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Unintended over-utilization by ethical physicians

Variation in the Tendency of Primary Care Physicians to Intervene
By Brenda E. Sirovich, MD, MS; Daniel J. Gottlieb, MS; H. Gilbert Welch, MD, MPH; Elliott S. Fisher, MD, MPH
Archives of Internal Medicine
October 24, 2005

There is widespread recognition that health care spending varies widely across the United States. Per capita Medicare expenditure in the areas of highest spending is double that in the lowest-spending areas, even though in some cases these represent neighboring areas. Because higher spending does not appear to result in better outcomes or quality of care, there is intense interest in understanding the reasons for the wide variation in utilization of services. Average illness severity varies little across regions; therefore, attention has focused increasingly on the role of physicians who, through their actions and recommendations, control most health care resources and thereby direct most health care spending.

There are, however, competing explanations of how physicians might contribute to higher health care spending. On the one hand, high-spending areas have more physicians per capita, and on average, patients in these areas each see a greater number of physicians. Even if each physician’s shared ordering pattern is identical to those in lower-spending areas, utilization (and spending) per capita would be higher in areas with a greater number of physicians. On the other hand, physicians in high- and low-spending regions may have entirely different ordering patterns.

Specifically, physicians in high-spending areas may be more prone to intervene – to order tests, referrals, and treatments – for individual patients.

We sought to determine whether physician behavior is at least in part responsible for widely varying spending and utilization patterns across the United States – that is, to what extent individual physicians in high-spending regions have a greater tendency to intervene for individual patients.

The sample of primary care physicians consisted of both family/general practitioners (57%) and general internists (43%). Regions in the quintile of highest spending averaged $8325 per capita in annual Medicare spending and
242 physicians per 100,000 persons compared with $6087 per capita and 193 physicians per 100,000 in moderate-spending regions and $4911 per capita and 185 physicians per 100,000 in regions of low spending. The supply of hospital beds and physicians of all specialties was more abundant in regions of higher spending, with the exception of family practitioners, whose numbers declined as local spending increased.

This study shows that widely differing levels of health care spending across the United States reflect the tendency of local physicians to recommend interventions for patients. In high-spending areas, physicians would order further evaluation or treatment for approximately 10 additional patients of every 100 patients seen compared with physicians in low-spending areas.

While we have shown that physicians who practice in areas of higher local health care spending are more prone to intervene, we are unable to distinguish among 3 potential explanations: (1) more aggressive physicians may be attracted to certain areas; (2) physicians may adopt the practice style (or standard of practice) of the community where they locate; or (3) characteristics of the market itself, such as greater difficulty maintaining target incomes in a more competitive marketplace, could lead to a lower threshold for referral and test ordering.

It is unlikely that physician behavior is the sole explanation for higher levels of spending in some areas. Having more specialists or more hospital beds in an area, for example, likely plays a role in higher levels of local spending. It is also possible that – notwithstanding similar end-of-life preferences – differences in patient expectations and demands across different regions impact the level of local health care spending via direct influence on physician decision making. However, in the present study we have been able to show that, when faced with the same patients, physicians in higher-spending areas are more likely to intervene, and this undoubtedly accounts for some portion of the higher spending seen in some US regions.

http://archinte.ama-assn.org/cgi/content/abstract/165/19/2252

Comment: We already know that there is a wide variation in spending in different locations, and that the differences are not explained by the relative health of the populations served. We know that the higher level of spending does not result in higher quality nor does it improve health outcomes. We know that regions with higher spending have excess capacity and an excess concentration of specialists. This study adds to others which demonstrate that physician behavior also drives up spending in high-cost areas.

The design of this study makes it very likely that these physicians believe that they are making optimal choices for their patients’ care. As we consider policy changes that would reduce excess spending in high-cost areas, it is a relief to know that not much attention needs to be directed to efforts to reduce fraud and abuse (except for the rare provider who clearly churns or submits fraudulent claims).

A single payer system can be beneficial because, as a monopsonistic purchaser, it can favorably alter the practice environment. Excess capacity of health care facilities can be controlled through budgeting of capital improvements. Excess concentration of specialists can be controlled by offering differential compensation based on regional needs.

Controlling excess capacity runs the risk of creating excessive queues. Continual monitoring with appropriate adjustments as needed would be required. Not only would we benefit by reducing the waste of over-utilization, but we would also improve access in regions with deficient capacity.

Those who are uncomfortable with a publicly administered process should keep in mind that currently the marketplace is failing to provide the oversight and adjustments that need to be made. We want to continue to spend nearly the same amount on health care, but we want to spend it much better.

Kentucky AFL-CIO Endorses Conyers' Single Payer HR 676

Adopted by the Kentucky State AFL-CIO Convention, October, 2005
RESOLUTION CALLING FOR THE KENTUCKY STATE AFL-CIO CONVENTION TO ENDORSE HR 676, SINGLE-PAYER UNIVERSAL HEALTH CARE

Workers, their families and their union are waging an increasingly difficult struggle to win or keep good health care coverage. Almost very union at every contract deadline must battle and sacrifice merely to sustain health care benefits. The rising costs of health insurance are blocking workers’ progress in wages and other areas. All of our unions face a health care crisis.

