PNHP

Is it the prices?

Is it the prices?

Health Spending In OECD Countries In 2004: An Update

By Gerard F. Anderson, Bianca K. Frogner and Uwe E. Reinhardt
Health Affairs
September/October 2007

In 2004, U.S. health care spending per capita was 2.5 times greater than health spending in the median Organization for Economic Cooperation and Development (OECD) country and much higher than health spending in any other OECD country. The United States had fewer physicians, nurses, hospital beds, doctor visits, and hospital days per capita than the median OECD country. Health care prices and higher per capita incomes continued to be the major reasons for the higher U.S. health spending.

http://content.healthaffairs.org/cgi/content/full/26/5/1481

Comment:

By Don McCanne, MD

(This report is an update of the 2003 Health Affairs article by Anderson, et al, “It’s the Prices, Stupid.”)

So we pay far more for health care, but we are not receiving any more care than is delivered in other nations. In fact, this article states, “the availability of health care resources and the actual use of services in the United States were below those of most industrialized countries.”

So does that mean that we need to quit paying greedy doctors, hospitals and pharmaceutical firms too much for the care and products that they deliver? To answer that, we need to look at what is built into our high prices.

In the United States, we have allowed our primary care infrastructure to deteriorate at a relatively rapid pace. Care provided by family physicians, nurse practitioners and general internists in other countries is often provided by specialists in the United States. Specialists charge higher routine fees and often provide additional high-priced diagnostic and therapeutic services for which they are personally compensated. Thus, without increasing the number of practitioners, but merely increasing the ratio of specialists to generalists, health care prices are increased for clinical problems that are presented to specialists, as opposed to the same problems being cared for by generalists.

Specialists who are offended by this observation will frequently respond with studies such as those that demonstrate that care provided by a cardiologist in a coronary care unit is less expensive than that provided by a generalist, primarily because of more judicious use of diagnostic and therapeutic interventions. But one obvious conclusion of this is that specialists should be utilized when specialized services are clinically warranted.

The advantage of having a strong primary care infrastructure is not only that care for routine problems is delivered more economically (lower prices), but also that the primary care practitioner is trained to identify those problems that are more appropriately managed by a specialist. Thus the over-utilization of higher-priced services is diminished.

Another problem is the maldistribution of high-tech services and facilities. Without changing total capacity and utilization, regional concentration of high-tech services results in excess capacity and over-utilization of specialized services. This comes at a cost of reducing primary care services, especially in rural and low-income urban areas where they are especially needed. Wennberg, Fisher and their colleagues at Dartmouth have demonstrated that this concentration increases spending without improving quality.

The profound administrative waste of our fragmented system of financing health care also adds significantly to prices without increasing health care utilization. This alone is enough to warrant changing to a national health insurance program, though the gain from realigning generalist/specialist incentives would also go a long way toward improving health care pricing.

And that question about greedy providers? Prices correlate strongly with a nation’s GDP. The providers are not paid too much overall, but they are being paid too much for useless administrative services and for high-tech excesses, and they are not being paid enough for primary care services. That’s not their greed. That’s our stupidity for continuing to support this wasteful, illogical system of financing health care.

Sanders' bill would initiate pilot health plan in five states

By Louis Porter
Rutland Herald
September 11, 2007

MONTPELIER — U.S. Sen. Bernard Sanders, I-Vt., has introduced a bill that would give five states money to try out programs providing for universal health care coverage — an experiment he hopes will show that so-called single-payer government insurance is “the cost-effective and moral thing to do.”

If his bill wins passage and becomes law — a feat Sanders acknowledges will be an uphill fight — he hopes Vermont will be one of the five states to apply for money and flexibility from the federal government to enact a pilot program, the senator said by telephone.

“I think, for a variety of reasons, Vermont can be a national leader in moving forward in universal health care,” Sanders said. Under Sanders’ proposal, at least one of the five states would institute a single-payer system.

But Vermont is already in the midst of implementing Catamount Health, a hybrid of private and public insurance systems reached as a compromise between Gov. James Douglas and the Legislature.

If Sanders’ proposal could provide more money for Catamount, it might be a good idea for the state to apply to be in it, said Michael Smith, secretary of administration. But Vermont has already had the debate over single-payer health care and decided against it, Smith said.

“We would welcome the additional money” for Catamount, Smith said. But Vermont should not join a new program that would take it in a different direction, with Catamount expected to begin this fall.

“We are just implementing Catamount,” he said. “This was a consensus piece of legislation, something Washington is incapable of.”

“We are going to stay on course on this,” Smith said.

Sanders said he would personally like to see Vermont’s health care reform effort go farther toward a single-payer system than the Catamount compromise program.

“My own view is, if a state in America — I would hope it would be Vermont, maybe it would be Maine or some other state — would go forward with a single-payer system I think it would show that you could provide every man, woman and child with coverage and do it in a cost-effective way,” Sanders said.

The Vermont Public Interest Research Group, which has lobbied for health care reform in the state, praised Sanders’ proposal.

“This bill could pave the way for states like Vermont to fundamentally change the way we think about health care,” said Stefanie Sidortsova, health care advocate for the organization, said in a statement.

Smith and Sanders agree on one major point, however. Health care innovation will likely come from the states, not the federal government, they said.

“If Washington can’t lead, they need to get out of the way and let states lead,” Smith said.

Given the powerful lobbying interests in Washington from the insurance and drug industries, states will likely provide the path to major health care reform — and eventually a single-payer system — not the feds, Sanders said.

“Let states be the laboratory of democracy,” Sanders said. And such a system might be better administered from the state level anyway, he said.

His legislation would help that along by allowing a handful of states to administer and fund five-year pilot programs.

“Let us give different states in this country the opportunity to experiment, to develop different models, but with the goal of providing universal access to all of their people,” Sanders said. If such an experiment included a single-payer program, it will likely show “that you could provide quality health care to everyone in the state without spending a nickel more than you are currently spending,” Sanders said.

If one or more of the pilot projects was successful other states would take the ideas from it, he said.

“That is what good governors do all the time, they steal the best ideas from other states,” Sanders said.

He is confident a single-payer system — administered by the states — would be the winning version of such a trial objectively measured.

“The United States is the only country in the industrialized world that does not have a national health care program,” Sander said. And, he said, Vermont could be the starting point.

“I think we have the infrastructure to, in fact, lead the nation into a single-payer national health care concept,” he said.

Contact Louis Porter at louis.porter@rutlandherald.com.

Canada's health care system and the sustainability paradox

By Irfan Dhalla, MD
CMAJ
July 3, 2007; 177 (1). doi:10.1503/cmaj.061064.

Click here to download a pdf of this document.

Irfan Dhalla is with the Departments of Medicine at St. Michael’s Hospital and at the University of Toronto, and with Canadian Doctors for Medicare, Toronto, Ont.

Correspondence to: Dr. Irfan Dhalla, Department of Medicine, St. Michael’s Hospital, 30 Bond St., Toronto ON M5B 1W8; irfan.dhalla@utoronto.ca

Physician leaders,1 newspaper columnists,2,3 representatives of the business community4 and even some health policy analysts5 have all expressed concerns that publicly funded health care is unsustainable. The current federal health minister has even gone so far as to say that “both the Prime Minister and I have indicated that the status quo won’t be sustainable in terms of demands on our system.”6

Not everyone holds this view. For example, in his report on health care in Canada,7 Roy Romanow concluded that our health care system was “as sustainable as we want it to be.” Despite this countervailing argument, concerns about unsustainability have provided an impetus for proposed reform.1

In this article, I will argue that Canada faces a sustainability paradox: despite ever-increasing expenditures, both in absolute dollars and as a percentage of the national income, increases in overall spending on health care in Canada are sustainable for the foreseeable future.

