PNHP

We need health care for all

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We need health care for all

Letters to the editor
The Oregonian, Sept. 28, 2010

Regence BlueCross BlueShield and other large insurers canceled their policies for children just before they would have had to accept any patient regardless of his or her medical condition (“Regence drops child-only coverage,” Sept. 23). This confirms what we have long known: Since 20 percent of the population use up 90 percent of health care expenses in any given year, insurance companies make money by not insuring these costly patients.

We need an insurance system that pools the risk evenly and spreads out the costs of the sickest 20 percent of us. Other rich nations have versions of a single-payer system to finance health service payments. It is time we adopt a single-payer national health program in the United States. Such a system would provide affordable access to medical services for everyone. No one would have to worry about pre-existing conditions, deductibles, provider networks, medical debt, losing insurance with a job loss or a doctor rejecting them as a patient because they are on Medicaid. Instead, the sick would simply choose their doctor and hospital.

Nancy Crumpacker, M.D.
Northwest Portland
Crumpacker is affiliated with Physicians for a National Health Program

http://blog.oregonlive.com/myoregon/2010/09/we_need_health_care_for_all.html

Incomes and health costs

Census Bureau Releases 2009 American Community Survey Data

U.S. Census Bureau
September 28, 2010

Median Household Income

Real median household income in the United States fell between 2008 and 2009 — decreasing by 2.9 percent from $51,726 to $50,221.

http://www.census.gov/newsroom/releases/archives/american_community_survey_acs/cb10-cn78.html

And…

U.S. Health Care Cost Rate Increases Reach Highest Levels in Five Years, According to New Data from Hewitt Associates

Hewitt
September 27, 2010

According to Hewitt’s analysis, the average total health care premium per employee for large companies will be $9,821 in 2011, up from $9,028 in 2010. The amount employees will be asked to contribute toward this cost is $2,209, or 22.5 percent of the total health care premium. This is up 12.4 percent from 2010, when employees contributed $1,966, or 21.8 percent of the total health care premium. Average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, are expected to be $2,177 in 2011—a 12.5 percent increase from 2010 ($1,934). These projections mean that in a decade, total health care premiums will have more than doubled, from $4,083 in 2001 to $9,821 in 2011. Employees’ share of medical costs—including employee contributions and out-of-pocket costs—will have more than tripled, from $1,229 in 2001 to $4,386 in 2011.

http://www.hewittassociates.com/Intl/NA/en-US/AboutHewitt/Newsroom/PressReleaseDetail.aspx?cid=9106

And…

Milliman Medical Index

The annual Milliman Medical Index (MMI) reports total annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program. The MMI represents the total cost of payments to healthcare providers, and excludes the non-medical administrative component of health plan premiums.

The total 2010 medical cost for a typical American family of four is $18,074.

https://pnhp.org/news/2010/may/the-mmi-proves-that-ppaca-is-already-a-failure

Comment:

By Don McCanne, MD

Think about this. Median household income is now back down to $50,000. The average cost of health care for a family of four with an employer-sponsored PPO plan is $18,000. Premiums for employer-sponsored plans have doubled in the last decade, while the employees’ spending on health care has tripled!

The Patient Protection and Accountable Care Act (PPACA) was specifically designed to leave the large market of employer-sponsored private health plans intact – the “you can keep the insurance you have…” strategy for reform. Most individuals and families will see little change as a result of PPACA since they will continue to receive their insurance coverage through their employment.

Very specifically, employees of larger companies will not see premium subsidies like for those who purchase plans in the state exchanges, nor will they see the subsidies for out-of-pocket expenses. The architects of PPACA decided that employer contributions to the premiums would obviate the need for subsidies – glibly suppressing the fact that employer contributions are actually paid by the employees in the form of forgone wage increases.

The health care financing structure of PPACA is an unmitigated disaster. For most families, health care costs will encroach at increasing percentages on their budgets for basic essentials such as housing, food, and transportation, not to mention education, retirement plans, and other discretionary expenses. The $18,000 in average health care costs for a family of four is already over one-third of the median household income of $50,000.

We desperately need to enact policies that will bring costs under control while establishing an equitable method of financing that makes health care affordable for everyone. PPACA doesn’t even come close. What will work is a single-payer national health program – an improved Medicare that includes everyone.

(Why aren’t people talking about this? Why is all of the media coverage about the tweaks to our fragmented, dysfunctional system – tweaks that will never get us there? Doesn’t anyone care?)

AP/Stanford/RWJ poll – Should health law have done more?

