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The unraveling of private insurance

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The unraveling of private insurance

By LEONARD RODBERG
Queens College

“Rising health care costs are undermining the institution of employer-based coverage. We…may well be seeing the whole institution unraveling…. [This] is the byproduct of what should be a good thing: advances in medical technology.”
— Paul Krugman and Robin Wells,”The Health Care Crisis and What to Do About It,” New York Review of Books, March 23, 2006

Americans spend more on health care than anyone else on earth. We are first in spending, but, according to recent surveys, 14th in public satisfaction with our health system. Per person, our government spending alone is more than government plus private spending on health care in any other country. And yet our health statistics are comparatively poor, with life expectancy 24th in the world, infant mortality 27th, and more than 45 million people without any health insurance at all.

So why does the US spend so much and get so little in return? Because of one simple fact: we are alone in the world in relying on private insurance to fund health care.

ONLY IN AMERICA

Many countries have a “single-payer” system, like Canada, in which the government directly funds a system of universal coverage. Some countries (e.g., France or Germany) use employer-supported, nonprofit sickness funds — industry-wide insurance plans created with the support of their union movements. But every economically developed nation funds its health care system through some kind of government- run regulatory or funding mechanism that makes sure everyone has coverage and that costs are controlled.

In the US, employer-based health insurance was a significant advance when it was created by the labor movement in the mid-1930s. It was greatly expanded during World War II and reached its peak of coverage in the 1950s. But now this system, and the collection of private insurance companies it spawned, is a barrier to access to health care for millions of Americans, including union members.

America’s current health insurance system is:

  • Wasteful. More than 20% of our spending on health care in this country is simply for administering our multipayer, for-profit insurance system.
  • Inflationary. The insurance system is good at denying or delaying care, but incapable of controlling costs and encouraging the efficient use of medical technology.
  • Obsolete. It is focused on treating illness when the major modern diseases — heart disease, cancer and stroke — are most effectively dealt with through prevention.

As costs rise, the number of employers who offer health insurance to their employees has steadily declined. Over just the last six years, costs rose by 87% — and the percentage of employers providing health insurance to their employees fell from 69% to below 60%.

SHIFTING COSTS

Those employers that continue to offer coverage pass more and more of the cost on to their employees. Employees now pay an average of 20% of the premiums in plans offered by their employers, on top of the rising co-pays and deductibles.

As employers drop coverage, government has to pick up many of those who are left without insurance — particularly through Medicaid, which covers some low-income people, especially children. In turn, the explosive growth of Medicaid creates financial problems for many states and localities, which share Medicaid costs with the federal government.

UNAFFORDABLE

With the employer-based system leaving increasing numbers of Americans without health coverage, some people propose requiring that individuals purchase insurance to solve the problem. The State of Massachusetts recently passed legislation to create an “affordable” insurance plan and require everyone without other insurance to purchase such a policy. The American Medical Association supports such an individual mandate, and other states are considering the idea.

What’s wrong with it? After all, anyone owning a car is required to have car insurance. The simple answer is that most people who don’t have health insurance today could not afford to buy a policy that would really give them adequate coverage. Today, the average policy for an individual costs more than $4,000 per year and, for a family, over $10,000 each year. Clearly someone earning the minimum wage ($10,000 per year for fulltime work) could not afford to purchase health insurance for her or his family.

While the Massachusetts plan envisions state subsidies that might lower the price for some people, these will be too limited to assure access to quality care. In the end, residents of Massachusetts will be required to spend a lot of money in exchange for very poor coverage.

FOR-PROFIT PROBLEMS

Nor is an individual mandate the solution from the point of view of the nation’s health system. As one wag put it, “If GM can’t keep down the cost of health care, how can we expect Mom and Dad to do it?” Employers have a lot more bargaining power than individual consumers, and they can’t keep a lid on costs.

Ultimately, it is not employer-based insurance that is failing, but the inefficient and increasingly unaffordable private, for-profit health insurance system.

The PSC, along with more than 150 other unions and union locals, is supporting the approach embodied in legislation introduced in Congress by Rep. John Conyers (D-MI). This bill, H.R. 676, the Expanded and Improved Medicare For All Act, builds on the success of the Medicare program in providing efficient, comprehensive coverage for more than 40 million elderly Americans on Social Security. This publicly funded “single-payer” plan gives patients a free choice of doctor and hospital, has much lower administrative costs than private insurance (3% vs. nearly 30%), and can provide the basis for a unified funding mechanism that would cover everyone while spending no more than we do now.