Are increases in government spending on health care sustainable?

One view maintains that our publicly funded health care system is unsustainable because health care expenditures are accounting for an ever-increasing share of government spending. In Ontario, for example, health care spending accounted for just over 30% of the provincial government’s expenditures in 1981/82, but 45% in 2004/05. Assuming that current trends will continue, the Ontario government has projected that the share will increase to 55% by 2025.8

One major flaw with this line of reasoning is the assumption that the percentage of government expenses devoted to health care depends primarily on how much governments spend on health. When measured by percentage of government expenses, health spending also depends on 2 other key factors: how much governments spend on non-health-related items (e.g., education, police services, social assistance) and how much governments collect in taxes. If a government reduces its spending on non-health-related items or cuts taxes, the percentage of expenditures devoted to health care will increase automatically.

A closer look at the Ontario data described earlier reveals that other trends are hidden amid the seemingly inexorable rise in health care spending. For example, starting in 1988, the share of Ontario’s expenditures devoted to health care actually decreased for almost 10 years, from 38% to just over 35%. After 1997, the share began to grow, but the increase was due in large part to reductions in spending on non-health-related items, tax cuts and reductions in transfers from the federal government.8

Arguments that our publicly funded health care system is unsustainable because it accounts for an ever-increasing share of government funding often depend on the premise that tax rates must be fixed or continually declining. This assumption, however, is open to challenge. Over the last 20 years, although the share of government tax revenue in Canada as a proportion of our gross domestic product (GDP) has remained essentially constant at 33%, many other economically advanced countries have quietly been increasing taxes. In 1985, members of the Organisation for Economic Co-operation and Development (OECD), a group of 30 countries “committed to democracy and the market economy,” collected taxes at an average rate of 30% of their respective GDPs. By 2004, these countries were collecting taxes at an average rate of 36% of GDP.9 Although some might argue that the overall taxation level in the United States is a more appropriate benchmark for Canada than the OECD average, others would argue that comparing ourselves exclusively to the United States leads to an artificially constricted range of policy options for Canadian decision-makers. Had our taxes increased at even half the rate of those among the OECD countries, the argument that health care expenditures are unsustainable because they account for an ever-increasing share of government spending would be far less viable.

For the reasons I have described, it is problematic to assess sustainability on the basis of health care spending as a share of government expenditures. Would it be better to consider health care spending as a share of GDP instead?

Is the increasing economic burden of health care sustainable?

The prevailing view that health care spending is rising faster than both inflation and the growth of the economy is correct. However, the difference between health care spending and economic growth is smaller than many assume. Health care spending (in both the private and public sectors) accounted for 7% of Canada’s GDP in 1970, and 9.9% in 2004.10 Contrary to popular belief, the larger part of the increase actually occurred over the first half of the last 35 years. Similar increases have occurred in other countries, and in many cases they have been even larger than those in Canada. For example, health care spending in Spain was 3.5% of the GDP in 1970 and 8.1% in 2004; in the United States, the corresponding numbers were 7% and 15.3% (Figure 1).10

Moreover, to measure health care spending as a percentage of GDP obscures an extremely important fact: over the last 35 years, the economy in all economically advanced countries has been growing. This growth has allowed us to spend more, not only on health but on a variety of other goods and services as well. In terms of sustainability, spending on health care itself is unimportant; what matters is how much we have left to spend on our other needs and desires. In other words, growth in health care spending is sustainable provided it does not reduce the average Canadian’s ability to purchase non-health-related goods and services.

Over the last 35 years, despite the phenomenal growth in health care spending, we have still had enough left to spend ever-increasing amounts on non-health-related goods and services. How is this possible? Imagine a country where spending on health care is $1 per capita and the GDP is $100 per capita. If, over 50 years, health care spending increases by 100 times, to $100, and the GDP increases 10 times, to $1000, the amount of money left for non-health-related spending has still increased from $99 to $900. In other words, the citizens of this imaginary country would have seen their health care spending increase from 1% of GDP to 10% of GDP and would still have almost 10 times as much money left for non-health-related spending. Some would call this the miracle of economic growth.

From 1992 to 2004, real per capita spending on health care (i.e., after exclusion of the effects of inflation) in Canada increased at a rate of 2.3% per year.10 During the same period, real per capita economic output (GDP) increased at a rate of 1.7% per year.11 If these growth rates were to continue indefinitely (and these numbers are similar to those forecasted by at least one provincial government8), the amount of money left for non-health-related spending would continue to increase for well over a century (Figure 2).

Conclusions

Is our health care system unsustainable? I have argued that increases in health care spending are sustainable as long as growth in non-health-related spending can still occur. From the evidence I have presented here, one can see that non-health-related spending can continue to increase even if health care expenditures grow at a faster rate than that of the GDP, provided the economy continues to grow over the long term.

Governments might argue that our health care system could still be unsustainable, if it were to crowd out other important government priorities, such as spending on child care or the environment. This argument would be true only if governments were incapable of increasing taxes.

An obvious and important question remains: Should health care spending continue to grow at current rates? To answer this question would require an analysis of whether we are obtaining value for the money we spend. Evidence on this point is limited; however, one recent analysis of health care spending in the United States (where costs are significantly higher than in Canada) concluded that overall increases in spending have provided “reasonable value.”12 Given the limited strength of this evidence, it might be reasonable to argue that society has an interest in limiting further growth in health care expenditures. However, arguments that health care spending cannot grow at current rates are, because of the sustainability paradox, unsound.

Footnotes

This article has been peer reviewed.

Acknowledgements: I thank Tara Kiran, David Naylor, Jeff Kwong and Gordon Guyatt for their thoughtful comments on drafts of this article.

Competing interests: None declared.

REFERENCES

1. CMA Task Force on the Public-Private Interface. It’s about access! Informing the debate on public and private health care. Ottawa: Canadian Medical Association; 2006. Available: www.cma.ca/multimedia/CMA/Content_images/Inside_Cma/Media_Release/pdf/2006/about_access_e2.pdf (accessed 2007 Mar 28).
2. Mason G. Health system, you’re fired. Globe and Mail [Toronto] 2005 Nov 12;Sect A:3.
3. Simpson J. Who will start a frank debate on health care? Globe and Mail [Toronto] 2004 Apr 1;Sect A:17.
4. Challenging health care system sustainability: understanding health system performance of leading countries. Ottawa: The Conference Board of Canada; 2004. Available: www.health.gov.ab.ca/resources/publications/Conference_Board2.pdf (accessed 2007 Mar 28).
5. MacKinnon JC. The arithmetic of health care. CMAJ 2004;171:603-4.[Free Full Text]
6. Ivison J. Clement sees ‘opportunities’ in health care talk. Watching Alberta closely: federal health minister says ‘a lot’ can be accomplished within the Canada Health Act. National Post [Toronto] 2006 Mar 2;Sect A:5.
7. Romanow RJ. Building on values: the future of health care in Canada — final report. Saskatoon: Commission on the Future of Health Care in Canada; 2002. Available: www.hc-sc.gc.ca/english/pdf/romanow/pdfs/HCC_Final_Report.pdf (accessed 2007 Mar 28).
8. Ontario Ministry of Finance. Toward 2025: assessing Ontario’s long-term outlook. Toronto: The Ministry; 2005. Available: www.fin.gov.on.ca/english/economy/ltr/2005/05_ltr.pdf (accessed 2007 Mar 28).
9. Organisation for Economic Co-operation and Development. Revenue statistics 1965-2004. Paris: OECD Publishing; 2005.
10. Organisation for Economic Co-operation and Development. OECD health data 2006: statistics and indicators for 30 countries. Paris: OECD Publishing; 2006.
11. Baldwin JR, Brown M, Maynard JP, et al. Catching up and falling behind: the performance of provincial GDP per capita from 1990 to 2003 [Economic Analysis Research Paper Series]. Ottawa: Statistics Canada; 2004. Cat no 11F0027MIE – no 024. Available: www.statcan.ca/english/research/11F0027MIE/11F0027MIE2004024.pdf (accessed 2007 Mar 28).
12. Cutler DM, Rosen AB, Vijan S. The value of medical spending in the United States, 1960-2000. N Engl J Med 2006;355:920-7.[Abstract/Free Full Text]

