Ryan: I think a single-payer health care system would be a disaster for people who need health-care the most. I think it would cause rationing, waiting lines. I think it would be a fiscal house of cards, I think it would help accelerate a national debt crisis and hurt the economy.

Husseini: Wouldn’t it save a lot of money and cover everybody?

Ryan: Absolutely not. I totally and fundamentally disagree with it. I believe that you can have affordable access to healthcare for all Americans, including people with pre-existing conditions, without a government takeover of the healthcare sector. If we actually have government-run healthcare, what I think you’ll have is government managing, government-rationing healthcare. I think that will be a fiscal disaster, I think that it would accelerate a debt crisis that would slow our economy and take jobs and economic growth from those people that need it the most, which are people who are out of work.

Husseini: Doesn’t Medicare have a much lower — 2 or 3 percent — overhead compared to the insurance companies? Which — insurance companies –

Ryan: — That’s an apples and oranges comparison. If you take a look at Medicare itself, Medicare is going bankrupt.

Husseini: That’s the healthcare system in general that’s going bankrupt.

Ryan: There are three facts about medicare that you simply can’t dispute: 10,000 seniors are retiring everyday with fewer workers going into the workforce to pay for them; healthcare costs are skyrocketing at about four times the rate of inflation, which threatens medicare’s ability to give affordable care; and number three, the non-partisan experts agree that Medicare is going bankrupt. So Medicare’s status quo is bankruptcy and that threatens healthcare not only for current seniors but obviously for future seniors, so I believe a patient-centered healthcare system — reforms that put the patient at the center of the healthcare system, not the government — are the best for people who need healthcare and they’re best for the economy, and they’re the best way to avert a debt crisis.

Husseini: But isn’t the problem with healthcare fundamentally the corporate structure? I mean your biggest funders are a who’s who — Northwestern Mutual –

Ryan: — Which is a big employer in Milwaukee by the way —

Husseini: — Aurora Health Care, Abbott Laboratories, Credit Suisse — the insurers — [see “Paul Ryan’s Health Industry Ties…” Humana Inc., Blue Cross/Blue Shield and Aetna]
Ryan: — Government-run healthcare doesn’t work. Wherever we’ve seen government-run healthcare, it’s failed.

Husseini: You think that people are worse off in France and Canada?

Ryan: I think we’re worse off if we go with a government healthcare system that will cost us jobs, it will increase our deficit and our debt and I do believe, and I put ideas on the table that show, that we can get to a patient-centered healthcare system that helps create jobs, that helps get healthcare costs under control, and gives everybody affordable healthcare coverage for everyone regardless of income or pre-existing conditions.

Husseini: You think poor people in Europe are worse off than poor people here?

Ryan ends questioning here.

Margaret Flowers from Physicians for a National Health Program responded to Ryan’s statements: “Rep. Ryan’s comments show his true lack of understanding of single payer health care and the effect of health care costs on the economy. Rationing exists in the U.S. right now but it is done in the cruelest possible way — based on ability to pay. While people do wait in lines for elective care in some countries, there are at least 51 million people in the U.S. who can’t even get in line.

“As my testimony and this Congressional briefing argue, we cannot adequately address the deficit without effectively controlling health care costs and single payer is the most fiscally responsible way to finance universal and comprehensive health care.” See Flowers’ testimony before the Deficit Commission and a summary of a briefing done in Congress last Fall on Medicare and the deficit.

Thanks to Sam McCann for transcription. Thanks also to Josh Starcher. The full exchange between Ryan and Husseini is available at www.washingtonstakeout.com.

‘Medicare for All’ supporters to protest outside health insurers’ convention Thursday

Health advocates to protest insurance companies’ high premiums, denial of care, and meddling in doctor-patient relationship

FOR IMMEDIATE RELEASE
June 14, 2011

Contact:
Bill Skeen, M.D., M.P.H., executive director, Physicians for a National Health Program – California, (510) 665-8523, bill@pnhpcalifornia.org

SAN FRANCISCO — Hundreds of activists are expected to rally outside the Moscone Convention Center West complex on June 16 to protest what they call the outmoded and harmful role of private insurance companies in U.S. health care and to offer an alternative solution: a publicly financed single-payer system, otherwise known as “an improved Medicare for all.”

The occasion is the annual meeting of America’s Health Insurance Plans, AHIP, the trade association of the nation’s health insurance companies. The rally is set for 9 a.m. to 11 a.m. this Thursday at Howard and 4th streets in downtown San Francisco.

