By Amita Parashar
Kaiser Health News
December 20, 2010

McKinsey and Co., an international consulting company, estimates the number of people residually uninsured will be as high as 40 million in 2016. Dr. Robert Kocher, director of the firm’s Center for U.S. Health System Reform and a former special assistant to President Barack Obama on health care, recently spoke with Kaiser Health News’ Amita Parashar about the center’s estimates and who might not get insured as the health law takes effect.

Q. How did you come up with the figure that 30 million to 40 million people might remain uninsured after the individual mandate kicks in?

A. We built a simulation that allows us to model each county in the country. The model looks at businesses and individuals, coverage flows and changes over time. The model factors in health conditions, incomes, age and can allow one to make forecasts. … It is difficult to predict how big the residually uninsured market will be since it depends on many factors — how effective the individual mandate proves to be, how well auto-enrollment works [a provision of the law that will require large employers to enroll employees in a health plan, unless workers choose to opt-out], and how effectively exchanges and Medicaid programs work to enroll people. Depending on what you believe about these factors leads you to a large range for how many people will be residually uninsured. In some scenarios, that pool may be as large as 30 to 40 million people.

Q. Who are the residually uninsured?

A. There will always be a residual pool of uninsured that includes the following populations: undocumented [foreigners], people between jobs, those who may lose coverage from either changes in income [or from] rolling off of Medicaid. Also, the [people whose employer-based coverage] was dropped but who haven’t yet purchased insurance; those eligible and not enrolled in Medicaid; and those [who have not enrolled in insurance] by choice.

Q. Who do you think will choose to pay the penalty instead of getting insurance?

A. I’m not sure how big that population will be, but I think it’s conceivable that there will be people who are offered employer-sponsored insurance and choose not to take it when they don’t have an alternative and are above the income levels that would allow them to get other options. Naturally, there is going to be turnover, too, as people change jobs or move across state lines. There will be gaps in coverage that will hopefully be easier to remedy than they are today. But there will certainly be people who are in transit in the system, too. And there are some people that ideologically may choose not to get coverage, or to self-insure. While I think that’s going to be a relatively small population, I expect that there will be some that make that choice.

http://www.kaiserhealthnews.org/Checking-In-With/kocher.aspx

Comment:

By Don McCanne, MD

McKinsey and Co. estimates that as many as 30 to 40 million people will still be uninsured after the new health care law goes into affect. Telling people to do something they can’t do – buying subsidized health insurance that they still can’t pay for – will never succeed as a policy to eliminate the uninsured.

Enrollment needs to be automatic for everyone, with an automatic, equitable system of funding that makes it affordable for all – progressive taxes. That’s not such a difficult concept. I’ll bet you could easily solve it right now: an improved (fill in the blank) for all.

Checking In With Dr. Robert Kocher On Who Might Stay Uninsured In Spite Of The Individual Mandate

By Amita Parashar
Kaiser Health News
December 20, 2010

McKinsey and Co., an international consulting company, estimates the number of people residually uninsured will be as high as 40 million in 2016. Dr. Robert Kocher, director of the firm’s Center for U.S. Health System Reform and a former special assistant to President Barack Obama on health care, recently spoke with Kaiser Health News’ Amita Parashar about the center’s estimates and who might not get insured as the health law takes effect.

Q. How did you come up with the figure that 30 million to 40 million people might remain uninsured after the individual mandate kicks in?

A. We built a simulation that allows us to model each county in the country. The model looks at businesses and individuals, coverage flows and changes over time. The model factors in health conditions, incomes, age and can allow one to make forecasts. … It is difficult to predict how big the residually uninsured market will be since it depends on many factors — how effective the individual mandate proves to be, how well auto-enrollment works [a provision of the law that will require large employers to enroll employees in a health plan, unless workers choose to opt-out], and how effectively exchanges and Medicaid programs work to enroll people. Depending on what you believe about these factors leads you to a large range for how many people will be residually uninsured. In some scenarios, that pool may be as large as 30 to 40 million people.

Q. Who are the residually uninsured?

A. There will always be a residual pool of uninsured that includes the following populations: undocumented [foreigners], people between jobs, those who may lose coverage from either changes in income [or from] rolling off of Medicaid. Also, the [people whose employer-based coverage] was dropped but who haven’t yet purchased insurance; those eligible and not enrolled in Medicaid; and those [who have not enrolled in insurance] by choice.