AP Poll: Many think health overhaul should do more

By Ricardo Alonso-Zaldivar and Jennifer Agiesta
The Washington Post
September 26, 2010

A new AP poll finds that Americans who think the law should have done more outnumber those who think the government should stay out of health care by 2-to-1.

The poll found that about four in 10 adults think the new law did not go far enough to change the health care system, regardless of whether they support the law, oppose it or remain neutral. On the other side, about one in five say they oppose the law because they think the federal government should not be involved in health care at all.

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/26/AR2010092600409.html

And…

2010 Health Care Reform Survey

By Stanford University with the Robert Wood Johnson Foundation
The Associated Press

HC1. In general, do you favor, oppose, or neither favor nor oppose the law changing the health care system that the U.S. Congress passed last March?

9% – Favor strongly
21% – Favor somewhat
30% – Neither favor nor oppose
17% – Oppose somewhat
23% – Oppose strongly
0% – Refused

(Ask if HC1 = oppose strongly, oppose somewhat or neither favor nor oppose):

HC1A. Which of the following best expresses your view of the health care law that Congress passed last March?

28% – I oppose most or all of the changes made by the law
20% – I oppose a few of the changes made by the law
23% – I favor most or all of the changes made by the law, but I think that law doesn’t do enough to improve the health care system
28% – I oppose the law because I think the federal government should not be involved in health care at all
1% – Refused

(Ask if HC1 = favor strongly, favor somewhat or neither favor nor oppose):

HC1B. Do you think that the health care law passed last March by Congress should have done more to change the health care system, or do you not think that?

61% – It should have done more
36% – Do not think that
3% – Refused

HC2. How much, if at all, should the health care system in the United States be CHANGED from what it was like in February, 2010, before Congress passed the law to change the system? Would you say it should be changed…

17% – A great deal
22% – A lot
35% – A moderate amount
16% – A little
9% – Not at all
1% – Refused

PR6a. Do you favor, oppose, or neither favor nor oppose a law that would require every American to have health insurance, or pay money to the government as a penalty if they do not, unless the person is very poor?

8% – Strongly favor
17% – Somewhat favor
25% – Neither favor not oppose
16% – Somewhat oppose
33% – Strongly oppose
8% – Refused

Poll results (32 pages):
http://surveys.ap.org/data/KnowledgeNetworks/Health%20Reform%20Topline%20for%20Posting.pdf

Comment: 

By Don McCanne, MD

Twice as many Americans believe that the Patient Protection and Affordable Care Act should have done more to change the health care system than those who believe that the government should not be involved in health care at all, according to a release this weekend on the AP/Stanford/RWJ poll. Framed this way the statement would lead you to believe that the majority of Americans want more reform, when, according to this poll, only about two-fifths hold that view, whereas only one-fifth believe that the government should not be involved at all.

Another confusing result stems from the fact that those favoring reform and those opposing reform were asked two different questions (HC1A and HC1B), yet those neither favoring nor opposed were asked both questions. It would not be surprising to learn that those favoring reform would want to see more done, but it would have been helpful to know how many of those opposed were opposed because not near enough was done. The number probably would have been fairly small since only 23 percent of those opposed plus those neutral wanted more done.

There are some conclusions that we can draw from the poll that do seem to be valid:

*  Nine-tenths of Americans agree that the health care system should be changed from what it was like before the legislation passed.

*  Four-fifths favor “making sure that more Americans get the health care they need.”

*  Four-fifths favor “reducing the amount of money that patients pay for health care.”

*  Half are opposed and only one-fourth favor the individual mandate to either buy health insurance or pay a penalty – an essential element of a system based on private health plans.

*  Those polled were split on their understanding of various measures that may or may not have been included in the legislation. Thus these are the opinions of a relatively uninformed electorate.

The reassuring findings in this poll are that Americans do support the goals of reform: 1) Americans should have the health care that they need, and 2) Health care should be affordable for patients.

The poll also shows that the public is not well informed on health policy, so we need to do a much better job in showing them how they can achieve the health care reform goals that they want by enacting an improved Medicare program that covers everyone.

Want to save lives and money? Strengthen Medicare

The following text contains the remarks of Olveen Carrasquillo, M.D., at a congressional briefing titled “An analysis of proposed changes to Medicare before the Deficit Commission and a better alternative: Improved Medicare for all” held in Washington on Sept. 23.
 
Madam chairperson, members of Congress, legislative aides, colleagues and friends,
 
Thank you so much for assembling this critically important session on the need to preserve and strengthen our nation’s best and highest quality health insurance system, namely Medicare.
 
As data released last week by the Census Bureau shows, the need to enhance our health insurance systems is now more critical than ever.
 