“Health care decisions should be made by patients and doctors, not private corporations,” said Dr. Henry Abrons, president of the California chapter of Physicians for a National Health Program. “Commercial health insurers – with all their co-pays, deductibles, co-insurances, claim denials, excessive paperwork, wasteful marketing costs, outrageous CEO salaries and direct interference in the doctor-patient relationship – stand in the way of patients getting necessary care.”

“At one time private health insurers may have made sense, but no longer,” Abrons said. “Now they’re an obstacle to good, quality care. Even as 51 million Americans remain uninsured and millions more are saddled with inadequate insurance, the five largest for-profit insurers — Aetna, CIGNA, Humana, UnitedHealth and WellPoint — had combined profits of $11.7 billion last year. That’s outrageous.”

Abrons said the coalition protesting at the AHIP meeting on June 16 will be calling for “a proven, cost-efficient alternative: an improved Medicare for all, otherwise known as a single-payer system.”

“Improving Medicare and providing it to everyone is the only socially responsible way to protect our precious human and economic resources,” he said.

Dr. Joel Weddington, also a PNHP member, said, “We support a healthier America because we have the same values that everybody has – we value our families, we value our friends and neighbors, and we value this country. But as doctors, most of all we value health.”

“Health care for all will only be a reality when we remove the wasteful health insurance industry and have one public insurer for all Californians, through an Improved Medicare-for-All system,” he said. “California has legislation that can make this change: Senate Bill 810 by Sen. Mark Leno (D-3). There is national legislation that would do this too. California can pass this legislation, but only if the people demand it. Stand up for keeping your loved ones healthy. Stand up for health care as a human right.”

Co-sponsors of the June 16 rally include California Alliance for Retired Americans, California Nurses Association, Gray Panthers, Healthcare for All, Physicians for a National Health Program, Wellstone Democratic Club, and Single Payer Now.

Physicians for a National Health Program – California www.pnhpcalifornia.org
2344 Sixth Street
Berkeley CA 94710-2412
T 510.665.8523

Corporations profit from health care waste

Neither Democratic nor Republican proposals address $1 trillion in unnecessary annual spending on health care

By Charlie Cooper
Baltimore Sun, June 9, 2011

The United States wastes about $3,000 per person annually in health care spending — nearly $1 trillion a year. That’s bad enough. Even more disturbing is who gets that trillion.

The fact is, we cannot understand politics in the U.S. by watching mainstream media or following the arguments of Democrats and Republicans. That’s because neither side is honestly addressing the main problem.

In the U. S., according to Rick Kronick, a political scientist at the University of California at San Diego, “health care costs [are] going up at 2.4 percent a year faster than GDP.” We spent $2.5 trillion on health insurance and health care in 2009, or $8,086 per person, fully 17.6 percent of gross domestic product. In the next highest-spending nation, annual per-capital costs run about $5,000. Our health spending is remarkably above average and yet our health outcomes are below average for developed nations.

Drs. Steffie Woolhandler and David Himmelstein estimated that in 1999, Americans spent $1,059 per capita on administrative costs compared with only $307 spent in Canada — about $225 billion per year. The corporate geese are going to spare no effort to hold on to this golden egg.

Other components of waste in the U.S. health system include relatively high compensation for doctors; high prices for health services and pharmaceuticals due to the lack of a system that can negotiate fair prices; overuse of tests and other procedures; lack of access to primary care; and self-rationing, whereby people wait until their conditions are more advanced and costly to treat.

All this is driven by corporate profits. Doctors are increasingly employed by for-profit hospitals and practices, labs benefit from over-testing, and drug companies and device makers profit from lack of preventive services and overuse of medications and procedures.

The health care industry spends over a half billion dollars per year on lobbying. The corporate stranglehold on both parties that operates through the campaign financing system, the lobbying industry and corporate control of the media keep the real story in the background while politicians rant about death panels and Grandma eating dog food.

To break the chokehold, the people must wake up to the new reality that corporate dominance will destroy our democracy and that only massive grass-roots action can change the situation.

Let’s look at President Barack Obama’s history on this issue. In 2008, when he was running for president, and in 2009, when he was campaigning for his health insurance plan, he said that he opposed any mandate on the public to buy private insurance. He also declared support for the public option. In other words, anyone could opt into a plan similar to Medicare.

But soon after he took up health care as president, Mr. Obama dropped his opposition to the mandate and then his support for the public option. He negotiated with Big Pharma and the insurance industry and supported a national version of the plan put into effect in 2006 in Massachusetts by then-Gov. Mitt Romney, a Republican.

