PNHP

California’s largest insurers continue to cheat

pnhpf3a

California’s largest insurers continue to cheat

Blue Shield, Kaiser among state insurers fined

By Victoria Colliver
San Francisco Chronicle
November 30, 2010

State regulators Monday fined seven of California’s largest health insurers nearly $5 million for systematically failing to pay doctors and hospitals fairly and on time.

The California Department of Managed Health Care issued the fines following an 18-month audit in which investigators looked at a small but statistically significant sample of claims. The investigation found the plans were paying on average about 80 percent of the claims correctly, far below the legal threshold of 95 percent.

“Our clear and consistent message is that California’s hospitals and physicians must be paid fairly and on time,” said Cindy Ehnes, director of the Department of Managed Health Care, which is charged with regulating the states’ health maintenance organizations, or HMOs.

In addition to the fines, the companies must pay the doctors and hospitals restitution that is expected to run into the “tens of millions of dollars,” Ehnes said. The plans will also be required to come up with a plan to correct the problem and submit to future audits.

Five of the insurers, excluding Anthem and Blue Shield, were also found to have improper provider appeals processes.

When doctors and hospital officials try to dispute a claim, they often have to deal with the same individual who originally denied the claim in the appeals process, Ehnes said.

Cracking down on the health plans for not properly paying providers helps consumers, said Anthony Wright, executive director of Health Access California.

“Consumers would rather that the time and resources of health providers go to patient care, rather than in fighting to get insurers to pay correctly,” he said.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/30/BUSR1GJ01V.DTL

Comment: 

By Don McCanne, MD

What services do the private insurers provide for us? Processing claims? They won’t even do that right 20 percent of the time, according to this California audit. The total of $5 million in fines that they were assessed is so paltry that they have no incentive to discontinue their highly profitable policy of delaying and denying legitimate claims.

Let’s have the members of Congress fire the insurers and set up our own national health program – an improved Medicare that covers everyone. If they won’t do that then let’s fire them, replacing them with responsible elected stewards who will.

California's largest insurers continue to cheat

Blue Shield, Kaiser among state insurers fined

By Victoria Colliver
San Francisco Chronicle
November 30, 2010

State regulators Monday fined seven of California’s largest health insurers nearly $5 million for systematically failing to pay doctors and hospitals fairly and on time.

The California Department of Managed Health Care issued the fines following an 18-month audit in which investigators looked at a small but statistically significant sample of claims. The investigation found the plans were paying on average about 80 percent of the claims correctly, far below the legal threshold of 95 percent.

“Our clear and consistent message is that California’s hospitals and physicians must be paid fairly and on time,” said Cindy Ehnes, director of the Department of Managed Health Care, which is charged with regulating the states’ health maintenance organizations, or HMOs.

In addition to the fines, the companies must pay the doctors and hospitals restitution that is expected to run into the “tens of millions of dollars,” Ehnes said. The plans will also be required to come up with a plan to correct the problem and submit to future audits.

Five of the insurers, excluding Anthem and Blue Shield, were also found to have improper provider appeals processes.

When doctors and hospital officials try to dispute a claim, they often have to deal with the same individual who originally denied the claim in the appeals process, Ehnes said.

Cracking down on the health plans for not properly paying providers helps consumers, said Anthony Wright, executive director of Health Access California.

“Consumers would rather that the time and resources of health providers go to patient care, rather than in fighting to get insurers to pay correctly,” he said.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/30/BUSR1GJ01V.DTL

Comment: 

By Don McCanne, MD

What services do the private insurers provide for us? Processing claims? They won’t even do that right 20 percent of the time, according to this California audit. The total of $5 million in fines that they were assessed is so paltry that they have no incentive to discontinue their highly profitable policy of delaying and denying legitimate claims.

Let’s have the members of Congress fire the insurers and set up our own national health program – an improved Medicare that covers everyone. If they won’t do that then let’s fire them, replacing them with responsible elected stewards who will.

Guess Who Opposes Reversing the Individual Mandate in Health Reform?

Insurers and other health care companies view the mandate as the law's bedrockā€”and the source of new profits

By Drew Armstrong
BusinessWeek, November 18, 2010

When the White House and Democratic lawmakers wrote the health-care overhaul bill, they concocted a sweet coating for the bitter medicine the health industry would have to swallow. In exchange for tighter regulation and numerous new directives, insurers, drugmakers, hospitals, and physicians got some 30 million new paying customers under the individual mandate requiring almost everyone to buy insurance starting in 2014 or pay a fine.

The individual mandate is now under attack in the courts and on Capitol Hill by Republicans, libertarians, and Tea Party enthusiasts who call it an affront to personal liberty. The industry, however, views it as the bedrock supporting the entire health reform law and is lobbying to keep it. The prospect of a vastly bigger market has helped spark a 7.4 percent rise since Jan. 1 in the Standard & Poor’s 500 Managed Health Care Index of publicly traded health-care companies.

For insurers, eliminating millions of potential customers while keeping other aspects of the overhaul would be a “nuclear nightmare,” says Robert Laszewski, president of Health Policy and Strategy Associates, a consulting firm that works with insurers. It would leave insurers without the extra revenue to cover higher costs from the law’s ban on the denial of coverage to people with pre-existing conditions or charging sicker patients higher premiums. “It’s the No. 1 lobby issue in the insurance industry right now,” says Laszewski.