Instead of limited reforms that keep the private insurance companies in place (and which will ultimately fail), a Medicare For All system would be simpler, less costly and more equitable, and would cover everyone. And it would be better for our health.

Len Rodberg is a member of the PSC Health Care Reform Committee, sponsor of a Dec. 2 symposium on health care reform. See p. 8 for details.

Universal care appeals to USA

By Julie Appleby
USA TODAY

Universal health insurance — the idea that every resident would have medical coverage from birth to death — has been labeled everything from a communist plot to the only thing that will solve America’s growing problem of the uninsured.

Presidents from Harry Truman to Richard Nixon and, most recently, Bill Clinton, have proposed various plans for universal coverage, but all have been defeated.

Still, Americans consistently tell pollsters they embrace such an idea.

“We have always seen strong support for the goal of universal coverage but never seen consensus on how to get there or a willingness to pay the price,” says Drew Altman, president of the Kaiser Family Foundation.

That division was reflected in a wide-ranging poll of 1,201 Americans’ views on the nation’s health system sponsored by USA TODAY, ABC News and the Kaiser Family Foundation. The nationally representative sample has a margin of error of plus or minus 3 percentage points.

Fifty-six percent say they would prefer universal coverage to the current system, which relies on a mix of voluntary efforts by employers to offer insurance and a mix of government and private insurance options for those who don’t get coverage through work. The latest Census Bureau data estimate 46.6 million are uninsured.

“Universal coverage would make it possible for everyone to get the proper medical care,” says Theresa Harris, 36, of Middlesex County, Conn., one of those surveyed in the poll. Harris and her husband run their own business, so they buy their own health insurance, which costs $1,100 a month.

In the survey, 68% said providing coverage for everyone is more important than keeping taxes down.

Another poll respondent, Vince Ruck, 55, says he would expect a slight increase in taxes under such a proposal, but he would support that.

“Universal would be better,” says Ruck, who recently lost his health insurance when he was laid off from his customer service job after eight years. “Under the system we have, if employers don’t want to make any effort to provide benefits, such as health care, then the employee is basically left out.”

Proponents of universal care say it’s the only way to guarantee health coverage to all, would end fears by the middle class that they could go bankrupt if they fall ill, and take the burden off of employers to provide health insurance.

“It would bring comprehensive, affordable care to absolutely everyone,” says Don McCanne, president of Physicians for a National Health Program. “No other reform model can promise that. They all fall short.”

But opponents say a universal program might still require employers to pay, could mean higher taxes and longer waits for some medical services. “You can’t make the burden of health spending go away,” says Michael Cannon, director of health policy studies at the Cato Institute. “If you take it off of employers in the form of insurance premiums, you’ll just load it back on in the form of taxes.”

Rejecting trade-offs

When survey respondents were asked about possible trade-offs that might come with a universal program, positive responses plummeted. The poll found:

76% would oppose universal coverage if it meant some medical treatments currently covered by insurance would no longer be covered.

68% would be against it if it led to limits on the choice of doctors.

60% said they would be opposed if it led to higher payments, either through taxes or health premiums.

“I don’t think we can afford $6-a-gallon gas to pay for health care,” says poll respondent Richard Baker, 64, of Long Island, N.Y., who has insurance through his wife’s job.

Some Americans also express skepticism about the role government would play.

There are a wide range of options for how such a program could work, from a so-called single-payer model under which the government pays all the bills and oversees the health system to one where the government is responsible for paying the bills but channels payments to a largely private medical system.

“Government programs are great and necessary,” says Daniel Brown, 40, a pastor in Hazelwood, Mo., and a poll respondent. “I’m not opposed to helping people who need help. But I don’t want to live in a place where the government has ultimate control and tells you what to do.”

Brown says he runs an Internet marketing business and a travel company, in part to help pay $1,200 a month in health insurance costs to cover his family.

Baker, a retired billing specialist, says, “I don’t want government to handle anything about health care.”

But the government is increasingly involved in health care, already footing about 45% of the nation’s $2.2 trillion spending on medical care.

Medicare, which is paid for through tax dollars, covers about 43 million disabled Americans and senior citizens in a program that is as close as the USA gets to a universal system. Medicaid, which is administered jointly by the states and the federal government, provides health care services for more than 50 million Americans, including poor children and their parents and senior citizens in nursing homes.