But the crisis extends far beyond union members. More than 45 million people in the U.S. are currently without health care insurance. More than 75 million went without for some length of time within the last two (2) years; and millions more have inadequate coverage or are at risk of losing their coverage. Women, people of color and immigrants are denied care at disproportionate rates, while the elderly and many others must choose between the necessities and life sustaining drugs and care. Unorganized employers, such as Wal-Mart dump their responsibilities for health care onto public programs.

The U.S. health system continues to treat health care as a commodity distributed according to the ability to pay, rather than a social service to be distributed according to human need. Insurance companies and HMOs compete not by increasing quality or lowering costs, but by avoiding covering those with the greatest need.

Economic necessity and moral conscience compel us to seek a better way. Therefore, be it resolved that: A single payer program as provided for in Congressman John Conyers’ bill HR 676, ‘Expanded and Improved Medicare for All,’ a single payer health care program is the only affordable option for universal, comprehensive coverage.

That the Kentucky State AFL-CIO will work with unions and community groups to build a groundswell of popular support and action for single payer universal health care and HR 676 until we make what is morally right for our nation into what is also politically possible.

That the Kentucky State AFL-CIO will send a copy of this resolution to Congressman Conyers, to all the Kentucky members of the U.S. House and Senate, to the AFL-CIO Executive Committee, and to the news media.

Respectfully submitted by,

AFSCME Local 2629

Sheila Wade, President

Labor Resolutions

Adopted by the Kentucky State AFL-CIO Convention, October, 2005

RESOLUTION CALLING FOR THE KENTUCKY STATE AFL-CIO CONVENTION TO ENDORSE HR 676, SINGLE-PAYER UNIVERSAL HEALTH CARE

Workers, their families and their union are waging an increasingly difficult struggle to win or keep good health care coverage. Almost every union at every contract deadline must battle and sacrifice merely to sustain health care benefits. The rising costs of health insurance are blocking workers’ progress in wages and other areas. All of our unions face a health care crisis.

The U.S. health system continues to treat health care as a commoditydistributed according to the ability to pay, rather than a social service to be distributed according to human need. Insurance companies and HMOs compete not by increasing quality or lowering costs, but by avoiding covering those with the greatest need.

Economic necessity and moral conscience compel us to seek a better way.

Therefore, be it resolved that:
A single payer program as provided for in Congressman John Conyers’ bill HR 676, ‘Expanded and Improved Medicare for All,’ a single payer health care program is the only affordable option for universal, comprehensive coverage.

Respectfully submitted by,
AFSCME Local 2629
Sheila Wade, President

Kentucky AFL-CIO Endorses Conyers’ Single Payer HR 676

Adopted by the Kentucky State AFL-CIO Convention, October, 2005
RESOLUTION CALLING FOR THE KENTUCKY STATE AFL-CIO CONVENTION TO ENDORSE HR 676, SINGLE-PAYER UNIVERSAL HEALTH CARE

Respectfully submitted by,

AFSCME Local 2629

Sheila Wade, President

Increase in uninsured will save our economy

Changes In Economic Conditions And Health Insurance Coverage, 2000-2004
By John Holahan and Allison Cook
Health Affairs
November 1, 2005

Between 2000 and 2004, the number of uninsured Americans increased by six million, primarily because of a decline in employer-sponsored insurance. All of the increase occurred among adults, for whom the drop in employer coverage was not offset by an increase in public coverage. The number of uninsured children fell slightly. About two-thirds of the growth in the uninsured was among Americans below 200 percent of the federal poverty level. Coverage rates have also fallen among higher-income Americans. About half of the growth in the uninsured was among young adults ages 19-34, about 55 percent among whites, and 73 percent among native-born citizens.

The decline in employer coverage is likely to continue. Increases in health care costs, and thus health insurance premiums, are likely to continue to grow faster than workers’ earnings. The decline in employer coverage will be further exacerbated if the shift from working in large and midsize firms to small firms and self-employment and from high- to low-coverage industries continues. The problem of the uninsured can be addressed in many different ways, such as tax credits or public program expansions, but doing so is likely to prove very difficult. Federal budget deficits are large, which will limit the federal government’s ability to act for the foreseeable future, and all indications are that the government will pursue spending cuts to address the huge cost of hurricane recovery in the coming years.

States also face serious budget problems in part because increases in health care spending outpace the growth in state revenues, a trend that is likely to continue. As a result, it is difficult to envision a reversal of the trends we have described in this paper.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.498v1

Comment: So employment-based coverage is declining, and the increases in the numbers of uninsured cannot be addressed because federal and state spending must be cut. What? Why is that last statement presented as if it were an immutable given?

We do have the option of moving health care spending from private ledgers to public budgets. Yes, there would be challenges in a publicly-budgeted system. In using public funds we would have to be certain that everyone was covered, and that access and funding would be on an equitable basis. But that really wouldn’t be much of a challenge for a single payer system since it would achieve precisely those goals by design.

