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The Des Moines Register
5/10/2004
U.S. has the best? Think again
We’re tops in health-care costs, but not in quality
By Register Editorial Board

Most Americans know this country spends more money per person on health
care than any other country in the world. The United States spends twice as much as Australia, England and Canada. Yet Americans seem to think this spending is OK. After all, we have the best health care in the world, right? Don’t you get what you pay for?

No.

And no.

In fact, Americans are not getting what they pay for when it comes to health care because a poorly constructed system yields poor results.

Consider three studies that made the news last week.

The Robert Wood Johnson Foundation reminded everyone what a mess the U.S.
system of health care is when its study concluded about 20 million U.S. workers are uninsured. In a few states, one in five working adults doesn’t have coverage. The United States has a system that irrationally ties health care to employment, making a job the source of coverage for millions of Americans. But apparently even having a job doesn’t guarantee health insurance.

A study published in Health Affairs, a policy journal, looked at five countries and found the quality of care in the United States is no better, even though this country spends far more money. A fragmented system was given as one of the reasons for the higher costs, and the study found the United States had the worst five-year survival rates after kidney transplants of the nations examined.

Then there was the especially troubling study conducted by Rand Corp. This took the most comprehensive look yet at the quality of health care in this country. What did researchers find? Patients get about half the care recommended for conditions from heart disease to diabetes, regardless of where in the United States they live.

Imagine that. This country spends more than $1 trillion a year on health care, and patients are only getting half the care they need. Americans ought to feel like a shopper who pays too much for a product that turns out to be a lemon. But the U.S. system isn’t just a waste money; it costs people their lives.

How does the United States fix the system?

It doesn’t need to spend more. It needs to spend wisely. Health-care dollars
in this country are gobbled up by red tape. Money that could be spent directly on helping people is eaten up in the administrative costs and high profit margins of a fragmented and gap-riddled system.

The best system in the world, huh?

http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20040510/OPINION03/405100303/1035/OPINION

Health Affairs: How Does The Quality Of Care Compare In Five Countries?:
http://content.healthaffairs.org/cgi/content/abstract/23/3/89

Rand Corporation: The First National Report Card on Quality of Health Care in America:
http://www.rand.org/publications/RB/RB9053/

Health Affairs: Medicare Spending, The Physician Workforce, And Beneficiaries’ Quality Of Care (An alarming report that finds that “states with higher Medicare spending have lower-quality care.”):z
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.184v1

Comment: Read them and weep. Then get to work on fixing our system! Now!

Health Care Policy Roundtable
Press Release
May 10, 2004
Four Million Uninsured Workers to be Given Access to Affordable Health Care
by Coalition of Fortune 500 Companies

More than 50 Fortune 500 companies have joined forces to give an estimated
four million uninsured working Americans access to affordable health insurance coverage.

Specifically, members of the Affordable Health Care Solutions Coalition have
agreed to pool their affiliated uninsured workers and dependents to create a
single group currently estimated at four million people nationwide. They include:

* part-time employees;
* contract and temporary workers;
* independent agents, consultants, and vendors;
* pre-65 retirees who do not have group options;
* employees currently in a waiting period;
* COBRA participants who have exhausted their 18-month coverage; and
* students who are no longer eligible under their parents’ health care
plan.

The coalition will then seek bids from health plans, ultimately selecting one that will offer health insurance coverage at a lower cost than what is currently available in the individual insurance market and with fewer barriers to entry.

“We are aiming to work with one health plan to create a series of coverage
choices at different prices that can be tailored to fit a wide range of budgets, from low-income part-time workers to highly compensated full-time
independent contractors not covered by a company plan,” explained Greg A.
Lee, senior vice president, human resources, for Sears, Roebuck & Company
and chairman of the Affordable Health Care Solutions Coalition.

http://www.hcpr.org/press/2004/pr_051004.asp

Executive Summary of the Leadership Action Plan on the Uninsured:
http://www.hcpr.org/docs/2004/Executive_Summary.pdf

Comment: The Health Care Policy Roundtable, representing many of the nation’s largest corporations, has acknowledged that the nation is facing a crisis in health care costs and coverage. The members recognize that this unstable situation will result in change, and they have decided to take a leadership role in crafting change that presumably would have the least negative impact on their corporations. Without intervention, surely the government would take over.

