pnhpf3a

By Cathy Schoen, Jacob Lippa, Sara Collins, and David Radley
The Commonwealth Fund, December 2012

Across states, the total average premium reached $15,022 per year in 2011 for family coverage, an increase of 62 percent since 2003.

Although premiums are rising more slowly than they were before enactment of the recent reforms, private insurance spending per person is projected to continue to grow more rapidly than incomes over the next decade.

By 2011, there were 35 states in which the annual premium equaled 20 percent or more of income, compared with just one state in 2003. And there are now no states where premiums amount to less than 14 percent of median incomes, compared with 13 such states in 2003.

Although workers are paying more for insurance, their premiums are buying them less financial protection because of the rapid increase in deductibles from 2003 to 2011. The resulting shift of medical care costs onto workers and their families has led to higher out- of-pocket costs for medical bills — on top of higher premium costs. By 2011, 78 percent of workers faced a deductible, compared with about half (52 percent) in 2003.

With the recent recession, millions of workers lost their jobs or were otherwise unable to afford coverage and, as a result, joined the ranks of the uninsured. From 2008 to 2010, the percentage of people with employment-based insurance fell from 58.9 percent to 55.3 percent. An estimated 9 million adults ages 19 to 64 lost a job with health benefits and became uninsured during this period.

Along with rising numbers of uninsured, the nation has seen a rapid increase in the number of underinsured, those at risk of high out-of-pocket costs for medical care although insured all year. As of 2010, estimates indicate 81 million adults under age 65 (44% of all adults) were either uninsured during the year or underinsured, up from 61 million in 2003.

From 2003 to 2010, median family incomes increased by only 10 percent, on average, not enough to keep up with an inflation rate that has increased by 18.5 percent over these seven years.
 
To date, with highly concentrated insurance markets, the path of least resistance for insurers has been to simply pass on the rising costs of medical care and higher prices, while adding insurance administrative costs and profit margins. In fact, the major national private insurance companies have done well throughout the recession years, with strong pretax profit margins and administrative costs that have largely kept pace with increases in medical care costs.
 
The national debate on health care costs often centers on the federal deficit and on Medicare’s future. Less attention is focused on the costs of private insurance spending per person, which have been rising faster than Medicare spending per person and are projected to continue to do so over the next decade. The mounting stresses on businesses and families underscore the need for action on behalf of the private sector as well. Absent a significant change in the way private insurance and health care markets function, cost pressures will continue to push up private insurance costs and out-of-pocket medical expenses, if the past two decades are any guide.
 
The Affordable Care Act’s effectiveness in tackling costs, however, will require collaboration among public and private stakeholders to ensure that markets operate in the broad national interest of better health, more positive health care experiences, and lower future costs.

For full report, click “Issue Brief” at this link:
http://www.commonwealthfund.org/Publications/Issue-Briefs/2012/Dec/State-Trends-in-Premiums-and-Deductibles.aspx?omnicid=20

Comment:

By Don McCanne, MD

It just gets worse. Family insurance premiums are now over $15,000 – more than 20 percent of income in a majority of states. Family deductibles now average over $2000. Family incomes have not kept up with inflation, much less with the cost of health care. Yet private insurers are thriving.

Many are hoping that the Affordable Care Act will provide some relief. The PNHP website (www.pnhp.org) has a plethora of reports and studies indicating that there is no hope that that we will have truly substantial reform under this Act – only administratively-complex tweaks.

The authors of this report state that the Affordable Care Act’s effectiveness “will require collaboration among public and private stakeholders.” This is the fundamental reason that there is no hope. Under our current dysfunctional financing system, which was left in place by this legislation, that collaboration must be voluntary – an impossibility since each vested interest is jockeying for the most advantageous position.

Under a properly designed single payer system, the publicly-administered policies are designed to ensure collaboration of all parties. What works in the interests of the patients also works in the interests of the collaborators. Until the nation is ready to demand structural reform that benefits us all, we are going to continue to see the numbers in this report grow even worse.