Sanders’ bill would initiate pilot health plan in five states

By Louis Porter
Rutland Herald
September 11, 2007

MONTPELIER — U.S. Sen. Bernard Sanders, I-Vt., has introduced a bill that would give five states money to try out programs providing for universal health care coverage — an experiment he hopes will show that so-called single-payer government insurance is “the cost-effective and moral thing to do.”

If his bill wins passage and becomes law — a feat Sanders acknowledges will be an uphill fight — he hopes Vermont will be one of the five states to apply for money and flexibility from the federal government to enact a pilot program, the senator said by telephone.

“I think, for a variety of reasons, Vermont can be a national leader in moving forward in universal health care,” Sanders said. Under Sanders’ proposal, at least one of the five states would institute a single-payer system.

But Vermont is already in the midst of implementing Catamount Health, a hybrid of private and public insurance systems reached as a compromise between Gov. James Douglas and the Legislature.

If Sanders’ proposal could provide more money for Catamount, it might be a good idea for the state to apply to be in it, said Michael Smith, secretary of administration. But Vermont has already had the debate over single-payer health care and decided against it, Smith said.

“We would welcome the additional money” for Catamount, Smith said. But Vermont should not join a new program that would take it in a different direction, with Catamount expected to begin this fall.

“We are just implementing Catamount,” he said. “This was a consensus piece of legislation, something Washington is incapable of.”

“We are going to stay on course on this,” Smith said.

Sanders said he would personally like to see Vermont’s health care reform effort go farther toward a single-payer system than the Catamount compromise program.

“My own view is, if a state in America — I would hope it would be Vermont, maybe it would be Maine or some other state — would go forward with a single-payer system I think it would show that you could provide every man, woman and child with coverage and do it in a cost-effective way,” Sanders said.

The Vermont Public Interest Research Group, which has lobbied for health care reform in the state, praised Sanders’ proposal.

“This bill could pave the way for states like Vermont to fundamentally change the way we think about health care,” said Stefanie Sidortsova, health care advocate for the organization, said in a statement.

Smith and Sanders agree on one major point, however. Health care innovation will likely come from the states, not the federal government, they said.

“If Washington can’t lead, they need to get out of the way and let states lead,” Smith said.

Given the powerful lobbying interests in Washington from the insurance and drug industries, states will likely provide the path to major health care reform — and eventually a single-payer system — not the feds, Sanders said.

“Let states be the laboratory of democracy,” Sanders said. And such a system might be better administered from the state level anyway, he said.

His legislation would help that along by allowing a handful of states to administer and fund five-year pilot programs.

“Let us give different states in this country the opportunity to experiment, to develop different models, but with the goal of providing universal access to all of their people,” Sanders said. If such an experiment included a single-payer program, it will likely show “that you could provide quality health care to everyone in the state without spending a nickel more than you are currently spending,” Sanders said.

If one or more of the pilot projects was successful other states would take the ideas from it, he said.

“That is what good governors do all the time, they steal the best ideas from other states,” Sanders said.

He is confident a single-payer system — administered by the states — would be the winning version of such a trial objectively measured.

“The United States is the only country in the industrialized world that does not have a national health care program,” Sander said. And, he said, Vermont could be the starting point.

“I think we have the infrastructure to, in fact, lead the nation into a single-payer national health care concept,” he said.

Contact Louis Porter at louis.porter@rutlandherald.com.

Canada’s health care system and the sustainability paradox

By Irfan Dhalla, MD
CMAJ
July 3, 2007; 177 (1). doi:10.1503/cmaj.061064.

Click here to download a pdf of this document.

Irfan Dhalla is with the Departments of Medicine at St. Michael’s Hospital and at the University of Toronto, and with Canadian Doctors for Medicare, Toronto, Ont.

Correspondence to: Dr. Irfan Dhalla, Department of Medicine, St. Michael’s Hospital, 30 Bond St., Toronto ON M5B 1W8; irfan.dhalla@utoronto.ca

Physician leaders,1 newspaper columnists,2,3 representatives of the business community4 and even some health policy analysts5 have all expressed concerns that publicly funded health care is unsustainable. The current federal health minister has even gone so far as to say that “both the Prime Minister and I have indicated that the status quo won’t be sustainable in terms of demands on our system.”6

Not everyone holds this view. For example, in his report on health care in Canada,7 Roy Romanow concluded that our health care system was “as sustainable as we want it to be.” Despite this countervailing argument, concerns about unsustainability have provided an impetus for proposed reform.1

In this article, I will argue that Canada faces a sustainability paradox: despite ever-increasing expenditures, both in absolute dollars and as a percentage of the national income, increases in overall spending on health care in Canada are sustainable for the foreseeable future.

Are increases in government spending on health care sustainable?

One view maintains that our publicly funded health care system is unsustainable because health care expenditures are accounting for an ever-increasing share of government spending. In Ontario, for example, health care spending accounted for just over 30% of the provincial government’s expenditures in 1981/82, but 45% in 2004/05. Assuming that current trends will continue, the Ontario government has projected that the share will increase to 55% by 2025.8

One major flaw with this line of reasoning is the assumption that the percentage of government expenses devoted to health care depends primarily on how much governments spend on health. When measured by percentage of government expenses, health spending also depends on 2 other key factors: how much governments spend on non-health-related items (e.g., education, police services, social assistance) and how much governments collect in taxes. If a government reduces its spending on non-health-related items or cuts taxes, the percentage of expenditures devoted to health care will increase automatically.

A closer look at the Ontario data described earlier reveals that other trends are hidden amid the seemingly inexorable rise in health care spending. For example, starting in 1988, the share of Ontario’s expenditures devoted to health care actually decreased for almost 10 years, from 38% to just over 35%. After 1997, the share began to grow, but the increase was due in large part to reductions in spending on non-health-related items, tax cuts and reductions in transfers from the federal government.8

Arguments that our publicly funded health care system is unsustainable because it accounts for an ever-increasing share of government funding often depend on the premise that tax rates must be fixed or continually declining. This assumption, however, is open to challenge. Over the last 20 years, although the share of government tax revenue in Canada as a proportion of our gross domestic product (GDP) has remained essentially constant at 33%, many other economically advanced countries have quietly been increasing taxes. In 1985, members of the Organisation for Economic Co-operation and Development (OECD), a group of 30 countries “committed to democracy and the market economy,” collected taxes at an average rate of 30% of their respective GDPs. By 2004, these countries were collecting taxes at an average rate of 36% of GDP.9 Although some might argue that the overall taxation level in the United States is a more appropriate benchmark for Canada than the OECD average, others would argue that comparing ourselves exclusively to the United States leads to an artificially constricted range of policy options for Canadian decision-makers. Had our taxes increased at even half the rate of those among the OECD countries, the argument that health care expenditures are unsustainable because they account for an ever-increasing share of government spending would be far less viable.