Q. Who do you think will choose to pay the penalty instead of getting insurance?

A. I’m not sure how big that population will be, but I think it’s conceivable that there will be people who are offered employer-sponsored insurance and choose not to take it when they don’t have an alternative and are above the income levels that would allow them to get other options. Naturally, there is going to be turnover, too, as people change jobs or move across state lines. There will be gaps in coverage that will hopefully be easier to remedy than they are today. But there will certainly be people who are in transit in the system, too. And there are some people that ideologically may choose not to get coverage, or to self-insure. While I think that’s going to be a relatively small population, I expect that there will be some that make that choice.

http://www.kaiserhealthnews.org/Checking-In-With/kocher.aspx

McKinsey and Co. estimates that as many as 30 to 40 million people will still be uninsured after the new health care law goes into affect. Telling people to do something they can’t do – buying subsidized health insurance that they still can’t pay for – will never succeed as a policy to eliminate the uninsured.

Enrollment needs to be automatic for everyone, with an automatic, equitable system of funding that makes it affordable for all – progressive taxes. That’s not such a difficult concept. I’ll bet you could easily solve it right now: an improved (fill in the blank) for all.

By Peter J. Cunningham
Center for Studying Health System Change
December 2010

A key provision of the national health reform law is the creation of state-based exchanges to provide more affordable insurance options for people, especially the uninsured. Despite premium subsidies for people with incomes up to 400 percent of the poverty level, or $88,200 for a family of four in 2010, and an individual requirement to enroll in coverage, no one knows who will enroll in the exchanges and who will not, at least initially. Almost 40 percent of uninsured people eligible to receive subsidies through the exchanges have chronic conditions or report fair or poor health, and another 28 percent report recent problems with access to care or paying medical bills, according to a new national study by the Center for Studying Health System Change (HSC). However, about one-third of uninsured people eligible for subsidies have had no recent problems with their health, access to medical care or paying medical bills. Enrolling these apparently healthy uninsured people is likely to be challenging but essential to avoiding adverse selection, or enrolling sicker-than-average people, in the exchanges. Otherwise, health insurance costs in the exchanges could be higher than expected.

Contrary to popular perception, many of these healthy and low-cost uninsured people view themselves as risk-averse, which could motivate them to gain coverage in the absence of health or access problems. Also, most uninsured people believe they need health coverage, although fewer believe that health insurance is currently worth the cost, a situation that could change once premium subsidies are available in 2014.

http://www.hschange.org/CONTENT/1170/

Comment: 

By Don McCanne, MD

One concern of the authors of the Patient Protection and Affordable Care Act was that the state insurance exchanges called for in the legislation might be subject to adverse selection. That is, individuals with greater health care needs would buy the government-subsidized plans if they could afford them, whereas healthy individuals might well choose to remain uninsured, feeling that their portion of the premium was too expensive or frankly unaffordable. This would concentrate high-cost patients in the insurance plans, resulting in the death spiral of skyrocketing premiums.

Healthier individuals who tend to be younger – the so-called “young invincibles” – have been perceived to be greater risk takers and thus more willing to go without health care coverage. This study suggests that these healthy individuals are just as risk-averse as uninsured people with health problems. Everyone wants to be insured.

Thus it is not so much the willingness to take risks that causes these individuals to forgo insurance coverage, but rather it is more whether the additional cost of the premium over the penalty provides enough perceived value, or whether they even have enough funds to pay the premium after their other basic needs are met.

In writing the bill, the authors struggled to balance the actuarial values of the plans (what percentage of costs the plans pay), the subsidies for the premiums and out-of-pocket expenses, and the penalties for non-compliance in purchasing the plans. They wanted the premiums to be affordable, so they pushed actuarial values down, shifting more costs to patients in need. They wanted to limit the burden on the federal budget, so they limited the government-provided subsidies for premiums and out-of-pocket expenses. They didn’t want to press too hard on requiring individuals to purchase expensive private plans from an industry in such disfavor, risking public furor, so they kept the non-compliance penalties low.

No matter how much you adjust these variables, you cannot ever get everyone to agree to purchase insurance. The numbers of individuals declining to purchase plans will be significant, and they will be predominantly healthy. It is absolutely inevitable that the exchange plans will experience adverse selection and will need to keep pushing premiums up.

Households with an income of 400 percent of the federal poverty level ($88,200 for a family of four) will feel the full brunt of the premiums inflated by the death spiral. How high? $25,000? $50,000? And should the family need health care, none of their out-of-pocket expenses are subsidized.

Trying to fudge the numbers won’t work in this structurally unsound financing scheme. We should quit playing games simply to keep the middlemen private insurers in play. Instead, let’s go for an improved Medicare for everyone.

