PNHP

The health care infrastructure – a shared service

pnhpf3a

The health care infrastructure – a shared service

Rutland Herald
February 22, 2005
Editorial
Clarity on health care

As Vermont legislators confront the burdens and the irrationality of Vermont’s health care system, they face numerous obstacles. One of the most fundamental obstacles is conceptual. A new book written by three Vermonters and to be released within days from now goes a long way to clarifying the conceptual confusion and pointing the way to meaningful reform.

The authors are Cornelius Hogan, a longtime public servant who has served in the Cabinets of Republican and Democratic governors; Dr. Deborah Richter, a
physician and expert on health care reform; and Terry Doran, a journalist who has helped put together a book of unusual clarity and insight. It comes at a crucial moment in Vermont history and ought to be read by every member of the Vermont Legislature.

One of the authors’ central insights can be encapsulated in a number. They point out that about 70 percent of health care costs represent costs of infrastructure. By infrastructure, they mean the hospitals, clinics and personnel that are always available to us whether we are using them at a given moment or not. It is important to address the costs of pharmaceuticals and other supplies, but they only account for about 16 percent of health care costs. Reforming the health care system means taking a look at how we finance the health infrastructure.

The authors refer to this infrastructure as a “shared service.” It is a service we expect to be on call for us whenever we are in need. It so happens that about 10 percent of Vermonters account for about 70 percent of health care spending. And yet it would be impossible for that 10 percent to shoulder the entire cost of the hospitals, physicians and other fixed expenses that were there waiting for them when they got sick.

We spend most of our lives among the 90 percent who are not piling up huge
medical expenses. But we know that if we want those services ready for us
when we need them, we must share the expense even when we are not using
them. That is why we have health insurance.

The problem is our health financing system is disorganized, erratic and unreliable. In the past four years, about 20,000 Vermonters have lost insurance. The Medicaid program for low-income Vermonters is stacking up an enormous deficit. The costs to businesses and individuals continue to escalate at double-digit rates. One of the reasons is that our helter-skelter system of health financing requires an enormous administrative expense for chasing or denying payments. About $1 billion out of $3 billion in health expenditures in Vermont goes to administration.

Past attempts at cost controls have not worked, mainly because they have focused on the individual rather than the system. Managed care was an attempt to curb usage by focusing on individual claims. Thus, HMOs and insurance companies set up bureaucratic systems for screening out what were deemed to be unneeded services. The public rebelled at the interference, and the system failed to control costs.

The focus on individual demand is appropriate in its place. Gov. James Douglas has proposed programs for managing chronic disease better and for promoting good health. These are useful for the individual and, to an extent, for the system.

But we are always going to have a predictable level of health care needs- births, broken legs, heart attacks, diabetes, end-of-life illnesses – and we will continue to need to maintain the infrastructure necessary for coping with these demands. The authors note that it is the capacity of our system that costs us, not its use. It is good to encourage heart health, but medical specialists know that in a population the size of Vermont’s there will always be a certain level of heart disease. Our medical facilities and personnel will have to be there to deal with it, and the underlying assumption of our system is that we will share the cost.

It is an underlying but not fully acknowledged assumption. We share the cost at present by means of insurance provided, if we are lucky, by our employers. Many Vermonters are not so lucky. They are underinsured or not insured at all. A high percentage of all personal bankruptcies occur because of health care crises – a sign that the system is not working.

If we acknowledge the assumption that our system depends on shared costs, like our highways or our schools, then we could put in place a more dependable way of financing it and controlling its costs.

That will be the topic of another editorial.

http://rutlandherald.com/apps/pbcs.dll/article?AID=/20050222/NEWS/502220310/1018/OPINION

Comment: The concept is straightforward. If we want health care to be there when we need it then we must all participate in funding the health care infrastructure so that it is always available. Expecting it to be funded primarily by individuals at the time of expensive, on-demand use is totally unrealistic. Thus insurance.

But what is the trend in insurance today? Under the banner of consumer empowerment, there is a drive to make insurance much less expensive for the
80-90% who are relatively healthy. This is accomplished not only by reducing
benefits and increasing cost sharing, but, more ominously, by gradually transforming the insurance market into one that places the majority who are
healthy into low cost pools (i.e., low cost, high deductible insurance) while leaving the few with high costs in very expensive (unaffordable) pools or with no coverage at all. Only the government would have the capability of funding these high risk pools.

But then where does the government get its money? From taxes paid primarily
by the majority who are healthy. In fact, 60% of our health care system is already funded through the tax system. So why are we wasting health care dollars on insurer middlemen who are creating innovative, rinky-dink pseudo-insurance policies for the healthy?

Since we’re paying for it anyway, why don’t we adopt an equitable method of
funding our “shared service.” None of us use all of our highways, but we want them there when we need them. Can any less be said about our health care system?

Why Association Health Plans?

BCBS HealthIssues.com
Association Health Plans
A Step Backward for Small Employers and Consumers
February 2005

Congress is considering legislation to exempt association-sponsored health insurance plans (called Association Health Plans or AHPs) from existing state consumer protections. While promoted as a way to address health insurance affordability problems facing small businesses and their employees, the research overwhelmingly indicates that this proposal will make health insurance less accessible, less affordable and less secure for the vast majority of small employers and individual consumers.