For the reasons I have described, it is problematic to assess sustainability on the basis of health care spending as a share of government expenditures. Would it be better to consider health care spending as a share of GDP instead?

Is the increasing economic burden of health care sustainable?

The prevailing view that health care spending is rising faster than both inflation and the growth of the economy is correct. However, the difference between health care spending and economic growth is smaller than many assume. Health care spending (in both the private and public sectors) accounted for 7% of Canada’s GDP in 1970, and 9.9% in 2004.10 Contrary to popular belief, the larger part of the increase actually occurred over the first half of the last 35 years. Similar increases have occurred in other countries, and in many cases they have been even larger than those in Canada. For example, health care spending in Spain was 3.5% of the GDP in 1970 and 8.1% in 2004; in the United States, the corresponding numbers were 7% and 15.3% (Figure 1).10

Moreover, to measure health care spending as a percentage of GDP obscures an extremely important fact: over the last 35 years, the economy in all economically advanced countries has been growing. This growth has allowed us to spend more, not only on health but on a variety of other goods and services as well. In terms of sustainability, spending on health care itself is unimportant; what matters is how much we have left to spend on our other needs and desires. In other words, growth in health care spending is sustainable provided it does not reduce the average Canadian’s ability to purchase non-health-related goods and services.

Over the last 35 years, despite the phenomenal growth in health care spending, we have still had enough left to spend ever-increasing amounts on non-health-related goods and services. How is this possible? Imagine a country where spending on health care is $1 per capita and the GDP is $100 per capita. If, over 50 years, health care spending increases by 100 times, to $100, and the GDP increases 10 times, to $1000, the amount of money left for non-health-related spending has still increased from $99 to $900. In other words, the citizens of this imaginary country would have seen their health care spending increase from 1% of GDP to 10% of GDP and would still have almost 10 times as much money left for non-health-related spending. Some would call this the miracle of economic growth.

From 1992 to 2004, real per capita spending on health care (i.e., after exclusion of the effects of inflation) in Canada increased at a rate of 2.3% per year.10 During the same period, real per capita economic output (GDP) increased at a rate of 1.7% per year.11 If these growth rates were to continue indefinitely (and these numbers are similar to those forecasted by at least one provincial government8), the amount of money left for non-health-related spending would continue to increase for well over a century (Figure 2).

Conclusions

Is our health care system unsustainable? I have argued that increases in health care spending are sustainable as long as growth in non-health-related spending can still occur. From the evidence I have presented here, one can see that non-health-related spending can continue to increase even if health care expenditures grow at a faster rate than that of the GDP, provided the economy continues to grow over the long term.

Governments might argue that our health care system could still be unsustainable, if it were to crowd out other important government priorities, such as spending on child care or the environment. This argument would be true only if governments were incapable of increasing taxes.

An obvious and important question remains: Should health care spending continue to grow at current rates? To answer this question would require an analysis of whether we are obtaining value for the money we spend. Evidence on this point is limited; however, one recent analysis of health care spending in the United States (where costs are significantly higher than in Canada) concluded that overall increases in spending have provided “reasonable value.”12 Given the limited strength of this evidence, it might be reasonable to argue that society has an interest in limiting further growth in health care expenditures. However, arguments that health care spending cannot grow at current rates are, because of the sustainability paradox, unsound.

Footnotes

This article has been peer reviewed.

Acknowledgements: I thank Tara Kiran, David Naylor, Jeff Kwong and Gordon Guyatt for their thoughtful comments on drafts of this article.

Competing interests: None declared.

REFERENCES

1. CMA Task Force on the Public-Private Interface. It’s about access! Informing the debate on public and private health care. Ottawa: Canadian Medical Association; 2006. Available: www.cma.ca/multimedia/CMA/Content_images/Inside_Cma/Media_Release/pdf/2006/about_access_e2.pdf (accessed 2007 Mar 28).
2. Mason G. Health system, you’re fired. Globe and Mail [Toronto] 2005 Nov 12;Sect A:3.
3. Simpson J. Who will start a frank debate on health care? Globe and Mail [Toronto] 2004 Apr 1;Sect A:17.
4. Challenging health care system sustainability: understanding health system performance of leading countries. Ottawa: The Conference Board of Canada; 2004. Available: www.health.gov.ab.ca/resources/publications/Conference_Board2.pdf (accessed 2007 Mar 28).
5. MacKinnon JC. The arithmetic of health care. CMAJ 2004;171:603-4.[Free Full Text]
6. Ivison J. Clement sees ‘opportunities’ in health care talk. Watching Alberta closely: federal health minister says ‘a lot’ can be accomplished within the Canada Health Act. National Post [Toronto] 2006 Mar 2;Sect A:5.
7. Romanow RJ. Building on values: the future of health care in Canada — final report. Saskatoon: Commission on the Future of Health Care in Canada; 2002. Available: www.hc-sc.gc.ca/english/pdf/romanow/pdfs/HCC_Final_Report.pdf (accessed 2007 Mar 28).
8. Ontario Ministry of Finance. Toward 2025: assessing Ontario’s long-term outlook. Toronto: The Ministry; 2005. Available: www.fin.gov.on.ca/english/economy/ltr/2005/05_ltr.pdf (accessed 2007 Mar 28).
9. Organisation for Economic Co-operation and Development. Revenue statistics 1965-2004. Paris: OECD Publishing; 2005.
10. Organisation for Economic Co-operation and Development. OECD health data 2006: statistics and indicators for 30 countries. Paris: OECD Publishing; 2006.
11. Baldwin JR, Brown M, Maynard JP, et al. Catching up and falling behind: the performance of provincial GDP per capita from 1990 to 2003 [Economic Analysis Research Paper Series]. Ottawa: Statistics Canada; 2004. Cat no 11F0027MIE – no 024. Available: www.statcan.ca/english/research/11F0027MIE/11F0027MIE2004024.pdf (accessed 2007 Mar 28).
12. Cutler DM, Rosen AB, Vijan S. The value of medical spending in the United States, 1960-2000. N Engl J Med 2006;355:920-7.[Abstract/Free Full Text]

Decline in premium increases is still an intolerable increase

Health Benefits In 2007: Premium Increases Fall To An Eight-Year Low, While Offer Rates And Enrollment Remain Stable

By Gary Claxton, Jon Gabel, Bianca DiJulio, Jeremy Pickreign, Heidi Whitmore, Benjamin Finder, Paul Jacobs and Samantha Hawkins
Health Affairs
September/October 2007

Premiums for (employer-sponsored) family coverage increased an average of 6.1 percent from spring 2006 to spring 2007. This was the lowest annual increase in premiums since 1999 (when premiums rose 5.3 percent) and the fourth consecutive year in which premium increases declined from the previous year’s increase. Nonetheless, the average premium increase is 3.5 percentage points more than the increase in overall inflation as measured by the Consumer Price Index and 2.4 percentage points greater than the rise in workers’ earnings. Since 2001, premiums have increased 78 percent, while inflation rose 17 percent and workers’ wages, 19 percent.