At the same time, some industry groups are worried that Republican plans to undo the centerpiece of the law, which President Barack Obama signed in March, could unravel other backroom deals they cut with the White House, forcing them to fight costly legislative battles all over again.

Drugmakers, for example, agreed to pay $80 billion in taxes over 10 years and give discounts to help the elderly pay for drugs. In return, the manufacturers are guaranteed millions of new customers. The White House and Senate Democrats also arranged not to allow the Medicare program, which covers the elderly and disabled, to negotiate drug prices, as do most state Medicaid programs that cover the poor. Additionally, the Administration agreed to continue blocking the re-importation of drugs from Canada. Some lawmakers in both parties favor re-importation, and the pharmaceutical industry adamantly opposes it. Both deals help drugmakers fend off pressures to lower prices. Hospitals, drug and device makers, and doctors also stand to benefit from the law’s expansion of Medicaid coverage to 16 million more people by 2017.

Republicans have already proposed alternatives to the mandate that put less emphasis on covering the uninsured. Their plan, offered by soon-to-be Speaker of the House John A. Boehner of Ohio, has no individual mandate, allows people to buy coverage across state lines, and would cover just 3 million people, according to the Congressional Budget Office.

Republicans traditionally have supported the insurance industry, but the Tea Party’s success in redefining the debate in Washington has changed the equation, says Laszewski. Democratic ranks were also thinned in the recent midterm elections that, in many districts, turned on voter distaste for the health law. Now, neither party may be happy with the individual mandate. “It’s hard to find a provision with more bipartisan opposition,” says Doug Badger, a lobbyist and partner with Nickles Group, which counts Philadelphia-based insurer Cigna (CI) among its clients. Says Thomas P. Miller, a health-care fellow at the American Enterprise Institute: “When you pull that mandate apart from the rest, you have to wonder why you’re doing all those other things.”

Cigna Chief Executive Officer David M. Cordani has said he does not think it’s in the country’s best interest to repeal the law or pull out specific provisions. “It’s a dangerous path to remove individual components from the law without understanding the impact,” he said in a Nov. 9 PBS television interview.

The insurance mandate, though, is more than just a policy issue for some Republicans. It’s an assault on the Constitution. In the Senate, for instance, Utah Republican Orrin G. Hatch, the current ranking member of the Judiciary Committee, called the mandate “an astonishing expansion of federal power and busts the limits that the Constitution imposes on the federal government.”

In the House, Republican Representative Eric Cantor of Virginia, who will be House Majority Leader in January, “is not supportive” of the mandate, according to John Murray, his communications director. “The individual mandate is something the insurance industry is hyperfocused on,” Murray says. “They feel they’ve got to have that to be successful. Our team is not supportive of that. We don’t like mandates.”

While Democrats who backed the law might now seem a more natural ally in defending the mandate, issues exist there as well. Insurers just spent $1.1 million funding opponents to Democratic campaigns. Now they will have to count on many of those same Democrats to defend them. Some may not. Joe Manchin, the Democratic senator-elect from West Virginia, called the mandate “far overreaching” during his campaign. The U.S. shouldn’t “mandate and dictate” how people act, he said. Manchin did not respond to requests for comment.

The one thing going for the individual mandate may be political gridlock. Next year’s split in Congress between Democrats who control the Senate and Republicans who will control the House could lead to a standoff that results in little change. Republican efforts to roll back the law over the next two years could be a table-setter for the real push to come after the next election, says James C. Capretta, a health-care fellow at the Ethics and Public Policy Center, a Washington think tank. “The decisive battle on the overhaul is likely to be the 2012 Presidential contest; that’s what everyone’s preparing for.”

The bottom line: As Republicans take aim at the individual mandate in the health reform law, health-care industry groups are lobbying to preserve it.

Drew Armstrong is a reporter for Bloomberg News.

http://www.businessweek.com/magazine/content/10_48/b4205037210208.htm

Health care tipping point, redux

By Dr. Howie Wolf
Daily Camera (Boulder, Colo.), Nov. 28, 2010

Nearly five years ago the Boulder Daily Camera published my Guest Opinion article, “What is ‘The Tipping Point’ for American’s Health Care Non-System?” There is a widely read book by Malcomb Gladwell called “The Tipping Point,” where the author points out how so many societal changes seem to happen quickly and unexpectedly. An example given was the sudden fashion frenzy over “Hush Puppies” for cool shoes in the fifties.

But social movements and reform also may reach a “tipping point” wherein it is accepted by most people that something needs to give. The civil rights movement and subsequent laws came into being partly because most of society could not tolerate racial inequality. There have been countless marches for and against various causes when a group of people reach their tipping point. Howard Beale, who played Peter Finch in the movie “Network,” utilized his famous line: “I’m mad as hell and I’m not going to take this anymore.”

As a family physician that has practiced in Boulder County for 48 years, I feel our inadequate health care system is significantly closer to a “tipping point” than in 2006. I see more patients who are uninsured or underinsured, many due to layoffs in our sluggish economy and the inability of business owners to continue paying exorbitant costs to provide employees with health care benefits.

Nationally, there now are nearly 60 million uninsured Americans compared with the 46.8 million cited in my 2006 article. Further, nearly 45,000 of our citizens die annually because of lack of or delayed access to care. That number was 18,000 in 2006. These shameful statistics represent not just numbers, but fellow Americans: our parents, brothers, sisters, other relatives, and friends.