The Democrats’ mandate creates real problems for middle-class families. For example, a couple with one child and no employment-related health insurance earning $72,000 annually will have to pay $570 per month in premiums plus 30 percent of incurred health expenses, up to a limit of $7,632 per year. Alternatively, they can pay a tax of $1,800 and have no health insurance.

Essentially, the Democrats are saying that people over 65 can have the public Medicare system, but people under 65 should be required to buy private insurance that, in many cases, will be unaffordable. Republicans, meanwhile, say that “Obamacare” is a socialist plan to control your personal health care decisions, even though it’s modeled on a Republican template from Massachusetts.

Fast forward to the plan unveiled by Republican House Budget Committee Chairman Paul Ryan: Medicare would change to “premium support” — that is, vouchers — and recipients would buy private insurance. While they have not proposed a legal mandate, Republicans would force most elders to choose between unaffordable private insurance and not being covered. The voucher would not nearly pay the full premium.

Democrats imply this is a calamity, yet they just enacted a very similar plan for people under 65. They say they want to give everybody affordable care, but they are afraid to challenge their corporate patrons. In the end, they failed on many counts, passing a bill that doesn’t cover everyone and isn’t affordable.

The Republicans say that the only sustainable way to provide health coverage is to give more and more to corporations by way of tax breaks, subsidies and voucher schemes. Instead of cutting wasteful administrative costs or unnecessary tests and procedures, they cut workers and retirees.

The Republican and Democratic talking points cannot hide the fact that corporate profit on $1 trillion in health care waste limits what can even be discussed within the parties and the mainstream media.

Health care costs cannot rise year after year by 2.4 percent more than the overall economy. Unless the citizens of the United States organize independently of the political parties and demand an end to corporate waste of $1 trillion per year (and growing), we will see some combination of more people with no health insurance, a major deterioration of the quality of care, and a decline in the health of the population.

Charlie Cooper is a Baltimore-based activist. His e-mail is charlie.coop@verizon.net.

http://www.baltimoresun.com/news/opinion/oped/bs-ed-health-costs-20110609,0,6183429.story

The hard truth about health care: Government works

By Ezra Klein
The Washington Post, June 7, 2011

Everyone in Washington claims to want the same thing lately: a “serious conversation” about health-care costs. So let’s have one.

Republicans have a plan that has been tried repeatedly but that has never worked. Democrats have a plan that might work in theory, but it is untested at the scale they’ll need for it to work in practice. And both parties are too scared to talk about the only plan that has worked.

But before we get to that plan, I want to tell you about a graph.

I found it buried inside a Kaiser Family Foundation brief entitled “Health Care Spending in the United States and Selected OECD Countries.” Inauspicious, maybe. But it should change the way we think about health-care costs. Because what it shows is that we’ve failed. Failed to control costs. Failed to restrain the growth of government.

And it shows something else, too: Where we’ve failed, others have succeeded.

Everyone knows — or should know — that the United States spends much more than any other country on health care. But the Kaiser Family Foundation broke that spending down into two parts, the government’s share and the private sector’s share (both measured as a percentage of total gross domestic product), then compared the results with figures from 12 other countries that are members of the Organization for Economic Cooperation and Development. And here’s the shocker: Our government spends more on health care than the governments of Japan, Australia, Norway, the United Kingdom, Spain, Italy, Canada or Switzerland.

Think about that for a minute. Canada has a single-payer health-care system. The government is the only insurer of any note. The United Kingdom has a socialized system, in which the government is not only the sole insurer of note but also employs most of the doctors and nurses and runs most of the hospitals. And yet, measured as a share of the economy, our government health-care system is the largest of the bunch.

And it’s worse than that: Atop our giant government health-care sector, we have an even more giant private health-care sector. Altogether, we’re spending about 16 percent of the GDP on health care. No other country even tops 12 percent. Which means we’ve got the worst of both worlds: huge government and high costs.

This is where a “serious conversation” on health-care costs would start — with what has worked, and what we can learn from it. Instead, it’s where our conversation about health-care costs never quite goes.

The Republican plan, in fact, heads in the opposite direction: The GOP outsources Medicare to private insurers and gives senior citizens checks that cover less and less of the cost of insurance every year. Republicans hope that when faced with more cost pressure and more options, seniors will be able to exert the sort of consumer pressure that lowers prices while retaining, or even improving, quality.