A large number of organizations oppose AHP legislation due to concerns about the impact that it would have on access to dependable and affordable health
insurance, including: the American Academy of Pediatrics, the American Cancer Society, the American Diabetes Association, Association of Health Insurance Advisors, the Blue Cross and Blue Shield Association, the Coalition Against Insurance Fraud, the National Association of Insurance and Financial Advisors, the National Partnership for Women and Families, and the National Small Business Association.

This compendium is intended to inform policymakers about this legislation by summarizing the research examining the impact AHPs would have on healthcare
coverage. Taken together, these studies provide a comprehensive economic,
policy and legal analysis of this proposal.

The overwhelming conclusion reached by these studies is that AHPs would:

* Increase premiums for the vast majority of small employers and their workers;

* Fail to address the problem of uninsured small businesses and workers;

* Lead to widespread plan insolvencies and fraud among these AHPs;

* Make it difficult or impossible for small businesses with older, sicker workers to have access to affordable health coverage; and

* Take away state-based consumer protections that millions of Americans rely on today, including the right to appeal when a health plan denies reimbursement for medical care.

http://bcbshealthissues.com/relatives/100240.pdf

Comment: This report is a compendium of conclusions from fifteen different
sources, all indicating significant adverse consequences of policies supporting Association Health Plans (AHPs). It is quite obvious that this is a political document. But it is crucial to understand whose politics this represents. A cursory glance through the list of opponents to AHPs is revealing:

http://www.protectyourhealthcare.org/allies.html

Though some interests may be on the list partially for self-serving reasons, the great majority are concerned about patient-consumers. AHPs would reduce
affordable access to health care.

If AHPs represent flawed health policy, why is there support for them? The following statement from the National Federation of Independent Business (NFIB) sheds light on this issue:

“AHPs would allow small-business owners to band together across state lines through their membership in a bona fide trade association, like NFIB, to purchase health coverage for their families and employees. For example, many small-business owners are members of several associations such as NFIB, the U.S. Chamber, the National Restaurant Association or other trade groups. If AHPs became law, a small-business owner could purchase health benefits through any one of these entities that would act much as the human resources department of a large company.”

http://www.nfib.com/page/AHPs.html

Should health care reform be about adding the NFIB and the U.S. Chamber of
Commerce into the equation as additional middlemen, or should it be about
ensuring affordable access to care for everyone?

Time for single-payer

Published in Times Argus, Vermont
By Stuart E. Williams, M.D. Family Physician Berlin

It is time for Vermont to establish a universal coverage, single-payer health-care system. We already have a network of excellent non-profit hospitals and well-trained health professionals in Vermont. Our quality of health care ranks with the best states in the nation. Yet high administrative costs, underfunding of Medicaid, and especially, the increasing numbers of uninsured and under-insured Vermonters are threatening our ability to maintain this quality of care.

We can overcome these threats by making a bold move in Vermont. A unified system for health-care reimbursement would reduce administrative costs by 30 percent, eliminate cost-shifting, increase our purchase power for medications and, most importantly, provide equitable health-care coverage for all Vermonters. This can be done in a way that distributes the financial burden fairly and maintains patients’ choices of providers. We are fortunate to have imaginative and compassionate leaders in state government who are capable of forming a state-wide unified health payment system, but they need our encouragement and support. Many communities will offer voters a chance to support a universal health referendum on Town Meeting day. Legislators also pay attention to calls and letters from their constituents. Let us broaden this discussion and encourage debate on specific plans to achieve reform. All Vermonters deserve access to quality health care.

Clarity on health care(Rutland Herald)

As Vermont legislators confront the burdens and the irrationality of Vermont’s health care system, they face numerous obstacles. One of the most fundamental obstacles is conceptual. A new book written by three Vermonters and to be released within days from now goes a long way to clarifying the conceptual confusion and pointing the way to meaningful reform.

The authors are Cornelius Hogan, a longtime public servant who has served in the Cabinets of Republican and Democratic governors; Dr.Deborah Richter, a physician and expert on health care reform; and Terry Doran, a journalist who has helped put together a book of unusual clarity and insight. It comes at a crucial moment in Vermont history and ought to be read by every member of the Vermont Legislature.

One of the authors’ central insights can be encapsulated in a number. They point out that about 70 percent of health care costs represent costs of infrastructure. By infrastructure, they mean the hospitals, clinics and personnel that are always available to us whether we are using them at a given moment or not. It is important to address the costs of pharmaceuticals and other supplies, but they only account for about 16 percent of health care costs. Reforming the health care system means taking a look at how we finance the health infrastructure.

The authors refer to this infrastructure as a “shared service.” It is a service we expect to be on call for us whenever we are in need. It so happens that about 10 percent of Vermonters account for about 70 percent of health care spending. And yet it would be impossible for that 10 percent to shoulder the entire cost of the hospitals, physicians and other fixed expenses that were there waiting for them when they got sick.