The average annual cost for single and family coverage in 2007 is $4,479 and $12,106, including both employer and employee contributions.

http://content.healthaffairs.org/cgi/content/full/26/5/1407

Comment:

By Don McCanne, MD

Many of the media reports celebrate the fact that premium increases for this year have declined to only 6.1 percent. Stop right there!

This year’s premium will be used as the basis for next year’s increase. This year it is 3.5 percentage points more than the rate of inflation. That greater-than-inflation increase will never be recovered, and will be added to next year’s increase, and to the increase in every year thereafter. Not only this year’s increase, but the greater-than-inflation increases of each prior year and of each future year are also added. In the past six years alone, the greater-than-inflation increase has been 61 percent.

Some would say that the increase in workers’ wages is a more appropriate comparison than the rate of inflation. For the past six years, the greater-than-wage percentage increase in premiums has been only 59 percent. Only?

Some advocate lowering premiums by switching to less expensive, HSA-qualified high-deductible health plans (not less expensive health care). But, according to this report, “about two-thirds of employers offering HSA-qualified HDHPs do not make contributions to HSAs established by their workers with single coverage.” So the answer is to shift even more of the costs to the worker?

How much longer do we allow our health spending to compound at these rates? Isn’t this like… maybe… an emergency?

Immigrants and Health Care — At the Intersection of Two Broken Systems

By Susan Okie, M.D.
New England Journal of Medicine
Perspective
August 9, 2007
Volume 357:525-529

At a primary care clinic in Montgomery County, Maryland, where I volunteer, the patients are uninsured immigrants from Latin America or West Africa. Many are day laborers, house cleaners, or construction workers; most do not speak English. Several months ago, I saw a middle-aged Hispanic baker with profound weakness, fatigue, limb swelling, and severe muscle pain, who had to be hospitalized for myxedema. Fortunately, a local charity agreed to pay most of her hospital costs, and she’s now receiving thyroid hormone-replacement therapy — but with regular care, her hypothyroidism could have been diagnosed earlier and hospitalization averted. Another day, I tried to persuade a reticent West African man who had been tortured in prison that psychological counseling might help his chronic pain. However, mental health services for uninsured immigrants are sparse, and the man was reluctant to venture to a distant part of Washington, D.C., to a program for torture survivors. A third patient, a man in his 40s, came in with a nearly empty bottle of eyedrops, which he had brought from Ghana to take for glaucoma. The disease had already blinded him in one eye, and the vision in his other eye had been fluctuating. He needed a complete eye exam and visual-field testing, but arranging timely referrals to specialists is often difficult for caregivers treating the uninsured. I wrote him a prescription, and we managed to set up an appointment at a hospital-based ophthalmology clinic that accepts a limited number of uninsured patients.

For recent immigrants — especially the estimated 12 million who are here illegally — seeking health care often involves daunting encounters with a fragmented, bewildering, and hostile system. The reason most immigrants come here is to work and earn money; on average, they are younger and healthier than native-born Americans, and they tend to avoid going to the doctor. Many work for employers who don’t offer health insurance, and they can’t afford insurance premiums or medical care. They face language and cultural barriers, and many illegal immigrants fear that visiting a hospital or clinic may draw the attention of immigration officials. Although anti-immigrant sentiment is fueled by the belief that immigrants can obtain federal benefits, 1996 welfare-reform legislation greatly restricted immigrants’ access to programs such as Medicaid, shifting most health care responsibility to state and local governments. The law requires that immigrants wait 5 years after obtaining lawful permanent residency (a “green card”) to apply for federal benefits. In response, some states and localities — for instance, Illinois, New York, the District of Columbia, and certain California counties — have used their own funds to expand health insurance coverage even for undocumented immigrant children and pregnant women with low incomes. Other states, however, such as Arizona, Colorado, Georgia, and Virginia, have passed laws making it even more difficult for noncitizens to gain access to health services.

Whether or not they have health insurance, immigrants overall have much lower per capita health care expenditures than native-born Americans,1 and recent analyses indicate that they contribute more to the economy in taxes than they receive in public benefits. In a study from the RAND Corporation, researchers estimated that undocumented adult immigrants, who make up about 3.2% of the population, account for only about 1.5% of U.S. medical costs.2 Many immigrants do not seek medical treatment unless they are injured or acutely ill; at our clinic, patients with type 2 diabetes often have florid symptoms and even incipient renal damage by the time their disease is diagnosed.

One study found that annual per capita expenses for health care were 86% lower for uninsured immigrant children than for uninsured U.S.-born children — but emergency department expenditures were more than three times as high.1 Although U.S. hospitals must provide emergency care without first asking about income, insurance, or citizenship, early diagnosis and treatment in a primary care setting are both medically preferable and a better use of resources. “If people keep postponing medical care because they’re so concerned about being sent back over the border,” noted Elizabeth Benson Forer, executive director of the Venice Family Clinic, a venerable free clinic in Los Angeles that serves many immigrants, “then you can end up with some pretty horrendous health situations.”

Immigrants live, work, and attend school in communities throughout the country; laws and bureaucratic barriers that reduce their use of key preventive health services, such as immunizations and screenings for infectious disease, make for bad public health policy, and denying immigrants primary care ultimately increases health care costs for everyone. For example, labor and delivery costs for undocumented immigrant women are covered under the federal and state emergency Medicaid program, but most states do not cover prenatal care, and there is no coverage for family planning. Some of my patients say they would like to use oral contraceptives or an intrauterine device or undergo a tubal ligation, but they can’t afford it. And immigrants, like native-born Americans, are vulnerable to chronic diseases; as my colleague, nurse practitioner Lois Wessel, notes, “Even the 25-year-old day laborers are eventually going to become 45-year-olds, probably still undocumented, with hypertension and diabetes. . . . Life in America is going to make them become not so healthy.”

Recently, a bipartisan group of U.S. senators, with White House support, introduced an immigration bill that offered the best chance in years of achieving substantial reform of a dysfunctional system. However, the bill met with opposition from both conservatives and liberals and was killed in the Senate this past June, quashing all hope of immigration reform during the current administration. State legislatures this year are considering a record number of anti-immigrant measures, and the Senate bill’s demise heightens their chances of passage. “You will see the states and cities scrambling to pass their own laws and regulations, and you’re going to get a completely contradictory set of policies,” Senator John McCain (R-AZ) predicted in a Washington Post article on July 8. In many areas of the country, one consequence is likely to be reduced access to health care for immigrants.

Noncitizens make up about 20% of the 46 million uninsured people in the United States. Hospitals generally do not collect information on patient immigration status, and there are no reliable national figures on hospital costs for undocumented immigrants. Nevertheless, the soaring cost of uncompensated care (see graph A) has made the problem of providing care for uninsured immigrants a hot political issue, particularly in border states and those (such as the southeastern states) whose immigrant populations have grown rapidly in recent years. Some uninsured immigrants needing emergency treatment (including pregnant women, children, adults with dependent children, and elderly, blind, or disabled patients with incomes below Medicaid thresholds) qualify for emergency Medicaid coverage. In many other cases, hospitals receive no payment for their care, although in 2003 Congress appropriated $250 million per year for 4 years (starting in 2005) to partially compensate hospitals for treating undocumented immigrants.