Who Are the Uninsured Eligible for Premium Subsidies in the Health Insurance Exchanges?

By Peter J. Cunningham
Center for Studying Health System Change
December 2010

A key provision of the national health reform law is the creation of state-based exchanges to provide more affordable insurance options for people, especially the uninsured. Despite premium subsidies for people with incomes up to 400 percent of the poverty level, or $88,200 for a family of four in 2010, and an individual requirement to enroll in coverage, no one knows who will enroll in the exchanges and who will not, at least initially. Almost 40 percent of uninsured people eligible to receive subsidies through the exchanges have chronic conditions or report fair or poor health, and another 28 percent report recent problems with access to care or paying medical bills, according to a new national study by the Center for Studying Health System Change (HSC). However, about one-third of uninsured people eligible for subsidies have had no recent problems with their health, access to medical care or paying medical bills. Enrolling these apparently healthy uninsured people is likely to be challenging but essential to avoiding adverse selection, or enrolling sicker-than-average people, in the exchanges. Otherwise, health insurance costs in the exchanges could be higher than expected.

Contrary to popular perception, many of these healthy and low-cost uninsured people view themselves as risk-averse, which could motivate them to gain coverage in the absence of health or access problems. Also, most uninsured people believe they need health coverage, although fewer believe that health insurance is currently worth the cost, a situation that could change once premium subsidies are available in 2014.

http://www.hschange.org/CONTENT/1170/

One concern of the authors of the Patient Protection and Affordable Care Act was that the state insurance exchanges called for in the legislation might be subject to adverse selection. That is, individuals with greater health care needs would buy the government-subsidized plans if they could afford them, whereas healthy individuals might well choose to remain uninsured, feeling that their portion of the premium was too expensive or frankly unaffordable. This would concentrate high-cost patients in the insurance plans, resulting in the death spiral of skyrocketing premiums.

Healthier individuals who tend to be younger – the so-called “young invincibles” – have been perceived to be greater risk takers and thus more willing to go without health care coverage. This study suggests that these healthy individuals are just as risk-averse as uninsured people with health problems. Everyone wants to be insured.

Thus it is not so much the willingness to take risks that causes these individuals to forgo insurance coverage, but rather it is more whether the additional cost of the premium over the penalty provides enough perceived value, or whether they even have enough funds to pay the premium after their other basic needs are met.

In writing the bill, the authors struggled to balance the actuarial values of the plans (what percentage of costs the plans pay), the subsidies for the premiums and out-of-pocket expenses, and the penalties for non-compliance in purchasing the plans. They wanted the premiums to be affordable, so they pushed actuarial values down, shifting more costs to patients in need. They wanted to limit the burden on the federal budget, so they limited the government-provided subsidies for premiums and out-of-pocket expenses. They didn’t want to press too hard on requiring individuals to purchase expensive private plans from an industry in such disfavor, risking public furor, so they kept the non-compliance penalties low.

No matter how much you adjust these variables, you cannot ever get everyone to agree to purchase insurance. The numbers of individuals declining to purchase plans will be significant, and they will be predominantly healthy. It is absolutely inevitable that the exchange plans will experience adverse selection and will need to keep pushing premiums up.

Households with an income of 400 percent of the federal poverty level ($88,200 for a family of four) will feel the full brunt of the premiums inflated by the death spiral. How high? $25,000? $50,000? And should the family need health care, none of their out-of-pocket expenses are subsidized.

Trying to fudge the numbers won’t work in this structurally unsound financing scheme. We should quit playing games simply to keep the middlemen private insurers in play. Instead, let’s go for an improved Medicare for everyone.

Centers for Medicare and Medicaid Services

Section 302 of the Medicare Modernization Act of 2003 (MMA) established requirements for a new Competitive Bidding Program for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS). The MMA requires that competitive bid payment amounts be used to replace the current Medicare DMEPOS fee schedule payment amounts for selected items in selected areas. The competitive bid payment amounts are determined by using bids submitted by DMEPOS suppliers. The intent of the Competitive Bidding Program is to set more appropriate payment amounts for DMEPOS items, which will result in reduced beneficiary out-of-pocket expenses and savings to taxpayers and the Medicare program.

http://www.cms.gov/DMEPOSCompetitiveBid/

And…

Despite Objections, Medicare Competitive Bidding Set to Begin

By Miriam Davidson
Muscular Dystrophy Association
December 3, 2010

Competitive bidding among Medicare providers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) is set to begin January 1 in nine regions of the country, despite sharp criticism of the plan by lawmakers, economists, patient advocates and others.

