By Deborah Stone
Journal of Law, Medicine & Ethics, 2008 Winter;36(4):652-9, 607
In most other nations, insurance for medical care is called sickness insurance, and it covers sick people. In the United States, we have “health insurance,” and its major carriers — commercial insurers, large employers, and increasingly government programs — strive to avoid sick people and cover only the healthy. This perverse logic at the heart of the American health insurance system is the key to reform debates.
FOR IMMEDIATE RELEASE
Dec. 1, 2011
Contact:
Steffie Woolhandler, M.D., M.P.H.
Oliver Fein, M.D.
Danny McCormick, M.D., M.P.H.
Mark Almberg, PNHP, (312) 782-6006, mark@pnhp.org
In a letter (appended below) sent to Secretary of Health and Human Services Kathleen Sebelius and posted on the Internet today, more than 2,400 physicians, nurses and other health advocates condemn the recommendations of an Institute of Medicine (IOM) committee regarding the “essential benefits” to be mandated under the 2010 federal health reform law.
The signers, most of whom are physicians, charge the committee’s recommendations amount to prescribing skimpy coverage that would “sacrifice many lives and cause much suffering,” and urge the Obama administration to reject them.
“The IOM panel endorsed insurance coverage similar to that offered by small employers rather than the more comprehensive coverage offered by large employers,” said Dr. Danny McCormick, an internist, assistant professor at Harvard Medical School and former IOM fellow who helped circulate the letter. “The recommendation was widely viewed as a victory for the health insurance industry, which has long opposed mandating comprehensive benefits.”
The panel also recommended that coverage under the new law be defined by a premium target – an approach often called “defined contribution” – rather than by a list of medically necessary benefits, McCormick said.
The protest letter accuses the IOM panel of being “riddled with conflicts of interest” and notes that many of the panel members have “amassed personal wealth through their involvement with health insurers and other for-profit health care firms” whose businesses would be affected by the panel’s recommendations.
The IOM committee’s members include Sam Ho, executive vice president of UnitedHealthcare; Leonard D. Schaeffer, director of the biotechnology company Amgen and former chairman and CEO of WellPoint (Schaeffer’s family foundation donated $2 million to the IOM in 2010); as well as executives from 3M Health Information Systems, a medical supplier, Milliman Inc., an actuarial consulting firm with close ties to the insurance industry, and The Blackstone Group, a private equity firm with major health care interests. The IOM’s full list of panel’s members, with a partial listing of their affiliations, is accessible here.
“Many committee members’ strong ties to the health industry violate the guidance offered in a 2009 report issued by the IOM which recommended that those with industry conflicts of interest should generally be excluded from such panels,” said Dr. Steffie Woolhandler, professor of public health at the City University of New York and visiting professor of medicine at Harvard Medical School, who served as an IOM fellow in 1990-1991. Woolhandler also circulated the letter.
The signers of the protest letter include several prestigious members of the IOM, as well as several former fellows. The letter was first circulated to colleagues by attendees at the IOM’s annual meeting near Washington in October. After learning of the letter, IOM officials instructed security officers to block its distribution at the meeting.
The letter was also circulated by Physicians for a National Health Program, which advocates for a single-payer health system, and by other health professional groups.
Besides being submitted to Secretary Sebelius and other administration officials, the letter has been accepted for publication in the International Journal of Health Services, Woolhandler said.
We protest the Institute of Medicine’s (IOM) recommendation that cost rather than medical need be the basis for defining the “essential benefits” that insurance policies must cover when the federal health reform law takes effect in 2014. If adopted by the Department of Health and Human Services, this recommendation will sacrifice many lives and cause much suffering. We call on Secretary Sebelius and President Obama to reject them.
The IOM proposal would base the required coverage on the benefits typical of plans currently offered by small businesses – enshrining these skimpy plans as the new standard. These bare-bones policies come with a long list of uncovered services and saddle enrollees with unaffordable co-payments and deductibles.
Already, millions of underinsured Americans forgo essential care: adults with heart attacks delay seeking emergency care1; children forgo needed primary and specialty care2; patients fail to fill prescriptions for lifesaving medications3; and serious illness often leads to financial catastrophe4.
The inadequate coverage the IOM recommends would shift costs from corporate and government payers onto families already burdened by illness. Yet this strategy will not lower costs. Delaying care often creates even higher costs. Steadily rising co-payments and deductibles over the past two decades have failed to stem skyrocketing medical inflation. And nations that assure comprehensive coverage – with out-of-pocket costs a fraction of those in the United States – have experienced both slower cost growth and greater health gains than our country.
Our patients urgently need what people in these other nations already enjoy: universal and comprehensive coverage in a nonprofit system that prioritizes human need over corporate profit.
The IOM committee was riddled with conflicts of interest, many members having amassed personal wealth through their involvement with health insurers and other for-profit health care firms. Its recommendations were lauded by insurance industry leaders who have sought to undermine real health reform at every turn. As the Lancet noted on its Dec. 5, 2009, cover: “Corporate influence renders the U.S. government incapable of making policy on the basis of evidence and the public interest.”5
Sadly, the committee’s damaging recommendations suggest that this corporate bug has also infected the IOM.
1. Smolderen KG, Spertus JA, Nallamothu BK et al. Health Care Insurance, Financial Concerns in Accessing Care, and Delays to Hospital Presentation in Acute Myocardial Infarction. JAMA 2010;303:1392-1400.
2. Kogan MD, Newacheck PW, Blumberg SJ et al. Underinsurance among Children in the United States. N Engl J Med 2010;363:841-51.
3. Doty MM, Edwards JE, Holmgren AL. Seeing Red: Americans Driven into Debt by Medical Bills. The Commonwealth Fund, August 2005.
