PNHP

Background on Medicare’s founding and ease of expanding Medicare to all Americans with a simple majority vote

Background on Medicare’s founding and ease of expanding Medicare to all Americans with a simple majority vote

Excerpted From Thom Hartmann, “Medicare Part ‘E’ for Everybody”

12/13/10

It took a full year for President Obama and the Democrats to push, pull, and shove through Congress a relatively modest set of changes in the way that health insurance is administered in the United States. The bill that Obama eventually signed on March 22, 2010—titled the Patient Protection and Affordable Care Act—had been sufficiently watered down so that it posed no threat to the profits of the insurance companies and the pharmaceutical companies. The changes were so benign from the point of view of the health insurance industry that its stock prices actually went up the day after the legislation was passed. Ditto for the drug giants.  esident Obama was so fixed on getting “bipartisan” approval (he did get one Republican senator – Olympia Snowe of Maine – to vote for the bill in committee), that long before any bill came to a vote he embarked on a strategy to buy his own insurance, so to speak, for passage of the bill by addressing the concerns of the health insurance and pharmaceutical companies so that they would not lobby against it on Capitol Hill.

To buy their silence, if not their support, he made a series of major concessions: there would be no “public option” to compete with them to lower premiums (thus protecting insurance company profits and CEO salaries), there would be limits on importing drugs from abroad (thus protecting drug company profits and CEO salaries), and Medicare would be allowed to negotiate drug prices with Big Pharma only on a very limited basis over an extended period of time (more drug company profits). What’s more, the insurance mandate would send 30 million new Americans to the industry as customers. No surprise, then, that stock prices rose upon passage of the bill.

Reforming health insurance in the United States was probably a bigger job than reforming health care would have been. The reason is because the process required building entirely new structures of regulation and management. Such new laws and institutions required a supermajority of 60 of the Senate’s 100 senators to overcome a continuous filibuster, something the Republicans began using quite freely since Obama’s election.

Ironically, it’s much easier to expand an existing program. If legislation is considered in the Senate that only adjusts the amounts of revenue coming in or going out, it can be done through a process called “reconciliation,” which requires only a simple majority – 50 votes – to pass, with the vice president to break a tie.

For example, George W. Bush and the Republicans used reconciliation – majority rule – to push through his huge cuts in taxes on the richest Americans three different times in the first decade of this century. They were not creating a new program but simply adjusting the revenue figures. Ronald Reagan had done the same. If legislation has to do only with revenue or scale adjustments to existing programs, 50 votes in the Senate are enough.

Therein lies the greatest – and the simplest – opportunity to truly reform health care.

We already have Medicare, which is a fairly comprehensive basic health insurance/health-care program that covers nearly all Americans over 65 years of age. It is, in essence, a single-payer health-care program. Obama and the Democrats could easily push to expand the Medicare program to allow Americans of all ages to participate in it, and all they’d need is a simple majority, not a supermajority.

And here’s the most amazing part: this would be totally consistent with what President Lyndon B. Johnson and the folks in his administration and Congress had in mind when they created Medicare in July 1965.

The Birth of Medicare

Robert M. Ball was the commissioner of Social Security through the administrations of three presidents – John F. Kennedy, Lyndon B. Johnson, and Richard M. Nixon. He’d worked his way up in the Social Security Administration to become its head guy, spending 30 years of his life there; and then, after he retired, he was tapped by Ronald Reagan to be on the commission that, in 1983, overhauled Social Security to keep it solvent through the Baby Boomer retirement phase.

Medicare was established as an add-on to Social Security, not as a standalone program, so Ball was intimately involved in its creation as commissioner of Social Security throughout the Johnson years. He sat in on the meetings with members of the House and the Senate, he was involved in the writing of the Medicare legislation, and he was the man charged with helping implement it after LBJ signed it into law on July 30, 1965. He even ceremonially presented the first Medicare cards to Harry and Bess Truman.

Given his catbird seat during this entire process, Ball felt it important to put his recollections into the historical record, which he did in a 1995 article for Health Affairs journal titled “Perspectives on Medicare.” “Because I was deeply involved in the development, enactment, and implementation of the [Medicare] program,” he wrote, “my recollections may be of use in rounding out the historical record.” His article was appropriately subtitled “What Medicare’s Architects Had in Mind.” (Robert M. Ball, “Perspectives on Medicare,” Health Affairs 14, no. 4 (1995), http://content.healthaffairs.org/cgi/reprint/14/4/62.pdf)
Perhaps the most important thing the drafters had in mind, Ball wrote, was that Medicare was the first step in a more far-reaching solution to America’s healthcare problem:

For persons who are trying to understand what we were up to, the first broad point to keep in mind is that all of us who developed Medicare and fought for it—including Nelson Cruikshank and Lisbeth Schorr of the AFL-CIO and Wilbur Cohen, Alvin David, Bill Fullerton, Art Hess, Ida Merriam, Irv Wolkstein, myself, and others at the Social Security Administration—had been advocates for universal national health insurance. We saw insurance for the elderly as a fallback position, which we advocated solely because it seemed to have the best chance politically. Although the public record contains some explicit denials, we expected Medicare to be a first step toward universal national health insurance, perhaps with “Kiddicare” as another step.

In his article Ball talks about how national health insurance had actually once been advocated by the American Medical Association (AMA), whose leaders “were favorably impressed by the systems that had been established in Germany (1883) and Britain (1911), and several other countries around that time.” This was 1916, he notes, and “ironically, much of the American labor movement in 1916 was opposed” to national health insurance, as “Samuel Gompers, president of the American Federation of Labor (AFL), preferred collective bargaining to political solutions and feared that if workers began leaning on government, they might begin to look generally in that direction, rather than to unions, for help.”