The numbers show that in 2009 in the nation’s uninsured reached the highest levels since the Bureau has been keeping records – 50.7 million without health coverage. That represents 17 percent of the U.S. population. If you add the other 60 million people who are underinsured to that number, we see that we have no choice but to act.
 
Buried in those numbers is the disproportionate impact this crisis has had on the Latino population. In 2009, 32 percent of our Latinos in this country lacked health insurance, i.e. 16 million Latinos were living in the U.S. without health coverage.
 
This is an issue that affects both U.S.-born and immigrant Latinos. Nearly a quarter of U.S.-born Latinos lacked health coverage. But of course the impact is much worse among immigrant Latinos living in the U.S., with 50 percent of those persons lacking health coverage last year.
 
Thus, the problem must be addressed. Of course, there are aspects of the president’s health reform that may not please everybody. The fact that it does nothing for the 10-12 million Latinos who lack formal documentation in the U.S. and the fact the legal immigrants must wait five years for coverage are among my own irritations with the new law.
 
And of course the fact that we could have done this at much lower cost (about $1 trillion less) and provided truly universal coverage with Medicare for all – through a publicly funded but privately delivered health care system – is a real travesty.
 
That said, it is clear that a few million uninsured Latinos will benefit from the enacted health reform, and something is definitely better than nothing.
 
At the same time, it is ironic that after our nation’s brave steps to improve coverage, proposals have rapidly emerged that would weaken that coverage by undermining our nation’s best health care insurance system, namely Medicare. It makes no sense.
 
Here we pass a plan to potentially insure 32 million persons, and now we are seriously considering barring million of seniors from coverage by upping the Medicare eligibility age to 67 or even 70.
 
As a provider, I see firsthand what happens when people reach the “magic” age of 65. Suddenly all those health conditions they had been waiting to take care of because they were uninsured or underinsured can now be addressed: the poorly controlled hypertension and cholesterol, or preventive measures like colonoscopy that had been deferred because they couldn’t afford it.
 
Indeed, if we are truly interested in bettering the health of our country and potentially saving money, I would argue the exact opposite of those who advocate upping the eligibility age. Let’s extend coverage downward to age 60 or even better to age 50, when we can catch those conditions early and treat them.
 
Treating that high blood pressure or cholesterol early, or removing that pre-cancerous polyp in the colon early, is much more pound-wise than the penny-foolish notion that we can save money by allowing these conditions to fester until the person turns 67, when the patient may now face a $20,000 coronary stent procedure or colorectal surgery and chemotherapy.
 
You want save money? Reduce the Medicare eligibility age. Want to spend more? Let people get sicker from preventable conditions to the point where it will cost them and us exorbitantly.
 
Another terrible idea is increasing co-payments and deductibles. Every study shows that doing this will decrease costs, but much of that savings is achieved by reducing necessary health services.
 
Do we really want that diabetic not to see me three to four times a years because of co-payments? Do we want him to cut down on the average of five medicines he needs to take? Do we want him not to get the needed tests and screening he needs? Do we really want to let him end up on dialysis due to uncontrolled diabetes, or end up on disability because of an amputation, or end up blind because we tried to save a few dollars by increasing his co-payments and deductibles?
 
Equally terrible is the idea of substituting private vouchers for Medicare. We know that private insurers cannot compete on an equal footing with Medicare. The needs of their stockholders, outrageous administrative overhead, and CEOs making tens and sometimes even hundreds of millions of dollars mean they are much less efficient than Medicare.
 
From my end, I see the private insurers’ outrageous paperwork demands, pre-approvals for anything I want to do for my patients, limited participating sub-specialists, automatic denials.
 
I am so happy when a patient has straight Medicare. I know the hassles to get them the care they need will be minimal. This and Medicare’s provider payment structure makes many private plans quite unattractive to physicians like myself, and explain why my practice accepts so few of these of these privately managed Medicare plans.
 
So now some members of the Deficit Commission and others around it are proposing to move all of our seniors into highly bureaucratic, expensive and inefficient private plans to save us money. Come again?
 
Last is the idea of means testing, like we do for Medicaid. Yes Medicaid is better than nothing, but look at Medicaid. The administrative hassles created through means testing means millions of children who are eligible for the program don’t enroll in it. Millions more children are kicked off the rolls every year because they could not gather all the documents required to prove they still qualified for the program.
 
Most notably, as a program for the poor, Medicaid is chronically underfunded and often pays providers less than half of what Medicare pays – which is why less than half of all doctors in this country don’t even consider taking Medicaid patients. This means these patients are often segregated and have to get care at community clinics and public hospitals. So if you really want to dismantle Medicare, new means testing would be an extremely effective mechanism to do this.
 