4. Himmelstein DU, Thorne D, Warren E, Woolhandler S. Medical Bankruptcy in the United S
tates, 2007: Results of a National Study. Am J Med 2009;122:741-6.
5. Cover. The Lancet: Volume 374, Number 9705, 5 December 2009.
Physicians for a National Health Program (www.pnhp.org) is an organization of more than 18,000 doctors who support single-payer national health insurance. To speak with a physician/spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.
By Wendell Potter
PRWatch, October 24, 2011 – 2:24pm
Members of Congress and the Obama administration have assured us that on January 1, 2014, junk health insurance plans — which offer only the illusion of adequate coverage to the millions of Americans enrolled in them — will become a thing of the past.
Among those who clearly don’t believe those plans are headed for extinction are the insurance companies that market these highly profitable plans, and the employers that buy them — primarily restaurant chains and retailers with high employee turnover.
If I were President Obama, I would send one of my aides to the Chicago suburbs later this week to see first-hand just how determined these companies are to continue selling these plans — which are euphemistically called “mini-med” and “limited-benefit policies” — long past 2014.
On Wednesday, the third annual Voluntary Benefits and Limited Medical Conference will open at the Marriott Renaissance Schaumburg Convention Center, not far from Chicago’s O’Hare Airport. In just three years, this conference has grown to be a very big, three-day extravaganza. According to the conference website, it will “bring together all the players in the industry, from employers and benefits managers, to insurance agents, consultants, brokers, insurance companies, TPAs (third-party administrators), and enrollment firms.”
All you have to do is spend a few minutes on the website to get an understanding of just how much money there is to be made selling inadequate coverage to naive consumers. You’ll see all the big names in the insurance world among the attendees and exhibitors, including the very biggest — Aetna, Blue Cross and Blue Shield, CIGNA, Humana and United — as well as dozens of restaurant and fast food chains and other employers of low-wage workers.
Maybe Obama himself should plan a trip to his hometown and crash the party. He would learn a lot more about the future of health care benefits as envisioned by the insurance industry and a big segment of corporate America than if he stayed in Washington.
Insurers’ Latest Scam: Fake Insurance
One of the reasons I left my job as an insurance industry executive is because I could not in good conscience continue promoting these plans, which all but guarantee that the people who enroll in them immediately join the fast-growing ranks of the underinsured.
Even calling them insurance is a stretch. Many of them have annual coverage caps of $2,000, meaning that after the insurer has paid $2,000 in claims, the policyholder is on the hook for all other medical expenses. And a lot of these policies provide no coverage whatsoever for a stay in the hospital. This is why consumer advocates refer to them as junk or fake insurance. People who enroll in them often have been sold a false sense of security, only to find out when it’s too late that they’ve been sending hard-earned money to insurance companies whose executives are laughing all the way to the bank while consumers are on their way to bankruptcy court.
One of the big for-profit insurers sponsoring this year’s conference markets a limited-benefit plan only to employers with inordinately high employee turnover. Not only are the benefits very limited, the underwriting criteria almost guarantee an impressive profit margin.
Under the plan, the average age of an employer’s workers cannot be higher than 40, and no more than 65 percent of employees can be female. (Insurers have long charged women more than men simply because of their internal plumbing.) To meet the insurer’s additional demands, employers must have a 70 percent or higher annual employee-turnover rate (that’s not a typo), which means that most employees won’t even stay on the job long enough to use their benefits. Employees also get no coverage for care related to any preexisting conditions they might need during their first six months of enrollment in the plan. And get this: Employees have to pay the entire premium. The insurer doesn’t even allow employers to subsidize their workers’ coverage. No wonder the big box retailers and restaurant chains love this junk. They list them among the employee benefits they supposedly offer but don’t have to part with a dime when a worker enrolls in one of the plans.
There are so many restrictions built into limited-benefit contracts that there is comparatively little risk to the companies that sell them, which is why the Obama administration is under intense pressure from insurers and their corporate customers to let them keep on selling them.
Will President Obama Force Americans to Buy Junk Insurance?
One of the provisions of the Affordable Care Act that is supposed to kill these plans off requires insurers to spend at least 80 percent of what they collect in premiums on their policyholders’ medical care. Insurers typically spend far less than that on medical care for people enrolled in limited-benefit plans. That’s why they are so profitable.
As I write this, the insurance industry and its corporate allies are lobbying the Obama administration to grant limited-benefit plans permanent waivers from that provision. If the White House caves in to their demands, millions of low-wage earners will be forced to buy junk coverage on January 1, 2014. That’s the date all of us will have to buy coverage from a private insurer if we’re not eligible for a public plan like Medicare or Medicaid. If you don’t want to be forced to buy junk, send the White House a message. Now.
http://www.prwatch.org/news/2011/10/11093/dont-buy-insurers-junk-or-let-them-keep-selling-it
By Gary Claxton and Larry Levitt
Kaiser Family Foundation, November 15, 2011
Various market watchers have reported that the use of health care services has not been growing recently as it had in the past, resulting in lower than expected health care claims for people with private insurance and higher than expected earnings for insurers. A look at physician office visits by nonelderly patients with private insurance over the past decade illustrates the change in the use of services.
Although the total number of visits jumps around somewhat from quarter to quarter, the analysis shows generally that the quarterly number of office visits by privately insured patients increased from about 140 million visits per quarter at the beginning of the decade to 160 million visits early in 2005. The number of non-elderly people with private insurance changed hardly at all over that period, increasing by about 1% according to our analysis of the National Health Interview survey. So, the increase was driven by people with private insurance going to the doctor more often.
From 2005 through 2008, the trend in physician visits was largely flat as the number of people with private insurance dropped slightly (about 1.7%).