A decade later, Ball notes, the AMA and AFL positions had reversed and stayed that way up to and through the development of Medicare. The AMA was so vehemently opposed to government-offered health insurance that it even hired Hollywood actor and tobacco industry spokesman Ronald Reagan to produce an LP record titled Ronald Reagan Speaks Out against Socialized Medicine, which would be played at coffee klatches held by doctors’ wives nationwide to generate letters to Congress against the Medicare plan.

“The AMA’s opposition approached hysteria,” Ball wrote, noting that during the Truman administration the advocacy of the president for a national single-payer system so frightened the AMA that “members were assessed dues for the first time to create a $3.5 million war chest—very big money for the times
—with which the association conducted an unparalleled campaign of vituperation against the advocates of national health insurance.” This was, he notes, “a warm-up for the later campaign against Medicare.”

So how did Medicare get passed?

Ball lays it out quite simply: old people were not profitable for the health insurance companies, so they were happy to get them off their rolls and onto the government’s. “[The elderly] used, on average, more than twice as many hospital days as younger persons used but had, on average, only about half as much income. Private insurers, who set premiums to cover current costs, had to charge the elderly much more, and the elderly could not afford the charges.”

This set the stage for Medicare, and the health insurance companies were at first enthusiastic about it. But in the final days of the development of the Medicare program, word got out that the people putting it together, including President Johnson, saw it as a system that could easily be modified to cover all Americans by the simple process of lowering the eligibility age, presumably incrementally over a decade or two. This pushed the insurance companies over the edge, prompting on their part a “fervent desire to keep government from penetrating further into the insurance business.” Ball adds, “Although most business groups opposed Medicare, the insurance industry was the AMA’s main ally [in that opposition].”

But because people knew and trusted Social Security, and this was just a health-benefit add-on to that existing program, it was easy to sell in Congress and to the American people. It was one of the most important legislative accomplishments of the Johnson administration.

It’s been more than 45 years since Medicare was legislated into existence, and it was established with the idea that one day it would be slightly tweaked to become the national single-payer health insurance program for the United States of America.

In Vermont, single-payer health care in a single state

By Josh Goodman
Stateline.org, Tuesday, December 14, 2010

Congress never really considered a single-payer health plan run by the government. Vermont is planning for one. This isn’t some liberal fantasy. Vermont lawmakers are serious. To understand how serious, you only have to look at the resumes of William Hsiao and Jonathan Gruber.

Hsiao, a Harvard economist, is credited with designing Taiwan’s single-payer system. Gruber, an M.I.T. economist, helped design Massachusetts’ near-universal health care system and the federal health care reform law itself. They’re on the team that the Vermont legislature contracted with this year to explain how single-payer would work there. In other words, the nation’s 49th most populous state is deploying some of the world’s leading experts to redesign its health care system. Their report is due early next year, after which Vermont will decide whether to become America’s first single-payer state.

If Vermont decides on that course of action, the experiment will serve as a test of whether more aggressive government intervention can improve health care and reduce costs. Long before the results of that experiment would be known, Vermont’s project could serve as a test of something that even the state’s conservative counterparts elsewhere are interested in finding out: just how much power states have over their own health care systems.

Containing costs

Vermont is perhaps an unlikely place to try something dramatically new in health care. That’s because by most standards, Vermont’s health care system already is one of the nation’s best. The United Health Foundation has ranked Vermont the healthiest state in the country four years in a row. Fewer than 10 percent of Vermonters lack health insurance, one of the lowest rates in the country.

If the state’s only concern were getting insurance to the comparatively few people who lack it, Vermont could sit back and wait for the new federal law, with its promise of near-universal coverage, to kick in. But expanded access is only part of what the state wants — and it isn’t the part that officials tend to mention first.

“For Vermont, it’s all about containing costs,” Peter Shumlin, the governor-elect, told Stateline. He points out that the annual cost of health care in Vermont — for individuals, businesses and government — has doubled to roughly $5 billion a year over the past 8 years. “It’s killing small businesses,” Shumlin says, “kicking the middle class in the teeth.”

Vermont’s problems paying for health care aren’t much different than the problems other states face. What makes Vermont different is that many of its top officials believe the solution is to have only one entity providing health insurance. In their boldest schemes, they’re hoping to drive private health insurance providers out of existence and to free employers from the responsibility of providing health insurance to their employees.

That includes Shumlin, who led the state Senate when it approved the legislation approving the study that Hsiao is leading. The five-way Democratic primary for governor had other single-payer supporters, but none was more forceful than Shumlin. He won the primary by 203 votes, then won the general election by 2 percent.

Providing health insurance to everyone is, of course, a very costly endeavor. But Shumlin and many of the Democrats who run the legislature think single-payer can save money in a couple of ways. For one, they note that hospitals and doctors’ offices spend a lot of money filling out paperwork and coding claims for insurers. These administrative costs aren’t especially high in Vermont compared to many other states, but supporters of the single-payer plan believe that if health care providers could deal with one insurer, they’d be able to focus more on providing care and less on processing claims.

Supporters also see single-payer as an antidote to the fragmentation of Vermont’s health care system. For example, state Representative Mark Larson, who’s expected to chair the House Health Committee next year, laments that his local hospital, Fletcher Allen Health Care in Burlington, is planning to sell off its outpatient dialysis units.