By Elise Viebeck
The Hill, December 8, 2012

Democrats in Congress are changing their tune on means testing in Medicare, an idea the late Sen. Edward Kennedy (D-Mass.) resisted for decades.

Leading Democratic lawmakers have suggested that raising premiums for wealthy Medicare beneficiaries could be a matter of common ground with Republicans in the ongoing deficit-reduction talks.

“I think that is reasonable and certainly consistent with the Democratic message that those who are better off in our country should be willing to pay a little more,” Senate Majority Whip Dick Durbin (D-Ill.) said Thursday.

The idea of affluence testing is not new — wealthy Medicare recipients already pay higher premiums for doctor visits and prescription drug coverage.

But negotiations to avoid the so-called “fiscal cliff” open the door to new measures that would make Medicare costs more progressive based on income.

Last week, Senate Finance Committee Chairman Max Baucus (D-Mont.) called the idea “somewhat attractive” as a bargaining chip for talks on the so-called fiscal cliff.

Sen. Claire McCaskill (D-Mo.) remarked that “Donald Trump may need medication, but he certainly doesn’t need the government to pay for it.”

And Congressional Black Caucus Chairman Emanuel Cleaver (D-Mo.) called means testing a good way to bolster Medicare’s budget without cutting benefits.

“We already have a substantial amount of means-testing in the Medicare program — most significantly, there is no cap on the income subject to the Medicare tax,” said (Rep. Henry) Waxman in a statement to The Hill.

“That is the right way to ask the better-off to pay more. And in fact, we also have means testing now of the Part B and Part D premiums. It is a mistake to go further.”

http://thehill.com/blogs/healthwatch/medicare/271795-dems-warm-to-medicare-change-that-kennedy-opposed

Comment:

By Don McCanne, MD

Now that health care costs are unbearably high, Medicare must be progressively financed since moderate- and low-income individuals can no longer bear the full costs. A major step forward was the removal of the cap on wages subject to Medicare taxes, so higher income individuals pay more. The Affordable Care Act also added a new 0.9% Medicare tax for incomes over $200,000/$250,000.

In addition, in order to help cover Medicaid expansion and subsidies for the exchange plans, the Affordable Care Act also added a 3.8% tax on investment income, again for those with incomes over $200,000/$250,000. So we have already embarked on policies that make health care financing progressive, though we need to do more, but only on the financing end.

Medicare benefits should be the same for everyone. We should eliminate premiums and cost sharing, and we should expand benefits so that administratively wasteful Medigap and retiree health benefit programs are no longer necessary. Low income individuals should receive the same standard of care as the wealthy, just as was the intent in enacting the traditional Medicare program.

Introducing means testing, which we have already begun with Part B and Part D premiums, reduces support of wealthier beneficiaries who are annoyed by these additional charges. Once the principle of means testing is established, the budget hawks ratchet it up, driving wealthier individuals to look for private options, currently available as the Medicare Advantage plans. It is only one small additional step to introduce premium support – vouchers – where the wealthy will take their money and run. Once you lose support of wealthier individuals who have a strong political voice, then Medicare will descend down the path toward becoming a welfare program, like Medicaid.

We cannot allow this bipartisan attack on Medicare to proceed. Mobilize the forces!

John Goodman’s Health Policy Blog
By John Goodman
National Center for Policy Analysis, December 10, 2012

(Excerpts)

Have you ever noticed that people who worry about inequality seem to be focused only on certain kinds of inequality? When they obsess about the income and wealth of the top 1%, they seem to be bothered by only some of those at the top, and not others.

For example, have you ever seen Robert Reich or Paul Krugman or any like-minded complainer bemoan the huge salaries of professional athletes?

Even more puzzling, when is the last time you saw any of them assailing worthless heirs?

Something else is odd about the sociology of the anti-inequality crowd. They seem to be unfazed by inequality created by government.

Take the recent Powerball outcome. At $588 million, it was the largest lottery prize in history ― to be shared by two ticketholders.

Then there is the entire structure of elderly entitlements. They mainly take from people who have less and give to people who have more.