As the problem gets worse, tens of thousands more will die. Yet we do nothing because one individual says, “No new taxes.” Isn’t there a higher ethical principle that should guide us?

The danger of consumer-driven health care

The Danger of Consumer-Driven Health Care Crash Course
by Jonathan Cohn
The New Republic
Nov. 7, 2005

Health care operates by what economists commonly call an “80/20” rule. In any given year, most of the money being spent on medical care in the United States (about 80 percent of the total) is for the relatively small portion of Americans (about 20 percent of the population) recovering from severe accidents, fighting off a life-threatening disease like cancer, or struggling with a serious chronic condition like diabetes.

… traditional health insurance spreads the financial burden, using premiums paid by people who don’t use many medical services to help pay the bills of those who do. The trouble with HSAs is that they change the equation, dramatically, allowing people in relatively good health to keep much more of their own money. “One hundred percent of the time it makes sense for a healthy person to take the savings account,” one benefits consultant explained in The Tampa Tribune. “That’s a no-brainer.” But, once that happens, there’s less money to subsidize care for the people with high medical bills–which means those people must either make up the difference themselves or simply go without care. “A wholesale switch to [HSAs] would redistribute the nation’s overall financial burden of health care from the budgets of chronically healthy families to those of chronically ill families,” Princeton economist Uwe Reinhardt has written. “One should simply not brush these ethical issues aside.”

…we need to go back to the guiding principle of group health care–that the way to both lower costs and serve as many Americans as possible is to broaden, rather than shrink, the patient pool. One way to do this is through the plan we’ve been flirting with since the Progressive era–universal health coverage. These days, the case for it seems stronger than ever.

Depending on how it’s structured, universal health care would either limit or eliminate altogether the employers’ responsibility for their workers’ health bills, by transferring greater financial responsibility to an even broader base: the entire population, through some combination of taxes and premiums.

(Jonathan Cohn is a senior editor at The New Republic. He is currently writing a book on the U.S. health-care system.)

http://www.tnr.com/user/nregi.mhtml?i=20051107&s=cohn110705&pt=5%2FcM70%2FKqHd9828cDSfJPW%3D%3D

Comment: The full article is well worth reading for those who want an excellent crash course on the danger of consumer-directed health care.

We are looking forward to the publication of Jonathan Cohn’s new book on the U.S. health-care system. Now, more than ever, there is a greater need for more light and less heat on the subject.

Medicare catastrophic drug coverage is a catastrophe

Medicare Drug Benefit May Expand ‘Catastrophic’ Protection
By Karen Pallarito
Forbes.com
Oct. 26, 2005

The number of seniors protected against formidably high drug costs will increase sharply under the new Medicare prescription drug program, a new analysis finds.

The study focused on the 1.5 million Medicare beneficiaries in the United States who spend more than $4,000 annually on prescription drugs and who lack coverage for so-called “catastrophic” drug costs. These people include individuals who do not have supplemental drug coverage or whose “medigap” insurance does not pay for prescription drugs

“There’s no question of the impact this benefit will have on the lives of those who are dealing with serious illness and their accompanying prescription drug costs,” said Mary R. Grealy, who chairs the Medicare Today partnership. “Our task is simply to get the word out.”

But Robert M. Hayes, president of the Medicare Rights Center, a New York City-based information and consumer advocacy group, said the numbers are somewhat misleading.

“The point of a real Medicare drug benefit would be to assist folks who go without that medication because they cannot afford the $4,000,” he said.

http://www.forbes.com/lifestyle/health/feeds/hscout/
2005/10/26/hscout528779.html

And…

Medicare Prescription Drug Benefit Calculator
The Lewin Group

(The following is an example entered by The Lewin Group to demonstrate the use of the calculator, but you must click “calculate” to get correct results for the example entered.)

Information entered:
$6,000 – Your individual annual drug costs $25,000 – Your annual household income Single – Marital status

Calculated results:
$1,200 – Estimated savings due to Rx plan’s buying discounts $1,500 – Medicare Rx plan’s share of drug costs $3,300 – Your out-of-pocket costs under the new benefit $3,720 – Your costs including estimated premium

The calculator assumes savings to beneficiaries of 20% resulting from bulk purchasing of prescription drugs, compared to the retail prices many seniors face today as individual cash purchasers.

http://webstudies.lewin.com/pdb/medicare2.htm

Comment: Wow! $2,280 savings for $6,000 worth of drugs. Who could ever complain about that?

Before looking closer at these numbers, it’s important to understand that the Medicare drug benefit was carefully designed to advance the conservative agenda of privatizing Medicare. They wanted to allow drug coverage only under the private Medicare Advantage plans to give them a competitive advantage over the traditional Medicare program. But political realities were such that they had to develop some sort of a Medicare D option to provide drug coverage for those remaining in the traditional Medicare program. Otherwise, the Medicare privatization legislation was doomed to certain defeat.