Fletcher Allen made the move because it was losing money on dialysis. The reimbursements it was receiving from all of Vermont’s various public and private health insurance providers weren’t enough to pay for the costs. In the current system, even if it were clear that the cheapest and best way to care for dialysis patients was for Fletcher Allen to own the units, the state’s power to do anything is limited. The structure of health care is subject to the vagaries of Medicare and private insurers, not coherent planning.

Under single-payer, that would change. “It’s very hard to direct a strategy for accomplishing long-term savings in health care — to manage care better, to minimize unnecessary procedures, to invest in strategies that have demonstrated savings in quality and cost — without some system of financing and payments to direct those efforts,” Larson says.

One-state experiment

There remains one huge question: Can wholesale reform work in a single small state? State Representative George Till, a member of the legislature’s Health Care Reform Commission, is skeptical of single-payer.

Till points out all the different entities that provide health insurance to Vermont patients. There are the state’s private insurers. There’s the state itself, through Medicaid and through its coverage of state employees. There’s the federal government, separately through Medicare and the Veterans Health Administration. There are some larger companies, such as IBM, that self-insure. And there are many people whose health insurance isn’t even based in Vermont. “At the hospital that I work for, we deal with 14 different insurers from New York,” says Till, who is a doctor.

Due to those complications, what Vermont is trying to do is, at its heart, a test of the power of state government. Can a state wrest total control of health insurance from the federal government and private companies?

The simple answer is that it can’t without federal permission. Companies that insure their own employees at their own expense are exempted from state health care regulation under the federal Employee Retirement Income Security Act, known as ERISA. Medicare and the VA, of course, fall under federal purview. The new federal health care law forbids states from receiving waivers from its provisions until 2017, although some senators are working to change that date to 2014, when the law’s most consequential provisions kick in.

If those efforts succeed, states would gain a lot more freedom to do what they please. For now, though, the definition of single-payer is in doubt, even among the people who are designing Vermont’s programs. “The last thing we want to do is create the perfect policy that can’t be implemented,” says Steven Kappel, a Vermont-based health care researcher who is part of the Hsiao-Gruber team.

The question is whether single-payer without Medicare patients or without VA patients or any other piece of the pie would really be single-payer at all — and whether leaving a piece out would undermine the advantages of the change that Vermont expects. The researchers are charged with developing other plans beyond single-payer: One is a government plan open to all Vermonters with conventional private insurance as an alternative. Despite Shumlin’s commitment to single-payer, it’s possible another option might look more appealing in the end.

Chance to lead

For now, though, those obstacles haven’t compromised the incoming governor’s commitment to the single-payer concept. In fact, he doesn’t think he h
as much of a choice.

Shumlin’s view is that health care interests are powerful enough in Washington that aggressive cost containment isn’t really possible there. “I believe that the states will have to lead true, meaningful health care reform,” he says. “We have a real opportunity to lead the country in health care if we have the courage.” But Shumlin and others also argue that, despite some of the difficulties, Vermont is the perfect place to try.

The biggest advantage Vermont has is the political environment in the state. Blue Cross Blue Shield Vermont, the state’s largest private insurer, has stayed neutral on single-payer. “We don’t think it’s our role,” says Kevin Goddard, the company’s vice president of external affairs. Even the state chamber of commerce, while somewhat dubious of the concept in its purest form, isn’t actively opposed yet.

What everyone agrees upon is that some very smart people are thinking about the best way to structure Vermont’s health insurance system. The initial report is due next month. Even critic Till says, “I think people will listen very carefully to what Dr. Hsiao comes back with.”

Contact Josh Goodman at jgoodman@pewtrusts.org

http://www.stateline.org/live/details/story?contentId=535073

Ezra Klein on the constitutional single payer path

Health reform advocates have little to fear from judge’s ruling

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

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.”

Court ruling against the individual mandate

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA

ATTORNEY GENERAL OF THE COMMONWEALTH OF VIRGINIA, Plaintiff
v.
SECRETARY OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant

MEMORANDUM OPINION

VII.

On careful review, this court must conclude that Section 1501 of the Patient Protection and Affordable Care Act – specifically the Minimum Essential Coverage Provision – exceeds the constitutional boundaries of congressional power.

VIII.

Accordingly, the court will sever only Section 1501 and directly-dependent provisions which make specific reference to Section 1501.

IX.

The Commonwealth appears to concede that if the Secretary is duty-bound to honor this Court’s declaratory judgement, there is no need for injunctive relief. In this Court’s view, the award of declaratory judgement is sufficient to stay the hand of the Executive branch pending appellate review.

X.

In the final analysis, the Court will grant Plaintiff’s Motion for Summary Judgement and deny Defendant’s similar motion. The Court will sever Section 1501 from the balance of the ACA and deny Plaintiff’s request for injunctive relief.

Henry E. Hudson, United States District Judge
December 13, 2010
Richmond, VA

http://documents.nytimes.com/health-care-law-ruled-unconstitutional?ref=policy

Comment:

By Don McCanne, MD

Although this is only the beginning of a protracted legal process, Judge Hudson’s decision defines the nature of the constitutional challenge to the Patient Protection and Affordable Care Act (PPACA). The challenge is limited to Section 1501 which is the mandate for individuals to purchase health insurance. The remainder of the Act remains intact.

This is a serious challenge. Without the requirement that everyone be included, the risk pools are subject to adverse selection (only those with greater health care needs enroll) which cause them to become unstable as premiums skyrocket. Even if Section 1501 survives this challenge, there are so many other flaws in the PPACA scheme that we can never hope to achieve universality and affordability – the two reasons that prompted the reform process in the first place.