Under the new procedures, DMEPOS providers must go through a competitive bidding process to win the right to serve Medicare recipients. Medicare pays these providers to serve the medical needs of millions of Americans who use medical supplies at home, including oxygen equipment and power wheelchairs.

Medicare officials argue that competitive bidding is necessary to save money and streamline services. Opponents say that, while saving money and streamlining services are laudable goals, this plan could ultimately backfire. They say a lack of proper services and supports may force many people who are now living comfortably on their own into far more expensive institutional care.

A flawed process

Problems that came to light during the testing phase included Medicare beneficiaries being forced to go to multiple, unfamiliar providers for different items and services; nonlocal providers; inexperienced or unlicensed providers; and greater costs to Medicare from more emergency room visits and/or longer hospital stays as beneficiaries lost access to critical services and equipment.

Moreover, dozens of academics and members of Congress have pointed out two major flaws in the way the competitive bidding auction is being conducted. The first flaw is that bidders are not required to sign contracts that reflect their bid, thus encouraging DMEPOS suppliers to submit unrealistic, “low-ball” bids that competitors — and even they themselves — can’t match. Opponents contend that large companies will submit extremely low bids in order to drive smaller competitors out of business, knowing that ultimately, they won’t be forced to provide equipment and services at such low prices.

The second major flaw in the process, critics say, is that Medicare arrives at the price it will pay for a product or service by averaging all the bids it receives, winners and losers alike. Due to the presence of many unrealistically low bids, the final contract price is often lower than the bid submitted by the winning provider. In fact, during tests of the process, half of the bidders who won contracts were offered lower prices than their winning bids.

Critics say these flaws will result in a skewed system that rewards unscrupulous DMEPOS providers, as well as those who skimp on service and quality.

http://quest.mda.org/news/despite-objections-medicare-competitive-bidding-set-begin

And…

Invacare Analysis Raises New Doubts about Bid Winners

HomeCare
December 6, 2010

Even as CMS moves resolutely toward the Jan. 1 implementation of DMEPOS competitive bidding, industry stakeholders are uncovering increasingly troubling hard data about some of the project’s contract holders.

Nearly 21 percent — or 73 of the 356 bid winners — have limited ability to purchase products from Invacare Corp., the nation’s largest home medical equipment manufacturer, the company said last week in its final report on the credit-worthiness of suppliers awarded Round 1 contracts.

According to the manufacturer’s analysis:

* 8.5 percent of the contract holders have credit limits with Invacare of less than $10,000 (meaning they can buy very little product from the company);

* 5.4 percent are on credit hold (meaning they cannot purchase any product from the company); and

* 6.7 percent are so far behind on their payments with Invacare that their accounts have been turned over for collection or legal process (meaning they cannot purchase any product from the company).

http://homecaremag.com/topics/competitive-bidding/invacare-credit-report-20101206/index1.html

And…

Analysis of the Economic Impact of Competitive Bidding on the DME Market: A One Year Update

By Brian O’Roark, PhD, Associate Professor of Economics, Robert Morris University

Overview

* Competitive bidding reduces the number of sellers and thereby reduces competition.

* Competitive bidding concentrates market power, which creates regional oligopolies and reduces quality of patient care. Primary among economic concerns: by eliminating nine out of ten suppliers in the market for durable medical equipment (DME), the industry would become more concentrated.

* The Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees Medicare, misunderstands the structure of the market.

* The competitive bidding program forces an unsustainable business model on the DME industry. Ninety percent of providers were excluded from participating because they could not meet the bid. Those who qualify are forced to sustain prices for three years — an untenable position for any business.

http://www.aahomecare.org/associations/3208/files/O’Roark%20Summary%20of%20Economic%20Impact%20of%20Competitive%20Bidding%20August%202009.pdf

Comment: 

By Don McCanne, MD

The concept that competition will always bring the lowest prices for comparable value is so thoroughly ingrained in capitalistic societies such as ours that sometimes even the government will abandon administered pricing in favor of market competition. In this instance, the Centers for Medicare and Medicaid Services (CMS) has begun to use competitive bidding to price medical equipment and supplies. Initially, prices will likely be lower, but for how long and at what cost?

To begin with, for three years the CMS business is going to ten percent of the bidders. What does that do to the other 90 percent of suppliers who are excluded? Many of them will exit the market, concentrating the successful bidders into oligopolies or even monopolies.

What will happen to the manufacturers whose products are not distributed by the successful bidders? If the non-government market is not large enough to sustain them, some also will go under.