Then, as the economic downturn deepened, the number of physician visits among the privately insured started a downward trend, which has continued even as the recession technically ended in June of 2009. The number of visits fell to a low of 129 million in the 2nd quarter of 2011, a decline of 17% from 156 million visits in the 2nd quarter of 2009. The number of people with private insurance declined over this period as well as many people lost their jobs and their insurance along with them. But, the decline in the number of people with private insurance is much smaller than the decline in visits – about 2% between 2009 and 2010.
Even people who are insured are going to the doctor less. Likely, consumers are reacting to the severe economic downturn and significant job-loss which has defined the economy over the last several years by cutting back on health spending. Higher deductibles, copays and coinsurance increase the cost of care, and their impact may be magnified in these tough economic times. The Kaiser/HRET Annual Survey of Employer Health Benefits finds that the share of workers covered on the job by plans with a deductible of at least $1,000 grew from 18% in 2008 to 31% this year. In some cases people may be foregoing unnecessary care, meaning that health costs are reduced with little or no effect on health. In other cases people are likely cutting back on necessary care, potentially endangering patients’ longer term health and leading to higher costs over time.
KFF – Increase in employer-sponsored high-deductible plans:
http://ehbs.kff.org/?page=charts&id=2&sn=22&ch=2257
By Don McCanne, MD
In the past two years, office visits by privately insured patients under age 65 decreased by 17 percent. Although the insurers attribute this lower utilization to the economic downturn, it does correlate very closely to the increase in enrollment in employer-sponsored high-deductible plans.
Although it is difficult to predict future trends, it is very likely that the diminished utilization will persist since other studies have confirmed that high out-of-pocket expenses deter access to health care. It is also clear that many of the forgone services are beneficial.
Every reasonable person in the policy community agrees that patients should have access to beneficial services, but some believe that financial disincentives to care are important because they will encourage patients to forgo unnecessary services. The problem with this reasoning is that a person with symptoms cannot know without a consultation whether or not the visit is unnecessary. Even if it turns out that no intervention is required other than reassurance, even reassurance itself provides an important medical outcome in the form of reduced anxiety.
The consumer-directed advocates are winning the battle. The increase in high-deductible plans has placed financial barriers between patients and the care that they should be receiving. By making patients more sensitive to the costs of office visits, they are using fewer. But is this wise?
Studies such as the RAND Health Insurance Experiment suggest that there is not much harm done. But those studies do not measure certain endpoints such as symptom relief or simple reassurance. They also do not measure longer term consequences such as complications from inadequate management of chronic disorders – diabetes, hypertension, consequential hyperlipidemia, and many others. They do not measure the benefits of preventive screening in this under 65 population, which may prevent or ameliorate disorders that might occur only decades later.
Most of these office visits are for primary care services and constitute only a very small percentage of our national health expenditures. Reducing office visits by 17 percent does not save much overall because 17 percent of a small number is a very small number. Since primary care is essential in improving value in health care, we should be adopting policies that encourage primary care access, not discourage it as these high out-of-pocket costs do.
By Jenny Gold
Kaiser Health News, November 28, 2011
Say you’re trekking through the desert in Mexico, minding your own business, when all of a sudden a scorpion scrambles up your boot and stings your leg. You hobble over to a nearby clinic, where you’re given a dose of anti-venom that brings you fast relief. The charge for the serum is about $100.
Now imagine instead that you happen to be hiking in Arizona, and the same type of scorpion stings you. You make it to the emergency room, where the charge for a dose of the same anti-venom costs can cost as much as $12,000, according to a survey by The Arizona Republic. Since patients need three to five doses, the cost can reach about $50,000.
The drug, called Anascorp, has been available for years in Mexico, but was just given FDA approval in August for the U.S. market. Anascorp is designed to treat the sting of the Bark Scorpion, a particularly poisonous species.
Milton Ellis, president of Rare Disease Therapeutics, a Tennessee-based company that has the rights to Anascorp in the U.S., told The Arizona Republic that the cost of the drug is based on a number of factors, including the expensive clinical trial the company sponsored to get FDA approval and the expected demand for the serum. The company sells the drug for $3,500 to another firm that provides it to Arizona hospitals for about $3,780, The Republic found.
Hospitals mark up the drug to cover other costs, including the expenses of patients who are uninsured and the heavy discounts it gives to insurers.
Dr. Leslie Boyer, director of the Venom Immunochemistry, Pharmacology and Emergency Response (VIPER) Institute and the principal investigator of the Anascorp study published in the New England Journal of Medicine, says she was surprised and “a little saddened” by the high cost of the drug. “It’s priced at a level where we can only use it for the very sickest patients, when I know that people with more moderate symptom would also benefit but might not be able to afford it,” she explains.
If the drug were “priced for the walking miserable,” instead of only those patients with the most severe symptoms, more of the drug would be sold and the price could be lower, she explains. As it is, she worries that rural Arizona hospitals, which tend to be the least wealthy, will not be able to stock the anti-venom and will still have to send critically-ill patients on a long helicopter or ambulance ride instead.
The high prices, she says, are “a public health problem.”
****
Response
Don McCanne says:
(Comment is awaiting moderation as of this posting.)
November 29, 2011 at 12:38 PM
Results of a quick Internet search:
Study posted yesterday at ClinicalTrials.gov:
http://clinicaltrials.gov/ct2/show/study/NCT00624078?term=Anascorp&rank=1
Sponsor: Instituto Bioclon S.A. de C.V. (Mexico
Collaborator: University of Arizona
R&D at Instituto Bioclon:
http://www.bioclon.com.mx/bioclon/html/investigaciond_en.html
“The Bioclon Institute’s technology plan has been implemented through a financing strategy that combines the Institute’s own investments with resources from governmental institutions through agreements with: The National Science and Technology Board (El Consejo Nacional de Ciencia y Tecnologia) (Mexico), The Commerce Secretary (La Secretaria de Economía) (Mexico), and The Food and Drug Administration (United States).”
