PNHP

Vermont House Passes Single Payer Bill: Why It Can’t Opt-Out Of Federal Health Reform To Implement It

Vermont House Passes Single Payer Bill: Why It Can’t Opt-Out Of Federal Health Reform To Implement It

By Igor Volsky
Wonk Room, Think Progress
Apr 27th, 2010

Last Friday, the Vermont House approved “its own version of legislation passed earlier by the Senate” that would allow the state to design “a single-payer system, in which a government agency would administer and make all payments for health care” or a public option. California passed similar legislation earlier this year, and theoretically, under a provision added to the new health care law by Sen. Ron Wyden (D-OR), both states could opt-out of the requirements of federal health care reform and establish a single-payer structure.

But there are at least two problems that could deter states from leaving national reform and developing their own initiatives. First, sates can’t implement their own “innovative solutions” until 2017, after they’ve already spent time and energy establishing the new state-based exchanges and regulating insurers. Democrats may have moved back the date to allow for a smoother and more uniform implementation process, but delaying the opt-out date will only discourage states from establishing their own systems. States that still chose to pursue their own plan, will have to reconcile their programs with the federal requirements for Medicare, Medicaid, FEHBP, Indian Health Service and, most importantly ERISA — a 1974 law that, among other things, preempts states from enacting legislation that is “related to” employee benefit plans. Under Wyden’s provision, states could easily obtain a waiver from participating in the new federal exchanges if their innovative reform meets certain requirements, but states will have to go to Congress if their reform affects the health insurance offered by large employers.

As the Center for Policy Analysis’ Ellen Shaffer suggests, this is a major set back for single-payer advocates:

Section 1332 [see text below] provides that they can apply to the Secretary of HHS to opt out of the Exchanges beginning in 2017, if they have a plan to provide comparable benefits to at least as many people as the Exchange would have been estimated to cover, at no greater cost. At that point, if the Secretary grants the waiver, the states are guaranteed the transfer of federal funds that would have gone to pay for premium subsidies through the Exchanges. However, states have to apply to coordinate funds and programs with all the other federal programs. The bill offers each state a streamlined process to coordinate its waiver requests, but the Secretary can only grant funds for those programs where she has existing authority. For example, HHS does not have jurisdiction over ERISA, which is administered by the Department of Labor, so an ERISA waiver is not possible under this legislation. Within HHS, the Secretary already has waiver authority for some programs, but not all.

During the House Education and Labor Committee’s mark-up, Rep Dennis Kucinich (D-OH) introduced an amendment that would authorize and require “the Secretary of Labor, in consultation with the Secretary of Health and Human Services” to waive the ERISA pre-emption (Sec. 514) for states that have enacted a state single payer system. The committee adopted the amendment, but it was left out of the final House bill.

Kucinich characterized health care reform as a “detour” from the single-payer cause when he publicly announced that he would support the bill; Vermont and California will soon learn that it’s certainly of no great help.

Health Reform Timelines

From The Commonwealth Fund

Timeline for Health Care Reform Implementation: Health Insurance Provisions
http://www.commonwealthfund.org/Content/Publications/Other/2010/Timeline-for-Health-Care-Reform-Implementation.aspx

Timeline for Health Care Reform Implementation: Revenue Provisions
http://www.commonwealthfund.org/Content/Publications/Other/2010/Timeline-for-Health-Care-Reform-Implementation-Revenue-Provisions.aspx

Timeline for Health Care Reform Implementation: System and Delivery Reform Provisions
http://www.commonwealthfund.org/Content/Publications/Other/2010/Timeline-for-Health-Care-Reform-Implementation-System.aspx

Consumers Guide To Health Reform

By Phil Galewitz
Kaiser Health News
Apr 13, 2010

The new health reform law is the most far-reaching health legislation since the creation of the Medicare and Medicaid programs.

The following is a look at the impact of the law, which will extend insurance coverage to 32 million additional Americans by 2019, but which will also have an effect on almost every citizen.

Here are some commonly-asked questions about how you might be affected:

Q: I don’t have health insurance. Will I have to get it, and what happens if I don’t?

A: Under the legislation, most Americans will have to have insurance by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. This is the individual limit; families have a limit of $2,085 or 2.5 percent of household income, whichever is greater. Some people can be exempted from the insurance requirement, called an individual mandate, because of financial hardship or religious beliefs or if they are American Indians, for example.

Q: I want health insurance, but I can’t afford it. What do I do?

A: Depending on your income, you might be eligible for Medicaid, the state-federal program for the poor and disabled, which will be expanded sharply beginning in 2014. Low-income adults, including those without children, will be eligible, as long as their incomes didn’t exceed 133 percent of the federal poverty level, or $14,404 for individuals and $29,326 for a family of four, according to current poverty guidelines.

Q: What if I make too much for Medicaid but still can’t afford coverage?

A: You might be eligible for government subsidies to help you pay for private insurance that would be sold in the new state-based insurance marketplaces, called exchanges, slated to begin operation in 2014.

Premium subsidies will be available for individuals and families with incomes between 133 percent and 400 percent of the poverty level, or $14,404 to $43,320 for individuals and $29,326 to $88,200 for a family of four.

The subsidies will be on a sliding scale. For example, a family of four earning 150 percent of the poverty level, or $33,075 a year, will have to pay 4 percent of its income, or $1,323, on premiums. A family with income of 400 percent of the poverty level will have to pay 9.5 percent, or $8,379.

In addition, if your income is below 400 percent of the poverty level, your out-of-pocket health expenses will be limited.

