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U.S. Health Care Spending In An International Context

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U.S. Health Care Spending In An International Context

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Costs & Competition
U.S. Health Care Spending In An International Context
Uwe E. Reinhardt, Peter S. Hussey and Gerard F. Anderson

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. We comment on attempts by U.S. policy-makers to increase the prices foreign health systems pay for U.S. prescription drugs.

Health Affairs, Vol 23, Issue 3, 10-25
Copyright © 2004 by Project HOPE
DOI: 10.1377/hlthaff.23.3.10

M. Livingston on higher health insurance rates for women

Martha Livingston, Ph.D., Associate Professor of Health and Society, SUNY College at Old Westbury, responds to the message on the insurance industry effectively classifying female gender as a preexisting disorder:

I’m going to bring this to my last women’s health class of the semester tonight; what better way to illustrate the points we’ve been making all semester?

Years ago I had a button, which I’m planning to have duplicated, that says:

“Life: a preexisting condition spread by sexual contact which is invariably fatal.”

Being female is a preexisitng disorder?

The Hartford Courant
April 22, 2004
ConnectiCare Joining Gender Trend
By Diane Levick

ConnectiCare plans to start charging thousands of women higher health insurance rates than men – a difference ranging from 3 to 40 percent – in an effort to even up the score with competitors.

Anthem Blue Cross and UnitedHealth Group already use gender rates for small employers here, and it is not known yet whether other managed care companies will follow suit.

The impact of gender rates alone on a small employer depends on the make-up of the workforce. An employer with a predominantly female workforce could end up paying more than under the old system. A business with mostly male workers who are young to middle-aged would pay less than if unisex rates
were applied.

… ConnectiCare and other insurers who don’t gender-rate could attract a disproportionate share of employers with more women than men – the higher cost groups.

Employers, though, could still buy ConnectiCare insurance with unisex rates through the Connecticut Business and Industry Association’s Health Connections program (CBIA).

ConnectiCare’s decision is “marketing genius” because it still allows access to its unisex rates through CBIA, said Bob Feen, president of The Benefits Group Inc. in Cheshire, which sells health insurance and other employee benefits.

With the choice of accessing ConnectiCare directly or through CBIA, small employers and their benefits brokers “can pick which model works best for them,” Feen said.

http://www.ctnow.com/business/hc-connecticare0422.artapr22,0,6833223.story

Comment: The perversity of allowing decisions on health care financing to be made in the marketplace by the private insurance industry could not be better exemplified than by this decision that basically dictates that being born female is a preexisting disorder!

Market decisions by private insurance interests can never lead to an equitable, affordable, universal system of funding care. We desperately need to establish our own public system of social insurance.

Reinvention of health insurance in the consumer era

JAMA
April 21, 2004
Reinvention of Health Insurance in the Consumer Era
By James C. Robinson, PhD, MPH

The new products and policies will test the limits of US individuals’ willingness to assign responsibility for financing health care to those individuals who use it and exempt those who do not.

On the positive side, a shift in decision-making responsibility from the employer to the employee and from the insurer to the enrollee will create a social consciousness of the imperative to establish priorities as to who will receive which services now, which later, and which never. A greater sense of personal responsibility among patients for their own health and health care will attenuate some forms of cost inflation and support the prevention and treatment of many chronic conditions. But individual patients require financial subsidies, valid information, and empathetic support if they are to grapple successfully with the difficult challenges of illness and medicine. During the long term, the insurance industry will need to combine its contemporary focus on consumers with a commensurate focus on physicians, administrative simplicity, and the social pooling of risk if it is successfully to balance limited resources and unlimited expectations in health care.

http://jama.ama-assn.org/cgi/content/full/291/15/1880

Comment: Success will require “administrative simplicity” and “the social pooling of risk.” But those will never come from the insurance industry. We’ll have to accomplish those by adopting our own public program of universal insurance.