Instead of a protracted battle in the courts, our government should pursue an approach that remains within the constitutional boundaries of congressional power and would actually work to provide everyone with affordable health care – an improved Medicare for all. After almost half a century of success, only a fool would challenge the constitutionality of Medicare.

Court ruling against the individual mandate

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA

ATTORNEY GENERAL OF THE COMMONWEALTH OF VIRGINIA, Plaintiff
v.
SECRETARY OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant

MEMORANDUM OPINION

VII.

On careful review, this court must conclude that Section 1501 of the Patient Protection and Affordable Care Act – specifically the Minimum Essential Coverage Provision – exceeds the constitutional boundaries of congressional power.

VIII.

Accordingly, the court will sever only Section 1501 and directly-dependent provisions which make specific reference to Section 1501.

IX.

The Commonwealth appears to concede that if the Secretary is duty-bound to honor this Court’s declaratory judgement, there is no need for injunctive relief. In this Court’s view, the award of declaratory judgement is sufficient to stay the hand of the Executive branch pending appellate review.

X.

In the final analysis, the Court will grant Plaintiff’s Motion for Summary Judgement and deny Defendant’s similar motion. The Court will sever Section 1501 from the balance of the ACA and deny Plaintiff’s request for injunctive relief.

Henry E. Hudson, United States District Judge
December 13, 2010
Richmond, VA

http://documents.nytimes.com/health-care-law-ruled-unconstitutional?ref=policy

Although this is only the beginning of a protracted legal process, Judge Hudson’s decision defines the nature of the constitutional challenge to the Patient Protection and Affordable Care Act (PPACA). The challenge is limited to Section 1501 which is the mandate for individuals to purchase health insurance. The remainder of the Act remains intact.

This is a serious challenge. Without the requirement that everyone be included, the risk pools are subject to adverse selection (only those with greater health care needs enroll) which cause them to become unstable as premiums skyrocket. Even if Section 1501 survives this challenge, there are so many other flaws in the PPACA scheme that we can never hope to achieve universality and affordability – the two reasons that prompted the reform process in the first place.

Instead of a protracted battle in the courts, our government should pursue an approach that remains within the constitutional boundaries of congressional power and would actually work to provide everyone with affordable health care – an improved Medicare for all. After almost half a century of success, only a fool would challenge the constitutionality of Medicare.

Germany's lesson on in-house disease management

German Diabetes Management Programs Improve Quality Of Care And Curb Costs

By Stephanie Stock, Anna Drabik, Guido Büscher, Christian Graf, Walter Ullrich, Andreas Gerber, Karl W. Lauterbach and Markus Lüngen
Health Affairs
December 2010

Abstract

This paper reports the results of a large-scale analysis of a nationwide disease management program in Germany for patients with diabetes mellitus. The German program differs markedly from “classic” disease management in the United States. Although it combines important hallmarks of vendor-based disease management and the Chronic Care Model, the German program is based in primary care practices and carried out by physicians, and it draws on their personal relationships with patients to promote adherence to treatment goals and self-management. After four years of follow-up, overall mortality for patients and drug and hospital costs were all significantly lower for patients who participated in the program compared to other insured patients with similar health profiles who were not in the program. These results suggest that the German disease management program is a successful strategy for improving chronic illness care.

From the Discussion

The quest to reorganize care for chronically ill beneficiaries has led to different approaches in the United States and Germany. While US Medicare invested in regional pilots that differ in their structure of care delivery and may use disease management vendors, German health plans decided on an approach with a heavy emphasis on quality assurance and the primary care physician as the program manager. The emphasis is on educating both the patient and the care provider. Characteristics of care considered desirable in a patient-centered medical home, such as coordination, integration, timeliness, efficiency, and effectiveness as well as the patient-centeredness of care, improved markedly.

http://content.healthaffairs.org/content/29/12/2197.abstract

Comment: 

By Don McCanne, MD

The Germans have demonstrated what disease management should be all about. Using primary care medical homes as a base, the physicians and their in-house teams provided coordinated and integrated care for their diabetic patients with the result that physician-patient relationships were enhanced, costs were lower, major complications were fewer, and mortality was reduced in half compared to the control group.

The phenomenal success was no doubt in a large part due to placement of the disease management process precisely where it belongs – within the team at the patient’s own primary care medical home. This is a model based on patient service.

In contrast, the U.S. uses a business model, often with intrusive, fragmented interventions by outside vendors and private insurers. The U.S. model compounds our administrative excesses, fails to recover the additional costs of these outside, for-profit business entities, and yet has not demonstrated the dramatic benefit that this German approach has.

What is our problem here in the United States? Why do we keep insisting that “the market can do it better,” whatever that means? It is blatantly obvious that diseases are best managed by the patient’s own medical team – a team that is, gee, trained to manage diseases, and a team who knows the patient’s medical and cultural background. Yet we passively accept an expensive, intrusive, ineffectual insurance industry and their vendors because, somehow, we are mesmerized by the meme that the market can do it better, as if private practices weren’t the health care market that actually matters.

Of course, now the insurers claim that disease management should not be counted as an administrative service, but should be classified as a health care service so that it provides them with a more favorable medical loss ratio. Thus the insurers are claiming, in effect, that they are partially usurping the role of the health care team in providing health care services themselves, and they are even being paid for it with fees that they explicitly classify as health care expenses under the medical loss ratio.