Survey respondents liked the idea of expanding Medicare: 75% said they support allowing uninsured people 55 to 64 to join the program.

States lead in trying universal plans

While there has been little interest in Washington in universal health coverage, some experiments are occurring in the states. Massachusetts has passed a law requiring everyone to buy insurance and offering subsidies for low-income residents. Employers, too, must offer coverage or pay into a fund. Illinois has expanded children’s health programs and made them available to all, not just the low-income.

Vermont is working to expand its ability to provide care to the chronically ill and will focus on efforts to stem the epidemic of obesity, which can lead to costly health problems. Its plan aims not only to cover more uninsured, but also control the rate of growth of insurance premiums for the insured.

Kenneth Thorpe, professor of health policy at Emory University, says that reform efforts must focus on providing assistance to both the insured and uninsured. Thorpe served as an adviser to health reform proponents in Vermont, an experience he says led him to embrace a different approach to rallying public support for change.

“As soon as people hear ‘cover the uninsured,’ they think they’ll get taxed, pay more and get less,” Thorpe says. “But if … reform is focused on making health care more affordable and better quality for the 85% of people that have insurance, you get the insured people engaged in a debate in a way where they see there is something in it for them.”

Kaiser's retroactive denial of a twenty-year patient

Kaiser Told to Reinstate Coverage

By Lisa Girion
Los Angeles Times
October 19, 2006

In an order posted Wednesday, the Department of Managed Health Care ruled that Kaiser Foundation Health Plan illegally canceled coverage for a Northern California woman in urgent need of medical attention for large kidney stones. The cancellation was illegal, the agency ruled, because there was no evidence the woman intended to deceive the health maintenance organization about her medical history.

The agency’s action is the latest salvo in a growing controversy over cancellations of individual health insurance policies that have saddled patients with huge medical bills. With the order against Kaiser, all three of the state’s largest health plans are now embroiled in the controversy.

Blue Cross of California, owned by Indianapolis-based WellPoint Inc., recently settled more than 70 lawsuits and claims filed by patients who accused the state’s largest health insurer of illegally canceling their coverage after they got sick. Suits have also been filed against Blue Shield of California.

The woman and her family had Kaiser coverage through her employer for 20 years. When she left her job, the family purchased from Kaiser a continuation plan commonly known as COBRA that is protected by a federal law. After that expired, the woman and her family bought individual coverage from Kaiser.

Four months after the switch, the HMO dumped her. Kaiser claimed she omitted information about her health from the application the HMO required her to fill out when it sold her the individual plan. Kaiser also threatened to report her to law enforcement for fraud and billed her for $13,000 worth of treatment.

The problem, regulators concluded, was that Kaiser faulted the woman for not disclosing an appointment she had for arm and neck pain with a Kaiser physician. “The enrollee had no reason to believe that Kaiser was not on notice of her arm and neck pain at the time she filled out her Personal Advantage application,” Amy Dobberteen, assistant deputy director of the state agency, said in the order. “Not only did a Kaiser physician treat her . but Kaiser also filled and paid for her pain medication.”

“Decisions about when insurance can be denied or revoked must be taken out of the hands of insurers who have a financial incentive to refuse to pay when we get sick and need it most,” said Jerry Flanagan, a healthcare advocate with the Foundation for Taxpayer and Consumer Rights.

http://www.latimes.com/business/la-fi-kaiser19oct19,1,3274480.story

Comment:

By Don McCanne, MD

43 states allow medical underwriting in the individual and small group health insurance market. Although situations such as the one described in this article would seem silly if they weren’t so tragic, nevertheless, the great majority of individuals with serious medical problems who lose their group insurance because of termination of employment are denied coverage in the individual market once their COBRA benefits run out. This is a very serious structural flaw in the way we provide health care coverage.

We need structural reform that would ensure that coverage is universal and permanent. That will never occur in a market of multiple private plans, each making every conceivable effort to avoid covering individuals who have a greater probability of requiring health care. We desperately need a universal national health insurance program.

Are the Swiss ready for single payer?

The Dangers of Undermining Patient Choice: Lessons for Europe and Canada

A joint project with Galen Institute, and International Policy Network October 2006
Institute for Policy Innovation

The U.S. is once again embarking on a national debate over health care reform, and many people want the country to embrace a system similar to those of Europe or Canada. This study includes nine papers from a number of economists and health policy experts from those countries. What these experts expose are governments micromanaging the health care system: imposing price controls, limiting access to prescription drugs, hindering research and innovation, and cutting government health care budgets. As a result, patients face long waiting lines, often go untreated, or treated with old and outdated technologies.