By Don McCanne, MD
The fact that government-supported research (United States and Mexico) can result in a product that sells for $100 in Mexico and $12,000 in the United States, says much more about how health care is financed in the United States than it does about government and private roles in research.
All other wealthy nations have controlled health care spending much more effectively, while covering everyone, by using financing systems that require considerable government oversight. We rely on a fragmented system of private plans, public programs (and no programs at all for far too many), that has allowed runaway spending without a commensurate improvement in quality and outcomes.
It really is time to dump the administratively wasteful but expensive private insurers which have been ineffective in slowing cost escalation. We should improve Medicare, and then provide it for everyone. We might not be able to get the price of Anascorp down to $100, but negotiations through our own public Medicare administrators would set pricing based on legitimate costs and fair profits – a price that would undoubtedly be a small fraction of the $12,000 being charged.
And…
By Leslie V. Boyer, M.D., et al
The New England Journal of Medicine, May 14, 2009
Among critically ill children with neurotoxic effects of scorpion envenomation, intravenous administration of scorpion-specific F(ab′)2 antivenom resolved the clinical syndrome within 4 hours, reduced the need for concomitant sedation with midazolam, and reduced the levels of circulating unbound venom. (ClinicalTrials.gov number, NCT00685230.)
Supported by grants from the Food and Drug Administration (FD-R-002385-01) and the Arizona Biomedical Research Commission (0001).
http://www.nejm.org/doi/full/10.1056/NEJMoa0808455#t=abstract
By Don McCanne, MD
Instead of administered pricing, our government depends more heavily on the market for the pricing of our health care when payments are made through private insurers. Only the magic of the marketplace can price a $100 vial of antivenin at $12,000! Obviously we do not have nor ever will have a functioning free market in health care. It’s time to abandon this myth and move on with an effective method of controlling costs through fair pricing – a single payer national health program.
By Ed Grystar, Chuck Pennacchio and Tony Buba
Pittsburgh Post-Gazette, Tuesday, November 29, 2011
The current contract disagreement between Highmark and UPMC provides a clear example of why the free-market health care system has failed. When profit is the primary motive, patient needs get short shrift.
Health care is not a commodity, but a human right. These two “nonprofits” operate with the needs of the public clearly secondary to fulfilling their first objective, which is maximizing profit. The public be damned.
While these two health care businesses fight for market share in our region, the number of uninsured in the country and in Pennsylvania has reached all-time highs, health insurance profits are breaking records for the third year in a row and ever-rising health care insurance premiums are unsustainable for business and the public. Nationwide, they now average $15,000 per year for family coverage while the median family income is approximately $49,000 per year.
What citizens want and need is the ability to choose physicians and providers for their health care needs, not the threat of losing their insurance or a forced choice (unavailable to many) to purchase another insurance plan.
Simply put, patients need and want heath care, not health insurance.
These insurance giants do not bring anything positive to the health care delivery system. They do not care for the sick or treat injuries. They are not necessary to patients, employers or the community.
While some are grateful for Highmark’s takeover of the ailing West Penn Allegheny Health System, there is an inherent and dangerous conflict of interest in joining medical services with private insurance companies — be it UPMC or Highmark — given that insurance companies earn profits by denying care, raising premiums and increasing patient out-of-pocket costs.
Only by replacing the insurance-dominated health care system with an improved Medicare-for-all system can we resolve the myriad problems with the current system.
Now in Congress and in the Pennsylvania Legislature is legislation that would move all citizens to a single-payer, not-for-profit Medicare-for-all system — H.R. 676 in the U.S. House of Representatives and S.B. 400 in the Pennsylvania Senate.
Patients would choose their physicians and hospitals, and decisions on care would be based not on which insurance product you have or network you are in, but on consultation between patient and doctor. Physicians and hospitals would not have to deal with time-consuming and wasteful insurance forms and processing.
In the federal bill, the government would negotiate lower prices for medications from pharmaceutical companies. Insurance company profits, executive salaries and marketing costs would no longer be passed on to the patient in the form of ever-increasing premiums and out-of-pocket costs. In fact, the overhead for the government to administer traditional Medicare is 3 percent, compared to 15 percent to 30 percent for private insurance companies.
Insurance premiums would be replaced with a single-payer fund that would reimburse providers a fair amount. There would be no premiums, deductibles or co-pays. This funding would be based on a tax that would amount to less than current insurance premiums.
Everyone, from cradle to grave, would be covered for all health care needs, including preventive, dental, vision and long term care. Such systems exist in other industrialized countries that spend far less money per capita and achieve better health care outcomes than the United States.
Because everyone would be covered, hospitals in economically distressed communities like Braddock and Aliquippa would stay open because they would be uniformly and fairly reimbursed for the care they deliver and their patients’ medical needs. In our current system, such communities have a larger proportion of people who are uninsured and on Medical Assistance, where reimbursement is lower and hospitals lose money.
Meanwhile, the advertising onslaught by UPMC and Highmark would no longer be necessary.
Opinion polls over the past decade show strong public support for a Medicare-for-all solution. Nevertheless, it has been consciously shut out of the debate by the media and political leaders.
The disconnect between strong public support and the lack of political support in the Congress and state legislatures can only be changed by building a grassroots movement that challenges the power of the big money that dominates our political process. It will take action by the 99 percent to make this happen.
Ed Grystar is co-chair of the Western Pennsylvania Coalition for Single Payer Healthcare (www.wpasinglepayer.org). Also submitting this article were Chuck Pennacchio, executive director of HEALTHCARE4ALLPA (www.healthcare4allpa.org), and Tony Buba, steering committee chair of Save Our Community Hospitals, whose original mission was to keep the UPMC hospital in Braddock.
