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Companies Sue Union Retirees To Cut Promised Health Benefits

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Companies Sue Union Retirees To Cut Promised Health Benefits

Firms Claim Right to Change Coverage, Attempt to Pick Sympathetic Jurisdictions
The Process Server Pays a Call
By Ellen E. Schultz

Staff Reporter of THE WALL STREET JOURNAL
November 10, 2004; Page A1

When a deputy sheriff came to his door with a court summons, George Kneifel, a retiree in Union Mills, Ind., was mystified. His former employer was suing him. The employer, beverage-can maker Rexam Inc., had agreed in labor contracts to provide retirees with health-care coverage. But now the company was asking a federal judge to rule that it could reduce or eliminate the benefit.

Many companies have already cut back company-paid health-care coverage for retirees from their salaried staffs. But until recently, employers generally were barred from touching unionized retirees’ benefits because they are spelled out in labor contracts. Now, some are taking aggressive steps to pare those benefits as well, including going to court.

In the past two years, employers have sued union retirees across the country. In the suits, they ask judges to rule that no matter what labor contracts say, they have a right to change the benefits. Some companies also argue that contract references to “lifetime” coverage don’t mean the lifetime of the retirees, but the life of the labor contract. Since the contracts expired many years ago, the promises, they say, have expired too.

The companies taking such steps remain a minority. Most big employers continue to provide the retiree health coverage spelled out in labor contracts. But the number of employers using the courts to attempt to reduce benefits for union retirees is rising, and some have been successful. “There’s absolutely no doubt that there’s been an increasing number of cases over the past three years,” says Richard Brean, associate general counsel of the United Steelworkers of America.
They have little to lose by trying. Typically, as such legal cases drag on, the employers save money as some of the retirees, who have to pay growing portions of their health-care costs, forgo costly care, drop out of the plans or die. If companies lose in court, the worst that happens is they have to resume paying benefits. They don’t face punitive damages or penalties. And they may not have to resume benefits for those retirees who dropped out of the health plans. What’s more, their earnings get a pop. That’s because at the same time as they sue, employers typically announce reductions in the retirees’ benefits. Doing so entitles them to lessen the liabilities carried on their books. Lower liabilities translate to higher earnings.

The retirees, by contrast, often find themselves in a bind — unsure of their recourse and facing, as they age, the court system’s typical long waits for legal resolution. The U.S. Labor Department is of little help. Retired workers “aren’t our constituents anymore,” says a spokeswoman for the department.

Unions often do go to bat for retirees. The United Auto Workers and the Steelworkers have been the most active in filing suits to protect retirees whose benefits a company has unilaterally changed. But unions aren’t allowed to strike or file unfair-labor-practice complaints on behalf of retirees.

Employers that want to cut union retirees’ health coverage or make retirees pay a larger portion could just impose changes and wait to be sued. But by suing first, they stand a chance of choosing the jurisdiction. This is important, because federal circuits’ appellate courts tend to take differing positions in these disputes. Indeed, the unsettled nature of the law on these issues — with employers’ arguments sometimes succeeding and sometimes not — may be a factor prompting some companies to have a go at gaining the legal right to change benefits.

One afternoon last December, Basil Chapman was sitting on his porch in Barboursville, W.Va., with his dog, Bo, when a union representative phoned the retiree to say an executive of his former employer wanted to speak to him. Mr. Chapman called the executive, at ACF Industries Inc., a railroad-car maker where Mr. Chapman worked for 38 years. He was told ACF was going to change health coverage, making retirees pay for a portion that previously was free.
“We have a contract. You can’t do that,” Mr. Chapman said, according to court papers later filed by ACF. “We will file in federal court against you b—–ds.” Asked about this, Mr. Chapman, who is 60, says he didn’t swear on the phone.

The next Monday, ACF, which financier Carl Icahn controls through an investment vehicle, sued Mr. Chapman in federal district court in St. Louis. The company asked the court to rule that it had the right to change or terminate health coverage for 678 retirees and their dependents. ACF said it was suing to protect itself, noting that “defendant Chapman has already informed ACF that he plans to file a lawsuit concerning the amendments of the plan.”

“I can’t understand why they’re picking on me,” Mr. Chapman says. “I’m just a retired guy who was sitting on my porch.”

CO-PAY BLUES
This week, the Online Journal looks at the financial burdens facing health-care consumers who have insurance and offers advice on handling medical expenses.
Do you have questions or ideas about selecting health-care coverage and managing your family’s costs? We invite you to participate in a discussion2 with health-insurance and benefits experts.

Monday: The lines between HMOs and PPOs are blurring. Here’s how to choose3 the right plan option for you.

Tuesday: Dr. Benjamin Brewer, in his Doctor’s Office column, talks about how insurance coverage affects the patients4 that doctors agree to service.

Thursday: Fiscally Fit columnist Terri Cullen focuses on the quandary patients face when health-care providers charge more than what insurers will pay.

Employers that sue retirees name one person or a handful. They may choose people at random, retirees who have complained, or people who were active in the union that negotiated the contract at issue. Mr. Chapman, who repaired equipment and stenciled names on railroad cars at ACF, also headed a Steelworkers bargaining committee. The named defendants represent the “class” of retirees.

Key Contract Element
Mr. Chapman says health coverage for retirees was a key element of labor contracts he helped negotiate in 1995. Up to then, although the company paid 100% of hospitalization and surgical coverage, retirees paid for major medical. But their premiums for that coverage had risen so high that many had dropped it.
To make health coverage affordable for future retirees, the union accepted lower starting pay for new workers in exchange for lower-cost major medical coverage for retirees. According to the contract, any employee retiring during the term of the agreement “will contribute a flat $100 per month for life towards the cost of such coverage. The Company will pay any additional required costs.”

The company doesn’t dispute that the contract says that, but it says that “$100 per month for life” referred only to the major medical coverage, not explicitly to the hospital/surgical portion.

In addition, it believes the agreements to provide health coverage to retirees expired with the contracts, said Marc Weitzen, general counsel for ACF at Icahn & Co. in New York, in an interview.

The retirees, represented by the union, countersued to dismiss the complaint. They contended ACF had gone through “the charade of telephoning retiree Mr. Chapman about the cuts, just so it could provoke a predictable negative reaction and then use the reaction to immediately sue.”