In order to embed the privatization agenda into the public Medicare D program, the conservatives required that the program be administered privately, through insurers and pharmacy benefit managers. They recognized that this private sector drug bureaucracy would consume much of the negotiated discounts because of their very high administrative costs. If Medicare were allowed to negotiate the same discounts, then the entire scheme would fall apart because Medicare would have been granted an “unfair” competitive advantage because of its greater efficiency. Consequently, the conservatives inserted into the legislation a prohibition against government-negotiated drug discounts. Now, let’s look at the numbers.

Suppose Medicare had been allowed to negotiate discounts. The amount of the discount should be greater since the much higher volume of drug utilization would increase drug costs by only the marginal costs of increasing manufacturing volume, a very small percentage of the overall costs for the pharmaceutical industry. But lets ignore this additional savings and assume that Medicare would receive the same discount as the private pharmacy benefit managers, estimated by The Lewin Group to be 20%.

In the example provided by The Lewin Group, the beneficiary pays the first $250, plus 25% of the next $2,000 ($500), plus the full amount between $2,250 and the discounted total of $4,800 ($2,550), and a premium of $35/month ($420), for a total of $3,720. Medicare pays 75% of the amount between $250 and $2,250, or $1500. Since the Medicare portion is paid from tax funds, it is really an allocated portion of pooled consumer funds and, thus, a portion of the costs paid indirectly on behalf of the Medicare beneficiary. So the full amount paid by the beneficiary, directly and indirectly, is $5,220 ($3,720 plus $1,500).

Wait a minute. If Medicare didn’t even set up a drug program but merely negotiated a 20% discount, the cost would have been $4,800. Thus an extra $420 ($5,220 minus $4,800) is the penalty assessed because we prohibited Medicare from negotiating the same discount that the pharmacy benefit managers receive.

This example assumes only a negotiated drug discount for Medicare and nothing else. But suppose that Congress were to authorize a bona fide Medicare drug benefit. We would receive not only the discounts, but also the tremendous power of spreading the risk through an equitable system of funding the program. By expanding the program into a Medicare for All, we would further dilute the costs per beneficiary by including younger, healthier individuals who have little need for drugs now, but who want to have affordable access when they are older and in poorer health.

Privatize Medicare? No way! We need a single payer, national health insurance program. How about Medicare for All?

The Chaoulli Case: A Two-Tier Magna Carta?

By Gregory P. Marchildon
Healthcare Quarterly
Vol 8, No 4, 2005

Abstract:
There has been considerable speculation about the potential impact of the Supreme Court of Canada’s judgment in Chaoulli v. Quebec. Even if those who are most friendly – or most hostile – to Canadian medicare are exaggerating the impact of the decision, its impact will be large. While the decision does not strike down any existing single-payer medicare system in any province, including Quebec’s single-payer system, it is certainly capable of becoming the Magna Carta for two-tier medicare through future judicial interpretation and extension. In any event, it has already become the battering ram of choice for medicare’s most tenacious opponents.

In recent years, the critics of medicare have become more vocal about what they invariably describe as the monopoly of single-payer health care, often comparing Canadian healthcare to the command economy of the former Soviet Union. This perception is not only misleading – it is fundamentally wrong on a number of counts.

In the first place, Canadians are awash in choices when it comes to medicare. We have the freedom to choose our physician. Within our respective provinces and territories, we are free to choose our health institutions – one hospital over another, one clinic over another, depending on our personal preferences. And in contrast to the imagery of a single government bureaucracy perpetuated by the critics of medicare, almost all of our physicians are independent professionals working on fee schedules or contracts freely negotiated with provincial and territorial governments. Many of our clinics are private (not-for-profit as well as for-profit) and the majority of our hospitals are either private not-for-profit institutions or part of regional health authorities that have varying degrees of managerial autonomy from government. This contrasts sharply with the history of the National Health Service in Britain, in which hospitals and their employees all became part of a central government bureaucracy.

In the second place, medicare refers to a quite narrow range of health services – mainly hospital, diagnostic and physician services that are provided on a universal basis and without direct payment by the patient. These services constitute about 43 per cent of total healthcare expenditures in the country. Almost all other healthcare, including home care, nursing home care, prescription drugs, vision care and alternative medicines, are outside the medicare basket. In other words, the so-called monopoly covers less than one-half of Canadian healthcare and does not at all apply to mixed and private sectors of healthcare – sectors in which private insurance, user fees and direct payment are the rule rather than the exception. Moreover, the mixed and private sectors – comprising over 50 per cent of health expenditures – have contributed far more than the public sector to the high rate of growth in healthcare expenditures over the last decades.

Finally, we have always permitted two small exceptions to our single-payer medicare regimes – one private, the other public. On the private side, no one is prohibited from purchasing private health services as long as they pay out-of-pocket for those services from providers who have chosen to be non-participating members of a provincial medicare scheme. On the public side, workers’ compensation health benefits predate medicare and were legally excluded from the operation of the Canada Health Act and provincial medicare laws. Of the two, at least until the Chaoulli decision, the public tier of workers’ compensation has been more problematic in terms of its damage to the principle of universality by allowing a segment of the population preferential access to medicare services, occasionally through non-participating physicians and private facilities.