Swiss Health Care: A Clockwork Model that Fails to Keep Promises

By Alphonse Crespo, M.D.

Switzerland’s pluralist social health care system stems from constitutional articles voted in 1890 guaranteeing access to adequate health care for all.

This goal was achieved by a delicate blend of social insurance, private enterprise, oligopoly and competition in which the government played a subsidiary role and where wide autonomy was left to the cantons. Limited government intrusion, strong and innovative health industries, reputable medical schools and a market economy spared by two world wars gave quality care to all levels of society for many decades.

The Promise Denied.

But efforts for health care reform that began in 1960, pushed for an increased regulatory and redistributive function of the state.

Social-democratic reformers finally got their way in 1994 with the creation of the Federal Law of Insurance against Sickness (LAMal), which established compulsory insurance and appointed insurance providers with wide regulatory powers.

Possibilities for Reform.

A constitutional initiative launched in 2004 by trade unions and the socialist party called for a single national insurance provider and for insurance premiums pegged to personal income. This proposal that would abolish some 90 existing sickness funds was rejected by Parliament, but the issue will be taken to referendum vote in 2007. Deep public dissatisfaction with sickness funds and current polls reflect a readiness to accept a single insurance provider as a lesser evil.

http://www.ipi.org/ipi/IPIPublications.nsf/PublicationLookupFullTextPDF/BED00643F2807FC18625720B003DEB12/$File/LessonsfromEuropeCanada.pdf?OpenElement

Comment:

By Don McCanne, MD

The producers of this report are supporters of the free market in health care, with its current incarnation as consumer-directed health care.

As expected, the report is saturated with anti-government rhetoric, containing their requisite criticisms of universal systems. Still it is a report worth reading since it is important to understand the rhetoric of the opponents of national health insurance, and it also does identify some genuine weaknesses of other systems, even if biased, distorted and sometimes false.

Only the United States spends more on health care than does Switzerland.
With an individual mandate to purchase insurance, choosing from 90 different sickness funds, the Swiss are looking for relief. It is a sign of the times that these free market advocates acknowledge that the Swiss seem ready to “accept an (equitably funded) single insurance provider as a lesser evil.”

Private equity investment in health care

Private equity infusion: A question of balance of growth vs. control for doctors

By Katherine VogtAmerican Medical News
Oct. 23/30, 2006

For the last few years, a growing pool of private equity investment money has been pouring into health care firms, swelling these enterprises until they are big enough to crest in rewards for investors.

The dollars have streamed into biotech, pharmaceutical, device and equipment companies as well as into hospitals, ambulatory surgery centers and even physician networks, providing relief for businesses that were thirsty for capital to grow and expand.

But implications for physicians are murky. Certainly some physician-led enterprises have benefited from the financial infusions. Yet those physicians may also be losing some control of their businesses as the private equity investors gain a stake. And, the increased leveraging of those enterprises may spell more risk for the physicians who have to make the businesses financially successful.

The money also is flowing into health care services such as integrated health care delivery systems, said Craig Frances, MD, a principal with the Palo Alto, Calif.-based private equity firm Summit Partners. “You’re seeing the resurrection of people believing after all there is a lot of value to some of these physician networks that are built differently, … as long as you are able to appropriately align incentives with doctors,” said Dr.
Frances, who was trained as an internist but no longer practices medicine.

“The difference with private equity is that although it’s a good source of capital, it also comes with owners and investors. And they will want results,” said (Richard Gundling, vice president of the Healthcare Financial Management Assn., a Westchester, Ill.-based association of health care financial executives). “Those private equity investors may want a seat at the table to govern changes. And you may have to give up some control.”

http://www.ama-assn.org/amednews/2006/10/23/bisa1023.htm

Comment:

By Don McCanne, MD

Res ipsa loquitur

Vic Kamber's Blog on HR 676 and Healthcare Reform

Vic Kamber, a prominent figure in many Democratic and labor-led campaigns, has posted a commentary on Congressman John Conyers’ single payer legislation, HR 676, and the outlook for real healthcare reform on his blog: www.vickamber.com.

The Kamber Group is well known to labor activists. Kamber served as assistant to the president of the Building and Construction Trades Department, AFL-CIO, and director of the AFL-CIO Task Force on Labor Law Reform. A veteran Democratic political consultant, Kamber has worked in over 100 political races, from City Council to Presidential.