Despite spending more per capita for health care than other country, our statistics for longevity, maternal death, and infant death rank the United States in 37th place according to the World Health Organization.

Although there are those who cried “socialism” when a government health reform program was proposed, the new Patient Protection and Affordable Care Act was signed into law by President Obama in March, 2010. It is far from perfect but PPACA does begin to address some significant issues, mainly some of the egregious actions which have been the modus operandi for private health insurance companies. The new program reverses such policies as the exclusion of applicants with pre-existing conditions, dropping coverage for families whose health expenses are too high, and not allowing coverage in families to go beyond age 19, even for college students. In the future this new law will extend coverage to 32 million Americans currently underserved, provide coverage for most preventive services, and improve end-of-life care.

Sixty percent of Americans actually favor a tax supported, government-run health system, according to a Pew Research poll. All industrialized countries have various types of insurance plans, but none except America permits insurance companies to profit from basic health care policies. The lobbyists for insurance and pharmaceutical companies will influence our elected officials to resist movements toward a public option or single payer type plan. Such reform would certainly be more economical and efficacious than our present dysfunctional non-system.

In my view, health care reform in the near future must focus primarily on insurance and pharmaceutical company reform. That Americans pay as much as 80 percent more than Canadians for the same prescription drugs is inexplicable without using the word “greed.” Insurance companies take 25-33 percent of our premium dollars for operating expenses, salaries, including as much as $30 million annually by some CEO’s.

There are those who say: “Let the market work. Competition will drive the prices lower.” Since the introduction of “managed care” in the early nineties, this credo has been proven untrue. Insurance premiums, deductibles and co-pay costs have escalated at unconscionable rates. Private insurance companies do not feature oversight or accountability, both required with any government-run health care system. Incidentally, our own “socialist” health programs — the VAH and Medicare — remain popular and operate at about a 3 percent overhead.

A recent international study revealed that 20 percent of U.S. adults had serious problems paying medical bills. The other ten countries in the survey reported less than ten percent! Even Americans with insurance spend more than citizens of other countries in out-of-pocket costs. Most Americans are frustrated with what their insurance company pays, and do not understand their so-called explanation of benefits.

Each of us knows many who are uninsured or underinsured. Most of us recognize how unfair our health care non-system can be, able to deliver excellent care to many, but marginalizes those who cannot pay. The U.S. system forces physicians and other providers to make unethical choices — offering services, prescription drugs, imaging studies, and referrals only to those who can afford them.

What can we do to stem the tide of the tipping point? We must become activists to support health and insurance/pharmaceutical reform efforts. We need a health system that includes all Americans and funds care fairly. There should be preventive care, lifetime enrollment, and choice of providers of many types, and no exclusions for pre-existing conditions.

If the federal government cannot make these changes, then individual states may be able to take the initiative. Good news: The newly elected governor of Vermont, Peter Shumlin, ran on a single payer platform for his state.

For more information check healthcareforallcolorado.org

Howie Wolf is a physician in Boulder.

http://www.dailycamera.com/ci_16703948#ixzz16hcXraCP

'The US model of private health insurers is inefficient, expensive'

Times of India
Nov 26, 2010

Joseph Stiglitz the Nobel prize-winning economist has written several articles on the inequity in access to health and the flaws in the drug discovery process of pharmaceutical companies. On a recent visit to Delhi, Professor Stiglitz spoke to Rema Nagarajan about the negative role of patents in drug discovery and the pitfalls of private insurance in health.

Why have you been pitching for a single payer system for health insurance rather than a system where several private companies compete?
The US model of private health insurers has been proven inefficient and expensive. Insurance companies have a very strong incentive to do cream skimming. They make more money figuring out the high cost and low cost people. Rather than provide better healthcare at lower costs, insurance companies innovate at finding better ways of discrimination. They are inefficient because they are trying to figure out how to insure people who don’t need the cover and keep out people who need it. With many companies, they also need to spend on marketing and advertising. The incentives are all wrong and the transaction costs are very high and you have to give them a high profit. In health, social and private incentives are totally disparate. Competition does not work in healthcare especially in the health insurance market. Several countries like the UK, France and Sweden have a single payer system, differing only in the organisation of healthcare delivery. People in these countries have done much better than the US.

Several health insurance companies are setting up business here. Should India be worried?
India would be in a terrible mess, given the size of its population, if it went down the wrong route (of private companies for health insurance). They should learn from the mess that the US has got into. Once the companies start making profits, special interests in politics will come into play and it will be difficult to get them out. In India, given the disparities in income, a single system for delivery might not work. So, it will probably need a mixture of public and private provision or maybe public healthcare for basic clinics and reimbursement for others, or the UK model where provisioning or delivery is also through public institutions.

Are you against intellectual property especially in health research into medicines?
I am not against intellectual property (IP). But the benefits of IP have been exaggerated and the costs underestimated. IP creates monopolies. And it does interfere with economic efficiency by interfering with the flow of knowledge and the use of knowledge, particularly for developing countries. IP is related to many different categories, like IP related to entertainment which is a completely different category from IP related to medicines. And IP appropriate to developing countries is different from what is appropriate to developed countries. The Trade related aspects of intellectual property rights (TRIPS) agreement is trying to impose the same IP framework on everybody. The question is whether IP promotes innovation. Increasingly, the evidence is that it may actually impede innovation. It is leading to infinite negotiations around patents. More money is being spent on lawyers than on research. The legal cost of using the system takes up more resources than the benefits from the system. New ideas are the most important input into research. IP is making that input difficult to get. We need some IP. But we also need to find better ways of financing and incentivising research such as government-sponsored research.