The current proposal purports to be a solution to obtaining coverage for sectors of our population who face affordability and underwriting barriers to coverage. They propose creating a single group to provide access to the better coverage and lower costs of group plans.

There are a couple of major problems with their proposal. The insurance coverage will have to be paid by the individuals themselves or perhaps by former employers or small business owners. Adverse selection will likely reduce or eliminate any negotiating advantage in premium pricing, and the insurance products will still be unaffordable for the overwhelming majority of these individuals, even without adverse selection.

Recognizing this affordability issue, they propose creating “a series of coverage choices at different prices that can be tailored to fit a wide range of budgets.” An affordable premium is not of much value if the insurance product purchased is so devoid of benefits that it does not provide financial security for those who have or may develop significant health care needs.

A proposal for unaffordable premiums and inadequate benefits is yet another
non-starter. We will not have health care reform until we accept the fundamental principle that risk must be distributed equitably through a common pool, and that pool must be funded in an equitable manner.

If the Health Care Policy Roundtable wants to serve as a moral voice in leading the nation to health care reform, then they’d better go back to their table and draw up plans for a universal, comprehensive, equitably funded system. In fact, they don’t even have to do the work. We’ll hand them the proposal.

HSAs encourage tax evasion

The Journal Gazette
Sep. 5, 2004
New health accounts allow more individual control
By Sherry Slater

Another advantage of HSAs is the ease of paying those expenses. But that ease could tempt participants to skirt the rules. HSA participants can get checks or a debit card tied to the account and use them for co-pays to doctors’ offices or drugstores. The payment methods aren’t labeled as tied to HSAs, however, and clerks aren’t expected to make decisions about which items can legally be purchased with HSA money. The participant should collect all receipts in case of an audit, said (actuary David) Peppler.

“If they never audit you, you can get away with it,” he said. “I’m sure it must be a troubling thing for the Treasury Department because people can cheat on these and (the government will) get less tax revenue.”

http://www.fortwayne.com/mld/journalgazette/business/9589353.htm

Comment: Regardless of whether HSAs (health savings accounts) function as
personal accounts to pay medical bills, or function as retirement accounts for those who have minimal health care needs, these accounts will be highly visible to and under the control of the individual account owner. Is that a problem?

HSAs are very similar to IRAs (individual retirement accounts) with the added advantage that HSAs can be used for health care costs. IRAs are established by individuals who wish to provide a more secure retirement for themselves and who have enough disposable income to fund them. When funds are removed from either type of account for other than their intended purposes, taxes plus penalties are assessed. But a major difference between the two is that withdrawals from IRAs are automatically reported to the IRS, whereas withdrawals from HSAs are not.

Many individuals with IRAs do find reasons to withdraw their funds and pay the taxes and penalties. Such reasons may include business or investment opportunities for which funds may not otherwise be available. Or they may be
withdrawn because of financial difficulties such as an unexpected interval of unemployment or significant financial losses in other personal ventures. Regardless, merely because the funds are there, they will frequently be withdrawn in spite of the tax and penalty consequences.

Now consider the HSAs. Owners of these accounts have in their position a checkbook or debit card that will allow access to their funds with no individual reports generated as to their use. Since it is unlikely that the IRS will demand full accounting of every single HSA expenditure, there is a significant probability that these tax-favored funds can be spent without any oversight as to where they are directed.

In this age in which credit card addiction has caused financial ruin for tens of millions of families, what will be the attitude towards these HSAs? The money is just sitting there not being used. And it’s not really borrowing because it doesn’t have to be paid back. And in the unlikely event that you are caught, the penalty will be that you will be asked merely to pay the taxes you owed anyway with perhaps an additional penalty for late payment. Under these circumstances, many individuals believe that it would be foolish to report distributions that are not used for health care services.

Policies which provide an open and unambiguous invitation for you to violate
the law are bad policies. As HSAs are invaded by their owners, there will be
rampant tax evasion. Failure to pay taxes is a crime against your fellow Americans who are then footing your share of the national tax bill. To provide temptation without risk of significant punishment encourages this crime against your fellow citizens. This, in turn, diminishes your respect for yourself and for our national institutions.