In contrast, the private exception based upon private payment never really developed in Canada for a number of complex reasons, particularly the refusal of provincial and territorial governments to subsidize private care or encourage physicians to work both sides of the public-private street at the same time. Although I know it is contentious to do so, I would add that the generally high quality of Canadian medicare has also prevented a large private market from developing. At any rate, the very few Canadians who have wanted such services have always been free to purchase them in the United States, where a ready market for privately purchased services has always existed because of the truncated nature of public health insurance in that country.

This brings us to the nub of the Supreme Court’s decision. Despite the lack of evidence, opponents of Canadian-style medicare, including Dr. Jacques Chaoulli, have long argued that the inability to purchase private insurance for medically necessary health services has been the key factor in preventing a viable second tier from emerging capable of competing with publicly administered medicare for customers (Coffey and Chaoulli 2001). They often point to examples such as Australia, where public and private hospital and physician services co-exist. Of course, they conveniently ignore the fact that the Australian government has had to provide a huge public subsidy in the form of a 30 per cent deduction for private insurance premiums to keep the private system in business, an experience that seems common in countries with such two-tier systems. In other words, public funds are often diverted to the wealthier members of society in order to prop up the private tier where it exists.

Proponents of medicare have long argued that to preserve the universality of a system, with access based solely on need, government needs to discourage the emergence of a separate “upper” tier of care based on ability to pay. Most governments in Canada have done so because they wanted to prevent major exceptions to the principle that access should be based on urgency of need. They have also done so to prevent a parallel private system from robbing the financial and human resources needed to run a top-notch public system. To protect their single-payer systems, different provinces have selected different and various means to discourage a second private tier. These means include: not allowing non-participating physicians to charge more than the medicare fee schedule; refunding patients only the medicare portion of fees paid to non-participating physicians; and in the case of six provinces (British Columbia, Alberta, Manitoba, Ontario, Quebec and Prince Edward Island) prohibiting private health insurance for medicare services.

In Chaoulli, the Supreme Court decided that Quebec’s prohibition on private health insurance is contrary to the Quebec Charter of Human Rights and Freedoms when an individual’s lengthy wait for medicare services seriously compromises the health of that individual. The court provided little guidance, however, in helping governments, health organizations and physicians know at what point a waiting time is too long. Moreover, little or no consideration was given to the fact that many provincial governments and health organizations, through initiatives such as the Western Canada Wait List Project and the Saskatchewan Surgical Care Network, have focused their efforts at understanding and shortening wait lists. Indeed, while the degree of success varies across and within provinces, there has been considerable progress in reducing waiting times in many parts of the country in the last couple of years.

Contrary to the majority view of the court, which seemed to swallow the monolithic, monopoly view of the world, medicare is actually a highly local system depending on the management and decisions of individual physicians, hospitals and regional health authorities. It is up to these organizations, under a publicly administered framework provided by the provincial government, to balance the many priorities, from urgent to elective care, and from sickness care to illness prevention and health promotion. We must ask ourselves whether the court’s concern with one waiting list problem in one city in one province is going to end up dictating the priorities of health organizations and governments throughout Canada, even further tipping the balance in favour of downstream illness care and away from prevention and promotion efforts that will keep us all healthier (and at less cost) in the long run.

So, what next?

In the face of this decision, those governments that support medicare should act now rather than waiting for the inevitable offensive driven by the powerful interests supporting the radical privatization of Canadian medicare. Individuals and groups within those provinces can strengthen the resolve of these governments by expressing their support for universal medicare, their opposition to allowing a private upper-tier of care, and initiating their own litigation to support the principles of medicare.

Those provinces that have prohibited private insurance should consider amendments that clarify the reasons for prohibition and the merits of a single-tier system of medicare. The legislative debates will force everyone to make their positions and assumptions clear and will provide an opportunity for medicare-friendly governments to set out the evidence supporting a single-tier system. Once enshrined in law, each government’s legislative intent will have to be taken into consideration in future court rulings.

The provinces that have not previously prohibited private insurance have at least two options open to them. They can re-examine the combination of measures they have used in place of an outright prohibition on private health insurance to protect the integrity of their single-payer systems, and the extent to which their circumstances may be similar to, or different from, the provinces with express prohibitions. They can then amend their own medicare laws to make clear their legislative intent to continue to preserve the integrity of their single-payer systems.

Although unlikely because of the inherent cautiousness of the advice given by health bureaucracies to their political masters, it would be interesting to see at least one provincial jurisdiction carefully draft a new law prohibiting private health insurance for the express purpose of having it tested in the courts, perhaps through a reference case. I am quite sure that it would be relatively easy in such a case to demonstrate the broader point that the policy measures relied upon by any government to protect medicare are better determined by governments accountable to the public through the democratic process than by the courts.

The federal government could also take some long overdue action to enforce the Canada Health Act. There is a reason that Montreal has the largest number of private MRI clinics in the country – a market has been created because of the extremely long waiting lists in the public sector and the willingness of participating physicians to encourage their more well-off patients to jump the medicare queue by getting a private MRI. If the federal government had forced this issue into the public domain years ago through a (temporary) reduction in its transfer payments, the Quebec government might have better ensured timeliness of care through the public system and not relied so surreptitiously on its private release valve. In more general terms, while it is up to individual provinces to decide on how best to administer (and protect) their respective single-payer systems, the federal government needs to continue to ensure that it is effectively discouraging major exceptions to the fundamental principles of public administration, universality, comprehensiveness, portability and accessibility.