Is it viable for governments to finance drug research?
Yes, public financing of drug research is financially viable. In a system where government pays for drugs, it is in effect, the government or the public who pay for hugely expensive drugs. Is this an efficient way of public spending? Drug companies greatly exaggerate the cost, especially on research and if you broke down their costs, you would see that basic research is done by the government. The applied research of a particular molecule is mostly done by small companies, often linked to universities, which is still private. But the biggest cost is testing of the drugs and that is usually blown up and often includes promotion costs. There could be public funded testing of drugs and the costs could be recovered when you sell the drugs. The net saving would be enormous. For India, this alternative model of drug testing could be a revenue generator also because India has the scientific and research capacity and the production capacity, being a dominant player in the generic business. Maybe, the IP framework is actually impeding India. I have argued that for the US too.

Will clinical trials conducted by governments be more reliable?
The very guy who will make billions from the sale of a drug is asked to do the clinical trial to test its safety. It gives rise to conflict of interest. There is always an accident or mistake or whatever by which they fail to report the negative effects of a drug as happened in the case of the drug Vioxx. From an economist point of view it is predictable. You cannot have people, who will make billions from the drug, test it. It is like self regulation of banking structures. It is totally flawed from an economic point of view. The government could set up a separate agency or company that is government financed to do the clinical trials and recuperate the money spent from the fees charged for the drugs.

http://timesofindia.indiatimes.com/home/opinion/edit-page/The-US-model-of-private-health-insurers-is-inefficient-expensive/articleshow/6989634.cms

‘The US model of private health insurers is inefficient, expensive’

Times of India
Nov 26, 2010

Joseph Stiglitz the Nobel prize-winning economist has written several articles on the inequity in access to health and the flaws in the drug discovery process of pharmaceutical companies. On a recent visit to Delhi, Professor Stiglitz spoke to Rema Nagarajan about the negative role of patents in drug discovery and the pitfalls of private insurance in health.

Why have you been pitching for a single payer system for health insurance rather than a system where several private companies compete?
The US model of private health insurers has been proven inefficient and expensive. Insurance companies have a very strong incentive to do cream skimming. They make more money figuring out the high cost and low cost people. Rather than provide better healthcare at lower costs, insurance companies innovate at finding better ways of discrimination. They are inefficient because they are trying to figure out how to insure people who don’t need the cover and keep out people who need it. With many companies, they also need to spend on marketing and advertising. The incentives are all wrong and the transaction costs are very high and you have to give them a high profit. In health, social and private incentives are totally disparate. Competition does not work in healthcare especially in the health insurance market. Several countries like the UK, France and Sweden have a single payer system, differing only in the organisation of healthcare delivery. People in these countries have done much better than the US.

Several health insurance companies are setting up business here. Should India be worried?
India would be in a terrible mess, given the size of its population, if it went down the wrong route (of private companies for health insurance). They should learn from the mess that the US has got into. Once the companies start making profits, special interests in politics will come into play and it will be difficult to get them out. In India, given the disparities in income, a single system for delivery might not work. So, it will probably need a mixture of public and private provision or maybe public healthcare for basic clinics and reimbursement for others, or the UK model where provisioning or delivery is also through public institutions.

Are you against intellectual property especially in health research into medicines?
I am not against intellectual property (IP). But the benefits of IP have been exaggerated and the costs underestimated. IP creates monopolies. And it does interfere with economic efficiency by interfering with the flow of knowledge and the use of knowledge, particularly for developing countries. IP is related to many different categories, like IP related to entertainment which is a completely different category from IP related to medicines. And IP appropriate to developing countries is different from what is appropriate to developed countries. The Trade related aspects of intellectual property rights (TRIPS) agreement is trying to impose the same IP framework on everybody. The question is whether IP promotes innovation. Increasingly, the evidence is that it may actually impede innovation. It is leading to infinite negotiations around patents. More money is being spent on lawyers than on research. The legal cost of using the system takes up more resources than the benefits from the system. New ideas are the most important input into research. IP is making that input difficult to get. We need some IP. But we also need to find better ways of financing and incentivising research such as government-sponsored research.

Is it viable for governments to finance drug research?
Yes, public financing of drug research is financially viable. In a system where government pays for drugs, it is in effect, the government or the public who pay for hugely expensive drugs. Is this an efficient way of public spending? Drug companies greatly exaggerate the cost, especially on research and if you broke down their costs, you would see that basic research is done by the government. The applied research of a particular molecule is mostly done by small companies, often linked to universities, which is still private. But the biggest cost is testing of the drugs and that is usually blown up and often includes promotion costs. There could be public funded testing of drugs and the costs could be recovered when you sell the drugs. The net saving would be enormous. For India, this alternative model of drug testing could be a revenue generator also because India has the scientific and research capacity and the production capacity, being a dominant player in the generic business. Maybe, the IP framework is actually impeding India. I have argued that for the US too.