The retirees said ACF had sued in St. Louis, which is part of the 8th federal circuit, because it “apparently believes that the 8th Circuit is more favorable to employers in retiree medical benefits cases, and apparently feels that its chances are improved if it makes the retirees litigate hundreds of miles from their homes.”

CREATIVE STRATEGIES

Companies that cut retiree health benefits promised in writing may use one or more arguments or tactics:
” Escape Clause: Insert sentence in benefit plan saying company “reserves the right” to change benefits.
 
” ‘Life’ Line: Argue that “lifetime coverage” refers to life of the contract, not lives of retirees.
 
” Fine Print: Say that retirees signing health-plan enrollment forms waived prior agreements.
 
” Trip to Court: Sue retirees, ask court to declare company has right to cut benefits.
 
Source: WSJ research

Most of ACF’s retirees live in West Virginia, in the 4th Circuit, where a court favored union retirees in an earlier decision. The retirees asked the judge to dismiss the case or transfer it to the southern district of West Virginia.

Mr. Weitzen at Icahn & Co. said ACF sued in Missouri because it administers the benefits plans from there. He added, “As with many other U.S. businesses, ACF believes it has the right to pass along certain of its health-insurance costs to retirees.”

It is legal and common for litigants to try to pick a favorable jurisdiction. If two parties sue each other, the courts generally hear the case that’s filed first. But a court can dismiss or transfer a case if it believes a company is “forum shopping” or suing retirees as a pre-emptive strike to deprive them of their rights, as “natural plaintiffs,” to sue in the court they would choose.

That happened in this case. In August, the court in St. Louis — saying it appeared ACF’s move “resulted in a proverbial race to the courthouse in order to deprive defendants of their choice of forum” — moved the suit to federal court in Huntington, W.Va. The case is ongoing.

But a different court came to the opposite conclusion regarding Rexam, illustrating why employers make these legal thrusts at retirees.

In early 2002, Rexam raised retirees’ share of the cost of prescription drugs. “For people getting a pension of $300 to $400 a month, it ate their whole pension,” says Mr. Kneifel, the retiree in Union Mills, Ind., who is 65.

For more than a year, retirees complained to the company that it had no right to change negotiated agreements, which stated that “Company-paid major medical coverage will be provided for all retirees,” and specified what the retirees’ costs would be.

‘Reserves the Right’
Rexam responded that a booklet describing the coverage contained a clause that said the company “reserves the right to amend, modify or discontinue the plan in the future in conformity with applicable legislation.”

The retirees said the clause meant that if government legislation or regulations changed, then the plan might have to be modified accordingly. It didn’t give the company a right to unilaterally change the agreement, retirees said, pointing to another clause specifically stating that the right to modify the benefits “was subject to any applicable collective bargaining agreement.”

In May 2003, Rexam sued the retirees, asking a federal court to declare that it had the right to change their benefits.

It filed in Minneapolis. The appearance of a deputy sheriff bearing a summons to court 475 miles away was a shock to Mr. Kneifel. “I’m glad I was home when they came, because my wife had a stroke about six years ago,” he says. “Suing retirees is a cowardly way to go about the whole thing.”

The retirees, represented by the Steelworkers, countersued in Toledo, Ohio, asking that the case be dismissed or transferred there. They said Minnesota was home to only 100 of the 3,600 retirees and that Rexam had made a pre-emptive legal strike to choose the jurisdiction. The business, which was called American National Can Co. before its 2000 purchase by Rexam Inc., is based in Chicago and has offices in Charlotte, N.C. It is a subsidiary of Britain’s Rexam PLC. The judge in Minneapolis rejected the retirees’ arguments. Because they had not been planning to sue Rexam, they couldn’t claim Rexam was suing in a pre-emptive strike, said Judge Ann Montgomery. She let the case stay in Minneapolis because Rexam employs 115 people in St. Paul and has retirees in Minnesota.

Judge Montgomery also said she was allowing the suit to move forward “in the interests of justice.” She cited a liability for the benefits on Rexam’s balance sheet and said the company was harmed “because it cannot lower the liability unless it reduces the retirees’ benefits.” The case is pending.

A Rexam spokesman said with health-care costs rising, the company “must do what we can to address these costs” to remain competitive, but will continue to provide retirees with fair coverage.

Gradual Erosion

The erosion of legal protection for retiree health benefits has been gradual. When medical costs began to rise steeply in the 1980s, employers first started to cut benefits for salaried retirees. If sued, employers pointed to clauses they had added to the health plans’ technical documents. The clauses said the employer reserved the right to change the benefits.

Retirees complained that the clauses were buried in long technical documents they often didn’t know existed. (Companies must provide employees a summary of these documents when they first become health-plan participants; the summaries may or may not include the clauses at issue.) The retirees also pointed to employer literature referring to lifetime coverage. Nonetheless, courts began accepting company arguments.

A key case involved cuts by General Motors Corp. in coverage it had offered to 50,000 salaried employees over the years to induce them to retire early. A 6th Circuit appellate court ruled in 1998 that what mattered weren’t brochures that advised prospective retirees that health coverage would be provided “at GM’s expense for your lifetime,” but a clause in which GM reserved the right to alter benefits. Although dissenting judges assailed this reasoning, and the federal circuits remain divided about it, salaried retirees have steadily lost in benefits cases ever since.

Union retirees were more secure because their benefits were part of negotiated contracts. But after the GM ruling, more employers began to argue that that decision’s logic applied to union retirees, as well, and some courts agreed.

Meanwhile, over the years some employers also have argued that promises of lifetime coverage expired when the contracts expired, or were canceled out by clauses noting how long the contracts would run. Initially, courts rejected those arguments, saying general “duration clauses” in contracts refer simply to the period of the contract, and pertain to salary and benefits for active employees, not to benefits for retirees.

But some courts in the past decade have accepted these employer arguments. The federal circuits are split. Retirees who go to court on their own to contest cuts in their benefits face a hard road. Employers generally use a combination of arguments when they unilaterally change union retirees’ health coverage and file suit against the retirees.

Serving Papers
Asarco Inc. told retirees in mid-2003 that it was raising their health-care premiums. As it did so, the copper company sent summonses to some retirees in Arizona, where many live, telling them they were defendants in a suit it was filing in Phoenix.

The suit pointed to a clause in health-plan documents saying, “The Company reserves the right to amend or terminate the Plans at any time for any reason….even after you retire.”