Kaiser Permanente follows the market

Contra Costa Times
Apr. 29, 2004
Kaiser adds deductibles to some insurance plans
By Judy Silber

Kaiser Permanente is the last large insurer to add deductibles to individual insurance plans purchased by people without coverage through work. By forcing consumers to pay for more of their care, deductibles lower monthly premiums…

“If we don’t follow the market, people will lose access to health care”, said Christine Paige, Kaiser’s senior vice president of marketing. “We have members who have been here their entire lives. We don’t want to abandon them as the market changes.”

Kaiser has set its deductibles relatively low compared with what’s offered by other insurers. Other insurers offer plans with deductibles as high as $5,000. But Kaiser’s deductible will be $1,500 for individuals, $1,000 or less for small employers and $1,000 initially for large firms.

But Karen Pollitz, a senior health policy researcher at the Health Policy Institute at Georgetown University, noted that deductibles contradict Kaiser’s mission of removing — rather than erecting — barriers to care.

“It’s too bad because Kaiser wrote the book on managing health care and disease,” Pollitz said. “I think they just made their task a lot harder.”

For people who don’t visit the doctor often, deductibles can lower overall out-of-pocket costs by decreasing the amount paid for monthly premiums.

But for those in need of care, deductibles add to their cost burden. Pollitz worries that will discourage people, especially those with chronic diseases, from seeking care.

Kaiser felt pressure to offer the deductible plans because it was losing members, Paige said. They (high-deductible plans) are an industry standard for the individual market, and employers are increasingly considering them as an option to stabilize premiums.

http://www.contracostatimes.com/mld/cctimes/business/8547735.htm

Comment: Rather than addressing health care costs, insurers and purchasers have narrowed their attention to the price of health insurance premiums in order to make health insurance affordable. The tragedy is that, as health insurance plans become more affordable, health care is becoming much less affordable for precisely those individuals with significant health care needs because of the dramatic increases in out-of-pocket expenses that they are facing.

Kaiser Permanente did not have much choice. Their competitors, especially Blue Cross and Blue Shield, have dominated the market with low-premium,high-deductible plans. Individuals with significant needs were selecting Kaiser because of its comprehensive coverage. By concentrating high-cost patients within their plans, Kaiser was faced with the prospect of driving premiums up even further and then losing market share because of unaffordable premiums (the “death spiral” of insurance premiums). Using standard market principles, they were forced to offer a competitive-market insurance product.

The marketplace, by making health plans affordable, has made health care unaffordable for those who need it. The unintentionally perverse, amoral nature of market dynamics has established the principle that the marketplace is not the proper environment to guide the financing of health care.

In sharp contrast, a universal program of social insurance would ensure that health care would be affordable for all who are in need. Isn’t that what we should be striving for?

Canada's Health Minister shifts and sides with the people

The Globe and Mail
April 29, 2004
Pettigrew clarifies health-care statements
By Campbell Clark and Brian Laghi

AND

Calgary Herald
April 29, 2004
From good to bad in hours
By Tom Olsen

Health Minister Pierre Pettigrew backtracked yesterday from his statements about allowing private health-care delivery…

Canada’s Health Minister Pierre Pettigrew:

“Unfortunately, I now realize that I have left the impression that I favour increased private delivery within the public health system. That was in no way my intent, nor is that the intent of the Government of Canada.

“To put it as plainly as I can, the ambition of the federal government is not to encourage private delivery even within the terms of the Canada Health Act. Quite the contrary, our ambition is to expand public delivery because, as Roy Romanow said it very well, public delivery provides Canadians with the best system possible.”

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040429/HEALTH29/TPHealth/

http://www.canada.com/calgary/calgaryherald/news/story.html?id=84d78fc4-0220-4ad5-aa0f-8f7b38c34cd7

Comment: Some construed yesterday’s message as an attack on the profits that can be realized in the health care delivery system. In my comment, I referred to “the perverse incentives created by including for-profit corporations and their passive investors in the health care delivery system.”