Will clinical trials conducted by governments be more reliable?
The very guy who will make billions from the sale of a drug is asked to do the clinical trial to test its safety. It gives rise to conflict of interest. There is always an accident or mistake or whatever by which they fail to report the negative effects of a drug as happened in the case of the drug Vioxx. From an economist point of view it is predictable. You cannot have people, who will make billions from the drug, test it. It is like self regulation of banking structures. It is totally flawed from an economic point of view. The government could set up a separate agency or company that is government financed to do the clinical trials and recuperate the money spent from the fees charged for the drugs.

http://timesofindia.indiatimes.com/home/opinion/edit-page/The-US-model-of-private-health-insurers-is-inefficient-expensive/articleshow/6989634.cms

Is Uwe Reinhardt for or against single payer?

Reinhardt: Repeal Health Care, Make GOP Cut Costs

By John Greenwald
The Fiscal Times
November 28, 2010

In a freewheeling interview with The Fiscal Times, (Uwe Reinhardt) critiques the new health care reform law ā€” including its lack of cost containment ā€” and recent proposals from the president’s deficit-cutting panel. Never one to mince words, Reinhardt also discusses what he sees as the real culprit behind soaring health care costs, why he doubts a single payer health care system could work in the United States ā€” and where he believes the country’s founding fathers went wrong.

The Fiscal Times (TFT): What would a high-performing national health care system look like?

Uwe Reinhardt (UR): I think the Germans, the Swiss, the Dutch have a perfectly fine approach. It’s not a single-payer system. While I’m a Canadian I am not for [single payer] in the U.S. because we do not have a political system that can handle it responsibly. Canada has a parliamentary system that insulates considerably the public program from lobbying.

TFT: So you favor universal coverage but not a single payer system?

UR: For other countries I do [favor single payer] but we can’t run it. You need a responsible system of governance. Whatever you can say about U.S. governance, you cannot call it responsible. You really couldn’t. I think the founding fathers gave us an impotent government that acts quite irresponsibly. I don’t think parliamentary systems are that bad.

http://www.thefiscaltimes.com/Issues/Health-Care/2010/11/28/GOP-Health-Reform-Repeal.aspx

Comment:

By Don McCanne, MD

Single payer advocates frequently are perplexed by Uwe Reinhardt’s positions on health care reform.

He seems to support health care justice. He frequently uses the example of the waitress who is trying her best to support herself and her child, but who is unable to afford health care. By extrapolation, a just society would not let her or her child go without the essential health care services that they might need.

Yet what about single payer? He is a supporter for single payer, but for other countries. In this interview he states that he does not support single payer for the United States. The reason he gives is that “the founding fathers gave us an impotent government that acts quite irresponsibly.”

Right now the British and the Canadians are facing an assault on their public health systems by their conservative governments. In the United States, we are facing an assault on our Medicare program by the conservatives and right-leaning moderates. Although we don’t know how much damage, if any, will be done to the systems, it is highly probable that all three of the systems will survive intact considering the strong public support in each nation.

Does our government act irresponsibly? Wars? Income transfer from the workers to the wealthy? Neglect of poverty and other social inequities? Of course our leaders have been irresponsible, and so have the leaders of all other nations, but only at times. Social Security? Medicare? Our national parks? Most government activities are quite responsible and certainly do not set us apart from other nations.

Although Reinhardt criticizes the new health care reform law for failing to contain costs, he states, “The private sector is the inflationary component of health care, not Medicare or Medicaid.” Can he seriously contend that these government programs are irresponsible and impotent when they continue to outperform the private plans on cost containment? Considering this, how can he support single payer for other nations, yet reject it for the United States?

Government impotence and irresponsibility are not reasons to reject single payer. They are merely an excuse as to why we haven’t enacted it yet. What we need is more responsible people power. Let’s get busy stirring it up.

Joseph Stiglitz on single payer

Rema Nagarajan interviews Joseph Stiglitz

The Times of India
November 26, 2010

Why have you been pitching for a single payer system for health insurance rather than a system where several private companies compete?

The US model of private health insurers has been proven inefficient and expensive. Rather than provide better healthcare at lower costs, insurance companies innovate at finding better ways of discrimination. They are inefficient because they are trying to figure out how to insure people who don’t need the cover and keep out people who need it. With many companies, they also need to spend on marketing and advertising. The incentives are all wrong and the transaction costs are very high and you have to give them a high profit. In health, social and private incentives are totally disparate. Competition does not work in healthcare especially in the health insurance market. Several countries like the UK, France and Sweden have a single payer system, differing only in the organisation of healthcare delivery.

Several health insurance companies are setting up business here. Should India be worried?

India would be in a terrible mess, given the size of its population, if it went down the wrong route (of private companies for health insurance). They should learn from the mess that the US has got into. Once the companies start making profits, special interests in politics will come into play and it will be difficult to get them out.

http://timesofindia.indiatimes.com/home/opinion/edit-page/The-US-model-of-private-health-insurers-is-inefficient-expensive/articleshow/6989634.cms

Comment: 

By Don McCanne, MD

Nobel laureate Joseph Stiglitz understands single payer. President Obama knows that he does. So why doesn’t…

(No, health care reform shouldn’t be reduced to a mere conundrum.)

Ezra Klein on prices and innovation

Americans pay too much for health care -- in charts

By Ezra Klein
The Washington Post
November 23, 2010

There are a lot of complicated explanations for why American health-care costs so much, but there are also some simple ones. Chief among them is “we pay too much.” And I don’t mean in general. I mean specifically. Mountains of research show that for every piece of care you might name — a drug, a doctor visit, a diagnostic — you’ll pay far more in the United States than in other countries.