In addition, Asarco pointed to general “duration clauses” in the contracts, which said the agreements expired when the labor contracts did. The agreements that expired, the company said, included the one to provide retirees with health coverage until they qualify for Medicare.

Retired Asarco miner Chuck Yarter learned he was being sued when he got a call from a process server trying to find his remote home in the Sonora Desert near Marana, Ariz. Mr. Yarter, 61, says he told the man how to find his modest 625-square-foot house, which sits at the end of a dirt road, with a distant view of the open-pit Silver Bell copper mine where Mr. Yarter was a mechanic on heavy equipment.

He smiles recalling the visit: His black dog, Lady, wouldn’t let the visitor out of his car. The process server handed the papers through the car window before trundling away through the saguaro and mesquite. “I’ve never been served papers in my life,” Mr. Yarter says.

In its July 8, 2003, letter to him and other retirees, Asarco, a unit of Grupo Mexico SA, said: “As you know, the past several years have been very difficult for the copper industry. The continuing low copper prices and escalating medical costs force us to make these changes.”

Mr. Yarter, who monitors copper prices on the Internet, says Asarco is just making excuses. Copper prices have nearly doubled since the July 2003 letter, to about $1.36 a pound from 76 cents.

Asarco, in a statement, said it acted in response to “the constantly escalating” cost of providing medical and drug coverage, saying it must control costs because it can’t control what it gets for its copper. It said it continues to make coverage available “at a reasonable cost,” declining further comment because the case is in litigation.

Three unions filed a counterclaim on retirees’ behalf against Asarco: the Steelworkers, the International Brotherhood of Electrical Workers and the International Chemical Workers. The retirees’ suit says that the duration clauses weren’t meant to limit the retirement benefits of people who had already retired, “as such retirement benefits were meant to last during retirement independent of the expiration of agreements applicable to active employees.”

It added that the “alleged ‘severe financial distress’ has not prevented the Company from paying its top management quite handsomely.” And it said that ” ‘unforeseen circumstances’ do not justify a breach of contractual obligations … to persons living on fixed income who can ill-afford to pay the costs the company has shifted upon them.”

Since Asarco imposed the changes, Mr. Yarter’s share of premiums, deductibles and co-payments has grown to consume half of his $1,005 monthly pension. He says he is staying in the plan anyway, because his wife, Frances, has diabetes.
But Larry Bracamonte, 64, with a pension of $448 a month, is among Asarco retirees who have dropped the plan as a result of the increase. He works at a furniture store, and twice a month, he drives a van full of Arizona retirees five hours to Algodones, Mexico, to buy prescription drugs more cheaply than in the U.S. He says a neighbor can’t afford even the lower-cost Mexican drugs on her Asarco widow’s pension of $54 a month, so she gets drugs from a state program for low-income people.

Mr. Yarter says he’s in better shape than many Asarco retirees. “I did all the retirement planning you’re supposed to do,” he says. “I decided I could afford to retire.” After retiring, he studied computer programming and obtained an associate’s degree in systems administration.

Now he’s looking for work, so far without success. “If the company kept its promise, I’d be all right,” he says. “Nobody ever thought the company would try to renege on a contract like that.”

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Plaintiff Cry: When Retirees Sue an Ex-Employer

Sue an Ex-Employer
By Ellen E. Schultz
Staff Reporter of The Wall Street Journal
November 10, 2004; Page A12

When retirees of GenCorp Inc. were told the company was going to start charging them for health insurance, despite a labor contract they say promises coverage for life, John Van Dyke thought fighting back in court was the answer. “I was sure that once the judge saw the contract, it would be over,” the 76-year-old says. “How long could it take?”

So far, almost five years. What happened to the retirees shows the daunting challenges faced by the oldest Americans, union and salaried, if they go to court on their own to recover health benefits.

In January 2000, the former General Tire & Rubber began charging 2,063 hourly retirees health-care premiums. Mr. Van Dyke, a former millwright who once was active in the Rubber Workers union, quickly learned that it couldn’t help. In negotiating a contract in 1994, the union had agreed not to represent retirees in any future lawsuit.

On their own, the retirees faced their first challenge: finding a lawyer. Few lawyers take cases involving health benefits, because under the Employee Retirement Income Security Act, or Erisa, there are no punitive damages that contingency-fee attorneys can use to finance cases. All a plaintiff can win is restoration of the disputed benefit, and the judge may or may not let the plaintiff’s lawyer be reimbursed from that for the cost of preparing the case, thanks to a quirk in Erisa.

So Mr. Van Dyke passed the hat. He collected $12,000 from fellow retirees of a GenCorp plant in Jeanette, Pa. They chipped in $100 per couple, widows $50. While this would cover only a fraction of the cost of mounting a suit, he found lawyers who were willing to take the case. In August 2000, he met them at a diner in Pittsburgh, taking along a cardboard box full of union literature going back decades.

Told the suit needed named plaintiffs, he volunteered, along with fellow retirees Stanley Wotus and Ed Peksa. All three are World War II veterans who served in either Iwo Jima or Okinawa. (Veterans may qualify for some health care from Veteran’s hospitals, but there can be long waits for care and their spouses don’t qualify.)

In October 2000, they sued GenCorp in federal court in Akron, Ohio. The suit cited labor contracts promising lifetime coverage. But GenCorp, in court documents, responded that lifetime didn’t mean “at no cost.”

GenCorp also pointed to enrollment cards retirees filled out a decade ago. The cards asked the retirees either to pick a plan that had high deductibles and co-payments or continue in one that had no cost. They chose the no-cost option. But at the bottom of the form was fine print saying the signer acknowledged that “I am choosing the benefits selected on this form to replace any medical benefits available under any prior GenCorp retiree medical plan.” By signing the forms, GenCorp now argued, the retirees had released it from its obligation under the union contract.

In April 2001 came the first meeting with a judge. The retirees left early in the morning, first heading to a rendezvous with their lead lawyer. At the wheel was Mr. Van Dyke, who had the best eyesight. Still, at 5 a.m. in the dark on the Pennsylvania turnpike, he missed his turn, he recalls.