Granted, we need to save money in Medicare. But the question is how do we do it? We certainly don’t need ill-informed, retrograde ideas that will destroy the health of our elders and likely save us little money or, even worse, end up costing us more.
 
Well, I am from south Florida and I can give you some stories about Medicare fraud and abuse. So yes, there is some fat there. Increased surveillance and enforcement, which the new health law calls for, will definitely help a little.
 
Second, as noted, we overpay private Medicare Advantage plans for the inefficient and burdensome care they deliver. We should build on the steps that have already been taken and compel these plans to meet the same efficiency criteria as Medicare. Of course their CEOs and stockholders may not like the fact that we are ending their outrageous welfare-like subsidies, but if the goal is to improve care and reduce costs, taking this kind of action is a no-brainer.
 
But here is an even bolder idea. Rather than dismantling Medicare, why don’t we improve Medicare and extend
it all persons living in the United States? Why don’t we eliminate the bureaucratic, private-insurance middlemen?
 
Doing so would save us money. Every health economist will tell you that a Medicare-for-all system would the most efficient mechanism to reduce our national health expenditures. Savings estimates are in the $200 billion to $400 billion range. In fact, estimates are that we may be able to cover the entire U.S. population without even increasing our annual health expenditures with a Medicare-for-all system.
 
This of course would mean angering very well-connected constituencies, namely the medical insurance and pharmaceutical industries. But that’s what is called for.
 
I hope for the day when Congress will realize that their job here in Washington is here to help the American people and not to enrich private corporations.
 
Until Congress gets enough courage to do the right thing, we have to hold briefings like this one to dissuade Congress from undermining our best health insurance system, Medicare. As a start, let’s dismiss the harmful ideas for weakening the Medicare program floating around the National Commission for Fiscal Responsibility and Reform.
 
Thank you.
 
Dr. Carrasquillo is a national authority on health disparities, minority health, health services research, health policy, access to care and national health insurance. He is presently chief of the Division of General Internal Medicine in the Department of Medicine at the Miller School of the University of Miami and a board member of Physicians for a National Health Program (www.pnhp.org).

What if everyone had Medicare?

By Henry Abrons
San Francisco Chronicle, Friday, September 24, 2010

The Census Bureau released its annual report on income, poverty and health insurance coverage in the United States earlier this month, and it’s no surprise to learn that we’re in bad shape. The number of people living in poverty was 43.6 million (14.3 percent), up sharply from 2008, and real per capita income declined 1 percent.

Looking at health insurance, the situation is truly dire. There was a dramatic spike in the uninsured – 4.3 million more, to a record 50.7 million – in spite of the expansion of government health insurance rolls by nearly 6 million.

Those opposing government health insurance should ponder the fact that private health insurance coverage dropped to the lowest level since comparable data were first collected in 1987. On the other hand, those who look to the new health reform law – the Patient Protection and Affordable Care Act (PPACA) – for a solution should be deeply disturbed.

PPACA was not designed to provide universal coverage. In fact, if the new law works as planned, in 2019 there will still be 23 million uninsured. Yet the consequence of being uninsured can be lethal: Research published last year shows about 45,000 deaths annually can be linked to lack of coverage. That number is probably more than 50,000 today.

As Don McCanne, senior health policy fellow at Physicians for a National Health Program, has observed, PPACA is an underinsurance program. Employers, seeing little relief, will expand the present trend of shifting more insurance and health care costs onto employees.

Individuals buying plans in the new insurance exchanges (which won’t start until 2014) will discover that subsidies are inadequate to avoid financial hardship. Inevitably, they will end up with underinsurance, spotty coverage and high deductibles.

And workers who are unemployed or without employment-based insurance will move into Medicaid (Medi-Cal in California), where providers are reimbursed at such low rates that many will not accept patients.

When Congress passed the new law last spring, it based its decision on a faulty assumption – namely, that the rest of the population will have sustainable private health insurance. But between 2008 and 2009, the number of people covered by private health insurance decreased from 201.0 million to 194.5 million, and the number covered by employment-based health insurance declined from 176.3 million to 169.7 million.

If this trend continues, as it’s bound to do under current economic conditions, the ranks of the uninsured will expand and the new law will fall far short of the mark – either the cost will exceed projections, or coverage will need to be reduced.

The Census Bureau report underscores the urgency of going beyond the Obama administration and swiftly implementing a more fundamental reform – a single-payer national health insurance program – improved Medicare for all.