Q: How will the legislation affect the kind of insurance I can buy? Will it make it easier for me to get coverage, even if I have health problems?

A: If you have a medical condition, the law will make it easier for you to get coverage; insurers will be barred from rejecting applicants based on health status once the exchanges are operating in 2014.

In the meantime, the law will create a temporary high-risk insurance pool for people with medical problems who have been rejected by insurers and have been uninsured at least six months. This will occur this year.

Starting later this year, insurers can no longer exclude coverage for specific medical problems for children with pre-existing conditions nor deny coverage to children with pre-existing illnesses.

Insurers later this year will also be barred from setting lifetime coverage limits for adults and kids. In 2014, annual limits on coverage will be banned.

New policies sold on the exchanges will be required to cover a range of benefits, including hospitalizations, doctor visits, prescription drugs, maternity care and certain preventive tests.

Q: How will the legislation affect young adults?

A: If you’re an adult younger than 26, you’ll be able to stay on your parent’s insurance coverage as long as you are not offered health coverage at work. This provision officially takes effect in September, but insurers may not have to comply until the beginning of a new health plan year – which often happens in January.

In addition, people in their 20s will be given the option starting in 2014 of buying a “catastrophic” plan that will have lower premiums. The coverage will largely only kick in after the individual has $6,000 in out-of-pocket expenses

Q: I own a small business. Will I have to buy insurance for my workers? What help can I get?

A: It depends on the size of your firm. Companies with fewer than 50 workers won’t face any penalties if they don’t didn’t offer insurance.

Companies can get tax credits to help buy insurance if they have 25 or fewer employees and a workforce with an average wage of up to $50,000. Tax credits of up to 35 percent of the cost of premiums will be available this year and will reach 50 percent in 2014. The full credits are for the smallest firms with low-wage workers; the subsidies shrink as companies’ workforces and average wages rise.

Firms with more than 50 employees that do not offer coverage will have to pay a fee of up to $2,000 per full-time employee if any of their workers get government-subsidized insurance coverage in the exchanges. The first 30 workers will be excluded from the assessment.

Q: I’m over 65. How will the legislation affect seniors?

A: The Medicare prescription-drug benefit will be improved substantially. This year, seniors who enter the Part D coverage gap, known as the “doughnut hole,” will get $250 to help pay for their medications.

Beyond that, drug company discounts on brand-name drugs and federal subsidies and discounts for all drugs will gradually reduce the gap, eliminating it by 2020. That means that seniors, who now pay 100 percent of their drug costs once they hit the doughnut hole, will pay 25 percent. Beginning in 2011, drug companies will be required to give a 50 percent discount on brand-name drugs for prescriptions filled in the doughnut hole.

And, as under current law, once seniors spend a certain amount on medications, they will get “catastrophic” coverage and pay only 5 percent of the cost of their medications.

Meanwhile, government payments to Medicare Advantage, the private-plan part of Medicare, will be frozen starting in 2011, and cut in the following years. If you’re one of the 10 million enrollees, you could lose extra benefits that many of the plans offer, such as free eyeglasses, hearing aids and gym memberships. To cushion the blow to beneficiaries, the cuts to health plans in high-cost areas of the country such as New York City and South Florida — where seniors have enjoyed the richest benefits — will be phased in over as many as seven years.

Beginning this year, the law will make all Medicare preventive services, such as screenings for colon, prostate and breast cancer, free to beneficiaries.

Q: How much is all this going to cost? Will it increase my taxes?

A: The package is estimated to cost $938 billion over a decade. But because of higher taxes and fees and billions of dollars in Medicare payment cuts to providers, the package will narrow the federal budget deficit by $143 billion over 10 years, according to the Congressional Budget Office.

If you have a high income, you will face higher taxes. Starting in 2013, indivi
duals with earnings over $200,000 and married couples earning more than $250,000 will pay a Medicare payroll tax of 2.35 percent, up from the current 1.45 percent. In addition, high-income taxpayers will face a 3.8 percent tax on unearned income such as dividends and interest over the threshold.

Starting in 2018, the law will also impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year for individuals and $27,500 for families. The tax is often referred to as a “Cadillac” tax.

The law also will raise the threshold for deducting unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent.

The law also will limit the amount of money you can put in a flexible spending account to pay medical expenses to $2,500 starting in 2013. Those using an indoor tanning salon will pay a 10 percent tax starting this year.

Q: What will happen to my premiums?

A: That’s hard to predict and the subject of much debate. People who are sick might face lower premiums than otherwise because insurers won’t be permitted to charge sick people more; healthier people might pay more. Older people could still be charged more than younger people, but no more than three times as much.

The bigger question is what happens to rising medical costs, which drive up premiums. Even proponents acknowledge that efforts in the legislation to control health costs, such as a new board to oversee Medicare spending, won’t have much of an effect for several years.

http://www.kaiserhealthnews.org/Stories/2010/March/22/consumers-guide-health-reform.aspx

Problems and Challenges in the New Healthcare Act

By Peter Knowlton, President, UE Northeast Region

(Published in the May 2010  edition of the UE News.  UE is the abbreviation for the United Electrical, Radio, and Machine Workers of America.)

UE locals bargaining for their members’ healthcare will get little help from the Health Care and Education Reconciliation Act (HCERA) passed by Congress and signed by the president. While millions of uninsured will gain access to coverage, and for the first time the U.S. government will prohibit health insurance companies to deny coverage because of pre-existing conditions, there are harmful aspects to the new law. Much as NAFTA legitimized cross-border corporate exploitation of workers, HCERA confirms the domination of healthcare in the U.S. by private health insurance corporations, whose own maximum profit remains their overriding priority.