The retirees linked up with the lawyer, William Payne of Pittsburgh, who drove them the last 180 miles in his minivan, usually used to take his sons to hockey practice. Because of their various infirmities, they had to pull over several times. Mr. Van Dyke had part of his stomach removed following a bout of cancer in the 1990s. Mr. Wotus was taking several medications for blood pressure and heart problems. In the back seat, Mr. Van Dyke recalls, the diabetic Mr. Peksa had taken one insulin shot too many and was passing out. “I was worried about Ed. He’s got the sugar real bad,” Mr. Van Dyke says. They pulled over and gave Mr. Peksa some juice.

They finally made it to Akron in time for the 9 a.m. court session. There, the judge pressed the two parties to settle their differences. With nothing resolved, the retirees headed home.

GenCorp then said the plaintiffs should include retirees from other plant locations besides Jeanette, Pa. The judge agreed. So the retirees recruited more volunteers to serve as plaintiffs.

A year later, a larger group headed out, this time to a mediation meeting in Cleveland. Several retirees traveled from Kentucky and Ohio, booking senior-discount rooms at the Holiday Inn. Coming farthest was Kenneth Bottolfs, now 83. He made the three-flight trip from Waco, Texas, in eight hours. Mr. Bottolfs says the health-care premium for him and his wife is now $685 a month, more than erasing his GenCorp pension of $460. “A lot have dropped out because of the inability to pay” for the health coverage, he says. “My wife says they’re waiting for everyone to die.”

Fine Print

GenCorp argues it can change union retirees’ health benefits because of a line in enrollment forms they signed nearly a decade ago:
I have read the brochure which explains my retiree medical benefit options under the GenCorp plan, and I am electing to enroll in the coverages stated on this form.
I agree to pay any contributions, deductibles, and copayments required under the plan, and I authorize release of information on all claims submitted for payment.
I understand that I may change coverages only under limited circumstances. I acknowledge that I have choices available, and that I am choosing the benefits selected on this form to replace any medical benefits available under any prior GenCorp retiree medical plans.
The Cleveland meeting was to see whether the retirees and the company could resolve their dispute. It failed. The retirees began their long trips home. Eight months later, the retirees went to another mediation meeting, minus Mr. Wotus, who’d had a stroke. It failed too. The judge said the case should move to trial.
The retirees traveled to Cleveland on May 14, 2003, for depositions by GenCorp. The sessions took several hours each. The retirees whiled away their waits playing cards and trading war stories, says Mr. Van Dyke.

The following August, their lawyers filed to have the suit certified as a class action. Without this, even if the named plaintiffs won, no others would get their benefits restored.

Although GenCorp had insisted the plaintiff group be expanded to include people from around the country, and this was done, GenCorp opposed its certification as a class. It said the men didn’t qualify as representatives of the whole group of retirees. The reasons: Depositions showed some had forgotten what they were thinking when they signed enrollment forms. One didn’t remember what was in GenCorp’s slide presentation explaining the benefit options eight years earlier.
What’s more, the retirees had mixed their paper work when they pooled their brochures in a cardboard box while searching for a lawyer. That constituted “spoliation,” or destroying evidence, GenCorp said, adding it would “seek appropriate remedies at a later date.” Remedies in these situations can include charging retirees for a company’s legal fees.

Finally, GenCorp said the retirees should be denied class status because they were too dispersed, and because the named plaintiffs were too sick to adequately represent everybody.

Indeed, after GenCorp filed its brief, one plaintiff, Robert Berger, 69, died in October 2003. Plaintiff Frank Polumbo, who joined the company at 16, and as a youth took part in a 1934 strike that gave birth to the Rubber Workers union, died in November. He was 89. “He was a fighter, says his widow, Mary Elizabeth, 88, who volunteered to take his place.

In December 2003, Judge Dan Polster agreed with GenCorp and denied retirees’ request to be certified as a class. “I just couldn’t believe it,” Mr. Van Dyke says.
The retirees, fearing they’d all be dead by the time the case was resolved, and worried about a statute of limitations that the company said was running out, signed up an additional 294 plaintiffs and filed another suit in July 2004. In August, the judge dismissed that case. Now the 294 retirees, most in their 80s, must file individual suits by the end of January 2005, and each pay a $150 filing fee.

The original suit continues. In its latest quarterly filing, GenCorp said it didn’t expect a trial until after next summer. Its filings also show that over five years, GenCorp’s liabilities for retiree health care have declined 16%. The company declined to comment, citing ongoing litigation.

Mr. Van Dyke got out of the hospital last February after treatment for colon cancer. He had been caring for his wife of 58 years, June, who earlier this year had a stroke and a heart attack, but in September she died.

“A lot of people want to drop out” of the suits to restore company-paid health care, he says, “but I keep telling them to hang on.”

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Our 'Kindness Deficit' of Care

Newsweek, November 8 
Jane Bryant Quinn
 
Our ‘Kindness Deficit’ of Care

After the third presidential debate, the plight of those without health insurance vanished from political sight. No surprise there. Lack of medical care represents a moral lapse that voters love to tut-tut about but aren’t moved to fix. Fixing it might cost money, at which point the moralists usually change the subject to the weather. Besides, the uninsured tend to be powerless people whom America’s comfortable middle can ignore.
 
A cynical judgment? Sure, but true. If we cared, public policy would have changed long ago. When the elderly scream about the cost of prescription drugs, ears prick up. But 80 percent of the 45 million uninsured are what Princeton health-care analyst Uwe Reinhardt calls “low-income, hardworking stiffs “waitresses, taxi drivers, clerks, nursing-home aides, gas-station attendants. They swing no weight among policymakers; no lobby represents them; their pockets aren’t deep enough to buy congressional attention. Working stiffs have to depend on the kindness of strangers and we’re running a kindness deficit.
What’s more, failing to cover 45 million people is, indisputably, a bargain.

The uninsured received $48 billion in free or government-paid care last year (less than they needed, but so what?). Insuring them could cost about $96 billion more. Ooooh, that would raise taxes, so we look away.But does it have to raise taxes? Imagine, for a blessed moment, that we ditched our costly, inefficient, bureaucratic, paper-pushing, interfering private health insurers in favor of a single government-run system for example, Medicare for everyone. The savings in administrative costs alone could reach $325 billion, says Dr. David Himmelstein of the Harvard Medical School. Taxpayers already cover 61 percent of American health-care spending (counting both subsidies and direct payments). If that money didn’t have to be funneled through private insurers, who take 20 percent or more off the top, we could have universal care at no increase in cost.