By James C. Robinson, PhD, University of California, Berkeley
National Institute for Health Care Management, November 2011
After a swell of hospital mergers and acquisitions in the 1990s, the industry has again been experiencing significant consolidation as large hospital systems have bought up smaller systems and stand-alone hospitals left vulnerable by the recession. The local and regional chains resulting from consolidation typically wield greater bargaining leverage than do stand-alone facilities. The evidence from several decades of research on this topic shows higher hospital prices following consolidation and recent work documents how large hospital systems serving multiple markets are able to extract higher prices for all facilities in their chain, not just in markets where they are dominant.
Two provisions of the 2010 Affordable Care Act (ACA) have brought new attention to the issue of hospital market power. First, because the ACA coverage expansions will be financed in part by slowing the rate of increase in Medicare payment updates, there is concern that hospitals with as yet unexploited pricing leverage will attempt to recoup some of the lost Medicare revenue by raising prices to private insurers. Second, the integration of hospitals and physicians into the accountable care organizations (ACOs) encouraged by the health reform legislation is expected to accelerate provider consolidation in local markets. Indeed, hospitals are already consolidating with physicians at a fast clip, and many observers are asking whether this integration will give hospitals (and physicians) additional pricing power vis-à-vis private payers.
In this essay I present findings from a new study that adds another piece of evidence to support concerns over hospital consolidation and market power. Specifically, using individual level data from 61 hospitals for patients treated during 2008 for any of six high-cost inpatient cardiac or orthopedic procedures, I show that hospitals in concentrated markets charge significantly higher prices to private payers than do their peers in more competitive markets. Furthermore, these prices are significantly above their direct costs of providing care.
The work reported here confirms earlier studies showing that hospitals are able to extract higher private payments when they hold more market power. Public policy has been ambivalent with respect to the ongoing consolidation within hospital markets. While antitrust regulatory agencies have challenged a number of hospital mergers in the past few decades, these challenges rarely culminated in decisions to disallow a merger. Now provisions of the ACA are encouraging further consolidation of hospitals and physicians, and the final antitrust review regulations from the Department of Justice and the Federal Trade Commission have eliminated the proposed mandatory review of certain prospective ACOs.
It will take some time to see what types of ACOs are allowed to form and how they will affect the competitive structure within their markets. It is clear, however, that the ongoing consolidation of local hospital markets is already frustrating the efforts of employers and private insurers to moderate the growth of health care costs. While the use of administered pricing systems largely insulates public payers from the effects of provider market power, the higher reimbursement rates that dominant providers can extract from private payers during rate negotiations put significant upward pressure on private premiums. In response, employers and other purchasers of private coverage have begun demonstrating a new willingness to accept limits on their health plan’s provider network, and private insurers are developing new products using tiered networks that exclude or disadvantage providers judged to not deliver value commensurate with their higher prices.
http://nihcm.org/images/stories/NIHCM-EV-Robinson-Final.pdf
By Don McCanne, MD
The increase in hospital market concentration has resulted in higher prices with enormous profits, simply due to the boost in leverage that consolidation of hospitals has had in price negotiations with private insurers. How will the Affordable Care Act impact this?
The Federal Trade Commission will be relaxing antitrust review of provider consolidation in order to allow greater freedom for accountable care organizations to experiment with delivery system reform. Consolidation will likely increase.
To counter this, private insurers are already developing new products such as those with tiered networks which will penalize patients financially if they use the dominant providers in their communities.
So the intent is to improve quality and the cost effectiveness of health care by encouraging integration of the health care providers, as through accountable care organizations, yet we will be seeing higher costs and higher profits as a result. That inevitably means that premiums for the private health plans will be higher – a problem that the Affordable Care Act was supposed to address.
What is the link that causes this unintended perversity? It is the insistence of our policymakers that the private insurers be included as the financial intermediaries. Plenty of studies have now shown that the private insurers do not have negotiating clout in markets with provider consolidation. So why should we continue to include them, especially when they waste so much in imposing a huge administration burden, while taking away patients’ choices of health care providers?
The government does have the leverage to get the pricing right. We should have it representing all of us in obtaining the best value for our national health expenditures. An improved Medicare for everyone is the vehicle that we need.
By Kirsten Stewart
The Salt Lake Tribune, Nov. 24, 2011
Joseph Jarvis resolved six months ago to lose 25 pounds after a failed assault on the Grand Canyon.
He started jogging and counting calories in pursuit of a second attempt, which he accomplished in the summer.
“I make the claim that I’m the heaviest person to make it from rim to rim in one day,” said the 56-year-old retired doctor, who applies the same dogged focus to bettering the nation’s bloated health care system.
His decades-long push for a statewide health cooperative — a publicly funded, nonprofit health insurance trust to cover every Utahn for all medically necessary care — has been a non-starter in conservative Utah. Chances of it gaining traction grew slimmer with passage of President Barack Obama’s health overhaul, which Jarvis says “sucked all the oxygen out of the room.”
But if the U.S. Supreme Court rules some or all of the federal law unconstitutional this winter, as some predict, Jarvis and others like him could be free to pursue universal health care without apology.
“The pendulum has swung back to this issue over and over again,” said Jarvis, citing the failed presidential reforms of Roosevelt, Nixon, Clinton and others. “Why? Because we never do the right thing. It’ll come back and when it does we’ll ride that wave of interest.”
Jarvis’ own interest is personal and professional, born from treating low-income, uninsured patients as a University of Utah-trained family doctor and a stint as Nevada’s public health officer overseeing communicable disease control and hospital regulation.
Witnessing firsthand how a knot of profit-centered special interests is “hurting the economy, bankrupting families and killing patients,” he set about finding a better, cheaper and more equitable way to deliver health care.
Recounting an “aha” moment, Jarvis tells how the Nevada Legislature created a system for designating hospitals as trauma centers.