Excerpts from Vic Kamber’s Oct. 18, 2006, Blog “Congress: Conyers is alive and well”:

“Every day more and more evidence piles up that Democrats are going to regain control of the Congress. It’s so compelling that even Democrats in Congress are beginning to believe it.”

“Here’s how I know: Rep. John Conyers’ universal health care bill that has been lying dormant all these years has suddenly come alive. If the American people could have voted on the bill, Conyers’ legislation would have passed overwhelmingly when it was first introduced… .”

“For years, labor unions have wanted health care taken off the collective bargaining table and have been active participants in statewide universal health care campaigns. Now as they perceive Democrats regaining control of the Congress, they’re giving new attention to the Conyers’ bill. Hundreds of local unions and central labor councils have endorsed HR 676, including state AFL-CIOs in Pennsylvania, Ohio, Connecticut and Kentucky. Just the other day the nation’s largest labor union, the National Education Association, signed on.”

“There is a huge and anxious audience impatient for government to do something about our country’s biggest domestic crisis… .”
________________________________________________________________________

For a complete list of union endorsers of HR 676 and a sample union resolution
contact:
Kay Tillow,
All Unions Committee for Single Payer-HR 676,
c/o Nurses Professional Organization,
1169 Eastern Parkway, #2218,
Louisville, KY 40217, (502) 636-1551.
email: nursenpo@aol.com

Proposal of the Physicians’ Working Group for Single-Payer National Health Insurance

PNHP note: to view the most recent version of the Physicians’ Proposal, published May 5, 2016, please click here.

Executive Summary

The United States spends more than twice as much on health care as the average of other developed nations, all of which boast universal coverage. Yet over 39 million Americans have no health insurance whatsoever, and most others are underinsured, in the sense that they lack adequate coverage for all contingencies (e.g., long-term care and prescription drug costs).

Why is the U. S. so different? The short answer is that we alone treat health care as a commodity distributed according to the ability to pay, rather than as a social service to be distributed according to medical need. In our market-driven system, investor-owned firms compete not so much by increasing quality or lowering costs, but by avoiding unprofitable patients and shifting costs back to patients or to other payers. This creates the paradox of a health care system based on avoiding the sick. It generates huge administrative costs, which, along with profits, divert resources from clinical care to the demands of business. In addition, burgeoning satellite businesses, such as consulting firms and marketing companies, consume an increasing fraction of the health care dollar.

We endorse a fundamental change in America’s health care – the creation of a comprehensive National Health Insurance (NHI) Program. Such a program – which in essence would be an expanded and improved version of Medicare – would cover every American for all necessary medical care. Most hospitals and clinics would remain privately owned and operated, receiving a budget from the NHI to cover all operating costs. Investor-owned facilities would be converted to not-for-profit status, and their former owners compensated for past investments. Physicians could continue to practice on a fee-for-service basis, or receive salaries from group practices, hospitals or clinics.

A National Health Insurance Program would save at least $150 billion annually by eliminating the high overhead and profits of the private, investor-owned insurance industry and reducing spending for marketing and other satellite services. Doctors and hospitals would be freed from the concomitant burdens and expenses of paperwork created by having to deal with multiple insurers with different rules – often rules designed to avoid payment. During the transition to an NHI, the savings on administration and profits would fully offset the costs of expanded and improved coverage. NHI would make it possible to set and enforce overall spending limits for the health care system, slowing cost growth over the long run.

A National Health Insurance Program is the only affordable option for universal, comprehensive coverage. Under the current system, expanding access to health care inevitably means increasing costs, and reducing costs inevitably means limiting access. But an NHI could both expand access and reduce costs. It would squeeze out bureaucratic waste and eliminate the perverse incentives that threaten the quality of care and the ethical foundations of medicine.

Click here to return to the Physicians’ Proposal page

Endorse the Physicians’ Proposal




The current U.S. health care system is fraught with profiteering, mismanagement, corruption and crippling bureaucracy. In addition to putting patients at risk, this broken system dishonors the dedication and service of physicians and other health professionals.

The time for collective action has come. As the presidential election approaches, physicians nationwide can compel our elected officials to stop serving the powerful health insurance and pharmaceutical industries, and start shaping a coherent vision for national health care. It is possible to end uninsurance, lower costs, guarantee coverage, and provide better health for all Americans.