The new law endorses the insurance industry and employer push for high-deductible plans, health savings accounts and flexible spending accounts. Such schemes require working people to pay the first several thousand dollars of health service costs out of pocket before the insurer pays a dime.

HCERA also subtly sets the dangerous benchmark that 10 percent or more of your income should go toward the cost of healthcare. The legislation sets a threshold in 2014 that, only after you pay more than 9.5 percent of your income for health insurance do you qualify for a “premium tax credit”. In 2013 the legislation increases the threshold for the itemized deduction for unreimbursed medical expenses on your income tax return from the present 7.5 percent of adjusted gross income, to 10 percent of adjusted gross income.

The private health insurance industry will not only survive, but thrive, under this legislation which mandates everyone not covered by an employer plan to purchase health insurance. In my home state of Massachusetts, where the state legislated an individual mandate in 2006, we have the highest private insurance premium rates in the country.

An extremely troubling provision of HCERA says that, starting in 2014, an employer with 50 or more full-time employees will pay a $2,000 per employee penalty for not providing affordable health insurance. That could be the beginning of the end for employer-provided healthcare. It is hard to imagine that employers won’t notice that the fine for not providing insurance is a lot lower than the cost of premiums to insure employers. It’s not clear what will happen to those workers who lose coverage.

The so-called “Cadillac” tax will be imposed on plans that would have been considered “Chevys” just a few years ago. Most workers’ health plans have not gotten better or more luxurious – they’ve just gotten a lot more expensive. That’s not the workers’ fault, and the rise in overall premium costs is not really our employers’ fault either. It is the insurance companies, along with the pharmaceutical industry and big hospitals, that have made good health coverage so expensive that it seems like a luxury. But starting in 2018 HCERA levies a tax penalty on decent health insurance plans above a certain dollar limit – another subtle and dangerous message that there should be a financially penalty for having decent healthcare. In my part of the country, the Northeast, many employers’ health premiums are already high enough to qualify for the tax penalty.

The conversion of our health insurance system from managed care (HMOs) to high deductible plans and health savings accounts will continue to harm workers forced to make higher and higher up-front payments when they or their children need care. In the last four years the number of companies offering high-deductible plans has nearly tripled, from 4 to 10 percent in 2005, to 11 to 28 percent in 2009.

Healthcare reform did not have to turn out this way. The organization Physicians for a National Health Plan (PNHP) says that, with a payroll tax of just 3 to 5 percent, we could have a medicare-for-all single payer system that would cover every U.S. resident, and put an end to deductible, co-pays, and the insurance companies’ controlling our healthcare system. Employers would also have to contribute 6 to 8 percent of their total payroll to finance such a plan, but that is a lot less than the 20 to 30 percent of payrolls that they now hand over to the private insurance
companies in the form of premiums.

The bill approved by Congress and the White House does some good, but will also cause us many problems. But because we are organized, we are not powerless. UE locals have the ability to shape how much we pay for health insurance. Whether we have a fee-for-service plan, an HMO, PPO, or HSA, we can fight to set limits on what our members pay for healthcare each year. Keeping our health insurance affordable, while it’s controlled by profit-driven insurance corporations, will continue to be very difficult, but with membership involvement and action we will find ways to make healthcare more affordable and accessible to our members, regardless of their health condition.

As is so often the case, when the government fails to adequately protect us, UE members must act together to win some relief and fairness. In the area of health insurance, our collective vigilance and militance are still going to be necessary.

Single-Payer Candidate Wins NC Primary

By David Swanson
Posted on 05 May 2010

North Carolina house candidate Marcus Brandon defeated a 30-year incumbent tonight, by 60% to 40%, to become the Democratic nominee in an overwhelmingly Democratic district in Greensboro, North Carolina.

Brandon has pledged to introduce a bill to create single-payer healthcare in North Carolina, and now he’ll be able to do it.

Brandon has promised that the first piece of legislation he will introduce will be the “North Carolina Healthcare Act” which will provide universal single-payer healthcare to every citizen of the state.

I spoke with Brandon back in February, and he said that he remains a supporter of national single-payer healthcare and will continue lobbying for passage of HR 676, Congressman John Conyers’ bill:

“The HR 676 fight is definitely not over, but we must now strategically shift the focus to the state level. When other states see that we can cut the cost of healthcare, streamline our medical industry, and still provide universal coverage to all North Carolinians, then all of the sudden, single-payer health care doesn’t look so bad.”

Brandon argues that a single-payer system could save over $1.5 billion per year in reduced bureaucracy in the state of North Carolina alone. And he speaks confidently about making this happen:

“North Carolina is poised to be the first state to adopt single-payer, once I am able to introduce it. North Carolinians are ready for real solutions to healthcare. North Carolina has the third highest healthcare cost of any state, while it sags at 37th in average income. This is a disparity that most North Carolinians feel when they have to think about healthcare. Every day, as I am knocking on doors to talk to voters, I hear stories of people who cannot afford insurance and become victims of this for-profit industry.”

Brandon says his bill is similar to other states’ initiatives such as the “Minnesota Health Act” or the “California Universal Healthcare Act.” Brandon points to these two bills as excellent examples of how a single payer healthcare system could be both fiscally sound and provide full coverage.

Brandon served in 2007 and 2008 as Dennis Kucinich’s National Finance Director and Deputy Campaign Manager. He says that Kucinich inspired him:

“Dennis urged me to run for office so we could build a state-by-state grassroots movement for single payer and other progressive issues. My campaign for the North Carolina House is an extension of the work I did with Dennis Kucinich.”