(He posts charts demonstrating higher health care prices in the U.S.)

The most positive spin you can give this data is that we’re paying to subsidize innovation for everyone, and though that’s not ideal, it’s better than that innovation not happening. The less positive spin is that we’re just getting ripped off.

For an analytical take — and a good look at the political economy of the problem — read Alec MacGillis’s October article on the subject.

Comment:

By Don McCanne, MD

The basic premise that our prices are higher than those of other nations is certainly correct. Alec MacGillis was precisely on target in the article that you cite.

But the claim that we “subsidize innovation for everyone” needs to be challenged.

Donald Light, in a Health Affairs article last year, wrote, “… a comprehensive data set of all new chemical entities approved between 1982 and 2003 shows that the United States never overtook Europe in research productivity, and that Europe in fact is pulling ahead of U.S. productivity.”

Also the Nobel prizes for C-T scanning and MRIs were shared with British scientists. So we don’t even have an exclusive claim on our budget-busting technology. (In fact, the Beetles financed the British development of C-T scanners.)

And our outrageous pricing has proven that the private insurance industry has failed us miserably in its most important function – negotiating value in health care.

Our pharmaceutical and technological firms do excel in one regard. They know how to manipulate the political process to prevent an effective public role in setting best prices (legitimate costs and fair profits), even though all other nations have done so.

Maybe someday we’ll be smart enough to follow their lead, but, until then, we’ll keep paying dearly for the failures of our electorate to become adequately informed and then to take appropriate action in the polling booth.

Fixing Medicare and providing it for everyone would create a beneficent public monopsony (single purchaser) which would be capable of enforcing value in our health care purchases.

Even Milton Friedman’s mentor, F.A. Hayek, wrote, in The Road to Serfdom, “Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”

Klein article and responses:
http://voices.washingtonpost.com/ezra-klein/2010/11/americans_pay_too_much_for_hea.html

International Federation of Health Plans – Comparative Prices:
http://www.ifhp.com/documents/IFHPPricereportfinal.pdf

Alec MacGillis – The price problem that health-care reform failed to cure:
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/22/AR2010102203394.html

Donald Light – Global Drug Discovery: Europe Is Ahead:
http://content.healthaffairs.org/cgi/content/abstract/28/5/w969

High-deductible health plans foster bad decisions by rich and poor

Health Care Use and Decision Making Among Lower-Income Families in High-Deductible Health Plans

By Jeffrey T. Kullgren, MD, MPH; Alison A. Galbraith, MD, MPH; Virginia L. Hinrichsen, MS, MPH; Irina Miroshnik, MS; Robert B. Penfold, PhD; Meredith B. Rosenthal, PhD; Bruce E. Landon, MD, MBA; Tracy A. Lieu, MD, MPH

Archives of Internal Medicine
November 22, 2010

From the Introduction:

In early 2009, 23% of all nonelderly adults with private insurance, and nearly 50% of adults who purchased coverage through the nongroup market, were enrolled in an HDHP (high-deductible health plan). Because of their relatively low premiums, HDHPs are also playing a prominent role in expanding insurance coverage. For example, most individuals who have purchased unsubsidized plans through the Commonwealth Connector, the new health insurance exchange in Massachusetts, have selected products like HDHPs that offer low premiums with high levels of cost-sharing.

As enrollment in HDHPs has grown, many analysts have voiced concerns about the impact these plans may have on low-income families. Decades of health services research have demonstrated that higher levels of cost-sharing reduce health care utilization, sometimes with greater adverse consequences for low-income patients.

From the Comment:

We found that lower-income families with at least $500 in annualized out-of-pocket expenditures in an HDHP were more likely than higher-income families to delay or forego health care services owing to cost (57% vs 42%).

Overall, we observed relatively high rates of delayed or foregone care in both income groups, with nearly half of all families having either delayed or foregone care in the last 6 months owing to the cost. These rates were substantially higher than the 20% of the US population reporting either unmet need or delayed care in the previous 12 months in the 2007 Heath Tracking Household Survey.

Beyond the implications for clinicians, our findings have important implications for federal health reform. Reform legislation that establishes an individual health insurance mandate could lead more families to enroll in plans with high levels of cost-sharing, as has been seen following the implementation of coverage mandates in Massachusetts.

http://archinte.ama-assn.org/cgi/content/abstract/170/21/1918

And…

Higher Deductibles, Lower Spending

By Reed Abelson
The New York Times
Prescriptions blog
November 22, 2010

As more families find themselves enrolled in health plans with high deductibles, they are increasingly likely to delay or forgo medical care because of the out-of-pocket cost, a new study shows (the study cited above).

Do you think people are better and more savvy consumers when they share in the cost of their medical care?

Three reader responses:

12. Anonymous BE, Belgium
November 23rd, 2010

NO. Medical care should be free at the point of service. The whole point of health insurance is that no one should be financially worse off because they have health problems. High deductible plans violate this maxim.

Furthermore, people are not in a position to judge what is necessary or not. People listen to what their doctor says, and they do it, unless their lack of insurance coverage makes it a financial problem. Patients are not evaluating the effectiveness of various treatments – that is a job for doctors and scientists, not patients. Patients are not consumers – they are people who are suffering who place themselves in the hands of the medical profession.