What they’ve got in mind already exists in Medicare. “Our premium-support plan is modeled after the Medicare Part D prescription-drug program,” Paul Ryan (R-Wis.) told me. But Part D hasn’t controlled costs. Instead, premiums have risen by 57 percent since 2006, and the program is expected to see nearly 10 percent growth in annual costs over the next decade.

Moreover, this isn’t the first time we’ve tried to let private insurers into Medicare to work their magic. The Medicare Advantage program, which invited private insurers to offer managed-care options to Medicare beneficiaries, was expected to save money, but it ended up costing about 120 percent of what Medicare costs.

The Democratic plan, conversely, quietly recognizes that government-run health-care systems that are willing to throw their weight around can control costs. So the plan is to have Medicare try to pay for quality, not volume.

The first step is figuring out what quality is. So Medicare has been collecting vast amounts of hospital data on patients’ experiences, the delivery of pre-operative antibiotics, the prevalence of medical imaging and other topics. Come October, the hospitals posting good numbers will get a bonus from the Affordable Care Act; those posting bad numbers will face a penalty. Next year, the bonus and penalty will get bigger. Democrats have also created and funded a center to start testing the effectiveness of various drug, device and surgical treatments.

As for the inevitable political blowback, Democrats created the Independent Payment Advisory Board, a panel of 15 Senate-confirmed health-care experts who can make tough, cost-cutting reforms to Medicare in Congress’s stead. To be stopped, Congress needs to vote the board down, and the president needs to sign off on lawmakers’ opposition. That creates ample room for Congress to hand the IPAB the decisions it doesn’t want to make on its own.

Could it work? Sure. But it’s a gamble. It’s easy to imagine that strategy improving quality without cutting costs. That’d leave us with a better health-care system than we have now but the same budget problems. Another danger is that Congress could override the IPAB, rendering it useless as a tool for cost control.

But that’s the choice we’ve been left with: a plan that has never worked or a plan that’s never been tried. As for the approach that’s helped every other industrialized country achieve universal coverage at about half our costs? Well, we’re still not ready to talk about that.

http://www.washingtonpost.com/blogs/ezra-klein/post/the-hard-truth-about-health-care-government-works/2011/05/19/AGcE95KH_blog.html?wprss=ezra-klein

McKinsey report on employer-sponsored insurance

How US health care reform will affect employee benefits

By Shubham Singhal, Jeris Stueland, and Drew Ungerman
McKinsey Quarterly, June 2011

US health care reform sets in motion the largest change in employer-provided health benefits in the post–World War II era. While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.

Many of the law’s relevant provisions take effect in 2014. Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014. However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response.

Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014.

Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.

A transformed employer market

Health care reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation. The new law guarantees the right to health insurance regardless of an individual’s medical status. In doing so, it minimizes the moral obligation employers may feel to cover the sickest employees, who would otherwise be denied coverage in today’s individual health insurance market. Reform preserves the corporate tax advantages associated with offering health benefits—except for high-premium “Cadillac” insurance plans.

Starting in 2014, people who are not offered affordable health insurance coverage by their employers will receive income-indexed premium and out-of-pocket cost-sharing subsidies. The highest subsidies will be offered to the lowest-income workers. That reduces the social-equity advantage of employer-sponsored insurance, by enabling these workers to obtain coverage they could not afford on today’s individual market. It also significantly increases the availability of substitutes for employer coverage. As a result, whether to offer ESI after 2014 becomes mostly a business decision.

What the law says

Reform requires all employers with more than 50 employees to offer health benefits to every full-timer or to pay a penalty of $2,000 per worker (less the first 30). The benefits must provide a reasonable level of health coverage, and (except for grandfathered plans) employers will no longer be able to offer better benefits to their highly compensated executives than to their hourly employees. These requirements will increase medical costs for many companies. It’s important to note that the penalty for not offering coverage is set significantly below these costs.

The subsidies will cap the amount lower- and middle-income individuals and families will have to spend on health coverage, to 9.5 percent of household income for those at 400 percent of the federal poverty level and less for those at lower income levels. The subsidies will keep the cost of insurance coverage from the exchanges below what many employees now pay toward employer-sponsored coverage, especially for those whose earnings are less than 200 percent of the federal poverty level.

A bigger effect than expected

As we have seen, a Congressional Budget Office report estimated that only 9 million to 10 million people, or about 7 percent of employees, currently covered by ESI would have to switch to subsidized exchange policies in 2014. Most surveys of employers likewise show relatively low interest in shifting employees from traditional ESI.