A recent study found that although emergency Medicaid spending for immigrants in North Carolina grew by 28% between 2001 and 2004, it still represented less than 1% of the state’s Medicaid budget.3 More than 80% of that spending was for childbirth and complications of pregnancy, and major injuries accounted for nearly one third of the rest. In California, emergency Medicaid spending for uninsured immigrants for fiscal year 2007 exceeded $941 million, according to Kim Belshé, secretary of the California Health and Human Services Agency. “Clearly, there are medical needs faced by this population,” said Belshé, “and the emergency room is not the most cost-effective place for [addressing] them.” In addition, undocumented immigrants may account for as much as $750 million annually of the cost of uncompensated care in California hospitals — about 10% of the annual total — since they represent about 10% of the state’s emergency department patients, according to Jan Emerson, vice president of external affairs for the California Hospital Association. “Almost half of the hospitals in California are currently operating in the red,” she said. “It would not be fair to place the blame solely on undocumented immigrants, but certainly, they are a contributing factor.”

The chief sources of outpatient care for uninsured immigrants are public clinics and community health centers. Such clinics are often sparse in suburban and rural areas that have recently faced an influx of immigrants. Even in cities with strong community-clinic networks and a long history of serving immigrants, access to care is uneven. For example, at the Venice Family Clinic, a bilingual nurse educator runs health and exercise classes in Spanish and English for patients with diabetes, pregnant women receive free state-subsidized prenatal care, and there are regularly scheduled clinic sessions for victims of torture and human trafficking. Yet arranging specialty referrals is a constant challenge — it usually entails sending patients to outpatient clinics at county hospitals, where some have to wait as long as a year for an appointment. In the Washington, D.C., area uninsured women, including undocumented immigrants, can get free annual mammograms and Pap smears through subsidized cancer-screening programs, but follow-up treatment for abnormal findings other than cancer is usually not included, and many clients have no source of primary care, as noted by nurse practitioner Wessel, who works monthly at one such program. “Patients come in year after year” for Pap smears — “but they’ve never had their blood pressure checked,” she said. “We don’t check it, because all we’re financed to do is cervical- and breast-cancer screening.”

In states seeking to expand insurance coverage, the question of including undocumented immigrants is a thorny one. About 1 million of California’s 4.8 million uninsured residents are undocumented adults, and about 136,000 are undocumented children.4 As part of a proposal for comprehensive health care reform, Governor Arnold Schwarzenegger is seeking to provide health insurance coverage (through Medicaid and the State Children’s Health Insurance Program, or SCHIP) to all children with family incomes at or below 300% of the federal poverty level, regardless of immigration status. Although there is considerable public support for insuring undocumented immigrant children, Republican state legislators “do not believe that state general fund revenues should be invested in people who are here illegally,” said health secretary Belshé — “and that extends to children.”

The federal Medicaid program has always been restricted to U.S. citizens and legal residents, but recent federal and state laws designed to strengthen enforcement of eligibility rules have created new barriers, even for infants and children who are citizens, and have had a chilling effect on other programs providing health services for immigrants. The 2005 Deficit Reduction Act requires all persons applying for or renewing Medicaid coverage to provide proof of identity and U.S. citizenship. Since that law went into effect, at least eight states have reported dramatic declines in Medicaid enrollment, and some Medicaid-eligible infants and children have gone without immunizations and needed medical care because of delays in coverage.5

In Georgia, which last year passed a law requiring immigrants to show proof of legal residency in many situations, “we’ve started seeing a lot of kids not going to the doctor,” said Flavia Mercado, a pediatrician who runs the International Medical Center at Atlanta’s Grady Memorial Hospital. “A lot of my clients are leaving and going to other states, and a couple are even going back to their country. Everyone is very fearful.” She said that Atlanta organizations are scaling back health services for Hispanics and have stopped sponsoring Hispanic health fairs, fearing that they will be raided by police or immigration officials. Meanwhile, faced with rising health care costs and increasing numbers of uninsured persons, the state’s Medicaid program has sharply reduced benefits: it recently stopped paying for prenatal care for high-risk women and for nonemergency hemodialysis. Although immigrants make up a minority of the uninsured, Mercado said media reports regularly blame illegal immigrants for the worsening problems of the state’s health care system. Anger over high medical costs and reduced access to care no doubt contributes to anti-immigrant sentiment; the remedy, however, is not immigrant bashing, but health care reform.

“As an American citizen, I understand that you want to make sure the resources are there for the right people,” Mercado said. “Yet how can you deny someone health access? If we don’t treat and prevent illness . . . our whole community is going to suffer.”

Source Information

Dr. Okie is a contributing editor of the Journal.

References

1. Mohanty SA, Woolhandler S, Himmelstein DU, Pati S, Carrasquillo O, Bor DH. Health care expenditures of immigrants in the United States: a nationally representative analysis. Am J Public Health 2005;95:1431-1438. [Free Full Text]
2. Goldman DP, Smith JP, Sood N. Immigrants and the cost of medical care. Health Aff (Millwood) 2006;25:1700-1711. [Free Full Text]
3. DuBard CA, Massing MW. Trends in emergency Medicaid expenditures for recent and undocumented immigrants. JAMA 2007;297:1085-1092. [Erratum, JAMA 2007;297:1774.] [Free Full Text]
4. Brown ER, Pourat N, Wallace SP. Undocumented residents make up small share of California’s uninsured population. Los Angeles: UCLA Center for Health Policy Research, March 2007.
5. Pear R. Lacking papers, citizens are cut from Medicaid. New York Times. March 12, 2007:A1.

Cost of Uncompensated Care (Panel A), Number of Unauthorized Immigrants (Panel B), and Number of Uninsured People (Panel C) in the United States.

The annual cost to U.S. hospitals of uncompensated care (charity care plus bad debt) has been rising, although the fraction of total hospital expenses represented by such care has remained relatively constant at about 5 to 6% since 1980. The number of unauthorized immigrants present in the United States has also been increasing, although the estimates are uncertain. Treatment of unauthorized immigrants contributes to uncompensated care costs, but the main reason such costs are increasing is the rise in the number of people who lack health insurance. Immigrants represent only about 20% of the uninsured. Data on uncompensated care are from the American Hospital Association; data on unauthorized immigrants are from the Pew Hispanic Center; data on the uninsured are from the U.S. Census Bureau.

Militants in tennis shoes

Nurses Association won’t bend on health reform

By Timm Herdt
Ventura County Star
Wednesday, September 12, 2007

John Graham, a hulking man with sad eyes, wearing a shirt only half buttoned, looked the part Tuesday of a man who had not slept well.

“It was not an easy night,” he said.

There have been many such nights over the last six years, but Monday had been particularly bad, knowing dawn would deliver the anniversary of the date that painted the sadness in his eyes.

He had been a volunteer emergency medical technician six years earlier, working at a job site in Manhattan near the World Trade Center.

“I was looking up at the second plane that hit the tower just like I’m looking at you,” he said, staring intently at his interviewer.

His immediate response was to start looking for the injured and to help.

We spoke in the lobby of the Sacramento Convention Center, where Graham was an honored guest of more than 1,000 union nurses. Later in the day, he would speak at a rally on the Capitol lawn.

His message: America’s healthcare system is such a mess it has failed even those whose illnesses spring from patriotic heroism.

Oct. 10, 2001, Graham was diagnosed with asthma and “five or six other” respiratory ailments. Since, he says, “It’s gotten progressively worse.” He quit his job as a safety officer for the Carpenters’ Union in 2004 after having battled pneumonia three times in a year.

His health insurance ran out a year later. These days, he’s got an oxygen tank and other paraphernalia at home. “When I have an asthma attack, I give myself my own emergency respiratory treatment.”