Improved Medicare-for-all, by replacing our dysfunctional patchwork of private health insurers with a single, streamlined system of financing, would save about $400 billion annually in unnecessary paperwork and bureaucracy. That’s enough to cover all of those now uninsured and to provide every person in the United States with quality, comprehensive coverage.

A single-payer plan would also furnish us with effective cost-control tools, like the ability to negotiate fees and purchase medications in bulk. It would permit patients to go to the doctor and hospital of their choice.

Short of a full national plan, some states, like ours, are eyeing a state-based single-payer model. The new health law allows states to experiment with different models of reform, but not until 2017. Congress should move that date forward. There is no time to waste.

Henry Abrons, M.D., is a member of Physicians for a National Health Program-California (www.pnhpcalifornia.org).

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/09/24/EDRK1FFRST.DTL

This article appeared on page A – 14 of the San Francisco Chronicle

They're Mad As Hell: Doctors take California road trip in support of universal health care

By John Driscoll
Times-Standard (Eureka, Calif.), Sept. 24, 2010

In their pursuit of nationalized health care for everyone, Drs. Paul Hochfeld and Mike Huntington are under no illusions. They are swimming upstream.

At a time when Republicans — who could take control of Congress in the upcoming election — are talking about repealing recent health care legislation, some doctors are pushing to make health care reform far more complete. They are the Mad as Hell Doctors, currently on tour around California in an effort to educate people on the benefits of a single-payer and improved Medicare system.

After a rally at Humboldt State University, and before a community dinner and entertainment event at Bayside Grange in Arcata, Hochfeld and Huntington said that some people will benefit from the recently passed Patient Protection and Affordable Health Care Act. But the law leaves insurance companies entrenched, they said, and forces people to buy a flawed product through an industry that doesn’t add value to health care.

”We still have this chaotic nonsystem,” Hochfeld said.

Since people without insurance aren’t turned away at the emergency room door, the public is paying for the treatment that they get anyway, Hochfeld said. In a single-payer system, everyone is in the same risk pool, and taking the insurance companies out of the equation frees up 20 percent to 25 percent of the overall resources to improve care, he said.

But if Congress was unwilling to pursue true government-run health care, what makes
the Mad As Hell Doctors think anything will change? It won’t, Hochfeld said, until large numbers of people understand the benefits of such a system. Which is why the doctors are on tour again.

In 2009, the Mad As Hell Doctors visited 15 states in an effort to bring a message to Congress that the current system is inefficient, costly and doesn’t lead to better care. The 2010 California tour is backing Senate Bill 810 — the California Universal Healthcare Act — which they see as potentially leading the way toward a national single-payer system.

Huntington said that the United States can provide high-quality health care, but it does so at a higher cost than in other countries. The wealthy can afford such treatment, he said, but average people needing intensive health care find themselves facing bankruptcy.

Huntington said he knows of a man, with a family, who was diagnosed with throat cancer and was facing a long and uncertain treatment and recovery. The cure was no sure thing, Huntington said. The man might die or be unable to work after the treatment was over, Huntington said, making him worry that he’d be saddling his family with a massive debt.

“Nobody should be in that dilemma,” Huntington said.

http://www.times-standard.com/localnews/ci_16162335

They’re Mad As Hell: Doctors take California road trip in support of universal health care

By John Driscoll
Times-Standard (Eureka, Calif.), Sept. 24, 2010

In their pursuit of nationalized health care for everyone, Drs. Paul Hochfeld and Mike Huntington are under no illusions. They are swimming upstream.

At a time when Republicans — who could take control of Congress in the upcoming election — are talking about repealing recent health care legislation, some doctors are pushing to make health care reform far more complete. They are the Mad as Hell Doctors, currently on tour around California in an effort to educate people on the benefits of a single-payer and improved Medicare system.

After a rally at Humboldt State University, and before a community dinner and entertainment event at Bayside Grange in Arcata, Hochfeld and Huntington said that some people will benefit from the recently passed Patient Protection and Affordable Health Care Act. But the law leaves insurance companies entrenched, they said, and forces people to buy a flawed product through an industry that doesn’t add value to health care.

”We still have this chaotic nonsystem,” Hochfeld said.

Since people without insurance aren’t turned away at the emergency room door, the public is paying for the treatment that they get anyway, Hochfeld said. In a single-payer system, everyone is in the same risk pool, and taking the insurance companies out of the equation frees up 20 percent to 25 percent of the overall resources to improve care, he said.

But if Congress was unwilling to pursue true government-run health care, what makes
the Mad As Hell Doctors think anything will change? It won’t, Hochfeld said, until large numbers of people understand the benefits of such a system. Which is why the doctors are on tour again.