Haven’t we had enough? Let’s throw them out and establish our own public national health program that will redirect our funds toward reinforcing our primary care infrastructure so that our physicians and their teams will be there to manage our diseases when we need them managed.

Germany’s lesson on in-house disease management

German Diabetes Management Programs Improve Quality Of Care And Curb Costs

By Stephanie Stock, Anna Drabik, Guido Büscher, Christian Graf, Walter Ullrich, Andreas Gerber, Karl W. Lauterbach and Markus Lüngen
Health Affairs
December 2010

Abstract

This paper reports the results of a large-scale analysis of a nationwide disease management program in Germany for patients with diabetes mellitus. The German program differs markedly from “classic” disease management in the United States. Although it combines important hallmarks of vendor-based disease management and the Chronic Care Model, the German program is based in primary care practices and carried out by physicians, and it draws on their personal relationships with patients to promote adherence to treatment goals and self-management. After four years of follow-up, overall mortality for patients and drug and hospital costs were all significantly lower for patients who participated in the program compared to other insured patients with similar health profiles who were not in the program. These results suggest that the German disease management program is a successful strategy for improving chronic illness care.

From the Discussion

The quest to reorganize care for chronically ill beneficiaries has led to different approaches in the United States and Germany. While US Medicare invested in regional pilots that differ in their structure of care delivery and may use disease management vendors, German health plans decided on an approach with a heavy emphasis on quality assurance and the primary care physician as the program manager. The emphasis is on educating both the patient and the care provider. Characteristics of care considered desirable in a patient-centered medical home, such as coordination, integration, timeliness, efficiency, and effectiveness as well as the patient-centeredness of care, improved markedly.

http://content.healthaffairs.org/content/29/12/2197.abstract

Comment: 

By Don McCanne, MD

The Germans have demonstrated what disease management should be all about. Using primary care medical homes as a base, the physicians and their in-house teams provided coordinated and integrated care for their diabetic patients with the result that physician-patient relationships were enhanced, costs were lower, major complications were fewer, and mortality was reduced in half compared to the control group.

The phenomenal success was no doubt in a large part due to placement of the disease management process precisely where it belongs – within the team at the patient’s own primary care medical home. This is a model based on patient service.

In contrast, the U.S. uses a business model, often with intrusive, fragmented interventions by outside vendors and private insurers. The U.S. model compounds our administrative excesses, fails to recover the additional costs of these outside, for-profit business entities, and yet has not demonstrated the dramatic benefit that this German approach has.

What is our problem here in the United States? Why do we keep insisting that “the market can do it better,” whatever that means? It is blatantly obvious that diseases are best managed by the patient’s own medical team – a team that is, gee, trained to manage diseases, and a team who knows the patient’s medical and cultural background. Yet we passively accept an expensive, intrusive, ineffectual insurance industry and their vendors because, somehow, we are mesmerized by the meme that the market can do it better, as if private practices weren’t the health care market that actually matters.

Of course, now the insurers claim that disease management should not be counted as an administrative service, but should be classified as a health care service so that it provides them with a more favorable medical loss ratio. Thus the insurers are claiming, in effect, that they are partially usurping the role of the health care team in providing health care services themselves, and they are even being paid for it with fees that they explicitly classify as health care expenses under the medical loss ratio.

Haven’t we had enough? Let’s throw them out and establish our own public national health program that will redirect our funds toward reinforcing our primary care infrastructure so that our physicians and their teams will be there to manage our diseases when we need them managed.

Germany’s lesson on in-house disease management

German Diabetes Management Programs Improve Quality Of Care And Curb Costs

By Stephanie Stock, Anna Drabik, Guido Büscher, Christian Graf, Walter Ullrich, Andreas Gerber, Karl W. Lauterbach and Markus Lüngen
Health Affairs
December 2010

Abstract

This paper reports the results of a large-scale analysis of a nationwide disease management program in Germany for patients with diabetes mellitus. The German program differs markedly from “classic” disease management in the United States. Although it combines important hallmarks of vendor-based disease management and the Chronic Care Model, the German program is based in primary care practices and carried out by physicians, and it draws on their personal relationships with patients to promote adherence to treatment goals and self-management. After four years of follow-up, overall mortality for patients and drug and hospital costs were all significantly lower for patients who participated in the program compared to other insured patients with similar health profiles who were not in the program. These results suggest that the German disease management program is a successful strategy for improving chronic illness care.

From the Discussion

The quest to reorganize care for chronically ill beneficiaries has led to different approaches in the United States and Germany. While US Medicare invested in regional pilots that differ in their structure of care delivery and may use disease management vendors, German health plans decided on an approach with a heavy emphasis on quality assurance and the primary care physician as the program manager. The emphasis is on educating both the patient and the care provider. Characteristics of care considered desirable in a patient-centered medical home, such as coordination, integration, timeliness, efficiency, and effectiveness as well as the patient-centeredness of care, improved markedly.

http://content.healthaffairs.org/content/29/12/2197.abstract

The Germans have demonstrated what disease management should be all about. Using primary care medical homes as a base, the physicians and their in-house teams provided coordinated and integrated care for their diabetic patients with the result that physician-patient relationships were enhanced, costs were lower, major complications were fewer, and mortality was reduced in half compared to the control group.

The phenomenal success was no doubt in a large part due to placement of the disease management process precisely where it belongs – within the team at the patient’s own primary care medical home. This is a model based on patient service.

In contrast, the U.S. uses a business model, often with intrusive, fragmented interventions by outside vendors and private insurers. The U.S. model compounds our administrative excesses, fails to recover the additional costs of these outside, for-profit business entities, and yet has not demonstrated the dramatic benefit that this German approach has.