13. GoozNews, Washington, DC
November 23rd, 2010

RE: eliminating useful v. non-useful care via higher co-pays. It’s not an open question. The Rand Health Insurance Experiment, the only comprehensive study to date, showed that people were just as like to avoid necessary car as unnecessary care when forced to pay higher co-pays and deductibles. This is also common sense. When the quality of a good, in this case health services, has no relationship to price, and consumers lack accurate and timely information about what constitutes high quality, making rational decisions based on price is virtually impossible. It requires extensive research prior to the point of purchase — highly impractical when it comes to health care, which is usually purchased under the duress of immediate illness. Those who advocate “more skin in the game” as the cure for rising health care costs fail to acknowledge these all-too-human realities, or what an economist might call pervasive marketplace failures.

23. Don McCanne, San Juan Capistrano, CA
November 23rd, 2010

What really matters is our total national health expenditures. We are already spreading the risk by contributing to our public and private insurance pools through taxes and/or premiums. So we should decide whether the financial barriers to care that high-deductible health plans create are worth the projected savings in our total health care spending.

Only one-fifth of us use four-fifths of all health care. For this sector of our population, deductibles are rapidly exceeded and have virtually no impact on total national health care spending. (It is in this sector where most of the Dartmouth variations occur, but that is another topic.)

For the four-fifths of us who are relatively healthy, most of us would not decline clearly appropriate care even if it is below the deductible, providing that we had the ability to pay for it. Only the worried-well, perhaps with a common cold, might use the health care system more than necessary, but that doesn’t apply to most of us.

Although the trip to the doctor is almost always for legitimate reasons, perhaps ten percent of the time the marginal care offered might reasonably be declined, providing it is an informed decision. Studies show that about half of that care is still appropriate, so only five percent of care for healthier patients may be of no more value than receiving reassurance that no care is needed (which actually does have value in itself).

Since the four-fifths of us who are healthy consume only twenty percent of total health care, the five percent of our care that might deemed to be inappropriate constitutes only one percent of our national health expenditures (five percent of twenty percent). That one percent is the equivalent of only two or three months of health care inflation – not worthy of more than a footnote in our national health care budget.

We can control health care costs, but high-deductible health plans are not an effective mechanism. They certainly are not worth the price of denying beneficial care based on individual concerns over affordability.

Every other nation has controlled costs by establishing an effective model of social insurance. Unfortunately the model in the Patient Protection and Affordable care Act falls far short. What would work would be to improve the Medicare program and then include everyone. Several studies have shown that it would be the least expensive method of providing affordable care for absolutely everyone.

http://prescriptions.blogs.nytimes.com/2010/11/22/higher-deductibles-lower-spending/

Comment:

By Don McCanne, MD

This study of the impact of high-deductible health plans is unique in that it studied only families with over $500 in annual out-of-pocket medical expenses, thus they are families that do have some interaction with the health care system.

It is no surprise that 57 percent of these
lower-income families with high-deductible health plans delayed or had foregone health care. What is less intuitive is that 42 percent of the higher-income families with high-deductible health plans also delayed or had foregone health care. Other studies indicate that about half of that care would have been beneficial, so we really should question the policy of using high-deductible health plans as a method of containing health care costs.

Another important concern is that individuals purchasing plans from the Massachusetts health insurance exchange are choosing high-deductible plans because of the lower premiums. The state exchanges to be established under the Patient Protection and Affordable Care Act will offer low-actuarial value plans as the standard. These plans are high-deductible plans that will likely attract most buyers. Bad policy.

When the evidence so clearly indicts high-deductible plans, why did Congress adopt them wholesale? Simply to accommodate the private insurers in preserving their markets by trying to keep their premiums affordable (which they’re not anyway).

It’s time to dump the private insurers and establish an improved Medicare for all, with first dollar coverage. We can control costs far better with the other single payer tools that would be at our disposal.

New health care law fails to make the grade

By MARGARET FLOWERS
Capital Times (Madison, Wis.), Nov. 22, 2010

When it comes to health insurance coverage, Wisconsin receives a B in comparison to other states, but only because itā€™s graded on a curve. The stateā€™s 9.5 percent uninsured rate falls considerably below the national average of 16.7, but thatā€™s not much consolation to residents who remain uninsured or who are covered by skimpy policies with big deductibles and co-pays.

The Census Bureau reports that the number of uninsured in the U.S. jumped 10 percent to 51 million people in 2009. This is the greatest jump since data have been collected. The jump would have been more than 20 percent if not for public programs like BadgerCare.

No other rich nation experiences such high levels of people without access to health care and the resultant suffering and death. For example, a study in the American Journal of Public Health shows that in the United States nearly 45,000 deaths annually can be linked to lack of health insurance. Thatā€™s over 120 preventable deaths every day.

Even those who have health insurance are unprotected. A growing number of people have insurance policies that require high co-pays, deductibles and other out-of-pocket expenses. These ā€œcost-sharingā€ measures are serious obstacles to getting care. The majority of people who go bankrupt from medical bills have insurance when they get sick. Private health insurance is like an umbrella that melts in the rain — it may not be there when you need it most.

Sadly, the new federal health law fails to make the grade. Even the Congressional Budget Office estimates that 23 million people will still lack coverage in 2019 after the health legislation is fully implemented. The Centers for Medicare and Medicaid Services reports that health care costs will rise more quickly under the new law than if there had been no health bill.