What will happen to patients’ access to these essential medical products? Inevitably, successful bidders will not be inclined to cover rural and poverty-ridden urban areas. Also, since each category of equipment and supplies
is bid separately, services for patients may end up being highly fragmented.

After three years of market concentration, who will be bidding for the new contracts? Certainly not those entities that have already folded. Those suppliers that low-balled the bids the first time around did so to eliminate the competition. Those remaining will certainly jack up their bids. In an oligopoly, collusion is not essential to get higher prices, though some in this industry are certainly not above colluding if it increases profits.

Public stewards who do their homework can obtain optimal value through negotiated administered pricing – paying legitimate costs plus fair profits. All manufacturers and suppliers should be allowed to compete based on the quality and accessibility of their products and services, but always at a fair, predetermined price.

We should replace our public stewards who are foolish enough to dash our health care system onto the rocks, lured by Lorelei’s song of market competition. Let’s start singing the song of social solidarity – a song that won’t lure anyone onto the shoals – and then maybe we’ll attract public stewards who actually care about the patient.

DMEPOS Competitive Bidding

Centers for Medicare and Medicaid Services

Section 302 of the Medicare Modernization Act of 2003 (MMA) established requirements for a new Competitive Bidding Program for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS). The MMA requires that competitive bid payment amounts be used to replace the current Medicare DMEPOS fee schedule payment amounts for selected items in selected areas. The competitive bid payment amounts are determined by using bids submitted by DMEPOS suppliers. The intent of the Competitive Bidding Program is to set more appropriate payment amounts for DMEPOS items, which will result in reduced beneficiary out-of-pocket expenses and savings to taxpayers and the Medicare program.

http://www.cms.gov/DMEPOSCompetitiveBid/

And…

Despite Objections, Medicare Competitive Bidding Set to Begin

By Miriam Davidson
Muscular Dystrophy Association
December 3, 2010

Competitive bidding among Medicare providers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) is set to begin January 1 in nine regions of the country, despite sharp criticism of the plan by lawmakers, economists, patient advocates and others.

Under the new procedures, DMEPOS providers must go through a competitive bidding process to win the right to serve Medicare recipients. Medicare pays these providers to serve the medical needs of millions of Americans who use medical supplies at home, including oxygen equipment and power wheelchairs.

Medicare officials argue that competitive bidding is necessary to save money and streamline services. Opponents say that, while saving money and streamlining services are laudable goals, this plan could ultimately backfire. They say a lack of proper services and supports may force many people who are now living comfortably on their own into far more expensive institutional care.

A flawed process

Problems that came to light during the testing phase included Medicare beneficiaries being forced to go to multiple, unfamiliar providers for different items and services; nonlocal providers; inexperienced or unlicensed providers; and greater costs to Medicare from more emergency room visits and/or longer hospital stays as beneficiaries lost access to critical services and equipment.

Moreover, dozens of academics and members of Congress have pointed out two major flaws in the way the competitive bidding auction is being conducted. The first flaw is that bidders are not required to sign contracts that reflect their bid, thus encouraging DMEPOS suppliers to submit unrealistic, “low-ball” bids that competitors — and even they themselves — can’t match. Opponents contend that large companies will submit extremely low bids in order to drive smaller competitors out of business, knowing that ultimately, they won’t be forced to provide equipment and services at such low prices.

The second major flaw in the process, critics say, is that Medicare arrives at the price it will pay for a product or service by averaging all the bids it receives, winners and losers alike. Due to the presence of many unrealistically low bids, the final contract price is often lower than the bid submitted by the winning provider. In fact, during tests of the process, half of the bidders who won contracts were offered lower prices than their winning bids.

Critics say these flaws will result in a skewed system that rewards unscrupulous DMEPOS providers, as well as those who skimp on service and quality.

http://quest.mda.org/news/despite-objections-medicare-competitive-bidding-set-begin

And…

Invacare Analysis Raises New Doubts about Bid Winners

HomeCare
December 6, 2010

Even as CMS moves resolutely toward the Jan. 1 implementation of DMEPOS competitive bidding, industry stakeholders are uncovering increasingly troubling hard data about some of the project’s contract holders.

Nearly 21 percent — or 73 of the 356 bid winners — have limited ability to purchase products from Invacare Corp., the nation’s largest home medical equipment manufacturer, the company said last week in its final report on the credit-worthiness of suppliers awarded Round 1 contracts.