In 2009, the Mad As Hell Doctors visited 15 states in an effort to bring a message to Congress that the current system is inefficient, costly and doesn’t lead to better care. The 2010 California tour is backing Senate Bill 810 — the California Universal Healthcare Act — which they see as potentially leading the way toward a national single-payer system.

Huntington said that the United States can provide high-quality health care, but it does so at a higher cost than in other countries. The wealthy can afford such treatment, he said, but average people needing intensive health care find themselves facing bankruptcy.

Huntington said he knows of a man, with a family, who was diagnosed with throat cancer and was facing a long and uncertain treatment and recovery. The cure was no sure thing, Huntington said. The man might die or be unable to work after the treatment was over, Huntington said, making him worry that he’d be saddling his family with a massive debt.

“Nobody should be in that dilemma,” Huntington said.

http://www.times-standard.com/localnews/ci_16162335

Uwe Reinhardt on The Perennial Quest to Lower Health Care Spending

The Perennial Quest to Lower Health Care Spending

By Uwe Reinhardt
The New York Times
September 24, 2010

… the nation bravely set upon the mission of reducing the left-hand side of the dreaded health care equation — that is, National Health Care Spending = National Health Care Incomes — without the temerity of touching its right side. For obvious reasons, touching the right side always turns out to be the third rail of health reform.

Last year, health care spending in the United States absorbed slightly more than 17 percent of G.D.P. (For most other industrialized nations, the figure is still around 10 percent or less.)

What would the critics have the president and Congress do?

To explore that question, let us deconstruct national health spending, as shown in the chart below. Here we artificially assume that there is a well-defined thing called “health care,” measurable in standard units that have a defined single price per unit. Thus the rendering is merely conceptual, a guide to order the discussion.

NHE = Pg x Qg x Ng + Pp x Qp x Np
where
NHE = national health expenditures
Pg = prices for health care paid by public insurers
Pp = prices for health care paid by private insurers
Qg = volume of health care used per capita under public insurance
Qp = volume of health care used per capita under private insurance
Ng = number of persons served under public insurance
Np = number of persons served under private insurance

What, then, can any president and Congress do to the variables on the right side of that equation to reduce the future trajectory of national health spending on the left-hand side, especially in the current political climate?

As we have learned in the last year, any attempt to bend down the future trajectory of public-sector fees (Pg) will be met with outcries:

(1) that hospitals and doctors will be driven into bankruptcy;
(2) that publicly-insured individuals will lose access to physicians who will refuse to work for the low public-sector fees;
(3) that doctors, hospitals and other providers who do treat publicly-insured patients have no choice but to recover more of their costs from private payers, who are assumed to have little countervailing market power to resist such increased charges.

Therefore, strike Pg from a strategy of bending the cost curve.

The future trajectory of the volume variable, Qg, might possibly be bent down ever so slightly through cost-effectiveness analysis of alternative therapeutic approaches, or by more widespread use of living wills – an idea once actively promoted by Newt Gingrich.

But those ideas were met in the past year by dark allusions to “rationing,” to Nazi-style death panels and to “killing Granny.” Therefore, strike lowering Qg, as well, from a strategy for bending the cost curve.

Another option is to reduce the time path of the number of people served by public insurance (Ng).

This could be done by raising eligibility thresholds for Medicaid, or raising the eligibility age for Medicare, or partially privatizing Medicare through Medicare Advantage plans, or by converting the program from a defined benefit to a defined contribution program. But any of these options would merely move health spending off the books of government and into private-sector health spending.

There is no robust empirical evidence to suggest that such a shift would lower national health spending, unless the move increased the number of uninsured Americans for whom, on average, per capita health spending is less than half of the spending incurred on similarly situated insured Americans.

In fact, shifting Medicare beneficiaries out of traditional Medicare into private Medicare Advantage plans in past years is known to have increased the burden on taxpayers and is apt to have increased overall health spending. Therefore, strike Ng as well, unless we want the number of uninsured to climb.

In sum, any attempt to reduce health spending on the public-spending side (Pg x Qg x Ng) is limited by powerful political constraints and is unlikely to reduce overall health spending – especially if the providers of health care have the market power to recoup from private payers any reductions in public health spending coming their way.

This leaves private-sector spending as a potential source of reductions in health spending. But what control does any president or Congress have over those variables (Pp x Qp x Np)?

The last president with the temerity to control spending in the private sector directly was Richard Nixon, who imposed outright price controls on the sector the mid-1970s. One can only imagine what storm of protest that approach would unleash today.

Can private insurers or patients be counted on to bend down the future path of private-sector health care prices Pp? I doubt it.