Think about that last finding for a moment. Throughout the country, families who are struggling to get by and who cannot afford to buy their own health insurance are paying 15% of their income to fund hip and knee replacements for our true leisure class, so they can get back out on the golf course.

But when Paul Krugman writes about the top 1%, this is not who he has in mind. He is complaining about the incomes of people who run large companies. He wants their tax rate to be 91%!

I think Ayn Rand may have been right. The left is populated by people who are not especially bothered by those who become wealthy by virtue of birth or luck or good fortune. They do not even seem to be bothered by the winner-take-all feature of professional sports that confers millions of dollars on some athletes while those who were almost as good languish in near poverty. No, who they obsess about are the creators, the builders, the entrepreneurs.

They don’t hate the wealthy who don’t deserve their wealth. They hate the wealthy who do deserve it.

(John Goodman understandably wants his comments to be read in full, which you can do at the following link.)

http://healthblog.ncpa.org/the-anti-capitalist-mentality/

Reader Comments:

Don McCanne says:
December 10, 2012 at 12:30 pm

Although everyone already understands this, it is still important to distinguish between equality and equity. Most progressives are not striving for equality of income and wealth, rather the goal is equity – introduce an element of fairness in distribution.

Although sometimes expressed as an anti-corporate bias, the objection is more to policies favoring massive perverse distributions, as from rent seeking for instance. Rent seeking that provides little net benefit to society while the rent seekers scoop up the wealth, to many of us represents an intense sense of unfairness.

The work of Piketty and Saez demonstrates the unfairness that has now become the norm. In the face of a massive transfer to the wealthy, median household incomes are no longer enough to bring average families the American Dream – paying for essential needs while allowing enough for higher education of their children, adequate retirement accounts, medical costs for those with greater needs, and perhaps even a modest improvement in housing and transportation, and even an occasional well-earned vacation. And keep in mind the obvious that half of all households fall below the median.

With equitable public policies in a wealthy nation like the United States, hard working families should be able to realize the American Dream. That’s fair. What isn’t fair is for the rent seekers to establish a plutocracy and use it to break up our unions, clobber our retirement and health programs, ship jobs out of the country, saddle higher education with intolerable debt, all of this and similar abuses on top of filling their coffers with funds they have wrested away from the main source of our productivity – the workers of America.

Inequality will always be with us, but we do need policies that increase fairness by reducing inequity in America.

http://healthblog.ncpa.org/the-anti-capitalist-mentality/comment-page-1/#comment-137825

Comment:

By Don McCanne, MD

This blog on “The Anti-Capitalist Mentality” does pertain to health care reform in that we will never have an equitable health care system for all until we decide that equity – fairness – must be a primary goal of public policy.

By Colin P. West, MD, PhD and Denise M. Dupras, MD, PhD
JAMA, December 5, 2012

This study of a large national sample of internal medicine residents confirms that general medicine remains a less common career plan overall than subspecialty medicine. Combined with the fact that only a small minority of medical students express interest in general medicine and primary care careers, the small number of internal medicine residents reporting plans for generalist careers means a very limited number of generalists can be expected to enter practice each year.

http://jama.jamanetwork.com/article.aspx?articleid=1475191#RESULTS

Comment:

By Don McCanne, MD

This update confirms that internal medicine residents are selecting the subspecialties in preference to general medicine and primary care. In light of the pressing need for improving our primary care infrastructure, what policies should we support?

Since family medicine residents almost always eventually enter primary care, should training programs de-emphasize general internal medicine and place more emphasis on family medicine, while relegating internal medicine to the subspecialties? That would improve the allocation of residency slots since you would not be losing general medicine residents to the subspecialties after their residencies began. This is not to suggest that subspecialists should skip all training in general medicine. The purpose would be to stem the loss of generalists from the training programs.

Also many agree that the role of nurse practitioners in primary care should be expanded. This would be especially valuable in integrated health systems and medical homes. If so, the expansion should be coordinated with the family medicine programs to achieve an optimal balance of primary care professionals.