The best hospital in town refused to apply and when Jarvis asked why, he said the hospital CEO replied, “Because you included in your designation a requirement that we take everybody. We can’t do that. We are in the business of making money.”
Evolution of a thinker
Jarvis is not a household name. But in health policy circles, there’s no escaping him.
“Single-payer Jarvis? He’s a good guy, a good thinker. He keeps the other perspective alive,” said Rod Betit, CEO of the Utah Hospital Association.
Jarvis has been crusading since the early ’90s, when Betit headed Utah’s Department of Health.
Seeking a bully pulpit for his cause, Jarvis has forged alliances with low-income advocates, run unsuccessfully for the Legislature, and lobbied to fill Betit’s old post.
“I’ve given several governors the opportunity, and they’ve turned it down,” said Jarvis. “I’m too controversial.”
Betit says Jarvis is unwavering in his goal, but “has gotten better at couching it in politically acceptable terms.”
Single-payer means different things to different people. The model promoted by Jarvis, a Republican, has a distinctly free-market flavor.
Hospitals would remain private, operating as they do now. But a single, non-profit health cooperative supplying guaranteed coverage to all Utahns would take the place of commercial insurance.
People would still pay for coverage, but it would be subsidized and kept affordable by eliminating insurance middle-men and simplifying payments to doctors and hospitals.
Jarvis’ plan calls for creation of a commission to squelch overuse: unnecessary tests and procedures ordered by doctors required to meet productivity targets or to fend off malpractice lawsuits. The commission, comprised of medical experts, would determine which services are covered for given conditions based on research. It would also hear malpractice claims and insurance appeals.
It can be done, Jarvis says, for less than the $15 billion Utah already spends on health care, most of which flows to Medicaid, Medicare and health coverage for veterans and government employees, which the co-op would absorb.
Change is elusive
Today, Jarvis is no closer to realizing his vision.
For now, he is content to bide his time, fine-tuning his proposal for placement one day before voters as a ballot initiative. He blogs incessantly to raise awareness when not consulting on disease cluster investigations and worker’s compensation claims.
“People worry about government-funded health care and loss of choice,” Betit said. “The country is not ready for it.”
Doctors, too, dislike government telling them how to practice medicine and dictating how much they’ll be paid, said Michelle McOmber, executive vice president of the Utah Medical Association.
But the association, and other groups in Utah, are considering applying for federal grants to start their own health co-ops.
Meanwhile, universal-care proposals are moving through legislatures in Minnesota, New Mexico and Colorado, fueled by consumer angst over exorbitant hospital bills and insurance premiums.
“Vermont passed a cover-everybody plan, although it’s not perfect, and Massachusetts has 98.5 percent coverage. So why not Utah, a state with a strong religious heritage of caring for your neighbor?” says journalist T.R. Reid, author of The Healing of America, a best-selling book on the health systems of industrialized nations. “It’s more likely to happen state-by-state, as it did in some of the countries in my book.”
Jarvis has long insisted that health care is a local concern, an argument gaining favor amid the fervor over states’ rights — and from surprising corners.
“We can do this, not at the federal level, or state level, but locally,” says former state insurance commissioner Kent Michie.
The 67-year-old retired investment banker and political appointee under former Republican Gov. Jon Huntsman remembers a time when health spending was 4 percent of the U.S. gross domestic product. Now it’s exceeds 17 percent.
“Those are killer numbers. They’re wipe-out numbers,” said Michie.
If Jarvis envisions a co-op being run by a non-profit, like the Public Employee Health Plan for public employees, Michie sees it looking like a water or sewer district.
“We trust government to give us clean water and handle our sewage,” he said. “Why wouldn’t we trust a special health district, a public trust, to pay our medical bills? It would be more efficient.”
Getting there, he concedes, will take serious thinking by people capable of seeing beyond the socialist health care label.
“I have always trusted Utahns, when presented with the facts in an unemotional way, to do the right thing,” Michie said. “I hope it doesn’t take a financial collapse for us to figure it out.”
http://www.sltrib.com/sltrib/news/52826507-78/health-jarvis-care-utah.html.csp
By Sean F. Reardon and Kendra Bischoff, Stanford University
US2010 Project, November 2011
Report Abstract
As overall income inequality grew in the last four decades, high- and low-income families have become increasingly less likely to live near one another. Mixed income neighborhoods have grown rarer, while affluent and poor neighborhoods have grown much more common. In fact, the share of the population in large and moderate-sized metropolitan areas who live in the poorest and most affluent neighborhoods has more than doubled since 1970, while the share of families living in middle-income neighborhoods dropped from 65 percent to 44 percent. The residential isolation of the both poor and affluent families has grown over the last four decades, though affluent families have been generally more residentially isolated than poor families during this period. Income segregation among African Americans and Hispanics grew more rapidly than among non-Hispanic whites, especially since 2000. These trends are consequential because people are affected by the character of the local areas in which they live. The increasing concentration of income and wealth (and therefore of resources such as schools, parks, and public services) in a small number of neighborhoods results in greater disadvantages for the remaining neighborhoods where low- and middle-income families live.
From the Conclusion
During the last four decades, the isolation of the rich has been consistently greater than the isolation of the poor. Although much of the scholarly and policy discussion about the effects of segregation and neighborhood conditions focuses on the isolation of poor families in neighborhoods of concentrated disadvantage, it is perhaps equally important to consider the implications of the substantial, and growing, isolation of high-income families. Given that in 2008 the top 10 percent of earners controlled approximately 48 percent of all income in the United States (Piketty & Saez, 2010), the increasing isolation of the affluent from low- and moderate-income families means that a significant proportion of society’s resources are concentrated in a smaller and smaller proportion of neighborhoods. As we argued above, this has significant consequences for low- and middle-income families, because the isolation of the rich may lead to lower public and private investments in resources, services, and amenities that benefit large shares of the population, such as schools, parks, and public services.
http://cepa.stanford.edu/system/assets/drupal/RussellSageIncomeSegregationreport.pdf
By Don McCanne, MD
As the more affluent members of our society continue to concentrate themselves in their upscale neighborhoods, they take our resources with them, including some of the best of our health care services. Not only do they leave behind fewer resources for low- and moderate-income families, they also leave behind the political will to do something about it.