In the words of Margaret Meade, ‘Never doubt that a small group of thoughtful citizens can change the world: Indeed it is the only thing that ever has.’ In the coming months, we hope to add thousands of more physicians to our list of supporters. With our combined efforts, we can achieve true health care reform.

Thank you for partnering with us in this noble cause.

Yours truly,

Quentin Young, M.D.
PNHP National Coordinator”

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CHCF's three options for reform

Covering California’s Uninsured: Three Practical Options

By Rick Curtis and Ed Neuschler
California HealthCare Foundation
October 2006

The alternative mandatory coverage models analyzed in this report include:

* An individual mandate with no required contribution by employers.

* An individual mandate with a “pay-or-pay-plus” requirement on employers, including a modest employer-contribution floor for full-time permanent workers and a required employer fee for other workers and their dependents.

* An All-Consumer Choice Exchange (ACE) funded by payroll fees on all employers and workers (an insurance exchange of competing health plans).

All of the alternative mandatory-coverage approaches estimated in this project would, to the extent that they were sustainable, both preclude people from becoming uninsured and ensure that modest- and low-income people could afford coverage. We have no research basis for estimating different growth rates for health care spending under the different alternatives we analyzed. But unless the disproportionate increases in health care costs are curtailed, a growing number of people with higher incomes will not be able to afford coverage without subsidies, and government’s ability to finance adequate subsidies for even the initial low-income population will falter.

http://www.chcf.org/topics/healthinsurance/index.cfm?itemID=125690

Executive Summary:
http://www.chcf.org/documents/insurance/CoveringCaliforniasUninsuredExecSummary.pdf

Full Report:
http://www.chcf.org/documents/insurance/CoveringCaliforniasUninsuredFull%20Report.pdf

Comment:

By Don McCanne, MD

California HealthCare Foundation (CHCF) was established to serve the citizens of California by helping to improve California’s health care financing and delivery systems. It was funded with a largely-coerced contribution from Blue Cross of California which represented accrual of tax benefits rightly reverting to the citizens once Blue Cross was converted to a for-profit, investor owned company. Mark Smith, MD, MBA (Wharton) has been its president and CEO since its founding in 1996. He has been a strong supporter of managed care and private insurance, while also having expressed his opposition to single payer reform.

California is ripe for comprehensive reform. There is strong support for the single payer model with a bill having recently been passed by the state legislature, only to be vetoed by Gov. Schwarzenegger. The governor has promised to introduce his plan for reform in January.

This background makes it easier to understand why CHCF is presenting three models of reform, each of which dramatically expands the private insurance market in California, as if these were the only feasible options available.
These options, as described in the report, fail to achieve the efficiencies, comprehensiveness, cost containment, and equity of the single payer model.

The gold standard of single payer needs to be included in every dialogue on reform, not only in California, but throughout the nation. Please continue to do your part to be sure that it is.

Are Americans concerned about health care costs?

Understanding The American Public’s Health Priorities: A 2006 Perspective

By Robert J. Blendon, Kelly Hunt, John M. Benson, Channtal Fleischfresser, Tami Buhr
Health Affairs
October 17, 2006

Views on national health spending and health care costs.

Multiple survey results show that the public favors increased health spending in the years ahead but is concerned about the impact of rising health care costs on the financial situation of American families. In 2004,
78 percent of the public thought that national spending to improve health was too low; only 4 percent said that it was too high. Similarly, in 2006 a survey asked specifically about overall national spending on health care and national health care spending by government. The majority of respondents (57
percent) thought that the United States as a country was spending too little on health care in the aggregate, and 70 percent said that government health care spending was too low. Only 26 percent thought that the country as a whole was spending too much, and 11 percent thought that the government was spending too much. Around one-tenth of Americans thought that these spending levels were “about right” (9 percent, nation as a whole; 11 percent, government).

What concerns Americans is not aggregate spending, but the perceived negative impact on American families of their direct health care outlays (insurance premiums, copayments, deductibles, and direct payments for services and products). When asked about spending for health care by average Americans in 2006, 65 percent of respondents said that the average American spends too much, while only 17 percent said too little. (Twelve percent felt that the level of spending was “about right.”) This is what Americans mean when they list health care costs as the top health care priority for government action.