Since we aren’t getting the numbers right, shouldn’t we consider an alternative approach? If we had a federally funded national health program, wouldn’t we be striving to improve the use of our resources to be sure that our health care infrastructure is better balanced? Our current dysfunctional, fragmented method of financing our health care system doesn’t seem to be doing the job very well.

By Greg Scandlen
National Center for Policy Analysis (NCPA), December 5, 2012

Now we get to the biggest failure of them all — the individual mandate. The premise was simple: If people aren’t buying what they should (in this case, health insurance), pass a law telling them they have to, and they will. Presto, Change-o problem solved!

Now, to be fair, Congressional Democrats weren’t quite that simple minded. They threw in lots of subsidies and required that insurers enroll anyone who applied, no questions asked. So, they made it affordable and available, along with being mandated. So, it should work like a charm, right?

Well, maybe in a vacuum. But in reality this rule is being inserted into a very complex and mature system of existing subsidies, responsibilities, and incentives. In this case, one of the primary factors is the role of employers in providing and paying for coverage.

Many people, including this writer, believe that placing that responsibility on employers was a major policy screw-up that created all the wrong dynamics in health care and virtually eliminated market functions because the payer and the consumer were not the same person.

Nevertheless, it is a system we have lived with for two-thirds of a century. Almost everything about health care and employment has been built around that relationship — prospective employees consider a company’s health benefits when deciding to take a new job; employers devote a lot of staff time and resources on choosing benefit programs; laws and regulations are written to ease the problems of interruption of benefits when people change jobs; courts are concerned that employers may not always fulfill their obligations to their workers. Not all employers provide benefits, but all feel an obligation and responsibility to do so, and the ones who don’t offer health benefits often feel conflicted about it.

Unwinding all this, even if desirable, is extremely complex and should take a very long transition period as we all learn new ways of doing things.

Enter ObamaCare. This law provides stark incentives for employers to get out of the business immediately. It even assuages any guilt feelings the employer might have by, first requiring that they continue to help pay for it, and next, by offering workers richer subsidies than the employer typically can. An employer will be able to save many thousands of dollars per worker by dropping coverage and sending employees to the Obama Exchange where they will get a choice of benefits plans and substantial subsidies if they make under 400% of the poverty level. Instead of paying, say, $10,000 per worker for coverage, now the employer can pay a simple $2,000 penalty and use the savings to give each worker a raise. Most employers will be able to save even more by reducing their HR departments, and they will be freed of complaints about any problems with the health plan they offer.

In February, 2011 McKinsey & Company did a large (1,329) survey of employers asking about their intentions with the Affordable Care Act and found that 30% said their company would “probably” or “definitely” drop coverage as a result. McKinsey is an extremely credible firm, but that didn’t stop supporters of ObamaCare from lambasting the survey because it was not consistent with other economic analyses. McKinsey had to issue a statement explaining it was not intended to be an economic analysis, it was an opinion survey. I would argue that such a survey is probably far more accurate than an economic analysis that must rely too much on assumptions. Indeed, it likely understated the situation. As employers learn more about the requirements of the new law they are more likely to run away from it.

We can’t know until it happens how many employers will drop coverage, but the 30% estimated by McKinsey may be the minimum. That could mean 50 million or more people who used to get employer coverage no longer will. For those employees this means:

*  No more automatic enrollment going along with the job. People will have to take the initiative to find out about the Exchange.
*  No more pure community rating of the employee share of premiums. The Exchange will vary premiums every year based on a person’s age.
*  No more paycheck deductions of the employee share of premiums. People will have to make some kind of payment arrangement for their share of the premium.
*  No more convenient and friendly HR Department people to answer questions. People will have to seek out an “Exchange navigator” to get their questions answered.