We spend most of our lives among the 90 percent who are not piling up huge medical expenses. But we know that if we want those services ready for us when we need them, we must share the expense even when we are not using them. That is why we have health insurance.

The problem is our health financing system is disorganized, erratic and unreliable. In the past four years, about 20,000 Vermonters have lost insurance. The Medicaid program for low-income Vermonters is stacking up an enormous deficit. The costs to businesses and individuals continue to escalate at double-digit rates. One of the reasons is that our helter-skelter system of health financing requires an enormous administrative expense for chasing or denying payments. About $1 billion out of $3 billion in health expenditures in Vermont goes to administration.

Past attempts at cost controls have not worked, mainly because they have focused on the individual rather than the system. Managed care was an attempt to curb usage by focusing on individual claims. Thus, HMOs and insurance companies set up bureaucratic systems for screening out what were deemed to be unneeded services. The public rebelled at the interference, and the system failed to control costs.

The focus on individual demand is appropriate in its place. Gov. James Douglas has proposed programs for managing chronic disease better and for promoting good health. These are useful for the individual and, to an extent, for the system.

But we are always going to have a predictable level of health care needs— births, broken legs, heart attacks, diabetes, end-of-life illnesses — and we will continue to need to maintain the infrastructure necessary for coping with these demands. The authors note that it is the capacity of our system that costs us, not its use. It is good to encourage heart health, but medical specialists know that in a population the size of Vermont’s there will always be a certain level of heart disease. Our medical facilities and personnel will have to be there to deal with it, and the underlying assumption of our system is that we will share the cost.

It is an underlying but not fully acknowledged assumption. We share the cost at present by means of insurance provided, if we are lucky, by our employers. Many Vermonters are not so lucky. They are underinsured or not insured at all. A high percentage of all personal bankruptcies occur because of health care crises — a sign that the system is not working.

If we acknowledge the assumption that our system depends on shared costs, like our highways or our schools, then we could put in place a more dependable way of financing it and controlling its costs.

This editorial is written by the editorial board at the Rutland Herald. He is a Pulitzer prize winning journalist and a very big deal in Vermont.
http://rutlandherald.com/apps/pbcs.dll/article?AID=/20050222/NEWS/502220310/1018/OPINION

Outsourcing Medicine: Letter From Mexico

A haven south of the border
Douglas Bower – For the Atlanta Journal-Constitution

Guanajuato, Mexico — I had become too sick to live in America.

Even with private insurance, even with Medicare, we couldn’t keep up with my medical bills. So we found a country where we could, and we left.

Picture this: A childless, middle-aged couple, both gainfully employed, both college-educated, living a frugal but happy life near Kansas City. The husband is diagnosed with a chronic, incurable illness. He has to quit work because the illness is very serious.

But, not to worry: After four long years and a legal battle, he gets on Social Security disability and therefore qualifies for Medicare. There is also the added security of the wife’s health insurance to cover the expensive prescriptions and everything else Medicare doesn’t. Everything will be fine because they are insured, and they will continue to live a happy yet frugal life. Or will they?

By the fall of 2002, my wife and I could no longer afford my illness. I was afflicted with fibromyalgia syndrome, a pain and fatigue disorder that eventually leaves most of those afflicted unable to work. The decrease in my income, plus the 10 prescriptions I took (not counting the drugs my wife had to take), were breaking us financially. We were insured, but the co-pays, deductibles and non-covered expenses were eating away at our financial security, bite after bite.

We found a sort of bitter consolation in the fact that millions of Americans share our plight. It turns out that more than 50 percent of bankruptcies filed in 2001 were medically related and were by middle-class homeowners who not only had an income but also health insurance. The prevailing myth that most bankruptcies are related to credit card debt is not true. Less than 1 percent of filed bankruptcies result from credit card debt.

All-too-common plight

Researchers found that 1.9 million to 2.2 million U.S. residents filed a “medical bankruptcy.” The average person filing for bankruptcy during 2001 spent $13,460 on co-payments, deductibles and uncovered services even though they had private insurance.

“Our study is frightening. Unless you’re Bill Gates you’re just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick. Health insurance offered little protection,” said Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School who led the study.

Another one of the study’s authors, Elizabeth Warren, said, “It doesn’t take a medical catastrophe to create a financial catastrophe. A larger share of American workers are going to have insurance that’s like a paper umbrella. It looks good, and it might even protect you in a sprinkle, but it melts away in a downpour.”

In the fall of 2002, the sprinkle on our paper umbrella turned into an unstoppable downpour. We had to do something before it tore the paper umbrella to shreds and our lives along with it. Little did we suspect that our search for more affordable prescriptions would not only find us financial relief but also end up changing our lives.

An attractive option

We heard rumors that prescription drugs were cheaper in Canada and Mexico. Our research showed this was indeed true. But this, to be honest, was a scary proposition. I also read that the U.S. government was trying to shut down many of the Web sites through which you could order these drugs.

That’s all I needed — to get arrested for smuggling drugs through the U.S. Mail. Many Americans who live in border towns simply cross the border to get a prescription filled at substantially lower prices with no hassles. Moving to a border town was not what we wanted to do. But what did catch my eye was that, in Mexico, not only were my prescription drugs cheaper. Just about everything else was, too.