Our survey found, however, that 45 to 50 percent of employers say they will definitely or probably pursue alternatives to ESI in the years after 2014. Those alternatives include dropping coverage, offering it through a defined-contribution model, or in effect offering it only to certain employees. More than 30 percent of employers overall, and 28 percent of large ones, say they will definitely or probably drop coverage after 2014.

Our survey shows significantly more interest in alternatives to ESI than other sources do, for several reasons. Interest in these alternatives rises with increasing awareness of reform, and our survey educated respondents about its implications for their companies and employees before they were asked about post-2014 strategies. The propensity of employers to make big changes to ESI increases with awareness largely because shifting away will be economically rational not only for many of them but also for their lower-income employees, given the law’s incentives.

https://www.mckinseyquarterly.com/How_US_health_care_reform_will_affect_employee_benefits_2813

And…

Getting Insurance at Work

Posted by Nancy-Ann DeParle
The White House Blog, June 8, 2011

You might have seen reports about a study from McKinsey and Company claiming that a significant number of employers will stop offering insurance to their workers in 2014. Unfortunately, the study misses some key points and doesn’t provide the complete picture about how the Affordable Care Act will strengthen the health care system and make it easier for employers to offer high quality coverage to their employees.

The McKinsey Study is an Outlier

The Rand Corporation: “The percentage of employees offered insurance will not change substantially, but a small number of employees in small firms (defined as those with under 100 employees in 2016) will obtain employer-sponsored insurance through the state insurance exchanges.”

The Urban Institute: “Some have argued that the Patient Protection and Affordable Care Act would erode employer-sponsored insurance (ESI) by providing incentives for employers to stop offering coverage. Others have claimed that most businesses would face increased costs as a result of reform. A new study finds that overall ESI coverage under the ACA would not differ significantly from what coverage would be without reform.”

Mercer: “In a survey released today by consulting firm Mercer, employers were asked how likely they are to get out of the business of providing health care once state-run insurance exchanges become operational in 2014 and make it easier for individuals to buy coverage. For the great majority, the answer was ‘not likely.'”

The Bottom Line

A central goal of the Affordable Care Act is to reduce the cost of providing health insurance and make it easier for employers to offer coverage to their workers. We have implemented the law at every step of the way to minimize disruption and maximize affordability for businesses, workers, and families. And we agree with experts who project that employers will continue to offer high quality benefits to their workers under the new law. This one discordant study should be taken with a grain of salt.

(Nancy-Ann DeParle is the Assistant to the President and Deputy Chief of Staff.)

http://www.whitehouse.gov/blog/2011/06/08/getting-insurance-work

Comment:

By Don McCanne, MD

Republicans contend that this new McKinsey study shows that the provisions of the Affordable Care Act (ACA) will cause a massive transfer of employee health coverage from employer-subsidized plans to new government-subsidized plans that will be made available through the state insurance exchanges. Democrats contend that the ACA program design will prevent this shift. This either/or debate misses the point. The massive shift to government-subsidized private plans will occur under ACA. The uncertainty is only in how fast that will be.

This discussion is important because one of the main strategies was to establish policies that would ensure the perpetuation of the employer role in funding health care, thereby avoiding the necessity of infusing yet more taxpayer funds into health care. Ultimately, a taxpayer-financed system would be more equitable and efficient, but, until we have that, the employer funds are an important transitional resource to help fund our health care.

As the financing responsibility shifts more to the government, there is also a responsibility for the government to demand greater value in its health care purchasing. That will be difficult under ACA since a government-managed exchange of private health plans does not provide effective means of eliminating the administrative and clinical waste that typifies our dysfunctional U.S. system of financing health care.

The rate of employer-sponsored coverage continues to decline. The quality of employer-sponsored health plans continues to deteriorate as more and more costs are shifted to employees, making the plans less desirable. The opportunity offered to employers by the safety-valve of the state insurance exchanges will cause an acceleration in the decline of employer-sponsored coverage as employers realize that shifting to a government-financed program simply represents a wise business decision for them.

Once the government is stuck with the bill for these private exchange plans, maybe the light will finally go on. Why are we paying so much for these inadequate and wasteful plans when we could have a more efficient and effective program with better benefits – a single payer national health program? Fortunately, the emergence of this epiphany will not be a matter of whether, but how soon.

Managed Competition for Medicare? Sobering Lessons from the Netherlands

Comment:

Doctor prescribes Medicare for all

Auditing Access to Specialty Care for Children with Public Insurance

Comment:

Getting Insurance at Work

Comment:

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