Any rant against our carelessness toward the uninsured requires statistics, so here they are: among all working people, 61 percent receive employer coverage, down from 65 percent in 2001 (Kaiser Family Foundation). One out of three people under 65that’s 85.2 millionwent uninsured at some point during 2002-03 (Families USA). The proportion of doctors giving charity care dropped to 71.5 percent in 2001, from 76.3 percent in 1997 (Center for Studying Health System Change). Among people 51 to 61, the uninsured are 63 percent more likely to suffer declining health, over a four-year period, than the insured (Center on an Aging Society). All of us “comfortables” stay insured only because we keep our jobs or can afford to pay private-insurance premiums, whose cost has been soaring at three times the rate of earnings over the past four years.

Nevertheless, Big Medicine holds enough power to beat down true reform. You
can still be spooked by phrases like “government-run health care,” even though that defines Medicare, which you want more of. You’re also hearing a fierce assault on Canada’s universal coverageclaims that patients get poor care, wait months for treatment and flee to the United States for surgery. In truth, only a fraction of 1 percent of Canadians seek care in the United States, says health expert Steven Lewis of Access Consulting in Saskatoon, Saskatchewan. Canada does have waiting lines of eight to 12 weeks for surgery not considered urgent, owing to ceilings on what the government will spend. Maybe more patients would come south if they could afford it. But for most, the wait seems a reasonable trade-off for coverage that’s broad, universal and secure. Anyway, the United States doesn’t have to go that route. We spend nearly twice what Canada does per person. If that same money were applied to a universal program here, no one would wait. Canada outscores the United States in such basic health measures as longevity and infant mortality (not to mention cheap drugs and flu shots). “If the purpose of a health-care system is to improve health,” Lewis says, “Canada wins hands down.”

All health systems have pluses and minuses; all ration health care in some way. We ration it, harshly, by income and price. People with money and access command topnotch care. Those without scramble for what they can get. Big businesses negotiate good group-health insurance. Small businesses are pushed against the wall. The healthy find private policies, the sick get kicked out. That’s the American Way.The next Congress may give a nod to the uninsured, says Karen Davis, head of the Commonwealth Fund, which studies health policy. Maybe tax credits for people who lose their jobs, to help them buy interim, COBRA coverage, or eliminating the two-year waiting period that keeps the disabled from Medicare.

But will we make a fundamental fix? Nah. Too many rich, corporate players have a stake in the status quo. Princeton’s Reinhardt distills our chosen policy this way: the suffering of a few million Americans, while regrettable, is a price well worth paying for fine coverage for the rest of us. What’s really regrettable is that that sounds, to most Americans, OK.

Our ‘Kindness Deficit’ of Care

Newsweek, November 8 
Jane Bryant Quinn
 
Our ‘Kindness Deficit’ of Care

After the third presidential debate, the plight of those without health insurance vanished from political sight. No surprise there. Lack of medical care represents a moral lapse that voters love to tut-tut about but aren’t moved to fix. Fixing it might cost money, at which point the moralists usually change the subject to the weather. Besides, the uninsured tend to be powerless people whom America’s comfortable middle can ignore.
 
A cynical judgment? Sure, but true. If we cared, public policy would have changed long ago. When the elderly scream about the cost of prescription drugs, ears prick up. But 80 percent of the 45 million uninsured are what Princeton health-care analyst Uwe Reinhardt calls “low-income, hardworking stiffs “waitresses, taxi drivers, clerks, nursing-home aides, gas-station attendants. They swing no weight among policymakers; no lobby represents them; their pockets aren’t deep enough to buy congressional attention. Working stiffs have to depend on the kindness of strangers and we’re running a kindness deficit.
What’s more, failing to cover 45 million people is, indisputably, a bargain.

The uninsured received $48 billion in free or government-paid care last year (less than they needed, but so what?). Insuring them could cost about $96 billion more. Ooooh, that would raise taxes, so we look away.But does it have to raise taxes? Imagine, for a blessed moment, that we ditched our costly, inefficient, bureaucratic, paper-pushing, interfering private health insurers in favor of a single government-run system for example, Medicare for everyone. The savings in administrative costs alone could reach $325 billion, says Dr. David Himmelstein of the Harvard Medical School. Taxpayers already cover 61 percent of American health-care spending (counting both subsidies and direct payments). If that money didn’t have to be funneled through private insurers, who take 20 percent or more off the top, we could have universal care at no increase in cost.

Any rant against our carelessness toward the uninsured requires statistics, so here they are: among all working people, 61 percent receive employer coverage, down from 65 percent in 2001 (Kaiser Family Foundation). One out of three people under 65that’s 85.2 millionwent uninsured at some point during 2002-03 (Families USA). The proportion of doctors giving charity care dropped to 71.5 percent in 2001, from 76.3 percent in 1997 (Center for Studying Health System Change). Among people 51 to 61, the uninsured are 63 percent more likely to suffer declining health, over a four-year period, than the insured (Center on an Aging Society). All of us “comfortables” stay insured only because we keep our jobs or can afford to pay private-insurance premiums, whose cost has been soaring at three times the rate of earnings over the past four years.

Nevertheless, Big Medicine holds enough power to beat down true reform. You
can still be spooked by phrases like “government-run health care,” even though that defines Medicare, which you want more of. You’re also hearing a fierce assault on Canada’s universal coverageclaims that patients get poor care, wait months for treatment and flee to the United States for surgery. In truth, only a fraction of 1 percent of Canadians seek care in the United States, says health expert Steven Lewis of Access Consulting in Saskatoon, Saskatchewan. Canada does have waiting lines of eight to 12 weeks for surgery not considered urgent, owing to ceilings on what the government will spend. Maybe more patients would come south if they could afford it. But for most, the wait seems a reasonable trade-off for coverage that’s broad, universal and secure. Anyway, the United States doesn’t have to go that route. We spend nearly twice what Canada does per person. If that same money were applied to a universal program here, no one would wait. Canada outscores the United States in such basic health measures as longevity and infant mortality (not to mention cheap drugs and flu shots). “If the purpose of a health-care system is to improve health,” Lewis says, “Canada wins hands down.”