Digging deeper, we discovered that a large population of American expatriates, about 1 million, already live in Mexico, taking advantage of a significantly lower cost of living. This was a stunning revelation to us. Moving to Mexico hadn’t been a remote possibility; now it appeared to be salvation.

We began our new lives in a beautiful colonial city, the capital of Guanajuato state, also called Guanajuato, in August 2003.

We stepped into a new reality where everything— prescription drugs, housing, utilities, food, transportation, entertainment — is 25 percent to 75 percent cheaper than it is in America. My Social Security disability income more than adequately covers our expenses here in Guanajuato. An example is that I can buy all my needed prescriptions for less than the co-pay I forked over for one drug in the United States. I get a month of Prozac for less than $16. Same drugs, only affordable.

Is moving to Mexico an alternative for everyone? I doubt it. But it is working for us on so many levels that we have no plans anytime soon to return to the land of our birth.

The solution? I don’t know. What I do know is that we, and many other Americans, cannot sit idly by waiting for our elected officials to work it out. We had to take action, drastic as it was. That paper umbrella won’t last long.

Robert Reischauer on single payer

San Francisco Chronicle
February 20, 2005
Medicare not easy to salve
By David Lazarus

“We cannot solve the problems that face Medicare without dealing with the broader problems that face health care in America,” said Robert Reischauer, president of the nonpartisan Urban Institute — a Washington think tank– and former director of the Congressional Budget Office.

…Reischauer at the Urban Institute said single-payer may ultimately hold the answers not just for Medicare but also covering the 45 million Americans now lacking health insurance.

“If push came to shove, I would want a single-payer system instead of the system we have now,” he said. “But the political obstacles to that are considerable.”

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/02/20/BUG27BDFVP1.DTL&type=business

Comment: If more individuals of the caliber of Robert Reischauer join with him in speaking up, the political obstacles will melt away.

Taiwan's Healthcare System

Hsieh outlines his strategy
Taipei Times, Monday, Feb 21, 2005,Page 3

Premier Frank Hsieh defines the goals of his Cabinet as promoting negotiation and stability. `Taipei Times’ staff reporters Ko Shu-ling and Jimmy Chuang recently spoke with the former DPP chairman and Kaohsiung City mayor to find out more about his views on how he plans to approach `negotiation,’ especially on divisive issues such as health insurance, tax reform and cross-strait relations

(excerpt)

TT: Some have criticized as “unfair” your plan to increase the ceiling on indexed health insurance premiums and let the rich pay more. What do you think of this criticism?

Hsieh: A recent opinion poll shows that over 73 percent of voters support the measure. As the national health insurance program is, to some extent, a social insurance mechanism, I believe, as do other highly paid Cabinet officials, that it makes sense to have better-off Taiwanese pay more. The bottom line is that the program is only beneficial as long as society is stable, which is a more important consideration than how much the rich pay in their premiums.

If criticism of the new measure is justified, I’d like someone to explain how. I am not an expert on this, but I listen to the experts’ opinions and do the calculations myself. It’s not a good thing to listen to one person’s opinion and assume that something is wrong.

The change should be made based on three convictions. First, the national health insurance program must continue to work because it is extremely convenient, especially for the underprivileged. Second, because national health insurance is a social program, government intervention is necessary and we are obliged to shoulder certain financial burdens. Finally, we have to come up with strategies not only to save money, but to generate more. I firmly believe our national health insurance policy is among the world’s best.

In a bid to generate more money, we believe it is good to let the better-off pay a little more. While the current ceiling on indexed health insurance premiums is NT$87,600, it will be increased to NT$131,700. In other words, those who make NT$10 million a month will pay the same health premium as those who make NT$131,700.

I also believe the costs of promoting better health, education and disease prevention should be paid by the government rather than the health insurance program.

In addition, we have decided to raise the “health tax” on cigarettes. Our plan is to increase it from NT$5 to NT$10 per pack. It is estimated that such an increase will bring in an extra NT$1.5 billion to NT$2 billion each year. About NT$2 billion from air pollution fees will also be injected into the program.

In addition, we are considering requiring those responsible for public disasters, food poisoning, and major traffic accidents to pay the medical expenses of the victims. However, I don’t think it is right to channel lottery revenues into the program.

I hope to finalize the measure on how to better execute the hospital transfer system and its supplementary plan by July 1 or Jan. 1.

With the implementation of all the measures, I hope we will be able to keep the health insurance program afloat for two or three more years before the second-generation health insurance policy is in place. I believe most people will approve of the measure

Taiwan’s Healthcare System

Hsieh outlines his strategy
Taipei Times, Monday, Feb 21, 2005,Page 3

Premier Frank Hsieh defines the goals of his Cabinet as promoting negotiation and stability. `Taipei Times’ staff reporters Ko Shu-ling and Jimmy Chuang recently spoke with the former DPP chairman and Kaohsiung City mayor to find out more about his views on how he plans to approach `negotiation,’ especially on divisive issues such as health insurance, tax reform and cross-strait relations

(excerpt)

TT: Some have criticized as “unfair” your plan to increase the ceiling on indexed health insurance premiums and let the rich pay more. What do you think of this criticism?