What is our problem here in the United States? Why do we keep insisting that “the market can do it better,” whatever that means? It is blatantly obvious that diseases are best managed by the patient’s own medical team – a team that is, gee, trained to manage diseases, and a team who knows the patient’s medical and cultural background. Yet we passively accept an expensive, intrusive, ineffectual insurance industry and their vendors because, somehow, we are mesmerized by the meme that the market can do it better, as if private practices weren’t the health care market that actually matters.

Of course, now the insurers claim that disease management should not be counted as an administrative service, but should be classified as a health care service so that it provides them with a more favorable medical loss ratio. Thus the insurers are claiming, in effect, that they are partially usurping the role of the health care team in providing health care services themselves, and they are even being paid for it with fees that they explicitly classify as health care expenses under the medical loss ratio.

Haven’t we had enough? Let’s throw them out and establish our own public national health program that will redirect our funds toward reinforcing our primary care infrastructure so that our physicians and their teams will be there to manage our diseases when we need them managed.

Insurers selling more insurance to cover their deductibles

Insurers sell products to fill the gap

By L. M. Sixel
The Houston Chronicle, Dec. 8, 2010

As employees face higher co-pays, deductibles and health care premiums, a relatively new insurance product has become increasingly popular.

It’s known as “gap” or “bridge” insurance, and it covers some of the out-of-pocket health care costs that are becoming more difficult for employees to shoulder, such as annual deductibles that are rising to $1,000, $2,500 or even $5,000.

Families that live paycheck to paycheck can’t absorb the increase in costs, said Brad Peak, vice president of products and marketing with the insurance carrier Assurant Employee Benefits in Kansas City, Mo.

The trend is moving toward the $2,500 deductible, Peak said. Assurant views that as the “sweet spot” that makes gap insurance attractive to employees on a budget.

Some employee benefits experts, however, question the value of gap insurance. It can be expensive for what it offers. Some limitations on coverage for pre-existing conditions can make it useless for someone with a chronic medical problem. And the rules may be prohibitively restrictive, such as limiting reimbursement to patients whose conditions require hospitalization.

(Brett Haugh, a partner with Employee Benefit Solutions in Houston) said the policies can be pricey, with about 50 cents of every dollar going toward the broker’s commission.

http://www.chron.com/disp/story.mpl/business/sixel/7330802.html

Comment:

By Don McCanne, MD

It was inevitable. First in the individual market and then in the employer-sponsored insurance market relief from skyrocketing insurance premiums was gained by switching to high-deductible plans. Although this slowed the acceleration of premium increases, actual health care access was impaired for many because of the often-inappropriate financial disincentives of the  deductibles and other cost sharing. This financial barrier opened the doors for the insurance industry to sell protection against the deductibles by offering an additional insurance product to fill the gap in the primary insurance product – an insurance policy to insure against the adverse effects of another insurance policy.

If it sounds familiar, it is. Medigap policies are purchased by the majority of individuals covered by the traditional fee-for-service Medicare program. Medigap plans are private insurance products that cover the gap for deductibles and other out-of-pocket expenses that Medicare beneficiaries would otherwise face when they have health care needs.

We already know how lousy these products are. Medigap plans offer the worst value of commonly available insurance products. They impose a second wasteful administrative layer on top of the primary Medicare coverage. They typically have medical loss ratios of about 65 percent, meaning that they consume 35 percent of the Medigap premiums for their own intrinsic purposes. Yet seniors buy these plans because of fear of facing financial hardship just when health care needs are greatest.

In a bit of irony, the Patient Protection and Affordable Care Act requires that the Medigap plans be revised to “include nominal cost sharing requirements that encourage the use of appropriate Part B physician services.” Thus Congress, in its wisdom, wants Medicare beneficiaries to experience price sensitivity by establishing deductibles for the supplemental Medigap plans that pay the deductibles for the traditional Medicare program. What?

Now we have a market of similar private gap plans that cover private insurance plans, with all of the same inefficiencies and excesses as Medigap plans, except that they’ve added the market innovation of using half of the premiums just for the insurance brokers’ commissions (if you believe Brett Haugh, quoted in the Houston Chronicle article above).

This is so unnecessary. Deductibles have been proven to result in harm by causing patients to forgo appropriate care, yet they have very little impact in reducing our total national health expenditures. The administrative waste of gap plans can be avoided by simply eliminating the deductibles and other cost sharing. Then you wouldn’t need the gap plans at all.

In a recent response to a New York Times blog on how higher deductibles cause families to delay or forgo medical care I explained why the cost of eliminating deductibles is not that great. It is response # 23 at this link:
http://community.nytimes.com/comments/prescriptions.blogs.nytimes.com/2010/11/22/higher-deductibles-lower-spending/

Big Health Insurers Seek To Boost DC Influence

By Bara Vaida
Kaiser Health News, Dec 08, 2010

Five of the nation’s largest health insurance companies are taking a key step toward building their own inside-the-Beltway coalition to influence implementation of the new health law and congressional efforts to change it. The companies – Aetna, Cigna, Humana, UnitedHealthcare and Wellpoint – are shopping around Washington for a public relations firm to represent them, according to a source familiar with their work. Public Strategies and APCO are among PR firms that have spoken with the insurers, the source said.

“They plan to go public,” the person said. “They spent a ton of money [in 2009 on lobbying and the election] and liked being influential and they don’t want that to go away.”