Discussion And Conclusions (excerpt)

Most U.S. news coverage about medical care issues during the past year has concentrated on Medicare’s new prescription drug benefit, while many in the research and professional community have focused on the nation’s quality-of-care problems. What is important to recognize is that these are not the American public’s top health care priorities today. Americans want their government to do something about their rising health care costs and the problems of the uninsured. When Americans talk about health care costs, however, their concern is not for the share of the nation’s gross domestic product (GDP) going toward health care, but rather the financial impact on their own families.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.25.w508

Comment:

By Don McCanne, MD

This is an important distinction. Americans believe that aggregate health care spending should be increased, especially the contribution by the government. This is in sharp contrast to the concerns that Americans have about their own individual out-of-pocket spending for health care, including the cost of health insurance.

In evaluating reform options, the individual’s first concern is, “Does it work for me?” If individuals understand that it does, and then they see that it also works for everyone else with a negligible additional burden to the individual, then they can be supportive of that reform.

The single payer option is the reform model that would work the best for individuals. But another finding indicates that the public probably does not understand this. When asked which are the two most important problems with the nation’s health care system that the government should address, the top two responses were health care costs (43 percent spontaneous response), and uninsured/access to care (34 percent). Only one percent volunteered that organization of the system was one of the two most important problems, behind many other less pressing health care issues.

It is reassuring that our citizens understand that health care costs, and lack of insurance and access are the most important issues. But they still need to understand that reorganization of the financing of health care will be required to successfully address these issues. It’s our job to see that they do.

Moral high ground elusive to UnitedHealth and WellPoint/BlueCross

Chief Executive at Health Insurer Is Forced Out in Options Inquiry

By Eric Dash and Milt Freudenheim
The New York Times
October 16, 2006

Dr. William W. McGuire, a medical entrepreneur who built the UnitedHealth Group into a colossus in its field, was forced to resign from the company yesterday and to give up a portion of the $1.1 billion he holds in harshly criticized stock options.

At UnitedHealth, even the man named to replace Dr. McGuire as chief executive has been a beneficiary of backdated options: Stephen J. Hemsley, who has been Dr. McGuire’s top lieutenant, will lose a sizable portion of his options, the company said.

http://www.nytimes.com/2006/10/16/business/16united.html?_r=2&adxnnl=1&oref=slogin&adxnnlx=1161018912-8+gxj7+G8oF5ouY7SlJAGQ&pagewanted=all

And…

Hospital Sues Blue Cross for Payments

By Lisa Girion
Los Angeles Times
October 14, 2006

A class-action lawsuit filed Friday on behalf of all California hospitals accused Blue Cross of California of routinely violating state law by refusing to pay hundreds of hospitals statewide for patient care it authorized.

“Hospitals provided care to those Blue Cross patients in good faith,” said (Jan Emerson, a spokeswoman for the California Hospital Assn.). “In many cases that care is pre-authorized by Blue Cross. When they cancel coverage after that care has been provided, that causes a problem for the hospital.”

The suit alleges that, in many cases, such revocations are themselves illegal, triggered by a purported corporate policy to avoid expensive claims.

http://www.latimes.com/business/la-fi-hospitals14oct14,1,3867891.story?coll=la-headlines-business

Comment:

By Don McCanne, M.D.

Three questions:

(1) How many stock options would be granted to the trustees of a publicly funded and publicly administered program of national health insurance?
(Hint: No stock shares exist in a program owned by the citizens of the nation rather than by passive investors on Wall street.)

(2) Under what circumstances would a publicly funded and publicly administered program of national health insurance retroactively deny payment for legitimate health services already provided?
(Hint: The mission of a publicly owned national health insurance program is to prevent financial hardship for individuals requiring health care, whereas the mission of a for-profit health insurance corporation requires the adoption of policies that would maximize investor return.)

(3) Must the moral high ground remain elusive?
(Hint: As long as we leave the private insurance industry in charge… )

Alan Maynard on Porter and Teisberg's reinvention of the wheel

HEALTH REFORM: Reinventing The Wheel

by Alan Maynard
Health Affairs Blog
October 12th, 2006

The American health care systems perform impressively, producing what they are designed to deliver: cost inflation, inefficiency, and inequity. At regular intervals, local pundits declare that the outcomes of the incentive structures in the constituent parts of the systems are unacceptable, usually emphasising that “the nation cannot afford to spend 16 percent of GDP on health care.” Such “insights” ignore the fact that inflation is a consequence of the systems’ perverse incentives and that improved control of expenditure inflation would oblige physicians, nurses, hospitals, and the pharmaceutical industry to moderate their lifestyles.