These employees are also likely to find at the Exchange:

*  A clunky web site run by the state or federal government laying out the coverage options.
*  Overpriced insurance options. (Because insurers can no longer ask medical questions, they will have no idea what kind of risks they are enrolling, or the premiums needed to cover those risks. They will err on the side of caution and charge higher premiums.)
*  Confusion about how much they will be charged for their share of the premium. (They will be subsidized, but the amount of the subsidy will vary according to their age, income, geographic location, family size, and choice of plan.)
*  Insurance plans that cover a bunch of stuff they don’t want or need.
*  No reliable source of personalized information. (Ever tried to call the Medicare helpline?)

Finally, they will realize that they don’t need to go through all this. They can delay making a decision until they really need to get health care services:

*  Exchange coverage is guaranteed to accept them at any time with no questions asked.
*  They can save a whole lot of money by not paying premiums and using that money for more pressing needs.
*  There is no meaningful penalty for failing to enroll. What penalty there is applies only to people who make enough money to pay income taxes, and it can be collected only by seizing whatever tax return is due the taxpayer. This can be easily avoided by upping deductions at the start of the year.

Most people have very few medical expenses in the course of a year. According to this chart 50% of the people in the United States consume only 3.9% of all health care expenses each year, while the top 20% consume 78.3%. People in the top 20% will certainly want to be covered but the bottom 50% get no advantage from insurance coverage. They spend far less on services than they would on insurance premiums.

(Scandlen includes here a slide taken from a presentation on “Medicare for All” by Paul Y. Song, MD of Physicians for a National Health Program, graphically demonstrating this distribution of health care consumption.)

Obviously not everyone will make the choice to go uninsured. People who are risk-adverse, or who have ongoing medical needs, or who have small children, will continue to be covered. But every year, every person will have to decide how best to spend their money. A very large number will decide they have better things to do with that money than spend it on insurance coverage they don’t want and never use.

The odds are that after all the trauma and expense of enacting and implementing ObamaCare, we will have fewer people insured than we did before it was enacted.

http://healthblog.ncpa.org/the-crown-jewel-of-obamacare-failures-2/

Comment:

By Don McCanne, MD

Greg Scandlen is a very well informed and respected member of the policy community who has been associated with conservative/libertarian organizations such as the National Center for Policy Analysis, Cato Institute, Galen Institute and Heartland Institute. This article for NCPA is presented in its entirety to demonstrate how much agreement there is with those of us at Physicians for a
National Health Program in defining some of the problems with the highly flawed Affordable Care Act (Obamacare). This article could have been written by one of us at PNHP.

He does not offer any solutions in this particular article, though had he, it would undoubtedly be from his area of expertise and advocacy – consumer-driven health care, including health savings accounts and health reimbursement arrangements. That, of course, is quite a contrast from the single payer solution advanced by PNHP.

When there is so much agreement on what is wrong, why can’t we agree on the solution? Perhaps it’s our respective goals. We at PNHP want everyone to have affordable access to all essential health care services, as a matter of social justice. The advocates of consumer-driven health care seem to place the will of the individual consumer above that of society’s collective will for health care justice. But the divide is not quite that simple.

Supporters of an improved Medicare for all still agree that the patient (health care consumer) should make the ultimate decisions on his or her individual health care, after being informed on the options. The role of the government is to remove the financial barriers to that care.

The consumer-driven advocates would add to the health care consumer (patient) the responsibility of making spending decisions so that they would shop for higher quality and greater value. The role of the government would be to ensure access to basic health care services for those who lack the financial resources to pay for that care.

The problem with the consumer-driven approach is that is what we have now, and it isn’t working. Except for a marginal tax benefit, it doesn’t matter whether the patient’s share of cost comes from a health savings account or from other personal funds. The system perpetuates uninsurance and under-insurance which exposes far too many to financial hardship in the face of medical need.

An improved Medicare for all would eliminate financial hardship for individual patients while using public policies to reduce the excessive escalation of our collective health care spending. The latter is a task that our private insurers cannot master, but is ideally suited to a single, national, publicly-administered insurance risk pool.

Greg Scandlen understands this. He understands the inadequacies of his consumer-directed approach. I wish he could explain to us better, in terms devoid of ideology, just what is wrong with our approach – an approach that would provide everyone the care that they need in a progressively-financed system that we can all afford.