While Kucinich has struggled unsuccessfully thus far to pass federal legislation facilitating the state creation of single-payer healthcare systems, states are pressing ahead and will deal with lawsuits from “health” corporations when and if they arise.

http://www.davidswanson.org/node/2655

Washington Post Discussion on America's New Health Care Law

Washington Post Discussion on America’s New Health Care Law

Kaiser Foundation
May 10, 1010
Jackie Judd, vice president and senior advisor for communications, Kaiser Family Foundation:
“You wrote the… opening, overview chapter (of “Landmark” – a new book by the reporting staff of the Washington Post on the new health care law), and in there you said that while the law is complex, it’s also moderate and incremental, and it’s that very moderation that makes it complicated. What do you mean?”
Alec MacGillis, reporter for the Washington Post:
“Well, it’s something I tried to say often during this whole debate. When people complained about the length of the bill – a two thousand page monstrosity, so complicated – and I wrote a piece back in the Fall that tried to address that argument and pointed out that, you know, if you really wanted a simple bill, then you could just blow this whole thing up.
“And, you know, single payer is very simple. You just, you know – government-run health insurance – get rid of all the health insurance companies, and there are a lot fewer rules to write. That’s simpler, but, obviously, we were not going to do that.
“We were going to take a much more moderate, market-based approach to this. And that means preserving the foundations of our existing system. And that means ending up with something with a law that’s much more complex, because you’re sort of tweaking here and there. You’re not just – it’s not tabula rasa – you’re not starting over.
“But in its main elements it really is a quite moderate and incremental approach. We are preserving the private health insurance system. It’s modeled – no matter what Mitt Romney tells you now – this is modeled on the plan that he passed in 2006 as a Republican governor of Massachusetts; it’s modeled on the Republican alternative to the Clinton plan in the early nineties; it’s modeled on Richard Nixon’s plan in the seventies; it’s modeled on the idea put forward by the Heritage Foundation early last decade, although they’re trying to distance themselves right now from that; but it really is an attempt to build on what we have now, and because you’re doing it that way, you end up with this messy thing. But it’s really not that… but the main elements are not that complicated.
“What we basically have – the best way to think of it is kind of a three legged stool. We are expanding coverage by requiring that everyone get coverage. We’re also telling the insurance companies that they have to provide everyone coverage who comes and asks for it. So they have to take you; you have to get it. That way you get the healthy people into the pool so that they can afford to take the sick people as well. And then to help people afford to get the coverage that they’re required to get, you provide subsidies. But that’s it, and you need all three legs of that stool. That’s why you need have a mandate.”
http://www.c-span.org/Watch/Media/2010/05/10/HP/A/32795/Washington+Post+Discussion+on+Americas+New+Health+Care+Law.aspx

So by pursuing a moderate, market-based, Republican-based approach, the health care law was made much more complicated. But the greater tragedy is that it wasn’t only made more complicated, it failed in our goals of covering everyone with a financing system that we could afford. The complicated reform proposal that is now law is the most expensive model of reform ever devised, not to mention being one of the least effective.
As Alec MacGillis states, “… single payer is very simple. You just, you know – government-run health insurance – get rid of all the health insurance companies, and there are a lot fewer rules to write.”
We still can “blow this whole thing up,” and enact single payer. Not only would there be fewer rules, everyone would have the health care that they need, and we would be able to pay for it. That will never happen under the new law.

Washington Post Discussion on America’s New Health Care Law

Washington Post Discussion on America’s New Health Care Law

Kaiser Foundation
May 10, 1010

Jackie Judd, vice president and senior advisor for communications, Kaiser Family Foundation:

“You wrote the… opening, overview chapter (of “Landmark” – a new book by the reporting staff of the Washington Post on the new health care law), and in there you said that while the law is complex, it’s also moderate and incremental, and it’s that very moderation that makes it complicated. What do you mean?”

Alec MacGillis, reporter for the Washington Post:

“Well, it’s something I tried to say often during this whole debate. When people complained about the length of the bill – a two thousand page monstrosity, so complicated – and I wrote a piece back in the Fall that tried to address that argument and pointed out that, you know, if you really wanted a simple bill, then you could just blow this whole thing up.

“And, you know, single payer is very simple. You just, you know – government-run health insurance – get rid of all the health insurance companies, and there are a lot fewer rules to write. That’s simpler, but, obviously, we were not going to do that.

“We were going to take a much more moderate, market-based approach to this. And that means preserving the foundations of our existing system. And that means ending up with something with a law that’s much more complex, because you’re sort of tweaking here and there. You’re not just – it’s not tabula rasa – you’re not starting over.

“But in its main elements it really is a quite moderate and incremental approach. We are preserving the private health insurance system. It’s modeled – no matter what Mitt Romney tells you now – this is modeled on the plan that he passed in 2006 as a Republican governor of Massachusetts; it’s modeled on the Republican alternative to the Clinton plan in the early nineties; it’s modeled on Richard Nixon’s plan in the seventies; it’s modeled on the idea put forward by the Heritage Foundation early last decade, although they’re trying to distance themselves right now from that; but it really is an attempt to build on what we have now, and because you’re doing it that way, you end up with this messy thing. But it’s really not that… but the main elements are not that complicated.