Michael Porter, a management guru at Harvard, along with colleague Elizabeth Olmstead Teisberg, has now decided to switch his attention to the health care industry, no doubt in part because he has recognised that it is big and remunerative. The extent to which the lessons of Enron and the “successes” of other capitalist enterprises can inform health care policy can and should be debated carefully.

Any cure for the malaise of U.S. health care, or the British NHS to which Porter has also offered his vision of a New Jerusalem, is dependent on diagnostic skills and the evidence base for the treatments offered. Like many gurus before him, Porter makes an adequate job of the diagnostics, offering insights very reminiscent of the Jackson Hole proposals over a decade ago.

However when he gets to cures, there is nothing new to break the logjam of inertia and self-interest that stabilizes the inefficiency of the health care system, be it public or private. He rightly indicates that the industry needs a measure of value added and that instead of focusing on cost and activity, it is necessary to measure patient-reported outcomes – i.e., measures of whether patients feel better. Such a conclusion is welcome but ignores the forces that have prevented the use of outcome measures in health care for centuries. Another Bostonian, Ernest Codman, suggested systematic management for Massachusetts General Hospital – in particular, plans for evaluating the competence of surgeons in the early twentieth century – and, as a consequence of the unpopularity of his proposals, he lost his staff privileges in 1914.

Insurers and Governments Fixated on Failure

The RAND Insurance Experiment produced a generic health profile, Short Form 36. Work in Europe has produced a generic health index, EQ5D. These have been translated into dozens of languages and used in thousands of clinical trials. But with physicians and policy makers fixated with the measurement and management of failure (e.g. mortality), these measures of success have been ignored by insurers and governments alike as a means of measuring success and of bringing to account those providers failing to make their customers “better,” in terms of physical and mental functioning.

Porter’s lack of specificity about the outcome measures needed to improve the performance of the U.S. health care systems, and his glib reliance on “competition” to institute change, flies in the face of international evidence: Nowhere has any public or private institution managed to curb the excesses of powerful providers more interested in their wallets than demonstrably improving patients’ health. Porter adds little new to the debate, but he is a welcome and potentially powerful addition to the chorus advocating change.

A. Maynard, HEALTH REFORM: Reinventing The Wheel, Health Affairs Blog, October 12th, 2006, http://healthaffairs.org/blog/2006/10/12/health-reform-reinventing-the-wheel/,
Copyright ©2006 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

Comment:

By Don McCanne, MD

Health Affairs has initiated a blog and has begun with comments on Michael Porter and Elizabeth Teisberg’s “Redefining Health Care.” Comments by James Robinson, Uwe Reinhardt, Alain Enthoven, and Alan Maynard have been posted, along with responses from readers.

Besides Alan Maynard’s comments above, I would also recommend reading Uwe Reinhardt’s take. An excerpt: “Unfortunately, (Porter and Teisberg’s) book offers few practical hints on how the U.S. health system would transit from its current, allegedly negative-sum game to the allegedly positive-sum utopia (Porter and Teisberg) envision. That transition would vastly rearrange the distribution of economic power and clinical autonomy in our health system. It is naive to assume that the potential losers in that transition would simply roll over and accept their fate.”
http://healthaffairs.org/blog/2006/10/10/health-reform-porter-and-teisbergs-utopian-vision/#more-63

Regular readers of the Quote of the Day will know that I am not a fan of Porter and Teisberg’s concepts. An excerpt from an earlier comment of mine: “Imagine a system in which care is delivered based on teams, without geographical limitations, organized around medical conditions, competing with other teams organized around the same conditions. Imagine your community hospital and its specialists providing care for a very limited list of medical conditions selected on the basis of providing better outcomes and lower prices. Your community hospital may very well lack a team that is dedicated to your particular problem, requiring you to travel to the next county, or maybe the next state, for care. Then allegedly to create transparency in pricing, you receive a single bill that totally obscures any understanding as to where your payment goes. You really have to read the book to understand the extent to which this line of reasoning is carried.” https://pnhp.org/news/2006/june/porter_and_teisberg.php

“The American health care systems perform impressively, producing what they are designed to deliver: cost inflation, inefficiency, and inequity.” This first line in Alan Maynard’s comment leads us to our bottom line. The United States needs a new design that would address cost inflation, inefficiency, and inequity. The first step would be to establish an equitable, efficient national health insurance program that could begin to tackle the rapidly rising costs of health care. That won’t be easy, but it’s impossible under the status quo.