All health systems have pluses and minuses; all ration health care in some way. We ration it, harshly, by income and price. People with money and access command topnotch care. Those without scramble for what they can get. Big businesses negotiate good group-health insurance. Small businesses are pushed against the wall. The healthy find private policies, the sick get kicked out. That’s the American Way.The next Congress may give a nod to the uninsured, says Karen Davis, head of the Commonwealth Fund, which studies health policy. Maybe tax credits for people who lose their jobs, to help them buy interim, COBRA coverage, or eliminating the two-year waiting period that keeps the disabled from Medicare.

But will we make a fundamental fix? Nah. Too many rich, corporate players have a stake in the status quo. Princeton’s Reinhardt distills our chosen policy this way: the suffering of a few million Americans, while regrettable, is a price well worth paying for fine coverage for the rest of us. What’s really regrettable is that that sounds, to most Americans, OK.

A crisis too loud to ignore

A crisis too loud to ignore
Nov 5, 2004
By: Robert Lowes
Medical Economics

I began writing this in a hotel bathroom in San Francisco. Only there could I escape the racket of a picket line 20 floors below and hear myself think: Maybe doctors shouldn’t view national health insurance as a dirty idea.

The pickets were bellhops, waiters, room cleaners, and the like. Their union had struck four hotels; 10 other hotels had locked out their union employees in response.

I had a window on this war from my room at the Renaissance Parc 55. Its workers weren’t striking, but I could see picketers across the street at the Hilton. Some carried signs reading “Healthcare is a Right” while others drummed buckets, blew whistles, and chanted from 7 a.m. to 10 p.m., the limits set for noise-making. A renegade drummer woke me up at 2 a.m. Earplugs courtesy of the hotel were useless.

The din was unnerving but understandable. A proposed contract would increase a worker’s health in-surance premium from $10 a month, an unbelievably low amount, to $273.42 a month in five years, an unbelievably high amount. That’s more than my premium, and I make more than they do.

I asked Violeta Sarmiento, a 58-year-old housekeeping supervisor, whether she could afford $273.42 a month in premiums.

“Oh, my God, no,” said Sarmiento. “It’s too much; we can hardly pay our mortgage now.”

But shouldn’t employees assume a bigger share of the healthcare tab?

“No, no, no,” she said. “We’re not going to give Hilton anything from our pocket. They earn billions.”

Sarmiento has a point. Like other businesses, Hilton faces skyrocketing healthcare costs, but it earned $112 million in the first half of 2004.

Nationwide, millions of laid-off workers have lost insurance coverage. Millions more who’ve kept their jobs find it costlier. You, of course, encounter this crisis every day. If you’re like the doctors I know, you respond quietly but heroically by treating that hard-pressed, uninsured patient and tearing up the bill.

But this generosity applies the proverbial Band-Aid to a systemic problem. So what’s the systemic solution? “We don’t have national health insurance,” said Tim Miller, a waiter turned picket captain. “Shame on America.”

Maybe national health insurance strikes you as socialized medicine. But our society must replace the current system with something that’s fairer and more compassionate. I was heartened by the report of a surgeon who grabbed a sign and joined the hotel strikers. If anybody has the moral authority to provide leadership on this issue, it’s the healing profession.

The presidential election is over, but the crisis remains. Whatever we do, we can’t succumb to the temptation to stick in earplugs. Otherwise, the drumming will only get louder.

The Defeat of California's Employer Mandate

Other changes in health care may be sought
By Barbara Feder Ostrov
The Mercury News – Nov. 4, 2004

These comments are in response to the relatively narrow defeat of Proposition 72, California’s play or pay employer mandate.

Any “son of Proposition 72” proposals would need to incorporate cost controls and ease the financial burden on smaller businesses, said Rick Brown, who heads the University of California-Los Angeles Center for Health Policy Research.

“Everybody knows that the one option we don’t have is the status quo,” said Anthony Wright, executive director of the advocacy group Health Access. “The health care system is unraveling. People see it every time an employer scales back and drops coverage, every time an emergency room closes.”

http://www.mercurynews.com/mld/mercurynews/living/health/10096491.htm

Comment: The majority of voters are healthy and they have insurance coverage. They are concerned about health care costs, but they are even more concerned about disruption of their current perceived health security. Our message to them will have to be crafted to show them that we can provide significantly greater financial and health security. Let’s work on it.

The Defeat of California’s Employer Mandate

Other changes in health care may be sought
By Barbara Feder Ostrov
The Mercury News – Nov. 4, 2004

These comments are in response to the relatively narrow defeat of Proposition 72, California’s play or pay employer mandate.

Any “son of Proposition 72” proposals would need to incorporate cost controls and ease the financial burden on smaller businesses, said Rick Brown, who heads the University of California-Los Angeles Center for Health Policy Research.

“Everybody knows that the one option we don’t have is the status quo,” said Anthony Wright, executive director of the advocacy group Health Access. “The health care system is unraveling. People see it every time an employer scales back and drops coverage, every time an emergency room closes.”

http://www.mercurynews.com/mld/mercurynews/living/health/10096491.htm

Comment: The majority of voters are healthy and they have insurance coverage. They are concerned about health care costs, but they are even more concerned about disruption of their current perceived health security. Our message to them will have to be crafted to show them that we can provide significantly greater financial and health security. Let’s work on it.

Vote!

MSN Money
(Accessed 11/2/04)
Bush, Kerry and the great health-care divide
By Philipp Harper

They receive about half as much medical care as the rest of us, and as a result get sicker faster and die younger.

They’re the 44 million Americans who this year will live their lives without the benefit of a health insurance safety net. How they’re regarded by their fellow citizens could be one of the key turning points of the upcoming presidential election.

The question is simple: Do they represent a vexing cost or an unprecedented investment opportunity?

The candidates have voiced their opinions and they couldn’t be in sharper contrast.

At its most basic, the debate over health care is about how large a role the federal government should have in our economic lives. As such, it crystallizes like few other issues the philosophical divergence between Republicans and Democrats.

The fact that a new revenue source would have to be found to pay for the out years of the Kerry health plan has Republicans screaming “tax and spend.” What that label ignores, however, is that federal spending to promote a healthy population may constitute an investment rather than an expense.

Some voters will view that spending as an investment leading to a fine return, others as a confiscatory tax. Which viewpoint holds sway could well determine who occupies the White House for the next four years.

http://moneycentral.msn.com/content/Insurance/Insureyourhealth/P95373.asp
Comment: If you have not done so already, go out and vote. Now!