“What we basically have – the best way to think of it is kind of a three legged stool. We are expanding coverage by requiring that everyone get coverage. We’re also telling the insurance companies that they have to provide everyone coverage who comes and asks for it. So they have to take you; you have to get it. That way you get the healthy people into the pool so that they can afford to take the sick people as well. And then to help people afford to get the coverage that they’re required to get, you provide subsidies. But that’s it, and you need all three legs of that stool. That’s why you need have a mandate.”

http://www.c-span.org/Watch/Media/2010/05/10/HP/A/32795/Washington+Post+Discussion+on+Americas+New+Health+Care+Law.aspx

So by pursuing a moderate, market-based, Republican-based approach, the health care law was made much more complicated. But the greater tragedy is that it wasn’t only made more complicated, it failed in our goals of covering everyone with a financing system that we could afford. The complicated reform proposal that is now law is the most expensive model of reform ever devised, not to mention being one of the least effective.

As Alec MacGillis states, “… single payer is very simple. You just, you know – government-run health insurance – get rid of all the health insurance companies, and there are a lot fewer rules to write.”

We still can “blow this whole thing up,” and enact single payer. Not only would there be fewer rules, everyone would have the health care that they need, and we would be able to pay for it. That will never happen under the new law.

Testimony on ERISA before the Vermont legislature

By Ethan Parke
January 12, 2010

My name is Ethan Parke. I live in Montpelier, and I support universal health care in Vermont as outlined in S.88 and H.100. I thank the Senate President Pro Tem and the Chair of the Senate Health Care Committee for their commitment to giving serious consideration to S.88 in the Senate this year.

I want to address a reason that is frequently given for state legislators’ reluctance to consider public health care financing, and that issue is ERISA, the Employee Retirement Income Security Act. ERISA is a federal law that preempts states from enacting legislation “relating to” employee benefit plans.

In the course of deliberations on federal health care reform, it was reported that Senator Sanders asked for a legal opinion on the question of whether ERISA would preempt a state law establishing a state single payer system. The conclusion was that, although there is very limited case law on this matter, state legislators should not use ERISA as a reason to be defeatist in their attitude toward establishing publicly-funded health care. The following are reasons why this is so:

• Legislation creating a system that raises taxes to achieve a public good is different from a law that requires employers to provide a specific level of private benefits to their employees. Single payer is not an “employee benefit plan” as defined by ERISA.

• An ERISA challenge would target the financing mechanism in the state health care law. If (in a non-single payer system) employers are separately taxed and then required to provide a certain level of employee benefits, ERISA might be likely to preempt the state law. On the other hand, if an employer assessment is only one revenue source along with many others that are combined and deposited into a public fund that is used to provide uniform health care benefits to a population regardless of employment status, then ERISA is thought not to have the force of preemption.

• Although the first state to enact publicly-funded universal health care is likely to face a court challenge based on ERISA, a state with a properly structured single payer plan would have a strong case in its defense. Other state reform models, such as hybrid public/private programs in which employers are mandated to provide private insurance or pay a tax, would have much more difficulty surviving an ERISA challenge.

• ERISA was enacted to protect employees’ and retirees’ interests relating to pensions and health benefits. A single payer health system would strengthen those protections. In fact, looking solely at the health care aspects of ERISA, one could say that a single payer plan would fulfill all of the reasons for which ERISA exists. Therefore an ERISA preemption of a state single payer law would make no sense.

I hope these comments are helpful to you as you mark up S.88 and H. 100. Thank you.

"Behavioral economics" and "choice architecture"

For good behavior

By Rebecca Vesely
ModernHealthcare.com
May 10, 2010

The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.

“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”

But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.

Meanwhile, some employers are moving full-force to apply behavioral economics to benefit-package design in order to cut healthcare costs.

The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10-state pilot program for similar wellness initiatives on the individual insurance market.

The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were pioneered by the grocery chain Safeway.

But the American Diabetes Association, the AARP and other groups have criticized the enhanced incentives, saying that they could penalize those with chronic diseases by forcing them to pay more for healthcare.

“Our position hasn’t changed,” said Colleen Fogarty, spokeswoman for the American Diabetes Association, in an e-mail. “We remain opposed to the language, but it is now the law and we have to work to ensure that these provisions do not have a harmful or unfair impact on people with chronic diseases.”

Proponents of the provision say it is a good example of a component of behavioral economics called “choice architecture.” Essentially, choice architecture is organizing choices in such a way that influences people’s decisions. In theory, enhanced wellness program incentives allow employers to encourage workers to make the healthiest choices.

Choice architecture is sure to be hugely influential in how the government structures new health insurance exchanges, set to go online in 2014, Garber said. While the government won’t be able to pick favorites among insurers participating in the state-run exchanges, it will be able give customers information about the plans, using transparency measures. This has already been done through the Medicare Part D prescription drug program, which lets insurers compete on the Medicare website for business.

“Behavioral incentives can be powerful, but they are unlikely to overcome a powerful financial incentive,” Garber said. So, for some people, an expensive healthcare plan they have to pay for in monthly premiums could be less appealing than a once-a-year financial penalty.

The dangers of financial penalties in healthcare have been shown time and time again when examining prescription drug use. If copayments go up too high, then some people stop filling their prescriptions and wind up sicker.

On the other hand, financial incentives don’t always work to change behavior, as evidenced by the disappointing results in physician pay-for-performance programs.

“We’ll be seeing some interesting experiments unfolding over the next few years,” Garber said. “This will, in the end, play out in the market.”

Express Scripts, a St. Louis-based pharmacy benefit manager, in 2008 launched the Center for Cost-Effective Consumerism and hired experts in behavioral economics—including Garber at Stanford University—to its advisory board.