Graham’s story may by now sound familiar. He was featured in Michael Moore’s film, “Sicko,” and has become a crusader for universal healthcare.

“There are 18,000 people dying every year in the United States because they don’t have healthcare,” he says. “That’s six 9/11’s a year.”

Listening to Graham’s story is an uncomfortable experience. The Nurses Association knows that; it’s why it brought him to California at a time when legislators and Gov. Arnold Schwarzenegger are negotiating health insurance reform the nurses believe falls short of an authentic solution.

Alone among interest groups in Sacramento, the California Nurses Association opposes any healthcare reform that falls short of blowing up the private insurance-based system and replacing it with a Medicare-style system in which everyone would be insured by the government.

It’s not this union’s style to play nice or to compromise. Whether it’s organizing, negotiating, advocating for patients’ rights or fighting for political change, the CNA engages in what it calls “intelligent, focused, strategic militancy.”

Judging from the results of late, it’s hard to argue with the strategy.

The CNA has grown from 18,000 members in 1992 to 75,000 today. It has become a national force in recent years, picking up bargaining units in Illinois and Maine, and adding to its name: It’s now the California Nurses Association/National Nurses Organizing Committee.

Earlier this year, it affiliated with the AFL-CIO — an action that was not coincidentally followed by the national union’s decision to make healthcare its top priority in the 2008 election year.

MSNBC last year named CNA Executive Director Rose Ann DeMoro to its list of the “10 most influential women in America,” alongside such heavyweights as Hillary Clinton, Condoleezza Rice and Nancy Pelosi.

In the political arena, the CNA in 2004 hound Schwarzenegger to such distraction, he famously blurted that line about “kicking their butts.” Nurse protesters continued to disrupt every Schwarzenegger fundraiser in 2005, and if they weren’t solely responsible for defeating his special-election ballot measures, they certainly softened him up.

Polling at the time showed that nurses, by virtue of their profession and reputation, had more credibility with voters than any other group.

These days, it’s Democratic Assembly Speaker Fabian Nuñez who’s feeling the heat. Nurses denounce his compromises on healthcare reform as a sellout, and assert he’s become way too friendly with Schwarzenegger.

To look at those at the union convention and listen to their speeches is an exercise in cognitive dissonance. The women on the stage are gentile and grandmotherly, but their rhetoric is steely and defiant.

They say they won’t rest until California has a single-payer, universal healthcare system in place. Believe that.

Not this year, probably not next and maybe not the year after, but eventually there will be a showdown in this state over the issue. The nurses may not win, but you can be certain of this: They’ll make their opponents very uncomfortable.

— Timm Herdt is chief of The Star’s state bureau. His e-mail address is therdt@VenturaCountyStar.com.

California legislation set for veto and special session

Recap and Analysis of Yesterday's Legislative Floor Debates on California Health Care

By Hanh Kim Quach, Health Care Policy Coordinator, Health Access California
California Progress Report
September 11, 2007

The California Senate and Assembly passed historic health care reform legislation Monday… AB 8 (Nunez/Perata).

Yet even before the debate on AB 8 (Nunez/Perata) was finished in the Assembly, Gov. Arnold Schwarzenegger announced — though not unexpectedly — that he would veto the bill and call the Legislature back to work in a “special session” to “keep working until we achieve the kind of historic solution that all of us and the people of California want.”

Sen. Sam Aanestad and other Republican legislators attempted to disparage AB 8 by comparing it with the Massachusetts plan, pointing out that Governor Romney in “running from it.” While AB 8 certainly shares certain features with the Massachusetts plan, one missing provision is glaringly obvious: the absence of any mandate to buy coverage in the individual market. Even for group coverage, AB 8 does not require anyone to have coverage if they can’t afford it. Affordability is explicitly defined in the bill — unlike in Massachusetts. No worker would have to take up coverage if their health care costs — premiums and out-of-pocket costs –would exceed 5 percent of a person’s wages.

Many lawmakers, including Assembly Speaker Fabian Nunez, said AB 8 was California’s opportunity to provide a model for the federal government to implement health care reform. “We have a broken health care system in California and we must do something to fix it now… This health care package will deliver what the federal government has failed to do: to provide all Americans with affordable health care coverage,” Nunez said.

As part of a special session, (Sen. Don Perata said), “we would continue where we left off…”

http://www.californiaprogressreport.com/2007/09/recap_and_analy.html

Comment:

By Don McCanne, MD

This article from Health Access California, a supporter of AB 8, provides an overview of the legislation and the political activity taking place around it. For those interested, it is worth reading.

In a classic example of political irony, Democrats are abandoning their preferred option, single payer reform, in order to reach a compromise with the Republicans and the private insurance industry. They have crafted a model that they believe does not repeat the mistake of the Massachusetts reform program. California Democrats proudly proclaim that they will not require individuals who cannot afford private insurance to be covered by a program that is being inappropriately characterized as universal.

Not one Republican voted for this compromise, and Blue Cross of California is spending a couple million dollars in an advertising campaign opposing reform. So much for compromise. The Democrats have violated the first rule of negotiation. Before they even seriously sit down with the governor, they have removed from the table the most important polices that would bring comprehensive, affordable, high quality care to everyone.

When you read through AB 8, perhaps the most glaring defect is that the authors craft reform around the private insurance model – a model that served us fairly well in the last century, but one that has now become obsolete. Individual private insurance plans that are reasonably comprehensive and include everyone are no longer affordable for the majority of us. The model for this century is a universal risk pool that is equitably funded.

A report released today in Health Affairs stated that the average annual premium for family coverage is now $12,106. With a median household income of $48,200, those numbers no longer work. Do we provide large government subsidies for a majority of us to purchase administratively-inefficient private plans, or do we reduce the benefits of the plans so that the premiums become affordable? The current anti-tax political environment makes the former highly unlikely.

AB 8 will result in an explosion of the fastest growing problem in health care today: underinsurance. Private plans with affordable premiums but inadequate coverage will create financial hardships for precisely those individuals who should be protected – those who need health care.

Most of us who continue to advocate for a single payer national health insurance program have also supported incremental improvements as temporary measures until we can achieve the reform that we really need. But the line must be drawn with AB 8. We need health care financing reform that enables patients to access the health care system without being exposed to financial hardship.

We need a universal risk pool that is equitably funded and efficiently administered so that funds can be redirected to the health care that we need. What we don’t need is false pride in having protected the private insurance industry at the cost of leaving millions of Californians without coverage.

Worker-friendly candidates needed in November

Mansfield News Journal
Mansfield, Ohio
September 10, 2007

After a wonderful Labor Day weekend I got to wondering what would happen if all workers would demand something be done about the health care crisis we face in this country. How long would it take for our elected leaders to fix this problem if faced with the possibility of losing their positions?

I would like everyone to call or write their elected representatives about co-sponsoring a bill brought forth by Congressman John Conyers of Michigan. It is H.R. 676-The United States National Health Insurance Act. It is Medicare for all. It would streamline payments through a single, nonprofit payer. We would save more than enough to provide comprehensive, high quality coverage for all Americans.

Did you know the U.S. spends twice as much as other industrialized nations on health care? Yet our system leaves more than 46 million people without health coverage, and millions more inadequately covered.
Ladies and gentlemen, it is time that we all get involved and do something about this and other problems facing the American worker today. We all need to register to vote, and to vote at election time. We need to encourage our friends, neighbors and co-workers to do likewise. We need to find and elect American-worker friendly candidates.