Finally, I would like to offer some unsolicited advice to Premier Klein of Alberta, given his comments following the Chaoulli decision. If he truly believes that the founding principles of medicare are fundamentally flawed, then this court decision should finally give him the courage of his convictions. If he truly believes that Albertans endorse his vision, then he should immediately introduce a two-tier system. He can bypass the Canada Health Act by simply refusing federal health transfers in the future. If Saskatchewan was able to go it alone for years when it first introduced medicare, then surely oil-rich Alberta can now afford to go it alone. Albertans could then pay directly out-of-pocket or indirectly through private health insurance for a portion of their medicare services. Access for the majority would be based mainly on “ability to pay,” while access for the very poor (often defined as those on welfare) would be determined by a safety net type medicare program. Where the working poor fit into this picture is a little harder to determine but all Canadians outside Alberta would have a home-grown point of comparison on how the systems stack up against each other.

In the 1960s, this option was called Manningcare because Premier Ernest Manning was convinced of its merits compared to the universal medicare model. Personally, I would be confident that single-tier medicare would prove itself more efficient, effective and equitable in the comparison, just as it has done so relative to the American system. Whether a majority of Albertans would willingly go along with Premier Klein on this trip back to the past is highly questionable. Indeed, I suspect the majority of Albertans remains as opposed to a two-tier system as all other Canadians, a stubborn fact that explains the gap separating Klein’s bravado from his government’s timid actions on the ground.

We all know that the demand for healthcare services is potentially limitless. After protracted debates almost a half century ago, we decided that, at least for medicare services, rationing should be based upon urgency of need rather than ability to pay. Though the majority of Canadians continue to support that democratic decision and the founding principles of medicare, the Supreme Court through its Chaoulli Magna Carta is doing its best to force us back to the drawing board again.

About the Author
Gregory P. Marchildon, is Canada Research Chair and Professor Graduate School of Public Policy, University of Regina and Fellow, School of Policy Studies, Queen’s University. Email: greg.marchildon@uregina.ca.

References
Coffey, J. Edwin and J. Chaoulli. 2001. Universal Private Choice: Medicare Plus. Montreal: Montreal Economic Institute.

Will industry spur national health care?

Kalamazoo Gazette
Friday, October 28, 2005

Remember back in the 1960s when many politicians were having apoplexy over the prospect of Medicare?

Pure socialism, they ranted. It’ll break the bank!

Well, it hasn’t yet, although it has become obvious that Medicare, the health-insurance program for senior citizens, and Medicaid, a companion federal-state program to aid the destitute of all ages, have become hugely expensive and require streamlining and reform.

Now comes Gov. Jennifer Granholm with a suggestion for a national health plan. Is that a risky strategy for Granholm’s campaign for re-election next year?

Maybe not. This is Michigan, after all, and our auto industry is hurting. The big news recently is that Toyota will open a second auto manufacturing plant in Woodstock, Ontario, in 2008.

Toyota executives decided to forgo hundreds of millions of dollars in subsidies from several American states in favor of erecting their new plant less than 25 miles from its second Ontario plant and skilled workforce in Cambridge. It is expected that the new plant will bring well-paying jobs to 1,300 workers who would make 100,000 vehicles annually.

Often, in this space, we have called attention to the importance of a community having skilled workers. That’s why Michigan thrived for so many decades. The Japanese place a great importance on the abilities of the Canadian workers, much more so apparently than they did on those in southern states vying for the new plant.

The Toyota people also are aware of health-care costs. It was reported that because Canada has a taxpayer-supported national health insurance program that covers all citizens regardless of age, Toyota could save $4 to $5 an hour in benefits. Fortunately, the U.S. auto manufacturers and the labor unions have reached agreement on a new contract, which includes health-care provisions.

In America, excellent health care is available for seniors when they reach 65, affluent people who are covered by some type of private policy, or public health insurance for the very poor. But it’s different for tens of millions of our working poor. Many of them, honest and hard-working people, have lost everything they have to an expensive illness. In this land of plenty, that’s disgraceful.

All of these facts have not been lost on Granholm. The governor said Monday that some form of a national health care program — perhaps beginning with the use of public funds to take care of catastrophic costs for citizens of all ages — could be a starter.

Years ago, heads of big corporations and a lot of conservatives would have been aghast over such a plan. But, today, employee health-care insurance premiums are eating many industries alive.

Some otherwise unlikely allies could decide to receive Granholm’s notion with at least a modicum of enthusiasm.

A Republican Senate candidate supports single payer principles

Tarrant’s healthy idea
Brattleboro Reformer
October 26, 2005

IDX co-founder Richard Tarrant may be running for the Republican U.S. Senate nomination in 2006, but when it comes to health care, he has some ideas that are quite different from the same old things we hear from the Republican Party.