Can we convince those in the affluent communities that most of them are still a part of the 99 percent? Or will their guileless but infelicitous complacency perpetuate inertia?
Organization for Economic Cooperation and Development (OECD)
November 23,2011
Why is health spending in the United States so high?
The United States spends two-and-a-half times more than the OECD average health expenditure per person.
Rich countries spend more than poor countries. Chart 3 (at link below) shows that for nearly every country, if you know how rich they are, you can predict their health spending per person per year to within a few hundred dollars. The United States is an exception – Americans spend nearly $3000 per person per year more than Swiss people, even though Swiss people have about the same level of income.
Where does the money go?
Hospital spending is higher than in the five other OECD countries, by over 60%.
Spending on Ambulatory care providers – that is, physicians and specialists as well as dentists, is much higher than in the other OECD countries – almost two-and-a-half times the average of the other five countries.
Spending on Pharmaceuticals and medical goods is higher in the US than in any other country, but overall accounts for a smaller share of total health spending than in the other countries.
Spending on Public Health and Administration is particularly high – more than two-and-a-half times the average.
Are U.S. health prices high?
Overall, the evidence suggests that prices for health services and goods are substantially higher in the United States than elsewhere. This is an important cause of higher health spending in the United States.
Does the U.S. provide too much health care?
(The United States) does not have many physicians relative to its population; it does not have a lot of doctor consultations; it does not have a lot of hospital beds, or hospitals stays, when compared with other countries, and when people go to hospital, they do not stay for long. All these data on health care activities suggest that US health spending should be low compared with other countries.
On the other hand, the US health system does do a lot of interventions. Table 3 (at link below) shows that it has a lot of expensive diagnostic equipment, which it uses a lot. And it does a lot of elective surgery – the sort of activities where it is not always clearcut about whether a particular intervention is necessary or not.
Why is health spending in the United States so high?
http://www.oecd.org/dataoecd/12/16/49084355.pdf
Health at a Glance 2011: OECD Indicators
(The entire publication can be accessed for free at this website.)
http://www.oecd-ilibrary.org/social-issues-migration-health/health-at-a-glance-2011_health_glance-2011-en
By Don McCanne, MD
The Organization for Economic Cooperation and Development (OECD) has just released “Health at a Glance 2011: OECD Indicators.” It “provides the latest comparable data on different aspects of the performance of health systems in OECD countries.” You should save the link above that provides free access to this publication since the data are frequently used by the policy community to compare the United States with other nations.
When examining the tables, charts, graphs and text, keep in mind that the data are sometimes presented in a manner that does not always correlate with highly credible data from other sources.
For instance, the category of public health and administration does not include the same administrative costs as measured by Woolhandler and colleagues in their landmark NEJM articles. Nevertheless, the OECD still reports that public health and administrative costs in the United States are more than two-and-a-half times the OECD average.
Also, the OECD estimates of public spending for health care in the United States leave out two important categories. The tax deductibility of employer-sponsored plans amounts to a subsidy of taxpayer funds, plus taxpayers also pay for the employer component of health insurance premiums for employees of federal, state and local government agencies. Although the OECD reports the percent of government spending on health care in the United States as being one of the lowest, on a per capita basis our public spending on health care is actually higher than the public and private spending combined in almost all other nations.
So when you hear others cite the OECD data, it would be helpful if you have a heads up on the actual data and how it compares to that of other reliable sources. Save the link above for future reference.
By Ezekiel J. Emanuel
The New York Times, November 12, 2011
The range of expert opinions on how much of (administrative costs) could be saved goes as high as $180 billion, or half of current expenditures. But a more conservative and reasonable estimate comes from David Cutler, an economist at Harvard, who calculates that for the whole system – for insurers as well as doctors and hospitals – electronic billing and credentialing could save $32 billion a year. And United Health comes to a similar estimate, with 20 percent of savings going to the government, 50 percent to physicians and hospitals and 30 percent to insurers.
http://opinionator.blogs.nytimes.com/2011/11/12/billions-wasted-on-billing/
And…
Letters, The New York Times
November 20, 2011
To the Editor:
Ezekiel J. Emanuel lowballs estimates of the current costs and potential savings on medical bureaucracy, and raises vain hope that health reforms short of a single-payer system will realize substantial savings (“Billions Wasted on Billing,” Sunday Review, Nov. 13).
Peer-reviewed studies in The New England Journal of Medicine by two colleagues and me document that administrative costs account for 31 percent of health spending in the United States versus 17 percent in Canada. The 14 percentage-point difference translates to $380 billion in potential savings in 2011. Other researchers have reached similar conclusions.
A single-payer reform could realize these savings by eliminating insurance middlemen and radically simplifying payments to doctors and hospitals. The lesser measures that Dr. Emanuel champions – computerized and standardized billing – won’t do the job.
Hospital billing has been computerized for decades, and bureaucratic costs have skyrocketed since the adoption of the standard hospital billing form in 1982.
Combat over who pays and who profits underlies health administration’s overgrowth. A nonprofit single-payer system makes those issues moot.
Steffie Woolhandler
New York, Nov. 14, 2011
The writer, an internist, is a professor of public health at the City University of New York.