Undoubtedly some would consider this to be nit-picking. But providing temptation with a low risk of being caught is a real issue. Form 1099-INT was established because too many Americans did not report their interest income. Would we need to set up a Form 1099-HSA to report every distribution from HSA accounts? Wouldn’t it be a far better policy to never expose individuals to temptation in the first place?

There are innumerable reasons to eliminate HSAs; this is only one more. Legislation abolishing HSAs can authorize the conversion of existing HSAs
into IRAs. Then we can get on with more noble task of establishing policies that would ensure that everyone has affordable access to comprehensive health care. Then we would have a real basis for respecting ourselves and our national institutions.

Chicago Tribune
May 8, 2004
Voice of the People
Medicine prices
By Ida Hellander, MD, Executive director; Quentin Young, MD, National
coordinator; Physicians for a National Health Program

Chicago — This is regarding “The high price of drugs” (Editorial, May 2). It’s true that reimportation of drugs from Canada is “no long-term solution,” but it’s equally shortsighted to keep Medicare from negotiating drug prices with the pharmaceutical giants.

In fact, that’s the only long-term solution to ensuring that all Americans receive both lifesaving medications and value for their tax dollars. We don’t need to import drugs from Canada; we need to import Canadian drug prices. There is no reason to expose us to the costs and risks of physically exporting and then reimporting drugs when our sole intent is to bring our drug prices closer to those of Canada.

We need to negotiate with pharmaceutical firms, demanding that they provide much greater value for their products. Much of their research is wasted on products that are designed to restart the patent clock.

And then they waste funds on intensive marketing to convince physicians and the public that these more expensive products should be purchased when they are often no better than existing, but less profitable, generic products.

Medicare currently negotiates rates for physicians, hospitals, laboratories and other health-care providers. The process may not be perfect and needs continual fine-tuning, but the results are that we receive greater value for our Medicare investment. There is absolutely no reason that the pharmaceutical industry should be exempted from this process.

The claim that negotiated prices would bring an end to innovation and research is totally without merit. There is absolutely no way that the global pharmaceutical industry is going to walk away from its share of the $1.8 trillion that we are currently spending on health care. The growth in medical technology continues unabated even though profits on their products are limited by rate setting of both government and private insurance programs.

Pharmacy benefit managers are no substitute for Medicare using its purchasing power on behalf of seniors. PBMs don’t drive the best bargains for consumers; they switch patients’ medications to boost profits–their own. Some PBMs are under investigation for taking tens of millions of dollars in “rebates” from pharmaceutical companies in exchange for increasing sales of “preferred” brands (regardless of their cost). Do they pass on the savings? Do pigs fly?

Americans are already spending more than enough to provide comprehensive health care for everyone, including full access to beneficial drugs. But we need to eliminate the waste in our system. If we had a single, universal insurance system, such as Medicare for All, we would be in a position to sit down with the pharmaceutical firms and demand that they provide us with real value for our health-care investment.

http://www.chicagotribune.com/news/opinion/letters/chi-0405080062may08,1,1798244.story?coll=chi-newsopinionvoice-hed

The Fraser Institute
May 2004
How Good is Canadian Health Care? 2004 Report
By Nadeem Esmail and Michael Walker with Sabrina Yeudall

Conclusion

This study has attempted to provide answers to a series of questions that are important to resolve if Canada is to make the correct choices as it amends its health care policies. The study is strictly comparative and examines a wide number of factors for the member countries of the OECD in arriving at the answers to the questions posed.

Taking this empirical approach to health care provides clear direction for health care reform in Canada.

* Canada and Iceland have the most expensive health care systems amongst the
industrialized nations that have comprehensive, universal access to health
care.

* Canada ranks first in only one of seven health care outcome categories and does not rank first in any of access to care, supply of technologies, or supply of physicians.

* No country in the industrialized world other than Canada outlaws a parallel private health care system for their citizens.

* All four countries that out-perform Canada on the cumulative rank for mortality amenable to health care, potential years of life lost, mortality from breast cancer, and mortality from colorectal cancer have private health care alternatives to the public system and some form of user fees at the point of access; none spends more than Canada after age adjustment.