Hsieh: A recent opinion poll shows that over 73 percent of voters support the measure. As the national health insurance program is, to some extent, a social insurance mechanism, I believe, as do other highly paid Cabinet officials, that it makes sense to have better-off Taiwanese pay more. The bottom line is that the program is only beneficial as long as society is stable, which is a more important consideration than how much the rich pay in their premiums.

If criticism of the new measure is justified, I’d like someone to explain how. I am not an expert on this, but I listen to the experts’ opinions and do the calculations myself. It’s not a good thing to listen to one person’s opinion and assume that something is wrong.

The change should be made based on three convictions. First, the national health insurance program must continue to work because it is extremely convenient, especially for the underprivileged. Second, because national health insurance is a social program, government intervention is necessary and we are obliged to shoulder certain financial burdens. Finally, we have to come up with strategies not only to save money, but to generate more. I firmly believe our national health insurance policy is among the world’s best.

In a bid to generate more money, we believe it is good to let the better-off pay a little more. While the current ceiling on indexed health insurance premiums is NT$87,600, it will be increased to NT$131,700. In other words, those who make NT$10 million a month will pay the same health premium as those who make NT$131,700.

I also believe the costs of promoting better health, education and disease prevention should be paid by the government rather than the health insurance program.

In addition, we have decided to raise the “health tax” on cigarettes. Our plan is to increase it from NT$5 to NT$10 per pack. It is estimated that such an increase will bring in an extra NT$1.5 billion to NT$2 billion each year. About NT$2 billion from air pollution fees will also be injected into the program.

In addition, we are considering requiring those responsible for public disasters, food poisoning, and major traffic accidents to pay the medical expenses of the victims. However, I don’t think it is right to channel lottery revenues into the program.

I hope to finalize the measure on how to better execute the hospital transfer system and its supplementary plan by July 1 or Jan. 1.

With the implementation of all the measures, I hope we will be able to keep the health insurance program afloat for two or three more years before the second-generation health insurance policy is in place. I believe most people will approve of the measure

Medicare not easy to salve(SF Chronicle)

By David Lazarus

There’s no simple or straightforward solution to Medicare’s funding woes. At least with Social Security’s looming troubles, the remedies can be narrowed down to three fundamental (albeit unpleasant) options: raise taxes, reduce benefits or borrow a big pile of money.  It’s not so easy with Medicare.

“We cannot solve the problems that face Medicare without dealing with the broader problems that face health care in America,” said Robert Reischauer, president of the nonpartisan Urban Institute — a Washington think tank — and former director of the Congressional Budget Office.

Medicare and Social Security are plagued by the same demographic challenge– the pending retirement of millions of Baby Boomers. Both programs face huge funding shortfalls as fewer workers pay into each system and more retirees take money out.

In the case of Medicare, however, the fiscal difficulties come sooner and are considerably larger. Also, Medicare’s situation is greatly exacerbated by runaway prices for medical treatment and medication.”You can’t solve this by looking at Medicare alone,” Reischauer said. “There are systemic issues that have to be addressed as well. That’s the real problem.”
  
Medicare is the $350 billion-a-year federal health insurance program primarily for people over 65 or those with disabilities. It has about 42 million beneficiaries. (Medicare’s sister program, Medicaid, provides health coverage for about 44 million low-income recipients.)

As I reported Friday, Medicare costs are expected to surpass those of Social Security by 2024. By 2078, Medicare’s annual expenditures will be twice as large as Social Security’s.

The portion of Medicare that pays for hospital stays — the largest component of the program — is expected to be in the red five years from now. It will then have to start spending reserve funds.

By 2019, those reserves are expected to be gone and the program will no longer be able to pay full benefits. Medicare’s deficit over the next 75 years is projected to run as high as $27.7 trillion, compared with a $3.7 trillion shortfall for Social Security over the same period.

Leslie Norwalk, deputy administrator of the Centers for Medicare & Medicaid Services, the government agency overseeing Medicare, said a funding gap of nearly $28 trillion appears daunting, but “within a 75-year window, a lot can happen.”

“There’s a long time between now and then,” she said. “When you think about how much the health care system has changed, it’s very hard to sit in my chair and imagine how things will be 75 years from now.”

Much could happen, Norwalk believes, that could bring down the cost of health care for future generations. But Robert Moffit, director of the Center for Health Policy Studies at the conservative Heritage Foundation, said it’s far more likely that researchers will come up with new drugs and new treatments that will further extend people’s life spans.

“These kinds of breakthroughs will be terribly expensive,” he said. “This will only add to Medicare’s costs.” Reischauer at the Urban Institute said he would tackle Medicare’s issues by effectively reinventing the nation’s health care system.

“I would start at ground zero,” he said. “I would spend a significant amount of money on an independent body charged with evaluating all the procedures and devices in health care and writing practical guidelines.”
  
By following such national guidelines, Reischauer argued, health plans and health care providers throughout the country would be able to eliminate redundancies and introduce new efficiencies.