Lowe’s, the home-improvement retail chain, saved $5.2 million in 2009 by getting employees who take maintenance prescription medications to switch to home pharmacy delivery. It did it using behavioral economics. Bob Ihrie, senior vice president of employee rewards and services at Lowe’s Cos., describes the method as “carrot, carrot, stick, big stick.”

Lowe’s started by educating its 225,000 employees nationwide about home drug delivery, and the cost savings involved. After the third month, if workers hadn’t switched, they are notified at the pharmacy when picking up their prescription and told that if they don’t switch to home delivery, they would start paying the full price of the prescription. The next month, if they hadn’t signed on for home delivery, they paid full price at the in-store pharmacy.

Another carrot followed. Last September, about 22,000 employees who were not signed on for home delivery received a postcard from Lowe’s informing them that if they select home delivery, their prescription drug would be free the first month. About 10% responded to this incentive, Ihrie said.

At the end of 2009, nearly 38,000 workers had switched to home delivery, up about 160% from 14,500 in 2008. Then came the big stick. Starting in January, employees eligible for home delivery but not yet enrolled pay twice the retail price for the drug in store. “We are still waiting to see the outcome of this,” Ihrie said.

The program has worked by breaking the cycle of procrastination, Ihrie said. “We give them choices upfront and then gradually move them along a path that is more mandatory,” he said. Conducted in partnership with Express Scripts, the program cuts waste out of the system without affecting clinical outcomes, Ihrie said.

Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, co-author of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.

http://www.modernhealthcare.com/article/20100510/INFO/100509942#

Comment: 

By Don McCanne, MD

“Behavioral economics” and “choice architecture” are being used to shift health care spending from the healthy to the sick by directly or indirectly assessing financial penalties against those who are unfortunate enough to have greater health care needs. This is strictly another scheme by pro-market enthusiasts who support the flawed concept of consumer-directed health care.

As an example of the flaws, a scheme that requires patients to pay twice the usual retail price for a drug is a perverse scheme indeed. Another example is Safeway’s fraudulent claims of savings from their wellness programs when their savings were really only from shifting to high-deductible health plans.

Instead of jerking patients around with perverse market tools, we need to switch to a public system that simply helps patients get the care that they need – an improved Medicare for everyone.

“Behavioral economics” and “choice architecture”

For good behavior

By Rebecca Vesely
ModernHealthcare.com
May 10, 2010

The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.

“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”

But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.

Meanwhile, some employers are moving full-force to apply behavioral economics to benefit-package design in order to cut healthcare costs.

The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10-state pilot program for similar wellness initiatives on the individual insurance market.

The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were pioneered by the grocery chain Safeway.

But the American Diabetes Association, the AARP and other groups have criticized the enhanced incentives, saying that they could penalize those with chronic diseases by forcing them to pay more for healthcare.

“Our position hasn’t changed,” said Colleen Fogarty, spokeswoman for the American Diabetes Association, in an e-mail. “We remain opposed to the language, but it is now the law and we have to work to ensure that these provisions do not have a harmful or unfair impact on people with chronic diseases.”

Proponents of the provision say it is a good example of a component of behavioral economics called “choice architecture.” Essentially, choice architecture is organizing choices in such a way that influences people’s decisions. In theory, enhanced wellness program incentives allow employers to encourage workers to make the healthiest choices.

Choice architecture is sure to be hugely influential in how the government structures new health insurance exchanges, set to go online in 2014, Garber said. While the government won’t be able to pick favorites among insurers participating in the state-run exchanges, it will be able give customers information about the plans, using transparency measures. This has already been done through the Medicare Part D prescription drug program, which lets insurers compete on the Medicare website for business.

“Behavioral incentives can be powerful, but they are unlikely to overcome a powerful financial incentive,” Garber said. So, for some people, an expensive healthcare plan they have to pay for in monthly premiums could be less appealing than a once-a-year financial penalty.

The dangers of financial penalties in healthcare have been shown time and time again when examining prescription drug use. If copayments go up too high, then some people stop filling their prescriptions and wind up sicker.

On the other hand, financial incentives don’t always work to change behavior, as evidenced by the disappointing results in physician pay-for-performance programs.

“We’ll be seeing some interesting experiments unfolding over the next few years,” Garber said. “This will, in the end, play out in the market.”

Express Scripts, a St. Louis-based pharmacy benefit manager, in 2008 launched the Center for Cost-Effective Consumerism and hired experts in behavioral economics—including Garber at Stanford University—to its advisory board.

Lowe’s, the home-improvement retail chain, saved $5.2 million in 2009 by getting employees who take maintenance prescription medications to switch to home pharmacy delivery. It did it using behavioral economics. Bob Ihrie, senior vice president of employee rewards and services at Lowe’s Cos., describes the method as “carrot, carrot, stick, big stick.”

Lowe’s started by educating its 225,000 employees nationwide about home drug delivery, and the cost savings involved. After the third month, if workers hadn’t switched, they are notified at the pharmacy when picking up their prescription and told that if they don’t switch to home delivery, they would start paying the full price of the prescription. The next month, if they hadn’t signed on for home delivery, they paid full price at the in-store pharmacy.

Another carrot followed. Last September, about 22,000 employees who were not signed on for home delivery received a postcard from Lowe’s informing them that if they select home delivery, their prescription drug would be free the first month. About 10% responded to this incentive, Ihrie said.

At the end of 2009, nearly 38,000 workers had switched to home delivery, up about 160% from 14,500 in 2008. Then came the big stick. Starting in January, employees eligible for home delivery but not yet enrolled pay twice the retail price for the drug in store. “We are still waiting to see the outcome of this,” Ihrie said.