The comparative evidence is that the Canadian health care model is inferior to others in place in the OECD. It produces inferior access to physicians and technology, produces longer waiting times, is less successful in preventing death from preventable causes, and costs more than any of the other systems that have comparable objectives. The models that produce superior results and cost less than Canada’s monopolistic, single-insurer, single-provider system have user fees; alternative, comprehensive, private insurance; and private hospitals. Canada should follow the example of these superior health care models.

http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=658

Comment: This new report from The Fraser Institute is important because it will be distributed widely and used intensively by the opponents of both national health insurance in the United states and of the Canadian medicare system. It is important to understand the report and to be able to respond to it.

At the outset, the report attempts to set an erudite tone by providing a series of calculations, complete with Greek letter symbols, indicating that an adjustment of Canada’s health expenditures based on the age of their population results in the conclusion that Canada (tied with Iceland) has the most expensive health care system amongst the industrialized (OECD) nations that have universal access to health care. For purposes of this conclusion, the United States was conveniently excluded on the basis that it does not have a universal system.

A careful examination of the seemingly complex but very simple calculations
demonstrates that Canada’s costs were adjusted upwards because they would
have spent more if more Canadians were over age 65. This ignores the fact
that this increased spending is fictional and does not warrant their conclusion that Canada is the “highest spender.”

Another flaw is that they made the assumption that everyone over 65 suddenly requires a more intensive level of services. It is really only at the end of life when there is an abrupt increase in costs for a significant number of patients. And Canadians, being egalitarian, have accepted that each person is entitled to one but only one end to his or her life. It doesn’t matter at what age that occurs. There is no reason to falsify the level of spending based on such specious logic.

That should be adequate to completely destroy the credibility of this report. But then the report does include some well established economic theory that seems to lend some credibility to the report, even though the extrapolations by the authors are not warranted. But there are other major problems with this report.

The authors draw the conclusion that the “Canadian health care model is inferior to others in place in the OECD.” To reach this conclusion, citing numerous previously published reports, they compared Canada’s performance to other OECD nations with comprehensive, universal health systems. They used Canada’s ranking in these studies. Since these are all industrialized nations with comprehensive systems, an average rank should be evidence of success of the system. In most of the lists, Canada was in the upper half.

In fact, the cumulative rank was fifth, relatively high on the list of OECD nations. The conclusion that the Canadian model is inferior is refuted by the evidence included in their report.

The most outrageous conclusion of their report is that Canada should introduce user fees, private hospitals, and alternative, comprehensive, private insurance since these are features of superior systems. Not only is their data inadequate to establish the fact that other nations have superior systems, but they also failed to provide any cause and effect relationship between quality systems and privatization and cost sharing. The failure to provide any credible support to their conclusion unfortunately reduces their paper to the equivalent of gobbledygook.

USA TODAY, Editorial/Opinion
5/4/2004
Follow Canada’s example
By Quentin Young

Forget about importing Canadian drugs. We need to import Canadian drug prices.

How does Canada and most other developed nations get 40% to 80% discounts on brand-name drug prices? The same way the Department of Veterans Affairs does: It uses its purchasing power to negotiate lower prices. This is a healthy use of market forces to secure the best deal.

Each of these nations has universal health coverage. In contrast, Americans are saddled with a screwy for-profit insurance system and suffer the world’s highest out-of-pocket health costs, and drug purchases top the list.

High drug prices have serious consequences for the sick. Prescriptions go unfilled. Patients cut pills in half to make them “last longer.” The undertreatment of diabetes and hypertension leads to amputations, strokes, heart failure and other devastating complications. The hundreds of dollars a month needed to treat chronic conditions are big factors in personal bankruptcy.

In addition to harming many patients, high drug costs batter businesses, which bear much of the cost of workers’ medications. There is increasing disgust by business leaders with drug firms’ exorbitant profits, which are four-fold higher than those of every other sector of the economy. Overpriced drugs raise costs for U.S. industry, compromising our international competitiveness.

The drug industry is dominated by a handful of giant global corporations that spend more on marketing than research and, year after year, make at least as much in profits. The claim that they need high prices to cover high research costs is bogus. The government has guaranteed their profits by extending their 20-year patents and protecting them from real competition.

Medicare negotiates prices with physicians, hospitals, laboratories and other health care providers. The drug companies, however, are exempted from this process in the new Medicare drug bill, ensuring that drug prices will continue to skyrocket.