“We need to begin building a new system brick by brick, and the system needs to be evidence-based,” he said. That’s all well and good, responded Heritage’s Moffit, but it’s not politically realistic to think that the United States can simply throw its existing health care system out the window and start again from scratch.
  
“We can’t do it all at once,” he said of fixing Medicare’s problems. “It’s too big to do all at once.” Moffit’s solution involves changing the Medicare program at first only for the Baby Boomers — those turning 65 after 2010. He would replace the average $6,500 now spent annually on Medicare beneficiaries with a yearly subsidy, perhaps in the form of a tax credit.

Recipients in turn would use the money to choose their own health care plan based on individual needs. If someone wants to spend all his cash on Viagra — which is covered under President Bush’s costly new Medicare drug benefit — that would be his decision.

“This would address some of the long-term cost issues,” Moffit said. “It would not be an open-ended entitlement. “We’re going to be spending a lot more on the Baby Boomers than we did on the World War II generation,” he pointed out. “There’s just a lot more of them. ”

Medicare’s Norwalk called Moffit’s suggestion “a very interesting proposal.” But, she added, “I don’t see it as politically viable.” Ida Hellander, executive director of Physicians for a National Health Program, a Chicago advocacy group, said Medicare’s woes demonstrate the need for universal medical coverage in the United States.

The clear solution, she said, is a so-called single-payer system similar to national health plans in Canada and elsewhere. “You can’t control costs,” she said, “until you have a uniform system.”

Under a single-payer system, any citizen could be treated by any doctor at any hospital. Payroll taxes would replace all existing premiums,deductibles and co-pays.
  
Medicare could serve as the bedrock for creation of a single-payer system. Between that program, Medicaid and Veterans Affairs, Hellander said, taxpayer funds already account for about 60 percent of U.S. health spending.

In California, state Sen. Sheila Kuehl, D-Santa Monica, plans to introduce legislation this week that would establish a single-payer system for state residents.

A recent report by the Lewin Group, a well-regarded health care consulting firm, determined that universal coverage along the lines of what Kuehl is proposing would reduce health care spending in California by $8 billion next year alone.

It also would provide coverage for the nearly 6 million uninsured people statewide and result in lower costs for virtually all California companies now providing insurance to employees, Lewin found.

Heritage’s Moffit rejected the notion of a single-payer system in this country. “That’s exactly the way to go if you want to reduce quality and personal freedom,” he said.
  
However, Reischauer at the Urban Institute said single-payer may ultimately hold the answers not just for Medicare but also covering the 45 million Americans now lacking health insurance.

“If push came to shove, I would want a single-payer system instead of the system we have now,” he said. “But the political obstacles to that are considerable.”
  
There it is again — politics. Proposals for improving health care from both the left and right are routinely dismissed as being politically unrealistic.

All that remains is a sense of chronic crisis and a leadership vacuum when it comes to tackling some of the most important issues facing this country.

Medicare, like Social Security, can be salvaged. It won’t be easy. It will be damned painful, in fact. But we’ll never know how painful unless we try. David Lazarus’ column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU’s “Mornings on 2.”

Send tips or feedback to: dlazarus@sfchronicle.com.

Copyright 2005 SF Chronicle

Medicare for all is not socialized medicine

By Dr. James Cockey

It’s wonderful to see the recent interest by The Daily Times in health care policy. Our current health care financing system is simply not working. It costs too much and is giving us far too little in return.

I do want to correct The Daily Times’ editorial of Feb. 11, in which the following statement was made: “If we expect coverage for everything, we should take another look at socialized medicine.”

The only socialized medicine model I have seen in the United States with full centralized government control is the Veterans Health Administration system.

No one I know is advocating full government control of health care. Many of us are advocating universal health care coverage, along the lines of Medicare. No one currently considers Medicare “socialized medicine,” although its detractors used this epithet in 1965 when it was being created.

I appreciate the comments of my friend and colleague, Dr. Frank Arena. I do, however, dispute a few of his positions. While the health care of the VHA system has historically not always been the best, recent studies in major medical journals document its superiority to community hospitals on most quality indicators, largely due to extensive use of computerization to meet quality standards.

I also disagree on the relative complexity of Medicare billing. Billing the multitude of private insurers is far more difficult, requiring more employee expertise and time, than the comparatively straightforward and uniform Medicare regulations.

Our patients also have the added advantage of knowing Medicare will cover expected services and do not face the horror of huge uncovered bills due to fine print exclusions of coverage.

The virtues of high deductible health insurance are not as clear to me as they are to Arena. As soon as we advance the idea that “your premiums are fixed and you can’t be canceled as long as you pay the premium,” we are out of a marketplace insurance system and instituting a variation on national health insurance, with premiums fixed either by the government or some quasi-governmental organization. The for-profit health insurance industry depends on risk and premium stratification to maintain profitability.

A high-deductible, catastrophic coverage health plan creates the illusion of increasing consumer choice. It works for well-off, healthy people who can afford the high deductible for routine care and low-cost procedures. It does not work well for poor people, who can barely afford housing and food for their families. It does not work at all for sick people, who would be priced out of the catastrophic market.