A potent example of what to expect occurred when the recent provision preventing health insurers from denying new policies to children with pre-existing conditions kicked in. The day before this protection went into effect, insurers like WellPoint, UnitedHealth Group, Aetna, Cigna and Humana announced that they would no longer offer new policies to individual children.

What can we conclude about the new legislation? It further enriches and empowers the very industries which are at the heart of the problem. As long as private insurers occupy a commanding role in our health system, we will never achieve universal or affordable care. Insurers make money by enrolling the healthy, screening out the sick, denying claims and raising premiums.

There is a solution that receives top marks: a single-payer national health insurance program, commonly referred to as improved Medicare for all. Single-payer means that our health care dollars are pooled in a single public fund that pays for a universal health care system. This is estimated to save $400 billion, which would cover those who need care. Surveys show this approach is supported by two-thirds of the population.

Improved Medicare for all means every person living in the United States would be guaranteed high-quality care from birth to death. Coverage would be comprehensive, including dental care, vision care, mental health services and prescriptions. And the working and middle class would pay less for health care because of the increased efficiency of a single-payer system.

Patients would choose their physician and health facility, and decisions about treatment would be made by patients and their health professionals without interference by insurance company bureaucrats.

While the health care crisis may not be obvious in Madison, the effects are felt in Wisconsin and across the nation. We must work with renewed energy and commitment for a national health program that addresses our fundamental problems. Everybody in, nobody out.

Dr. Margaret Flowers, who spoke recently in Madison, resides in Baltimore and serves as congressional fellow for Physicians for a National Health Program. She is also a board member of Healthcare-Now.

http://host.madison.com/ct/news/opinion/column/article_eda0df58-9679-5f14-8fed-d41921476906.html

CBO analysis of the Rivlin/Ryan Medicare voucher and Medicaid block grant proposals

Preliminary Analysis of the Rivlin-Ryan Health Care Proposal

(Analysis transmitted by letter from Douglas Elmendorf, Director of the CBO, to Rep. Paul Ryan)
Congressional Budget Office
November 17, 2010

For purposes of this analysis, CBO assumed that all individuals projected to enroll in Medicare would use the proposed voucher. Voucher recipients would probably have to purchase less extensive coverage or pay higher premiums than they would under current law, for two reasons. First, most of the savings for Medicare under the proposal stem from reducing the amounts that the federal government would pay for enrollees on a per capita basis, relative to the projections under current law. Second, future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.

Similarly, reducing federal payments for Medicaid relative to currently projected amounts would probably require states to provide less extensive coverage, or to pay a larger share of the programā€™s total costs, than would be the case under current law.

For both Medicare and Medicaid, the budgetary effects would become larger over time because federal payments would tend to grow more slowly under the proposal than projected costs per enrollee under current law. Although the level of expected federal spending and the uncertainty surrounding that spending would decline, enrolleesā€™ spending for health care and the uncertainty surrounding that spending would increase.

http://www.cbo.gov/ftpdocs/119xx/doc11966/11-17-Rivlin-Ryan_Preliminary_Analysis.pdf

Comment: 

By Don McCanne, MD

Congressman Paul Ryan and former Clinton budget director Alice Rivlin are both members of the Bowles/Simpson deficit commission. They have asked the Congressional Budget Office to analyze their proposal to reduce future federal health care expenditures by converting Medicare to a voucher program for purchasing private health plans, and by converting Medicaid into a block-grant program for the states.

If you read the analysis found at the link above, you would see that the deficits related to future spending in the Medicare and Medicaid programs would be reduced by this proposal. If your only goal is to cut the federal deficit, then the analysis would predict success, but at what cost?

Compared to the current Medicare program, the vouchers would purchase less coverage, or the premiums paid by the beneficiaries would be higher, or both. Merely shifting to private plans alone would result in higher premiums if the benefits were to remain the same as in the traditional Medicare program. Many Medicare beneficiaries are already burdened with excess medical debt, and the voucher proposal would increase the burden by both lowering the federal contribution and increasing the administrative waste characteristic of private plans.

Converting Medicaid into a block grant program uses the same principle as converting defined benefit programs into defined contribution programs. The federal government ends its exposure to the risk of ever-increasing costs by fixing its contribution to the states through a defined block grant. The state then bears the risk for increases in health care costs.

Of course, states are already heavily burdened by the costs of their Medicaid programs. Adding more to that burden further strains state budgets. The states are then put into a position of trying to balance reductions in health services with the greater deficit holes punched into the state budgets. Passing the problem from the federal taxpayer to the state taxpayer accomplishes nothing.

As the CBO analysis states, “Although the level of expected federal spending and the uncertainty surrounding that spending would decline, enrolleesā€™ spending for health care and the uncertainty surrounding that spending would increase.”

What is our goal here? Appeasing anti-government budget hawks? Or removing financial barriers so that people can get the health care that they need?

The budget hawks say that we need to make hard choices. So what about the choice of a single payer monopsony – an improved Medicare for all? That would solve the budget deficit problem while enabling everyone to have the care that they need – not really very hard choices. Maybe it would be a hard choice for the hawks to accept a government program that would actually work, but let’s hold them to their demand. If they think an improved Medicare for all is a hard choice, then so be it.