FDA Memo Indicates Vioxx Might Have Contributed to About 27K Heart Attacks, Death

Wednesday, November 03, 2004
Coverage & Access
FDA Memo Indicates Vioxx Might Have Contributed to About 27K Heart Attacks, Deaths

Arthritis medication Vioxx, which maker Merck voluntarily withdrew from the market in September, might have contributed to an estimated 27,785 heart attacks and sudden cardiac deaths between 1999 and 2003, according to an FDA memo published online Tuesday, the Bloomberg/Baltimore Sun reports. David Graham, associate director for science in FDA’s office of drug safety and author of the memo, made the estimate based on 92.8 million U.S. prescriptions for Vioxx between 1999 and 2003. According to the memo, 27,785 more patients taking Vioxx may have had heart attacks, some causing death, than those taking Celebrex (Bloomberg/Baltimore Sun, 11/3).

Part of Earlier Study
The memo is part of a study Graham conducted with Kaiser Permanente (Bloomberg/New York Times, 11/3). For that research, Graham and colleagues examined records for 1.39 million members of Kaiser Permanente, including 26,748 who took Vioxx and 40,405 who were on Pfizer’s COX-2 inhibitor Celebrex. The study found that high doses of Vioxx, or rofecoxib, tripled risks of heart attacks and sudden cardiac death. Graham planned to present the findings at an epidemiology conference Aug. 25, but his supervisors said the results were “too preliminary” and recommended that the study be submitted first to a medical journal so it could undergo peer review or be presented at the conference with an alternative FDA opinion. When the study was presented Aug. 25, the abstract said, “[T]his and other studies cast serious doubt on the safety of rofecoxib … and its use by physicians and patients” at doses exceeding 25 milligrams. “When Graham submitted a revised, final version to FDA on Sept. 30, FDA’s announcement of the study’s release did not mention specific data on cardiovascular risks (Kaiser Daily Health Policy Report, 10/8).

Internal Documents
Prior to Merck’s withdrawal of Vioxx, about 20 million U.S. residents had taken the medication. The Wall Street Journal on Monday reported that internal e-mails, marketing documents and interviews with outside scientists who questioned the safety of Vioxx indicated that Merck was aware of safety concerns related to the medication and sought to hide them to protect sales. The internal documents are among those presented as evidence in lawsuits filed against Merck since 2001 on behalf of former Vioxx users who allegedly experienced heart attacks or strokes as a result of the medication (Kaiser Daily Health Policy Report, 11/1). Merck’s shares declined 5.2%, or $1.48, to $26.80 on Tuesday, following a 9.7% loss Monday when the internal documents were revealed (Talley, Wall Street Journal, 11/3). Merck’s shares have declined 42% this year.

Reaction
Merck spokesperson Chris Loder said, “In general, there is no reliable way to measure the actual use of Vioxx in the population, and therefore no reliable way to estimate the actual events. Because heart attacks and strokes occur in the general population, one cannot say that if someone had an event while taking Vioxx, that Vioxx caused it.” Analyst Ira Loss of Washington Analysis said, “We are in a situation where there seems to be no end to negative reaction for Merck, even if the news has been previously reported” (Bloomberg/Baltimore Sun, 11/3). The FDA memo is available online. Note: You must have Adobe Acrobat Reader to view the report.

Susan Dentzer's Innovative Proposal for Reform

It’s the Taj Mahal of Health Insurance Schemes
By Susan Dentzer (health correspondent for “The NewsHour With Jim Lehrer” on PBS)
The Washington Post – October 31, 2004

Following are excerpts from Susan Dentzer’s response to a Washington Post news story of an uninsured carpenter from Durham, N.C. who outsourced his own heart surgery to India, at a cost of $10,000, including transportation. He could not afford the $200,000 his surgery would have cost in this country.

Good grief, why didn’t someone think of this earlier! Forty-five million americans lack health insurance, and covering every one of them would be costly. Why not outsource them all to India?

Opponents will immediately say this idea is impractical. I say, don’t be health coverage girlie men! First, not all the uninsured would have to travel to India to get health care. For example, when an uninsured person first got the sniffles, he or she could pick up the phone and talk with someone at a call center in, say, Bangalore. An Indian nurse making $10 a day would listen (sympathetically, of course) and offer advice.

For those uninsured in need of hands-on medical care, here’s an idea: What if some of those failing U.S. airlines converted to running medical air shuttle services between, say, New York and New Delhi, or Boston and Bombay? Uncle Sam could hire them as private contractors, then pay them to ferry the uninsured back and forth.

The more I think about this idea, the better I like it. Just imagine all the problems it would solve: No more overcrowded emergency rooms choked with uninsured patients. No more worries about a nursing shortage; by transferring our patients to India, we’d outsource nursing care there, too. Hospitals and doctors here would be freed up to do what makes most sense for them economically: treat well-insured patients at steep prices — even to the point of giving them care that they probably don’t need! Perform the most lucrative elective surgeries on relatively healthy patients, rather than giving high-cost care to the sickest loss leaders!

We all know the uninsured are a terrible problem, an embarrassment, really, for such a rich country as ours. Every other major industrialized nation has figured out how to provide health coverage to most, if not all, of its citizens. At last, here’s a twist on globalization that could really work for everybody. So let’s get started. Who says Americans can’t take care of their own?

http://www.washingtonpost.com/ac2/wp-dyn/A11196-2004Oct30?language=printer

Comment: Susan Dentzer’s proposal certainly should embarrass us all. The $1.8 trillion that we are already spending on health care is more than enough to provide high quality, comprehensive health care for absolutely everyone. Her facetious proposal stands in stark contrast to well understood and effective policy solutions that would provide us with an affordable health care utopia. When we already have the resources, we should be ashamed that we continue to allow them to be frittered away when there is so much unmet need.

Appropriate are comments from today’s USA Today editorial on the president’s challenge to unite the nation:

“Almost every expert agrees that the (health care) system is not sustainable, and 70% of voters polled Tuesday said they were ‘very concerned’ about the availability and cost of health care.”

“The first step toward a bipartisan approach is to agree on universal coverage as a goal and be honest about its cost.”

“Only with a common starting point is there any hope of fighting off the lies spread by the interests that profit from the weaknesses of the current system.”

http://www.usatoday.com/news/opinion/editorials/2004-11-03-our-view_x.htm

(Being honest about costs includes being completely honest about the advantages and disadvantages of government versus market mechanisms of controlling costs.)