The program has worked by breaking the cycle of procrastination, Ihrie said. “We give them choices upfront and then gradually move them along a path that is more mandatory,” he said. Conducted in partnership with Express Scripts, the program cuts waste out of the system without affecting clinical outcomes, Ihrie said.

Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, co-author of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.

http://www.modernhealthcare.com/article/20100510/INFO/100509942#

Comment: 

By Don McCanne, MD

“Behavioral economics” and “choice architecture” are being used to shift health care spending from the healthy to the sick by directly or indirectly assessing financial penalties against those who are unfortunate enough to have greater health care needs. This is strictly another scheme by pro-market enthusiasts who support the flawed concept of consumer-directed health care.

As an example of the flaws, a scheme that requires patients to pay twice the usual retail price for a drug is a perverse scheme indeed. Another example is Safeway’s fraudulent claims of savings from their wellness programs when their savings were really only from shifting to high-deductible health plans.

Instead of jerking patients around with perverse market tools, we need to switch to a public system that simply helps patients get the care that they need – an improved Medicare for everyone.

"Behavioral economics" and "choice architecture"

For good behavior

By Rebecca Vesely
ModernHealthcare.com
May 10, 2010
The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.
“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”
But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.
Meanwhile, some employers are moving full-force to apply behavioral economics to benefit-package design in order to cut healthcare costs.
The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10-state pilot program for similar wellness initiatives on the individual insurance market.
The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were pioneered by the grocery chain Safeway.
But the American Diabetes Association, the AARP and other groups have criticized the enhanced incentives, saying that they could penalize those with chronic diseases by forcing them to pay more for healthcare.
“Our position hasn’t changed,” said Colleen Fogarty, spokeswoman for the American Diabetes Association, in an e-mail. “We remain opposed to the language, but it is now the law and we have to work to ensure that these provisions do not have a harmful or unfair impact on people with chronic diseases.”
Proponents of the provision say it is a good example of a component of behavioral economics called “choice architecture.” Essentially, choice architecture is organizing choices in such a way that influences people’s decisions. In theory, enhanced wellness program incentives allow employers to encourage workers to make the healthiest choices.
Choice architecture is sure to be hugely influential in how the government structures new health insurance exchanges, set to go online in 2014, Garber said. While the government won’t be able to pick favorites among insurers participating in the state-run exchanges, it will be able give customers information about the plans, using transparency measures. This has already been done through the Medicare Part D prescription drug program, which lets insurers compete on the Medicare website for business.
“Behavioral incentives can be powerful, but they are unlikely to overcome a powerful financial incentive,” Garber said. So, for some people, an expensive healthcare plan they have to pay for in monthly premiums could be less appealing than a once-a-year financial penalty.
The dangers of financial penalties in healthcare have been shown time and time again when examining prescription drug use. If copayments go up too high, then some people stop filling their prescriptions and wind up sicker.
On the other hand, financial incentives don’t always work to change behavior, as evidenced by the disappointing results in physician pay-for-performance programs.
“We’ll be seeing some interesting experiments unfolding over the next few years,” Garber said. “This will, in the end, play out in the market.”
Express Scripts, a St. Louis-based pharmacy benefit manager, in 2008 launched the Center for Cost-Effective Consumerism and hired experts in behavioral economics—including Garber at Stanford University—to its advisory board.
Lowe’s, the home-improvement retail chain, saved $5.2 million in 2009 by getting employees who take maintenance prescription medications to switch to home pharmacy delivery. It did it using behavioral economics. Bob Ihrie, senior vice president of employee rewards and services at Lowe’s Cos., describes the method as “carrot, carrot, stick, big stick.”
Lowe’s started by educating its 225,000 employees nationwide about home drug delivery, and the cost savings involved. After the third month, if workers hadn’t switched, they are notified at the pharmacy when picking up their prescription and told that if they don’t switch to home delivery, they would start paying the full price of the prescription. The next month, if they hadn’t signed on for home delivery, they paid full price at the in-store pharmacy.
Another carrot followed. Last September, about 22,000 employees who were not signed on for home delivery received a postcard from Lowe’s informing them that if they select home delivery, their prescription drug would be free the first month. About 10% responded to this incentive, Ihrie said.
At the end of 2009, nearly 38,000 workers had switched to home delivery, up about 160% from 14,500 in 2008. Then came the big stick. Starting in January, employees eligible for home delivery but not yet enrolled pay twice the retail price for the drug in store. “We are still waiting to see the outcome of this,” Ihrie said.
The program has worked by breaking the cycle of procrastination, Ihrie said. “We give them choices upfront and then gradually move them along a path that is more mandatory,” he said. Conducted in partnership with Express Scripts, the program cuts waste out of the system without affecting clinical outcomes, Ihrie said.
Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, co-author of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.
http://www.modernhealthcare.com/article/20100510/INFO/100509942#

“Behavioral economics” and “choice architecture” are being used to shift health care spending from the healthy to the sick by directly or indirectly assessing financial penalties against those who are unfortunate enough to have greater health care needs. This is strictly another scheme by pro-market enthusiasts who support the flawed concept of consumer-directed health care.
As an example of the flaws, a scheme that requires patients to pay twice the usual retail price for a drug is a perverse scheme indeed. Another example is Safeway’s fraudulent claims of savings from their wellness programs when their savings were really only from shifting to high-deductible health plans.
Instead of jerking patients around with perverse market tools, we need to switch to a public system that simply helps patients get the care that they need – an improved Medicare for everyone.