According to the manufacturer’s analysis:

* 8.5 percent of the contract holders have credit limits with Invacare of less than $10,000 (meaning they can buy very little product from the company);

* 5.4 percent are on credit hold (meaning they cannot purchase any product from the company); and

* 6.7 percent are so far behind on their payments with Invacare that their accounts have been turned over for collection or legal process (meaning they cannot purchase any product from the company).

http://homecaremag.com/topics/competitive-bidding/invacare-credit-report-20101206/index1.html

And…

Analysis of the Economic Impact of Competitive Bidding on the DME Market: A One Year Update

By Brian O’Roark, PhD, Associate Professor of Economics, Robert Morris University

Overview

* Competitive bidding reduces the number of sellers and thereby reduces competition.

* Competitive bidding concentrates market power, which creates regional oligopolies and reduces quality of patient care. Primary among economic concerns: by eliminating nine out of ten suppliers in the market for durable medical equipment (DME), the industry would become more concentrated.

* The Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees Medicare, misunderstands the structure of the market.

* The competitive bidding program forces an unsustainable business model on the DME industry. Ninety percent of providers were excluded from participating because they could not meet the bid. Those who qualify are forced to sustain prices for three years — an untenable position for any business.

http://www.aahomecare.org/

The concept that competition will always bring the lowest prices for comparable value is so thoroughly ingrained in capitalistic societies such as ours that sometimes even the government will abandon administered pricing in favor of market competition. In this instance, the Centers for Medicare and Medicaid Services (CMS) has begun to use competitive bidding to price medical equipment and supplies. Initially, prices will likely be lower, but for how long and at what cost?

To begin with, for three years the CMS business is going to ten percent of the bidders. What does that do to the other 90 percent of suppliers who are excluded? Many of them will exit the market, concentrating the successful bidders into oligopolies or even monopolies.

What will happen to the manufacturers whose products are not distributed by the successful bidders? If the non-government market is not large enough to sustain them, some also will go under.

What will happen to patients’ access to these essential medical products? Inevitably, successful bidders will not be inclined to cover rural and poverty-ridden urban areas. Also, since each category of equipment and supplies is bid separately, services for patients may end up being highly fragmented.

After three years of market concentration, who will be bidding for the new contracts? Certainly not those entities that have already folded. Those suppliers that low-balled the bids the first time around did so to eliminate the competition. Those remaining will certainly jack up their bids. In an oligopoly, collusion is not essential to get higher prices, though some in this industry are certainly not above colluding if it increases profits.

Public stewards who do their homework can obtain optimal value through negotiated administered pricing – paying legitimate costs plus fair profits. All manufacturers and suppliers should be allowed to compete based on the quality and accessibility of their products and services, but always at a fair, predetermined price.

We should replace our public stewards who are foolish enough to dash our health care system onto the rocks, lured by Lorelei’s song of market competition. Let’s start singing the song of social solidarity – a song that won’t lure anyone onto the shoals – and then maybe we’ll attract public stewards who actually care about the patient.

By Paul Fronstin, Dallas Salisbury, and Jack VanDerhei
Employee Benefit Research Institute
December 2010

This report provides estimates for savings needed to cover health insurance to supplement Medicare and out-of-pocket expenses for health care services in retirement.

Men who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $100,000 if comfortable with a 50 percent chance of having enough savings; to increase their odds to 90 percent, they would need $187,000.

Women who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $131,000 if comfortable with a 50 percent chance of having enough savings, while those who prefer a 90 percent chance of having enough savings would need $213,000.

Persons currently age 55 will need even greater savings when they turn 65 in 2020. Needed savings for men range from $109,000–$354,000, while needed savings for women range from $147,000–$406,000 depending on their source of health insurance coverage to supplement Medicare, any employer subsidies, prescription drug use, and their savings goal related to their comfort level with having a 50 percent, 75 percent, or 90 percent chance of having enough savings to cover health insurance premiums and out-of-pocket health care expenses in retirement.

Nearly 90 percent of Medicare beneficiaries have some form of insurance coverage to supplement Medicare Parts A and B. As employers continue to move away from providing retiree health benefits, more of the retirees who have had subsidized employment-based coverage in the past will have to assume for themselves the financial risk associated with longevity.

http://www.ebri.org/pdf/briefspdf/EBRI_IB_12-2010_No351_Savings3.pdf

Comment: 

By Don McCanne, MD

Medicare is not a complete program. Individuals turning 65 in 2020 will find that, to have a 90 percent chance of having enough savings to pay Medigap and Part D drug premiums and out-of-pocket health care expenses, they will have to have up to $350,000 (men) or $400,000 (women) in reserves in addition to their basic living expenses and any other expenses they might face in retirement. This does not even cover potential long-term care expenses.