Arena’s letter described single-payer, universal health care as “Utopian socialist.” “Utopian” literally means “nowhere.” Variations on single-payer, universal health care are firmly in place every where — in every other industrialized nation on earth. The United States is the only industrialized nation on earth that does not have such a system.

We also spend twice as much per capita on health care as most of the rest of the industrialized world, with health outcomes that place us low compared to other countries. It’s difficult for me to see where universal health care is any more “socialist” than universal public school education or universal rights to libraries or public roads.

Our health care system endangers our economic competitiveness. It bankrupts too many of our friends and neighbors, and does not effectively protect our health compared to the rest of the world. The only reform on the table which addresses all these problems is a single-payer, universal health care system: Medicare for all.

I hope there will be more articles in The Daily Times about health care financing, more letters to the editor and increased pressure on our politicians to act on this very real crisis.

* Dr. James Cockey lives and practices medicine in Salisbury.

A. Calman responds on the sustainable growth rate

Andy Calman, MD, PhD responds to the message on physician behavior under the Medicare Sustainable Growth Rate:

Wow. Where to begin? Time does not permit a full response so I’ll summarize.

You equate “cost-effectiveness” with “noble” behavior. The fact is that technology enables us to help people who previously could not be helped.

This month, in my field of ophthalmology, a new drug was approved for macular degeneration, the leading cause of legal blindness in Medicare-age Americans. This treatment is inordinately expensive ($1000 per injection just for the drug cost, and about $200 to the doc). But should we withhold this treatment, which is the first to offer the possibility of actual visual improvement? Would it be noble to do so? How would I explain this to my father-in-law, an engineer now blinded and unable to practice his profession because such treatments did not exist when he lost his vision to this disease?

Don’t assume that performing more service is ignoble or equates to “gaming the system” or “lacking integrity”. We pay more than we used to, and we get more than we used to (we pay more than other countries do, but that is a different issue). Whether it’s hip replacements, cataract surgery, arthritis meds, psychotherapy, or laparoscopic surgery, the recipients of these services are generally delighted that they are able to get on with healthier lives as a result. They do not view their physicians as ignoble because they made these services available.

Policymakers need to make rational decisions about how much it is worth to society to have the benefits of advanced medical care. I am not swayed by the arguments that we devote increasing amounts of our GDP to healthcare. We get real benefits for large numbers of people as a result of this investment. Sure, we could spend more of our GDP on other things that people want, like consumer electronics and SUV’s, but is this automatically the best public policy?

Also, be careful how strongly you defend the SGR. The SGR has some serious flaws: it does not adequately account for the increase in the over-80 demographic,it inappropriately ties services to GDP, and it includes in-office prescription drugs in the calculation — a component which has tripled in the last several years in its percentage of overall part B services.

I’m with you in general, but this editorial really turned me off. I want to see universal access to healthcare just as much as you do, and am working hard to help bring it about. But demonizing the physicians (or ennobling our critics) will not gain you many converts among our ranks. And universal access to substandard care is only marginally better than what we have now.

Andy Calman MD PhD
Founder and National Chair
Physicians for a Democratic Majority

Don’s response: We emphatically agree that beneficial technological advances are clearly desirable and should be incorporated into the payment structure of the health care system, even if that results in an increase in the health care component of the GDP.

The dispute is over whether the increases in physician spending represent the increased costs in technological advances. Keep in mind that we are addressing physician compensation only, which excludes most of the capital investments in operating rooms, imaging centers, specialty hospitals, and the purchase of prosthetic devices or of most drugs. From the physicians’ perspective, most of the impact of new technology is on the time and effort that the physicians devote to added services necessitated by the technology.

For 2003, this was estimated to be about a 1.5% increase, and another 1% for
2004. Intuitively about 1.25% per year seems reasonable since there has
not been an explosion of technology in the past two years that required an inordinate increase in physician effort. In fact, because of time constraints, some older, less effective interventions are abandoned, freeing up more time for the new.

Beginning with 100% of physician spending in 1996, a target level of spending was recalculated yearly by adding adjustments for demographics, for inflation, and for increased physician time and expense for newly approved technological advances (as above). The target amount for 2004, including the factor for technological advances, was $77.1 billion, but actual physician spending was $84.9 billion. It seems highly unlikely that physicians increased their effort an additional 15% over that which already includes a correction for new technology. And we know that they didn’t increase their working hours by 15%.

I think that it is much more likely that the physician adjustment factor (PAF) demonstrates what we feared: that physicians are pushing the limit on coding in an attempt to achieve income levels to which they believe they are entitled. I do not believe that this represents unethical behavior, but, rather, represents the fact that they are making the most of the somewhat flawed system that we have. I still stand by my position that we should investigate whether we could make changes that, instead, incentivize the most noble behavior on the part of physicians.

Uncovered medical expenses are leading to bankruptcies(SF Chronicle)

Back-breaking bills/Uncovered medical expenses are leading to bankruptcies
By Victoria Colliver, Chronicle Staff Writer

Jeannie Brewer is a physician married to a surgical resident. She and her family have health insurance. She’s not the kind of person you’d expect to be pushed to the verge of financial collapse by medical expenses. Yet Brewer is considering filing for bankruptcy, and part of the reason is the $16,500 in health care costs her family incurs each year that are not paid for by insurance.