“Behavioral economics” and “choice architecture”

For good behavior

By Rebecca Vesely
ModernHealthcare.com
May 10, 2010

The biggest test of how well behavioral economics can be applied to healthcare is the new federal health reform law, which contains in its more than 1,000 pages many opportunities to nudge people toward better health choices.

“There’s definitely a general fascination about this area,” said Alan Garber, an internal medicine physician and professor of medicine and economics at Stanford University. “In healthcare, for years and years and years there’s been an interest in changing provider and consumer behavior.”

But some worry that behavioral economics could exacerbate health disparities, or inadvertently punish the elderly or people who suffer from chronic diseases.

Meanwhile, some employers are moving full-force to apply behavioral economics to benefit-package design in order to cut healthcare costs.

The most obvious example of behavioral economics in the new healthcare law—and one that drew fire from chronic-disease groups—is a change in employer wellness program incentives. Starting in 2014, employers can offer workers rewards worth up to 30% to 50% of their cost of health coverage for participating in a wellness program and meeting health benchmarks. The law also sets up a 10-state pilot program for similar wellness initiatives on the individual insurance market.

The idea is to create more incentives for workers than is allowed by law today to improve their health, and thus lower medical costs for everyone. The large incentives were pioneered by the grocery chain Safeway.

But the American Diabetes Association, the AARP and other groups have criticized the enhanced incentives, saying that they could penalize those with chronic diseases by forcing them to pay more for healthcare.

“Our position hasn’t changed,” said Colleen Fogarty, spokeswoman for the American Diabetes Association, in an e-mail. “We remain opposed to the language, but it is now the law and we have to work to ensure that these provisions do not have a harmful or unfair impact on people with chronic diseases.”

Proponents of the provision say it is a good example of a component of behavioral economics called “choice architecture.” Essentially, choice architecture is organizing choices in such a way that influences people’s decisions. In theory, enhanced wellness program incentives allow employers to encourage workers to make the healthiest choices.

Choice architecture is sure to be hugely influential in how the government structures new health insurance exchanges, set to go online in 2014, Garber said. While the government won’t be able to pick favorites among insurers participating in the state-run exchanges, it will be able give customers information about the plans, using transparency measures. This has already been done through the Medicare Part D prescription drug program, which lets insurers compete on the Medicare website for business.

“Behavioral incentives can be powerful, but they are unlikely to overcome a powerful financial incentive,” Garber said. So, for some people, an expensive healthcare plan they have to pay for in monthly premiums could be less appealing than a once-a-year financial penalty.

The dangers of financial penalties in healthcare have been shown time and time again when examining prescription drug use. If copayments go up too high, then some people stop filling their prescriptions and wind up sicker.

On the other hand, financial incentives don’t always work to change behavior, as evidenced by the disappointing results in physician pay-for-performance programs.

“We’ll be seeing some interesting experiments unfolding over the next few years,” Garber said. “This will, in the end, play out in the market.”

Express Scripts, a St. Louis-based pharmacy benefit manager, in 2008 launched the Center for Cost-Effective Consumerism and hired experts in behavioral economics—including Garber at Stanford University—to its advisory board.

Lowe’s, the home-improvement retail chain, saved $5.2 million in 2009 by getting employees who take maintenance prescription medications to switch to home pharmacy delivery. It did it using behavioral economics. Bob Ihrie, senior vice president of employee rewards and services at Lowe’s Cos., describes the method as “carrot, carrot, stick, big stick.”

Lowe’s started by educating its 225,000 employees nationwide about home drug delivery, and the cost savings involved. After the third month, if workers hadn’t switched, they are notified at the pharmacy when picking up their prescription and told that if they don’t switch to home delivery, they would start paying the full price of the prescription. The next month, if they hadn’t signed on for home delivery, they paid full price at the in-store pharmacy.

Another carrot followed. Last September, about 22,000 employees who were not signed on for home delivery received a postcard from Lowe’s informing them that if they select home delivery, their prescription drug would be free the first month. About 10% responded to this incentive, Ihrie said.

At the end of 2009, nearly 38,000 workers had switched to home delivery, up about 160% from 14,500 in 2008. Then came the big stick. Starting in January, employees eligible for home delivery but not yet enrolled pay twice the retail price for the drug in store. “We are still waiting to see the outcome of this,” Ihrie said.

The program has worked by breaking the cycle of procrastination, Ihrie said. “We give them choices upfront and then gradually move them along a path that is more mandatory,” he said. Conducted in partnership with Express Scripts, the program cuts waste out of the system without affecting clinical outcomes, Ihrie said.

Several high-ranking officials in the Obama administration are strong proponents of behavioral economics. Cass Sunstein, co-author of Nudge, is now the administrator of the White House Office of Information and Regulatory Affairs. Peter Orszag, director of the White House Office of Management and Budget, has spoken about the promise of behavioral economics to control costs.

http://www.modernhealthcare.com/article/20100510/INFO/100509942#

“Behavioral economics” and “choice architecture” are being used to shift health care spending from the healthy to the sick by directly or indirectly assessing financial penalties against those who are unfortunate enough to have greater health care needs. This is strictly another scheme by pro-market enthusiasts who support the flawed concept of consumer-directed health care.

As an example of the flaws, a scheme that requires patients to pay twice the usual retail price for a drug is a perverse scheme indeed. Another example is Safeway’s fraudulent claims of savings from their wellness programs when their savings were really only from shifting to high-deductible health plans.

Instead of jerking patients around with perverse market tools, we need to switch to a public system that simply helps patients get the care that they need – an improved Medicare for everyone.