Susan Dentzer’s Innovative Proposal for Reform

It’s the Taj Mahal of Health Insurance Schemes
By Susan Dentzer (health correspondent for “The NewsHour With Jim Lehrer” on PBS)
The Washington Post – October 31, 2004

Following are excerpts from Susan Dentzer’s response to a Washington Post news story of an uninsured carpenter from Durham, N.C. who outsourced his own heart surgery to India, at a cost of $10,000, including transportation. He could not afford the $200,000 his surgery would have cost in this country.

Good grief, why didn’t someone think of this earlier! Forty-five million americans lack health insurance, and covering every one of them would be costly. Why not outsource them all to India?

Opponents will immediately say this idea is impractical. I say, don’t be health coverage girlie men! First, not all the uninsured would have to travel to India to get health care. For example, when an uninsured person first got the sniffles, he or she could pick up the phone and talk with someone at a call center in, say, Bangalore. An Indian nurse making $10 a day would listen (sympathetically, of course) and offer advice.

For those uninsured in need of hands-on medical care, here’s an idea: What if some of those failing U.S. airlines converted to running medical air shuttle services between, say, New York and New Delhi, or Boston and Bombay? Uncle Sam could hire them as private contractors, then pay them to ferry the uninsured back and forth.

The more I think about this idea, the better I like it. Just imagine all the problems it would solve: No more overcrowded emergency rooms choked with uninsured patients. No more worries about a nursing shortage; by transferring our patients to India, we’d outsource nursing care there, too. Hospitals and doctors here would be freed up to do what makes most sense for them economically: treat well-insured patients at steep prices — even to the point of giving them care that they probably don’t need! Perform the most lucrative elective surgeries on relatively healthy patients, rather than giving high-cost care to the sickest loss leaders!

We all know the uninsured are a terrible problem, an embarrassment, really, for such a rich country as ours. Every other major industrialized nation has figured out how to provide health coverage to most, if not all, of its citizens. At last, here’s a twist on globalization that could really work for everybody. So let’s get started. Who says Americans can’t take care of their own?

http://www.washingtonpost.com/ac2/wp-dyn/A11196-2004Oct30?language=printer

Comment: Susan Dentzer’s proposal certainly should embarrass us all. The $1.8 trillion that we are already spending on health care is more than enough to provide high quality, comprehensive health care for absolutely everyone. Her facetious proposal stands in stark contrast to well understood and effective policy solutions that would provide us with an affordable health care utopia. When we already have the resources, we should be ashamed that we continue to allow them to be frittered away when there is so much unmet need.

Appropriate are comments from today’s USA Today editorial on the president’s challenge to unite the nation:

“Almost every expert agrees that the (health care) system is not sustainable, and 70% of voters polled Tuesday said they were ‘very concerned’ about the availability and cost of health care.”

“The first step toward a bipartisan approach is to agree on universal coverage as a goal and be honest about its cost.”

“Only with a common starting point is there any hope of fighting off the lies spread by the interests that profit from the weaknesses of the current system.”

http://www.usatoday.com/news/opinion/editorials/2004-11-03-our-view_x.htm

(Being honest about costs includes being completely honest about the advantages and disadvantages of government versus market mechanisms of controlling costs.)

Public Opinion of Consumer-Driven Plans

What’s Important In A Health Plan?
Kaiser Family Foundation
Health Poll Report – September/October 2004

Which one of the following do you think is the MOST important reason to have health insurance?

71% – To protect against high medical bills
25% – To pay for everyday health care expenses
03% – Don’t know

Catastrophic Coverage: Opinions

Suppose you heard about a type of insurance plan that only starts paying once you (and your family) have paid ($2,000/$5,000) of medical expenses out of your pocket. After that, it would cover medical expenses like traditional insurance, requiring you to pay some co-payments each time you use services. The monthly premium for the plan would be less than half of what you would pay for a typical comprehensive health insurance policy.

Would you have a favorable or unfavorable opinion about this type of health plan?

56% – Very unfavorable
21% – Somewhat unfavorable
13% – Somewhat favorable
05% – Very favorable

Would you feel well protected, or would you feel vulnerable to high medical bills with this type of health plan?

79% – Vulnerable
16% – Well protected
05% – Don’t know

Consumer-Driven Plans: Opinions

(Asked of those with employer-sponsored health insurance) There is a new type of health plan that some employers are considering. It works like this: your employer pays for a health plan that only starts to pay after you have spent ($2,000/$4,000) in medical expenses. They also put ($1,000/$2,000) in an account you can use for medical costs. If your medical expenses are more than ($1,000/$2,000), you have to pay with your own money until you hit the ($2,000/$4,000) limit.

Would you have a favorable or unfavorable opinion about this type of health plan?

52% – Very unfavorable
21% – Somewhat unfavorable
16% – Somewhat favorable
06% – Very favorable
05% – Don’t know

Would you feel well protected, or would you feel vulnerable to high medical bills with this type of health plan?

78% – Vulnerable
18% – Well protected
05% – Don’t know

And by political party and ideology – unfavorable opinion of these consumer-driven plans:

67% of Republicans
74% of Independents
78% of Democrats

68% of Conservatives
70% of Moderates
79% of Liberals

http://www.kff.org/healthpollreport/Oct_2004/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=48477

Comment: The proponents of consumer-driven health coverage have been successful in persuading the public to parrot their rhetoric that health insurance should not be used to pay for everyday health care expenses, but that the purpose is to protect against high medical bills. So the public has bought the rhetoric, but do they really believe it?

Much more significant in this poll are the responses of the public when asked about proposals that would fund everyday expenses out-of-pocket or through personal accounts. It is very clear that the overwhelming majority correctly perceive that these proposals would leave them vulnerable to high medical bills.

Other polls have repeatedly confirmed that the number one health care concern for most Americans is affordability, whether that be for insurance or for actual health care.

It is fascinating to note that this issue is not partisan. Liberals and conservatives agree that we want affordable health care. The single payer model would accomplish this. Are we ready to sit down together to begin seriously addressing the real policy issues behind reform? Or are the conservatives going to stubbornly watch their own care become less and less affordable merely to avoid admitting that our government really can be an effective partner in health care?

The government already funds 60% of our health care (when tax incentives are included). Isn’t it time to demand accountability for our public health care investment? Isn’t accountability a goal of conservatives with which we all can agree?