For months there have been rumors the companies might abandon their trade group, America’s Health Insurance Plans. But industry sources say they aren’t. 

What exactly the group hopes to achieve isn’t entirely clear. Humana’s spokesman would only say that it doesn’t plan to leave AHIP. Officials with the other four companies could not be immediately reached. In November, Cigna CEO David Cordani and Aetna CEO Mark Bertolini both publicly stated at a Reuters Health Summit that they are opposed to halting progress on implementing the health law, but thought the law could be improved.

Several industry observers said the companies want their own “subcommittee” within AHIP to influence the group’s political and policy choices in 2011. “I think some of the companies felt the small and non-profit company interests were getting more attention within AHIP and they wanted to make sure their interests were considered too,” said one health insurance executive whose company is a member of AHIP. “I think this is just about normal tensions within trade associations.”

Others speculated that the health insurers were seeking a way to reestablish ties with congressional Republicans, who were angered that the companies, via AHIP, worked with the Obama administration for much of 2009 on health care legislation. As recently disclosed 2009 tax documents show, AHIP quietly gave $86.2 million to the U.S. Chamber of Commerce, which became one of the loudest opponents of the Democrats’ health care plans.

AHIP’s CEO Karen Ignagni declined to comment on the five insurers forming their own coalition.

AHIP’s political action committee donations tilted heavily to Republicans in the 2010 election cycle, with 59 percent of its $201,000 in direct PAC contributions going to GOP congressional candidates and 40 percent to Democrats, according to a Center for Responsive Politics analysis of Federal Election Commission records, as of Dec. 8.

Even as the insurers work to build relationships with Republicans, they are in a delicate political situation. The Democrats still run the Senate and the White House and the health law is safe from repeal at least until after the next presidential election in 2012.

Chris Jennings, president of Jennings Policy Strategies, said insurers don’t want to act in a way that will make them political targets by congressional Democrats and the Obama administration and risk “more aggressive implementation [of the law] in ways they don’t want to see, so they have to be careful.”

http://www.kaiserhealthnews.org/Stories/2010/December/09/Big-Health-Insurers-Seek-To-Boost-DC-Influence.aspx

Insurers selling more insurance to cover their deductibles

Insurers sell products to fill the gap

By L. M. Sixel
The Houston Chronicle, Dec. 8, 2010

As employees face higher co-pays, deductibles and health care premiums, a relatively new insurance product has become increasingly popular.

It’s known as “gap” or “bridge” insurance, and it covers some of the out-of-pocket health care costs that are becoming more difficult for employees to shoulder, such as annual deductibles that are rising to $1,000, $2,500 or even $5,000.

Families that live paycheck to paycheck can’t absorb the increase in costs, said Brad Peak, vice president of products and marketing with the insurance carrier Assurant Employee Benefits in Kansas City, Mo.

The trend is moving toward the $2,500 deductible, Peak said. Assurant views that as the “sweet spot” that makes gap insurance attractive to employees on a budget.

Some employee benefits experts, however, question the value of gap insurance. It can be expensive for what it offers. Some limitations on coverage for pre-existing conditions can make it useless for someone with a chronic medical problem. And the rules may be prohibitively restrictive, such as limiting reimbursement to patients whose conditions require hospitalization.

(Brett Haugh, a partner with Employee Benefit Solutions in Houston) said the policies can be pricey, with about 50 cents of every dollar going toward the broker’s commission.

http://www.chron.com/disp/story.mpl/business/sixel/7330802.html

It was inevitable. First in the individual market and then in the employer-sponsored insurance market relief from skyrocketing insurance premiums was gained by switching to high-deductible plans. Although this slowed the acceleration of premium increases, actual health care access was impaired for many because of the often-inappropriate financial disincentives of the  deductibles and other cost sharing. This financial barrier opened the doors for the insurance industry to sell protection against the deductibles by offering an additional insurance product to fill the gap in the primary insurance product – an insurance policy to insure against the adverse effects of another insurance policy.

If it sounds familiar, it is. Medigap policies are purchased by the majority of individuals covered by the traditional fee-for-service Medicare program. Medigap plans are private insurance products that cover the gap for deductibles and other out-of-pocket expenses that Medicare beneficiaries would otherwise face when they have health care needs.

We already know how lousy these products are. Medigap plans offer the worst value of commonly available insurance products. They impose a second wasteful administrative layer on top of the primary Medicare coverage. They typically have medical loss ratios of about 65 percent, meaning that they consume 35 percent of the Medigap premiums for their own intrinsic purposes. Yet seniors buy these plans because of fear of facing financial hardship just when health care needs are greatest.

In a bit of irony, the Patient Protection and Affordable Care Act requires that the Medigap plans be revised to “include nominal cost sharing requirements that encourage the use of appropriate Part B physician services.” Thus Congress, in its wisdom, wants Medicare beneficiaries to experience price sensitivity by establishing deductibles for the supplemental Medigap plans that pay the deductibles for the traditional Medicare program. What?

Now we have a market of similar private gap plans that cover private insurance plans, with all of the same inefficiencies and excesses as Medigap plans, except that they’ve added the market innovation of using half of the premiums just for the insurance brokers’ commissions (if you believe Brett Haugh, quoted in the Houston Chronicle article above).

This is so unnecessary. Deductibles have been proven to result in harm by causing patients to forgo appropriate care, yet they have very little impact in reducing our total national health expenditures. The administrative waste of gap plans can be avoided by simply eliminating the deductibles and other cost sharing. Then you wouldn’t need the gap plans at all.