Medicare cost sharing, private Medigap plans, and private Part D drug plans all increase administrative complexities and waste in the Medicare program. Since most seniors do not have enough reserves to meet these potential costs, these programs also create further financial barriers to care (keeping in mind that Medigap and Part D premiums are in themselves financial barriers since they are not prepaid before age 65, but are paid out of retirement funds).

Medicare would be a much better program if we were to 1) eliminate the middleman Medigap plans and roll these benefits into Medicare, 2) eliminate the middlemen Part D pharmacy benefit managers and roll drug benefits into Medicare, and 3) eliminate deductibles, coinsurance and copayments.

This would reverse the current trend of shifting health care costs from large risk pools to individuals who have health care needs, a trend bound to increase in Medicare if the deficit hawks claiming that Medicare is bankrupt have their way.

Yes, that would require more funds for the Medicare risk pool, but there are valid reasons why that would be a much better approach. First, an effective health care financing system should be designed to eliminate financial barriers to care, not create them. So the financing of the system should not be linked to access. Second, it is much easier to finance health care equitably if a single large risk pool is established and funded through equitable (progressive) tax policies. Third, it is not the size of the Medicare budget that matters, but rather it is the total health care spending on the Medicare beneficiaries that is important. The efficiencies of a streamlined Medicare program frees up funds that can be used for beneficial health care that becomes more readily accessible with the removal of the financial barriers. Single payer advocates understand that the savings from streamlining the existing Medicare program would be quite modest compared to the tremendous savings we could attain by replacing our entire health care financing system with a single improved Medicare for all program.

An additional potential benefit is that the administratively complex program for those eligible for both Medicare and Medicaid could be eliminated if long-term care were also folded into Medicare. For those who claim that we can’t afford to do that, we already do once we deplete the reserves of those who need nursing home care.

Some contend that wealthier individuals should pay more in Medicare premiums and cost sharing. That is already beginning to take place. But that unnecessarily increases the administrative complexity of Medicare, and it increases the risk of a two-tiered system as the wealthy turn to private options. Once again, the financing of Medicare should be totally separated from the Medicare benefits program. Higher income individuals can increase their contributions through equitable taxes without disrupting the efficient delivery of Medicare benefits.

These are just some of the more important reasons why we refer to an improved Medicare when we advocate for Medicare as a model for a single payer national health program. Medicare alone, as it is, won’t get us to where we need to be, at least not without $400,000 subsidies.

Funding Savings Needed for Health Expenses for Persons Eligible for Medicare

By Paul Fronstin, Dallas Salisbury, and Jack VanDerhei
Employee Benefit Research Institute
December 2010

This report provides estimates for savings needed to cover health insurance to supplement Medicare and out-of-pocket expenses for health care services in retirement.

Men who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $100,000 if comfortable with a 50 percent chance of having enough savings; to increase their odds to 90 percent, they would need $187,000.

Women who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $131,000 if comfortable with a 50 percent chance of having enough savings, while those who prefer a 90 percent chance of having enough savings would need $213,000.

Persons currently age 55 will need even greater savings when they turn 65 in 2020. Needed savings for men range from $109,000–$354,000, while needed savings for women range from $147,000–$406,000 depending on their source of health insurance coverage to supplement Medicare, any employer subsidies, prescription drug use, and their savings goal related to their comfort level with having a 50 percent, 75 percent, or 90 percent chance of having enough savings to cover health insurance premiums and out-of-pocket health care expenses in retirement.

Nearly 90 percent of Medicare beneficiaries have some form of insurance coverage to supplement Medicare Parts A and B. As employers continue to move away from providing retiree health benefits, more of the retirees who have had subsidized employment-based coverage in the past will have to assume for themselves the financial risk associated with longevity.

http://www.ebri.org/pdf/briefspdf/EBRI_IB_12-2010_No351_Savings3.pdf

Medicare is not a complete program. Individuals turning 65 in 2020 will find that, to have a 90 percent chance of having enough savings to pay Medigap and Part D drug premiums and out-of-pocket health care expenses, they will have to have up to $350,000 (men) or $400,000 (women) in reserves in addition to their basic living expenses and any other expenses they might face in retirement. This does not even cover potential long-term care expenses.

Medicare cost sharing, private Medigap plans, and private Part D drug plans all increase administrative complexities and waste in the Medicare program. Since most seniors do not have enough reserves to meet these potential costs, these programs also create further financial barriers to care (keeping in mind that Medigap and Part D premiums are in themselves financial barriers since they are not prepaid before age 65, but are paid out of retirement funds).