The U.S. health system is in disarray. The economic mess, epitomized by the drug-cost crisis, makes a convincing case for a single-payer national health insurance system. Such reform would make prescribed drugs an ensured benefit and drive down expenditures by allowing the government to bargain for the best prices and highest quality.

Quentin Young, M.D., is national coordinator of Physicians for a National Health Program (www.pnhp.org).

http://www.usatoday.com/news/opinion/editorials/2004-05-04-oppose_x.htm

Editorial opinion of USA TODAY (concluding remarks):

Two in three Americans favor lifting the ban on reimporting drugs, an Associated Press poll in February found. Still, taking advantage of foreign price controls amounts to putting a Band-Aid on a deep wound.

Letting the free market work is a better remedy for making prescription drugs more affordable for all Americans.

http://www.usatoday.com/news/opinion/editorials/2004-05-04-our-view_x.htm

For an article on the federal buying power of the VA (“America’s best discount drugstore is run by the federal government.”):

http://www.baltimoresun.com/business/bal-bz.vadrugs05may05,0,902614.story?coll=bal-business-headlines

Comment: The United States has much more of a “free market” in pharmaceuticals than any other nation, and everyone agrees that the market has been very ineffective in providing affordable access to drugs for tens of millions of patients with significant health care needs. You almost feel embarrassment for the editorial staff of USA TODAY when you read that they propose the really dumb solution of allowing the continuation of the market model that utilizes measures designed to excessively benefit the pharmaceutical industry while avoiding its responsibilities to a major segment of the nation’s patients.

In negotiations with a single-payer national health insurance program, pharmaceutical firms would be assured of fair profits and adequate funds for research. We need their industry, but we don’t need their excesses. Let’s set up our own public insurance program and then negotiate with them. They’ll get a fair deal, and we will too.

Health Affairs
May/June 2004
U.S. Health Care Spending In An International Context
Why is U.S. spending so high, and can we afford it?
By Uwe E. Reinhardt, Peter S. Hussey and Gerard F. Anderson

From the ‘Abstract’:

Using the most recent data on health spending published by the Organization for Economic Cooperation and Development (OECD), we explore reasons why U.S. health spending towers over that of other countries with much older populations. Prominent among the reasons are higher U.S. per capita gross domestic product (GDP) as well as a highly complex and fragmented payment system that weakens the demand side of the health sector and entails high administrative costs. We examine the economic burden that health spending places on the U.S. economy.

From the section ‘Pricing Low-Income Americans Out Of Health Care’:

This prospect (projected premium for family coverage of over $20,000 one decade from now) puts U.S. policymakers at a crossroads.

One approach would be to persuade the upper half of families in the nation’s income distribution to help purchase adequate health insurance for families in the lower third. One may call it the “universal health insurance” road. It would, of course, involve added taxes and transfers flowing through government budgets, which would bring with them additional government regulation, especially if the aim were to structure the U.S. health system as a one-tier system in which sick people have roughly the same health care experiences regardless of their own ability to pay.

The alternative option would be to embrace as official policy, both in employment-based health insurance and in public insurance programs, a multi-tier health system in which a person’s health care experience would be allowed to vary by his or her ability to pay for health care. In such a system families in the upper half of the income distribution would have a noticeably superior health care experience than families in the lower half would have. This is certainly already the case for U.S. families with good health insurance and those without it.

The emerging political battle at this crossroads is unlikely to be styled in stark terms such as “rationing by income class” or “one-class” versus “two-class” medicine. Instead, it will be styled as a debate over “market competition versus government regulation”; as a simple, technocratic quest for greater “efficiency”; or as the dubious dichotomy of “rationing versus markets,” even though textbooks in economics instruct the reader that market prices are just another way of rationing scarce commodities, on the basis of ability and willingness to pay. At its core, then, the debate over health care, in the United States as elsewhere, is less a pure macroeconomic issue than an exercise in the political economy of sharing.

http://content.healthaffairs.org/cgi/content/abstract/23/3/10?etoc

Comment: This article answers the questions posed in only 16 pages. It should be downloaded and retained as a resource that can be used to dismiss the myths on affordability while defining precisely the actual economic issues that we are facing.

Download this article now. It should be read in its entirety and retained as an essential reference in your health policy library.