In a recent response to a New York Times blog on how higher deductibles cause families to delay or forgo medical care I explained why the cost of eliminating deductibles is not that great. It is response # 23 at this link:
http://community.nytimes.com/comments/prescriptions.blogs.nytimes.com/2010/11/22/higher-deductibles-lower-spending/

Disastrous results of higher premiums and cost sharing for Oregon Health Plan

Raising Premiums And Other Costs For Oregon Health Plan Enrollees Drove Many To Drop Out

By Bill J. Wright, Matthew J. Carlson, Heidi Allen, Alyssa L. Holmgren and D. Leif Rustvold
Health Affairs
December 2010

The Oregon Health Plan was created to be a sustainable program that could weather budgetary storms without having to cut enrollees from Medicaid. A 2003 redesign of the program increased premiums, raised cost sharing, and imposed rigid premium payment deadlines for members in the “Standard” version of the program but not for members of the “Plus” version. This paper adds two years of longitudinal data to a previous study on the impacts of these changes. It shows that the redesign was a key factor driving a 77 percent disenrollment rate in the Standard program, from a high of 104,000 enrollees in February 2003 to just 24,000 by the end of the study period, November 2005. Those who were in the Standard plan when the reduced benefits and higher member costs went into effect were also nearly twice as likely to have unmet health care needs compared to those in the Plus plan.

Impact In Oregon

The 2003 Medicaid redesign had profound effects on the Oregon Health Plan Standard population. In the months immediately after the redesign, many of those enrolled in the Standard plan left the program entirely. These people, as well as those who remained in the program, subsequently experienced greater unmet health care needs, reduced use of care, more medical debt, and greater household financial strain than members of the Plus plan, to whom the redesign did not apply.

Changes to the cost-sharing structure, which consisted of mandatory copays, increased monthly premiums for some members, and tightened administrative rules including a loss of coverage for nonpayment of premiums, affected Standard plan members in two main ways. First, the changes in premium rules led to heavy disenrollment initially, and those who left often experienced periods of uninsurance throughout the study time frame along with the other changes, such as higher rates of unmet need.

Second, even after gaps in coverage and other known differences between the populations were controlled for, members of the Standard plan experienced poorer outcomes than members of the Plus plan. This suggests that even for those who managed to stay enrolled in spite of higher premiums, increased cost sharing in the form of mandatory copays may have limited members’ access to and use of care, in addition to having a direct financial impact.

Implications For Other States

These findings contain lessons for other states, particularly as they implement Medicaid expansions under the Affordable Care Act. Some states already provide Medicaid coverage to nonelderly adults with incomes up to 133 percent of the federal poverty level, but the act is expected to result in more than seventeen million Americans’ becoming eligible for Medicaid by 2014.

Cost Sharing:

The first lesson is that although strict cost-sharing rules might be an appealing way to offset the costs associated with increased Medicaid enrollment, they create barriers for people to get and keep insurance.

Our data show that Medicaid members are sensitive to even small cost-sharing increases. Coupling those increases with stricter payment policies can create widespread coverage loss. In fact, previously published analyses of this study’s data suggest that the most vulnerable Standard plan members were the most likely to leave in response to changes in cost-sharing rules.

This fact is particularly important because recent analyses of census data suggest that nearly half of those who will become eligible for Medicaid under the new federal eligibility guidelines have incomes below 50 percent of the federal poverty level. In this newly eligible, very-low-income population, offering payment flexibility and exemptions might help ensure that the neediest benefit from coverage expansion.

Coverage Gaps:

Second, those who leave Medicaid in response to changes in cost-sharing rules are very likely to experience major coverage gaps. Over time, they have more difficulty meeting their health care needs, accumulate more medical debt, and experience greater financial strain than those who stay insured.

Unmet Need:

Third, even among those who remain enrolled, increased cost sharing in the form of copayments may result in greater unmet need for health care, along with increased household financial strain and medical debt. It may also greatly depress health care use. Although reducing unnecessary use is one of the goals of cost sharing, when reduced use is paired with an increase in unmet need, the question arises, does the reduction represent care that is needed or that would help prevent costly complications in the future?

http://content.healthaffairs.org/content/29/12/2311.abstract

Comment: 

By Don McCanne, MD

Currently there is a fixation in the health policy community on designing plans that require a significant financial contribution from the beneficiary on the theory that high health care costs can be moderated by making patients more sensitive to those costs.

Many studies have now confirmed that these plan designs impair access to health care because of affordability issues, and result in impaired health outcomes. Although this is certainly true for those with moderate incomes, this new study confirms once again that it is particularly disastrous for low-income individuals.

As a result of the Patient Protection and Affordable Care Act (PPACA), in 2014 an estimated 17 million individuals will be added to state Medicaid programs. Because of tight budgets, states are already seeking federal waivers that would relax the PPACA requirements.

It is likely that most states will soon seek waivers for their Medicaid programs to allow flexibility in innovation. The innovations will not be for the purpose of assisting patients in getting the care that they need, but rather they will be for the purpose of reducing the Medicaid component of the state budgets.

PPACA has already enshrined high cost-sharing by establishing low-actuarial value plans (high deductibles, etc.) as the standard within the state insurance exchanges. The temptation for states to expand this concept to Medicaid will be great.

The Oregon Health Plan may have provided an important lesson for other states, but that won’t prevent them from doing the same. After all, making price-sensitive shoppers out of people who have no money is effective in reducing health care spending, even if it does result in further financial hardship, physical suffering, and even death, and dead patients are the least expensive of all.