For one, neither has left a stellar record in this regard over the last three decades. Furthermore, the cost-shift argument alluded to above suggests that in most local health care markets, private payers have rather limited power to exert much downward pressure on the prices they are charged for health care.

Thus, if the future path of private-sector health spending will be deflected downward at all, it will most likely come through reductions in the per-capita utilization (Qp). That may be achieved through ever-higher cost-sharing by patients at point of service – that is, through ever-higher deductibles and ever-higher coinsurance, if not outright lack of health insurance.

Some analysts think that higher cost-sharing will also force down prices (Pp), as patients, using their own money, shop around for a deal. But that could happen only if the veil of secrecy that has traditionally kept private-sector prices opaque from patients could be lifted.

So far the quest to get this done has had only limited and temporary success.

One should, of course, not labor under the illusion that reducing use of health care (Qp) through higher cost-sharing by patients would avoid rationing health care. As every economist knows, using price and ability to pay is merely one of several approaches to rationing scarce resources among unlimited wants.

Thus, absent some miracle – for example, that bundled payments per episode of illness to so-called Accountable Health Organizations will actually serve to bend down the future time path of health spending noticeably – the nation is likely to rely in the years ahead on rationing more and more of health care by income class.

Perhaps this is what the legendary “median voter” now wants.

http://economix.blogs.nytimes.com/2010/09/24/the-perennial-quest-to-lower-health-care-spending/

Comment:

By Don McCanne, MD

Of course, other nations do provide all of their citizens with health care at a much lower level of national health expenditures (NHE). So what is there in this conceptual rendering (Professor Reinhardt’s formula) that other nations have discovered and applied that we haven’t?

In his May 8, 2009 blog, Professor Reinhardt provided a taxonomy of public and private financing and health insurance. Essentially all other nations have found success by using some form of social insurance. Even when private insurers are used, they function much more in the G (government) portion of the equation than they do in the P (private) portion.

Professor Reinhardt also co-authored a landmark article titled, “It’s the Prices, Stupid.” Thus the secret of other nations: Even if they use private insurance plans, they control national health expenditures through various means of government control of prices. In contrast, the volume of heal
th care and number of persons remain relatively fixed. Private control of prices (market control) has played a negligible role in controlling NHE.

Although Professor Reinhardt can describe several models through which this can be accomplished, some of us remain convinced that the simplest and most efficient model would be a single payer national health program – an improved Medicare that covered everyone. Regardless, the Patient Protection and Accountable Care Act won’t get us there.

http://community.nytimes.com/comments/economix.blogs.nytimes.com/2010/09/24/the-perennial-quest-to-lower-health-care-spending/?permid=2#comment2

Insurers can't survive on 20% of the premiums?

States Ask for Phase-In on Insurance Change

By Robert Pear
The New York Times
September 22, 2010

State insurance regulators told the White House on Wednesday that health insurance markets in some states would be disrupted unless President Obama gave insurers a temporary dispensation from one major provision of the new health care law.

The provision requires insurance companies to spend at least 80 cents of every premium dollar on medical care, rather than administrative expenses, executive salaries and profits.

State officials said they feared that some companies would withdraw from the individual insurance market next year because they could not meet the 80 percent requirement.

Kevin M. McCarty, the Florida insurance commissioner and vice president of the National Association of Insurance Commissioners, said the new law was causing “a paradigm shift” in the insurance industry, and he predicted: “Some companies’ business plans simply will not be successful. There will be some casualties. They either have to adjust their business plans or perish.”

http://www.nytimes.com/2010/09/23/business/23states.html?emc=tnt&tntemail0=y

And…

Distribution of National Health Expenditures, by Type of Service, 2008

Kaiser Slides

30.7% – Hospital care
21.2% – Physician and clinical services
10.0% – Prescription drugs
5.9% – Nursing home care
2.8% – Home health care
12.9% – Other personal health care
16.5% – Other health spending

http://facts.kff.org/chart.aspx?ch=857

CMS, Office of Actuary, National Health Statistics Group:
http://www1.cms.gov/NationalHealthExpendData/downloads/tables.pdf

Comment:

By Don McCanne, MD

It is mind-boggling to think that 21 percent of our national health expenditures (NHE) are directed to physicians and clinical services, whereas many private insurers are now protesting that they cannot survive on 20 percent of the funds which they control – the insurance premiums that they collect.

Taking a closer look at those numbers, one-fifth of all health expenditures go to physicians and clinical services, whereas these insurers who are having difficulties complying with an 80 percent medical loss ratio are consuming over one-fifth of the funds used only for benefits covered by their plans – not one-fifth of the NHE. In fact, 30.9 percent of private insurance premiums do go to physicians and clinical services.