Medicare would be a much better program if we were to 1) eliminate the middleman Medigap plans and roll these benefits into Medicare, 2) eliminate the middlemen Part D pharmacy benefit managers and roll drug benefits into Medicare, and 3) eliminate deductibles, coinsurance and copayments.

This would reverse the current trend of shifting health care costs from large risk pools to individuals who have health care needs, a trend bound to increase in Medicare if the deficit hawks claiming that Medicare is bankrupt have their way.

Yes, that would require more funds for the Medicare risk pool, but there are valid reasons why that would be a much better approach. First, an effective health care financing system should be designed to eliminate financial barriers to care, not create them. So the financing of the system should not be linked to access. Second, it is much easier to finance health care equitably if a single large risk pool is established and funded through equitable (progressive) tax policies. Third, it is not the size of the Medicare budget that matters, but rather it is the total health care spending on the Medicare beneficiaries that is important. The efficiencies of a streamlined Medicare program frees up funds that can be used for beneficial health care that becomes more readily accessible with the removal of the financial barriers. Single payer advocates understand that the savings from streamlining the existing Medicare program would be quite modest compared to the tremendous savings we could attain by replacing our entire health care financing system with a single improved Medicare for all program.

An additional potential benefit is that the administratively complex program for those eligible for both Medicare and Medicaid could be eliminated if long-term care were also folded into Medicare. For those who claim that we can’t afford to do that, we already do once we deplete the reserves of those who need nursing home care.

Some contend that wealthier individuals should pay more in Medicare premiums and cost sharing. That is already beginning to take place. But that unnecessarily increases the administrative complexity of Medicare, and it increases the risk of a two-tiered system as the wealthy turn to private options. Once again, the financing of Medicare should be totally separated from the Medicare benefits program. Higher income individuals can increase their contributions through equitable taxes without disrupting the efficient delivery of Medicare benefits.

These are just some of the more important reasons why we refer to an improved Medicare when we advocate for Medicare as a model for a single payer national health program. Medicare alone, as it is, won’t get us to where we need to be, at least not without $400,000 subsidies.

By Washington Post Staff Writer (Ezra Klein, per Wonkbook)
The Washington Post
December 14, 2010

U.S. District Judge Henry E. Hudson, a George W. Bush appointee (and part-owner of a Republican campaign-consulting firm that fought the health-care overhaul legislation), has, as expected, ruled the individual mandate unconstitutional. So why are reform advocates so unexpectedly pleased?

The individual mandate began life as a Republican idea. Its earliest appearances in legislation were in the Republican alternatives to the Clinton health-care bill, where it was co-sponsored by such GOP stalwarts as Bob Dole, Orrin G. Hatch and Charles E. Grassley. Later on, it was the centerpiece of then-Gov. Mitt Romney’s health-reform plan in Massachusetts, and then it was included in the Wyden-Bennett bill, which many Republicans signed on to.

It was only when the individual mandate appeared in President Obama’s legislation that it became so polarizing on the right. The political logic was clear enough: The individual mandate was the most unpopular piece of the bill (you might remember that Obama’s 2008 campaign plan omitted it, and he frequently attacked Hillary Clinton for endorsing it in her proposal). But as a policy choice, it might prove disastrous.

The individual mandate was created by conservatives who realized that it was the only way to get universal coverage into the private market. Otherwise, insurers turn away the sick, public anger rises, and, eventually, you get some kind of government-run, single-payer system, much as they did in Europe, and much as we have with Medicare.

If Republicans succeed in taking it off the table, they may sign the death warrant for private insurers in America: Eventually, rising cost pressures will force more aggressive reforms than even Obama has proposed, and if conservative judges have made the private market unfixable by removing the most effective way to deal with adverse selection problems, the only alternative will be the very constitutional, but decidedly non-conservative, single-payer path.

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/13/AR2010121305475.html

Ezra Klein’s Wonkbook:
http://voices.washingtonpost.com/ezra-klein/2010/12/wonkbook_tax_plan_proceeds_wit.html#more

Comment: 

By Don McCanne, MD

It would be gratifying poetic irony if conservative legislators and conservative judges pushed us into single payer reform by either repealing or ruling unconstitutional the individual mandate.

As I said on KPFA/KPFK yesterday, “Nobody is going to argue that Medicare is unconstitutional..  We should fix it so it works better and then provide it to everyone.”