Tarrant’s company, which was recently purchased by General Electric for $1.2 billion, specializes in creating computer software for the health care industry. Through his work with IDX, Tarrant says he has a unique perspective on the health care issue.

“I’ve spent 35 years in it,” Tarrant told the Reformer during a meeting with the editorial staff on Monday. “I’ve seen a lot of different health care plans.”

Unlike many Republicans, Tarrant thinks single-payer health care isn’t a terrible thing. One reason why is that, at least for the elderly and the poor, the United States already has a form of it.

“Medicare is a bureaucracy, but it is one of the most efficient bureaucracies out there,” said Tarrant.

Because Medicare works in this regard, Tarrant would like to see it expanded so that the uninsured, small businesses and farmers could participate. It would be means-tested, with premiums based upon the ability to pay. Those who want to participate can do so, or stick with the current private insurance plan they might have.

Ultimately, Tarrant said, he would like Medicare, the elder health care plan, to merge with Medicaid, the health care plan for the very poor. This merger would make providing insurance more efficient.

“You have one plan for Medicare and a different plan in 50 different states for Medicaid,” said Tarrant. “And every state is having trouble paying for it. Medicaid can only be fixed on the federal level and I can see both programs eventually merging.”

Tarrant’s vision of a limited single-payer health insurance system functioning side-by-side with the current free market system is an intriguing idea. Although he didn’t discuss how it would be funded, his proposal certainly doesn’t reflect conservative orthodoxy.

His thoughts on health care may be a sign that Tarrant, who is better known for being one of the richest people in Vermont than for being a political thinker, may have some fresh ideas for next year’s Senate race.

http://www.reformer.com/Stories/0,1413,102~8854~3106021,00.html

Comment: Single payer advocates will be quick to point out that allowing a parallel private health insurance system defeats some of the efficiencies and equities of a single payer system. But what a shift in health policy views for a Republican!

It is anticipated that Independent Bernie Sanders, a very popular Vermont politician and outspoken single payer supporter, will be a candidate for the U.S. Senate. It may be that Tarrant’s statement on single payer is defensive posturing. But even if so, it is gratifying to see that a successful Republican businessman recognizes the validity and credibility of the single payer model.

Taking good care of WellPoint

WellPoint’s 3Q Profit More Than Doubles
By The Associated Press
The New York Times
October 26, 2005

WellPoint Inc. on Wednesday said earnings for the third quarter more than doubled as the company continued to reap the benefits of last year’s merger creating the largest health insurer in the U.S.

The company was formed last November when Indianapolis-based Anthem Inc. bought Thousand Oaks, Calif.-based WellPoint Health Networks Inc. and changed its name to WellPoint Inc.

(Third quarter) net income rose to $640.7 million, or $1.02 per share, from $242.1 million, or 85 cents per share.

Improvement at the company’s health-care segment was driven by strong membership growth, moderating medical costs in the current year, and synergies realized from the WellPoint-Anthem combination.

WellPoint is in the process of acquiring WellChoice, parent of Empire Blue Cross and Blue Shield. For 2006, WellPoint said it remains committed to its goal of achieving 15 percent growth in net income per share, not taking into account any effect from the WellChoice acquisition or from expensing stock options.

http://www.nytimes.com/aponline/business/AP-Earns-WellPoint.html

Comment: Why should we care about another ho-hum report on the profits of the nation’s largest health insurer? Well, theoretically, as health care consumers we are paying WellPoint and the other insurers for the services that they provide. So it’s fair to ask what benefits we are receiving from this very expensive, highly profitable enterprise. (Although I’ll use WellPoint in this discussion, the principles apply generally to the entire private insurance industry.)

Health care coverage in the United States is heavily dependent on employment-based plans. Our national and state policies are designed to protect and nurture this important sector of health care coverage. Policies have been established to be certain that this industry thrives, even if more and more burdens are being placed on employers and their employees. Without healthy insurers, our system of funding care would collapse (unless structural reform were enacted).

So who is covered under employer-sponsored plans? The nation’s workforce. These are comparatively young, healthy, gainfully employed individuals and their young, healthy families. Insurance is about pooling risk wherein the large numbers of healthy individuals pay into a pool to cover the high costs of the few with major health problems. But employment-based coverage segregates this very large sector of primarily healthy individuals and places them into a separate low-cost pool. So we have presented, on a silver platter, to the private insurance industry this highly lucrative sector, while relieving them of the need to cover most of us who do have significant health care needs.

What about private individual coverage? The story is much worse. The higher administrative costs of the individual market drive rates up to about 30% higher than comparable group coverage. Since these costs would make individual coverage unaffordable, the industry has responded by shifting costs from the insurer to the individual patient. Everyone is aware of the impact that this has had on individual bankruptcy, in spite of having insurance coverage. Even more alarming, the private insurers have been quite successful in excluding those with needs from individual coverage, either by exorbitant premiums or by underwriting exclusions. Once again, our policies have allowed the private insurance industry to skim off the healthy, leaving the sick behind.