NEJM – Costs of Health Care Administration in the United States and Canada
http://www.nejm.org/doi/full/10.1056/NEJMsa022033
By Don McCanne, MD
The landmark 1991 and 2003 New England Journal of Medicine articles comparing health care administrative costs in the fragmented, multi-payer financing system in the United States with the single payer system in Canada were meticulous, peer-reviewed studies that confirmed that a massive amount of administrative spending in the United States is potentially recoverable – an estimated $380 billion for 2011 alone.
Politicians and academics who believe that we need to support politically feasible models of reform, such as the Affordable Care Act, have attempted to ignore or discredit these numbers. Even the most noted attack on these numbers, by Brookings economist Henry Aaron, was based on a back-of-an-envelope calculation arbitrarily assuming health care wages to be one-tenth of what they actually are in the United States. There is some irony in this attack by the highly-respected and otherwise highly-credible Aaron when in the same article he states, “I look at the U.S. health care system and see an administrative monstrosity, a truly bizarre melange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.”
During the reform process, administrative inefficiencies were frequently brought up as a problem that needed to be addressed, but the perception of the extent of the problem always fell far short, at least by those who controlled the process. This led to grossly deficient suggestions such as merely streamlining insurance billing functions through computer systems (which already exist) and through a simplified universal billing form (which is already in use). This myopic thinking has led to grossly deficient estimates of potential savings, such as that of Ezekiel Emmanuel who suggests a savings less than one-tenth of the true potential.
It is true that not much of the current administrative waste can be recovered as long as politically influential individuals, such as Ezekiel Emmanuel, insist the the private insurers must remain as an intermediary in our health care financing. Their business product is administration.
As you watch the development of new innovations by the insurance industry, you will see that they all involve even more administrative products. As long as they are in charge, they will always try to capture a larger portion of our national health expenditures. However, since administrative costs will now be limited to 15 to 20 percent of their premiums, you will see these new administrative services being introduced as “health care.” Only the label has changed.
By Philip Caper, M.D.
Bangor Daily News, Nov. 17, 2011
America is the only wealthy country in the world that does not guarantee its people access to health care as a fundamental right. More than 15 percent of Americans are uninsured and many more are seriously underinsured. That was the bottom line message of T.R. Reid, author of the best-selling book “The Healing of America” and the television documentary based on it, “Sick Around The World.”
All other wealthy democracies provide universal health care to their residents, and do it for about half of what the U.S. spends. Reid, who was on a speaking tour of Maine last week, has studied health care in more than a dozen countries. He has concluded that America too could establish a universal health care system that covers everybody and simultaneously reduces overall costs. All that is required is the political will to do so.
Why has every country other than the U.S. made health care a human right? Reid attributes it to two basic factors.
The first is the ethic of “caring for the least of our brethren” shared by most of the world’s great cultures. They simply believe it is the right thing to do.
That’s not universally true in America. During a recent debate, Republican presidential candidates were asked whether somebody who had voluntarily decided to forgo health insurance but needed expensive life-saving treatment should be left to die. Many in the audience signaled their approval of that idea. One even shouted “let him die.” It’s clear that some Americans, worried about freeloaders or some other unworthy getting something they don’t deserve at public expense, are repelled by the idea of health care as a right.
My own experience, as well as the avalanche of negative coverage this episode generated, has convinced me that most Americans disagree. We are all human. At some unpredictable time in our lives most of us will become sick enough to require medical care. The chances of that happening increase as we age. All of us, if we’re lucky enough to live that long, will grow old and suffer from the infirmities that normally and inevitably accompany aging, but can be eased by good health care.
When — not if — that happens we will want to have that care available. For that reason, we should all be willing — and required — to participate in a health care system that protects us. Do unto others. Shared responsibility.
The second factor Reid cited is affordability. As strange as it seems, it turns out to be less expensive to include everybody in a health care system than to exclude some. In testimony before the Maine legislature last year, Harvard professor William Hsiao, one of Reid’s mentors, estimated that an improved Medicare-like system would produce annual savings to Mainers of a billion dollars. That’s right, a billion dollars every year.
I have yet another reason for wanting to see such a system enacted. A physician’s job is caring for the sick, no matter who they are. Our professional ethics do not permit us the luxury of deciding who is worthy of medical care and who is not.
Doctors want to work in a health care system that allows us to do our job. That job is to diagnose and treat disease, and to comfort patients according to our best professional judgment. In America, that is becoming increasingly difficult. The micromanagement of medical practice by outside parties is becoming commonplace.
No other country in the world would tolerate the degree of interference in medical practice that exists here. Doctors are becoming more and more frustrated with the conditions under which they must practice.
Such micromanagement is an attempt to save money and increase profitability for individual private insurance companies. But it adds hugely to our overall health care bill. In fact, it is estimated that up to 30 percent of our $2.7 trillion health care bill goes not for health care, but is squandered arguing about money — who gets what, and who pays. The effect on patients can be devastating.
Another lesson Reid learned in his travels is that in every country with a well-functioning health care system, government plays an overwhelmingly dominant role in financing, regulating or directly providing health care.
For the past 30 years, we have tried to let market forces govern our health care. That experiment has been a spectacular failure. Perhaps these excess costs could be justified if we produced superior results. But we don’t. According to the World Health Organization, many of our results are worse than other advanced nations, and few are better.
As a nation, we are already paying more than enough to care for every American, but we’re far from that goal. Even if the new federal health care reform law works perfectly, over 25 million Americans will be left out.
Reid, a self-described optimist, ended his tour by observing, “If the French can do it, so can Americans.” I agree. All we need is the will.
Physician Philip Caper of Brooklin is a founding board member of Maine AllCare, a nonpartisan, nonprofit group committed to making health care in Maine universal, accessible and affordable for all. He can be contacted at pcpcaper21@gmail.com.
http://bangordailynews.com/2011/11/17/health/should-health-care-in-america-be-a-right/