Mike Carroll
Mansfield, Ohio

Audit Cites Overpaid Medicare Insurers

Click here to read the full GAO report.

By ROBERT PEAR
New York Times
Published: September 10, 2007

WASHINGTON, Sept. 9 — Private insurance companies participating in Medicare have been allowed to keep tens of millions of dollars that should have gone to consumers, and the Bush administration did not properly audit the companies or try to recover money paid in error, Congressional investigators say in a new report.

The investigators, from the Government Accountability Office, said the money could have been used to reduce premiums or provide additional benefits to older Americans.

Under federal law, Medicare officials are supposed to audit the financial records of at least one-third of the insurance companies each year. But the investigators said the Bush administration had fallen far short of that goal and had never met the “statutory requirement.”

Indeed, they said, the proportion of companies audited by Medicare declined steadily — to 14 percent in 2006 from 24 percent in 2001 — despite a steady growth in Medicare payments to the plans. Those payments now total $75 billion a year, about one-fifth of all Medicare spending.

The Bush administration did not take issue with the findings.

“We welcome constructive suggestions for improving the audit process,” said Tim Hill, chief financial officer at the Centers for Medicare and Medicaid Services. An agency spokesman said it might need additional legislative authority to clarify its power to recoup money from insurers.

Administration officials have strongly encouraged insurance companies to participate in Medicare and have urged beneficiaries to enroll in private plans. Some plans, known as Medicare Advantage plans, cover a wide range of services, including doctor’s visits and hospital care. Others provide only prescription drug benefits.

The purpose of the audits is to determine whether insurers correctly calculated their costs and premiums and delivered the services promised to Medicare beneficiaries. Insurers typically receive fixed monthly payments, set in advance, for serving Medicare patients. Drug plans can receive extra payments if their costs exceed their expectations.

Likewise, if private plans hold down costs, they are supposed to share some of the savings with beneficiaries and the government.

In 2003, Medicare audited 49 of the 220 organizations participating in the program. Auditors found significant errors at 41 companies, but Medicare officials took no action on the findings. As a result of the errors, the auditors said, insurers kept “$59 million that beneficiaries could have received in additional benefits, lower co-payments or lower premiums.” The report did not identify the companies.

Paul Caban, assistant director of the financial management team at the Government Accountability Office, said the Medicare agency’s response was puzzling. “What is the value of conducting these audits if you do not act on the findings?” Mr. Caban asked.

Two influential members of Congress expressed dismay.

“Congress required audits for good reason,” said Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee. “There’s a lot of taxpayer money being spent, and we need to know where it goes. We also need consequences for spending that isn’t proven to serve beneficiaries.”

Mr. Grassley said Medicare officials had done “a poor job of bringing accountability here,” and he added, “I want to see concrete action to fix this.”

Representative Pete Stark, the California Democrat who is chairman of the Ways and Means Subcommittee on Health, said the Medicare agency “is not doing its job to protect beneficiaries.”

In separate action, the Bush administration is vigorously pursuing money that it says is owed to insurance companies by Medicare beneficiaries. The Medicare agency has sent letters to more than 135,000 people saying they still owe premiums for prescription drug coverage provided in 2006. In most cases, the premiums were supposed to have been withheld from monthly Social Security checks, but the government withheld the wrong amounts or nothing at all.

Kerry Weems, acting administrator of the Centers for Medicare and Medicaid Services, said, “I am intently focused on this matter and will make it a priority to correct the errors and minimize them in the future.”

Insurers submit bids to Medicare each year, saying how much they expect to be paid to provide specified benefits. If the government accepts these proposals, it signs contracts with the insurers.

The Medicare agency contends that it does not have the legal authority to force insurers to return money to beneficiaries or to the Medicare trust fund when auditors find “errors, incorrect or unreasonable assumptions or other misstatements” in company bids.

The Government Accountability Office insisted that Medicare officials “had the authority to pursue financial recoveries,” but did not use it.

Medicare hires private firms to conduct many audits. Insurers said that in many cases the auditors were not well versed in the intricacies of Medicare. Moreover, they said, Medicare has not provided clear guidance on how to define important items like administrative costs.

Medicare officials said they found significant errors in bids from 18 of the 80 organizations audited last year. But the Government Accountability Office said “there is a low probability of the audits identifying intentional misrepresentations,” because Medicare relies heavily on actuaries who prepare the bids to certify their accuracy.

Under a 2001 law, every federal agency is supposed to have a program for “recovering any amounts erroneously paid to contractors.”

The Bush administration told the Government Accountability Office that “general federal contract laws do not apply to the payments made under Medicare contracts.”

AHIP/Milliman report on guaranteed issue and community rating

New AHIP Report Takes a Ten Year Look at the Unintended Consequences of State Efforts to Change the Insurance Market

America’s Health Insurance Plans (AHIP)
September 7, 2007

As states consider proposals to expand access to health care coverage, a new study assesses the impact of prior efforts in states across the country. The study by Milliman, Inc. on behalf of America’s Health Insurance Plans (AHIP) examined what happened.

Specifically, the report examined eight states that enacted various forms of “guarantee issue” and “community rating” in the 1990’s, including Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont, and Washington.

Guarantee issue requires insurers to sell an individual health insurance policy without regard to a person’s health and community rating requires that all consumers pay the same or similar premiums without regard to age or gender. According to the report, these initiatives have the potential to cause individuals to wait until they have health problems to buy insurance. This could cause premiums to increase for all policyholders, increasing the likelihood that lower-risk individuals leave the market, which could lead to further rate increases. If this continues, the pool or market could essentially collapse or shrink to include only the high risk population.

Overall, the report found that states that implemented guarantee issue and community rating saw a rise in insurance premiums, a reduction of individual insurance enrollment, and an exodus of health insurers from the individual insurance market. In addition, the report found no significant decrease in the uninsured population in states that implemented these initiatives, often a stated goal of legislators.

Consequently, several states that initially implemented guarantee issue and community rating have since repealed or modified their laws with the intent of stabilizing the insurance marketplace and providing consumers more choice and access to coverage.

AHIP press release:
http://www.ahip.org/content/pressrelease.aspx?docid=20794

The Milliman report, “The Impact of Guaranteed Issue and Community Rating Reforms on Individual Insurance Markets:”
http://www.ahip.org/content/default.aspx?docid=20736

Comment:

By Don McCanne, MD

Everyone in the policy community understands that requiring insurers in the individual market to accept all applicants (guaranteed issue) and moderating the variation in premiums by more effectively pooling risk (community rating) result in higher insurance premiums than would be characteristic of insurance pools that exclude individuals with health care needs. It is also understood that the higher premiums result in both a lower rate of initial enrollment and a lower rate of renewals, further concentrating higher cost individuals in the risk pools. This upward pressure on premiums is known as antiselection or the death spiral since insurers eventually withdraw these unaffordable products from the market.

So why did AHIP decide to commission yet another study of these well understood phenomena? Simply because there is now enough experience with these policies that they could take the study one step further. They show what can happen when these policies are modified or reversed. To no surprise, the upward pressure on premiums diminishes and the private health insurance market improves.

The implicit conclusion presented is that guaranteed issue and community rating should be rejected in order to “stabilize the insurance marketplace and provide consumers more choice and access to coverage.” The problem is that this stabilizes the market only for healthy consumers.

If you’re sick, you’re on your own. If you don’t like that, try for a government handout or look for relief in the bankruptcy courts. But don’t destabilize the insurance marketplace by expecting your health care needs to be met. What do you think private health insurance is for, anyway?