Since these numbers are more comparable, let’s look at them to see the value that we are receiving.

Physicians make most of the decisions on what care their patients receive, thus they are controlling much of spending of the insurance premiums. Not only are they making these spending decisions, they are also providing their professional expertise and clinical skills for which they are compensated – 31 percent of the premium dollars. In a sense, the physicians are making the business decisions of health care spending as an uncompensated additional service – decisions which are very important for the patients’ health.

What about these insurers who need more than 20 percent of the premiums for their own intrinsic needs? They are using two-thirds as much of the premiums as physicians are receiving, but for what? It’s not for making decisions on how the funds will be spent; physicians are doing that. Do they really need that much just for claims processing? What other important services do they provide? Taking away our choices by establishing restrictive provider networks? Why should we be paying for a detrimental service that we don’t even want?

What’s the solution? What will give us greater value? Shall we pay these insurers half again as much and throw out the doctors and have the insurers take over the practice of medicine? Or shall we throw out the insurers and replace them with public stewards who can provide better administrative services at a small fraction of the cost?

What will the White House decide? Let the insurers have as much as the physicians are receiving? Right now they’re listening to the whining of the insurers, and single payer advocates are still not welcome.

Insurers can’t survive on 20% of the premiums?

States Ask for Phase-In on Insurance Change

By Robert Pear
The New York Times
September 22, 2010

State insurance regulators told the White House on Wednesday that health insurance markets in some states would be disrupted unless President Obama gave insurers a temporary dispensation from one major provision of the new health care law.

The provision requires insurance companies to spend at least 80 cents of every premium dollar on medical care, rather than administrative expenses, executive salaries and profits.

State officials said they feared that some companies would withdraw from the individual insurance market next year because they could not meet the 80 percent requirement.

Kevin M. McCarty, the Florida insurance commissioner and vice president of the National Association of Insurance Commissioners, said the new law was causing “a paradigm shift” in the insurance industry, and he predicted: “Some companies’ business plans simply will not be successful. There will be some casualties. They either have to adjust their business plans or perish.”

http://www.nytimes.com/2010/09/23/business/23states.html?emc=tnt&tntemail0=y

And…

Distribution of National Health Expenditures, by Type of Service, 2008

Kaiser Slides

30.7% – Hospital care
21.2% – Physician and clinical services
10.0% – Prescription drugs
5.9% – Nursing home care
2.8% – Home health care
12.9% – Other personal health care
16.5% – Other health spending

http://facts.kff.org/chart.aspx?ch=857

CMS, Office of Actuary, National Health Statistics Group:
http://www1.cms.gov/NationalHealthExpendData/downloads/tables.pdf

Comment:

By Don McCanne, MD

It is mind-boggling to think that 21 percent of our national health expenditures (NHE) are directed to physicians and clinical services, whereas many private insurers are now protesting that they cannot survive on 20 percent of the funds which they control – the insurance premiums that they collect.

Taking a closer look at those numbers, one-fifth of all health expenditures go to physicians and clinical services, whereas these insurers who are having difficulties complying with an 80 percent medical loss ratio are consuming over one-fifth of the funds used only for benefits covered by their plans – not one-fifth of the NHE. In fact, 30.9 percent of private insurance premiums do go to physicians and clinical services.

Since these numbers are more comparable, let’s look at them to see the value that we are receiving.

Physicians make most of the decisions on what care their patients receive, thus they are controlling much of spending of the insurance premiums. Not only are they making these spending decisions, they are also providing their professional expertise and clinical skills for which they are compensated – 31 percent of the premium dollars. In a sense, the physicians are making the business decisions of health care spending as an uncompensated additional service – decisions which are very important for the patients’ health.

What about these insurers who need more than 20 percent of the premiums for their own intrinsic needs? They are using two-thirds as much of the premiums as physicians are receiving, but for what? It’s not for making decisions on how the funds will be spent; physicians are doing that. Do they really need that much just for claims processing? What other important services do they provide? Taking away our choices by establishing restrictive provider networks? Why should we be paying for a detrimental service that we don’t even want?

What’s the solution? What will give us greater value? Shall we pay these insurers half again as much and throw out the doctors and have the insurers take over the practice of medicine? Or shall we throw out the insurers and replace them with public stewards who can provide better administrative services at a small fraction of the cost?

What will the White House decide? Let the insurers have as much as the physicians are receiving? Right now they’re listening to the whining of the insurers, and single payer advocates are still not welcome.