“I have got creditors all over me. I am at the point where I don’t know what else to do,” said Brewer, 44, of Alameda. Brewer is one of a growing number of Americans who are discovering that health insurance doesn’t protect them from financial troubles caused by medical expenses. There are several reasons for the trend. Employers have been offering skimpier health care benefits and requiring their workers to pay more for coverage. Policies with high deductibles have become increasingly popular as a way for employers to manage unaffordable premiums.

Between copayments, requirements to pay certain percentages of medical bills and services that just aren’t covered, large numbers of people with insurance are facing burdensome out-of-pocket expenses. Many of them wind up in debt. And a significant percentage of those turn to bankruptcy Court for relief.

“There is a trend toward insurance being viewed as sort of catastrophic protection,” said Jeff Morris, resident scholar at the American Bankruptcy Institute. “The problem, of course, is it doesn’t take a lot of hours at a hospital to generate a bill that is very difficult to pay.”

In Brewer’s case, financial problems stem in part from her daughter’s diabetic condition. Three-year-old Lara must be constantly monitored and tested at least eight times a day. That has prevented Brewer from working normal hours for her employer, Alta Bates Summit Medical Center in Oakland, and held her income to just $35,000 last year.

Her credit card debt has spiraled to about $140,000, including some medical bills, but mostly daily expenses. She and her husband, who earns a modest salary as a resident, also have a combined $360,000 in medical school debt.

Brewer said that if she files for bankruptcy, she will do so as an individual to preserve her husband’s credit rating.

Loopholes in insurance

A Harvard University study of medical bankruptcy released earlier this month found that financial hardship caused by medical bills is not a problem that affects only the uninsured. Most people who file for personal bankruptcy because of health care expenses, like Brewer, actually have health insurance, the study found.
  
“Even the best policies in this country have so many loopholes, it’s easy to build up thousands of dollars in expenses,” said Dr.Steffie Woolhandler, a Harvard associate medical professor and one of the study’s authors.

The study looked at 1,771 bankruptcies filed in 2001 in five states,including California. Almost half of those filers — 46.2 percent — cited illness and medical bills as a major cause of bankruptcy. More than three-quarters had insurance at the onset of illness.

The problem seems to be largely a middle-class phenomenon. Typical medical bankruptcy filers are in their early 40s and have children. Most have at least some college education and own their homes.

Even if people have health insurance to begin with, many lose coverage because they are unable to keep their jobs because of medical problems.

Need for disability insurance

The health insurance industry says the lack of proper disability income protection could be the primary reason for medical-related financial problems.

Disability insurance “doesn’t pay your doctor, but gives you income for food,” said Susan Pisano, spokeswoman for America’s Health Insurance Plans, a trade group for the health insurance industry.

Pisano said it’s difficult to separate medical debt from other financial pressures associated with a health problem, especially loss of income due to an individual’s inability to work full time or to keep a job at all.
  
Even if bankruptcy is averted, the financial strain of an illness can set finances back for years. Berkeley resident Connie Taylor found herself $38,000 in debt when her daughter had to be hospitalized for a psychiatric condition. She didn’t realize that the treating physician was not among her health insurance company’s covered network of doctors.

Extra expenses

“I thought if you had insurance, you had insurance. You would be OK,” said Taylor, 53, a hospital housekeeper. She said she did not know there was such a thing as an out-of-network provider under her policy and was not informed that her daughter’s doctor would cost extra.

The hospital, through its collection agency, placed a lien on her home. Although the episode occurred in 1993, Taylor did not pay off the bill until 2001, with the help of her church and her ex-husband.

For San Francisco resident Anna Chavez, the event that prompted her financial woes was a happy one: the birth of her first child in 2000. While she was glad to get pregnant, it was unplanned. She and her husband had just opened a restaurant in San Mateo and had bare-bones insurance through Blue Cross that didn’t cover childbirth. Unable to change her policy after becoming pregnant, Chavez figured that the couple would be responsible for about $4,000 in out-of-pocket insurance expenses and $1,000 in physician fees.

The couple balked when the hospital charged them $2,300 more than they had estimated. Chavez said she asked the hospital to arrange a payment plan. Instead, she said, the hospital filed a lawsuit, which the couple lost by default. She estimates that after the attorney’s fees and court expenses, the birth of their child cost the couple $10,000.

Understand the terms

A Blue Cross spokeswoman declined to comment on Chavez’s situation, citing privacy concerns. She said customers should work carefully with their brokers to understand the terms of their policies.

Chavez, 35, who is currently uninsured, has since qualified for the state’s Healthy Families program, which covers low- to moderate-income children. She had her second child essentially for free under another state program. That makes her uncomfortable. “I just feel like I was rewarded for not having insurance, and I was not rewarded for trying to do the right thing,” Chavez said.
  
Jeannie Brewer, MD is a CaPA member
E-mail Victoria Colliver at vcolliver@sfchronicle.com.