Is the private insurance industry helping us to fund the care of those who do have significant needs? End of life care is shifted to the taxpayers through the Medicare program. Many of those with chronic disabilities are shifted to the Medicare and Medicaid programs. The uninsurable theoretically are shifted to high-risk pools, but they don’t exist in many states, and are non-accessible because of minuscule quotas and high premiums in most other states. Some low-income individuals with a high incidence of health care disparities are covered by the taxpayer-funded Medicaid program. And 46 million, mostly employed, low-income individuals, are not served by the private plans simply because they do not have the funds to support the insurance industry.

If the private insurers are avoiding risk pooling and are shifting costs to patients, then what are they selling us? Administrative services! Hundreds of billions of dollars in administrative services (though some of that is the wasteful administrative burden that they place on the health care delivery system).

WellPoint’s $641 million profit this quarter, annualized with the projected 15% increase means that WellPoint will have almost $3 billion in profits next year. But that number is dwarfed by the cost of the egregiously wasteful administrative services that they are foisting off on us.

19% of health care in the United States is funded through employer-sponsored plans. The other 81% is through public programs and private spending. Yet our legislators take far better care of the private insurers than they do us.

The insurers shun the sick, steal our money, and Congress and our state legislators want to keep them in charge!?

Entrepreneurial physicians and their specialty hospitals

Effects Of Physician-Owned Limited-Service Hospitals: Evidence From Arizona
By Jean M. Mitchell
Health Affairs
October 25, 2005

In recent years physician ownership of so-called limited-service hospitals has become commonplace in many states lacking certificate-of-need regulations. Empirical evidence documenting the effects of these facilities is sparse. This study compares practice patterns of physician-owners of limited-service cardiac hospitals and physician-nonowners who treat cardiac patients at competing full-service community hospitals. Analyses of six years of Arizona inpatient discharge data show that physician-owners treat higher volumes of profitable cardiac surgical diagnosis-related groups (DRGs), higher percentages of low-severity cases, and higher percentages of cases with generous insurance compared with physician-nonowners who treat cardiac patients in community hospitals.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.481v1

And…

The Rise Of The Entrepreneurial Physician
By Allen Dobson and Randall Haught
Health Affairs
October 25, 2005

…after reviewing the evidence, we note that physicians’ demands for more clinical autonomy and control over their incomes will not go away if specialty hospitals are “banned.” The emergence of specialty hospitals is a manifestation of a larger issue: the rise of the entrepreneurial physician. In response, community hospitals are partnering with physicians in numerous creative ways. Thus, the future outlets for physician demand for clinical and economic control may go beyond specialty hospitals to include variants of partnering between community hospitals and physicians, and perhaps gain-sharing arrangements or pay-for-performance systems as advocated by the CMS and MedPAC.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.494v1

Comment: There is no dispute that physicians who own specialty hospitals admit higher volumes of more profitable patients with better insurance coverage while avoiding less-profitable, complex cases. Although advocates of physician-owned specialty hospitals argue that market competition with community hospitals results in a higher quality product, there is no evidence for that.

The true reason for skimming off more profitable patients is very clear. The physician is using the single patient to provide fees for professional services and to provide investment income for a parallel entrepreneurial venture. Professional fees and investment income are each legitimate, independent sources of income. But does it matter that they arise from the same patient source?

Advocating for the best care for the patient has traditionally been rewarded with professional fees. Although fee-for-service can result in excessive services, and salaries can result in sloth, in general, payment for professional services serves the patient fairly well.

What about receiving entrepreneurial income in caring for the same patient? In order to create a maximum return on investment, decisions are made on a business model basis. That may or may not benefit the patient, but that doesn’t matter as long as it has a positive impact, or at least no negative impact, on the specialty-hospital market. It does not take much imagination to think of measures that would increase revenues (e.g, high-tech services of questionable value) and other measures that would decrease expenses (e.g., a cheaper but less-tested, implantable cardio-defibrillator). Since the patient-care algorithm and the business-decision algorithm frequently depart at various junctures, a physician could never escape the fact that a conflict exists, no matter how altruistic that physician is.

A greater concern for many of us is the financial burden that is placed on community hospitals when the profitable patients are diverted away. Community hospitals already have the burden of providing uncompensated care which, hopefully, can be offset by insured patients. But when they lose the better-insured patients, their safety-net function is threatened. Do we really want to support a few specialty hospitals as a tradeoff for accepting under-funded mediocrity for the rest our community hospital needs?

Dobson and Haught suggest that, since we are in the age of the entrepreneurial physician, community hospitals can compete by making “gain-sharing arrangements” with physicians. When we accept the fact that market competition must be the driving force in health care, it leads to perverse concepts such as the need to supplement professional income with entrepreneurial gain-sharing income. Kickbacks and fee-splitting are historical terms that have no significance in today’s entrepreneurial environment, but maybe we should give more thought as to why they were made illegal.

We need comprehensive structural reform in the way that we fund health care. We should pay physicians, and pay them well, simply for caring for their patients. A national health insurance program would do that, but it would also establish safeguards against perverse non-professional income that might be deleterious to the patient or to the health care system as a whole. And, besides, physicians would have complete freedom to invest elsewhere.

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