In discussing the problems with for-profit corporations, the operative term is not “profit” but rather “investor-owned corporations.” Profits are just as essential in health care as they are in any other sector of our economy. But the primary mission of health care providers should be to deliver the best possible health care services and products while retaining a fair profit.

The primary responsibility of a board of directors of an investor-owned corporation is to provide maximum shareholder value through stock appreciation and distributed dividends. And boards of for-profit corporations frequently reward themselves with significant ownership. This clear conflict of interest between shareholders and patients leads to a health care delivery system that, as Mme. Desjarlais indicated, is “more costly, less efficient and even more dangerous to patient care than the regular public system.”

It is a relief to see that Health Minister Pettigrew now sees that the Canadian citizens are quite serious when they say that they want a health care system dedicated to patients rather than investors.

Canada’s Health Minister shifts and sides with the people

The Globe and Mail
April 29, 2004
Pettigrew clarifies health-care statements
By Campbell Clark and Brian Laghi

AND

Calgary Herald
April 29, 2004
From good to bad in hours
By Tom Olsen

Health Minister Pierre Pettigrew backtracked yesterday from his statements about allowing private health-care delivery…

Canada’s Health Minister Pierre Pettigrew:

“Unfortunately, I now realize that I have left the impression that I favour increased private delivery within the public health system. That was in no way my intent, nor is that the intent of the Government of Canada.

“To put it as plainly as I can, the ambition of the federal government is not to encourage private delivery even within the terms of the Canada Health Act. Quite the contrary, our ambition is to expand public delivery because, as Roy Romanow said it very well, public delivery provides Canadians with the best system possible.”

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040429/HEALTH29/TPHealth/

http://www.canada.com/calgary/calgaryherald/news/story.html?id=84d78fc4-0220-4ad5-aa0f-8f7b38c34cd7

Comment: Some construed yesterday’s message as an attack on the profits that can be realized in the health care delivery system. In my comment, I referred to “the perverse incentives created by including for-profit corporations and their passive investors in the health care delivery system.”

In discussing the problems with for-profit corporations, the operative term is not “profit” but rather “investor-owned corporations.” Profits are just as essential in health care as they are in any other sector of our economy. But the primary mission of health care providers should be to deliver the best possible health care services and products while retaining a fair profit.

The primary responsibility of a board of directors of an investor-owned corporation is to provide maximum shareholder value through stock appreciation and distributed dividends. And boards of for-profit corporations frequently reward themselves with significant ownership. This clear conflict of interest between shareholders and patients leads to a health care delivery system that, as Mme. Desjarlais indicated, is “more costly, less efficient and even more dangerous to patient care than the regular public system.”

It is a relief to see that Health Minister Pettigrew now sees that the Canadian citizens are quite serious when they say that they want a health care system dedicated to patients rather than investors.

Canada’s health minister supports privatization

The StarPhoenix (Saskatoon)
April 28, 2004
Ottawa opens up medicare
By Mark Kennedy

The federal government will not stand in the way of provinces that want to “experiment” with medicare by hiring for-profit private companies to deliver medical services within the publicly funded system, says Health Minister Pierre Pettigrew.

The declaration came Tuesday after an appearance before a House of Commons committee, where Pettigrew was grilled by MPs over his government’s commitment to enforcing the Canada Health Act and to allowing more privatization.

Pettigrew was remarkably blunt in his responses to MPs, providing what was likely the most direct statement in recent years by a federal health minister about private-sector delivery of medicare.

“Public administration is the principle, not public ownership. There’s a difference between public ownership and public administration.”

At the committee, New Democrat MP Bev Desjarlais pushed Pettigrew for a clear answer on whether the Liberal government will stop the growing trend of provinces using private firms to deliver medicare to patients.

But Pettigrew repeatedly stressed that the Canada Health Act does not forbid this.

It was also a hot political topic that Roy Romanow addressed in his royal commission report on health care two years ago. He warned about the “potential risks to the integrity and viability of our health-care system that might result from an expanded role for private providers.”

In a heated exchange Tuesday, Desjarlais told Pettigrew he is supporting the use of taxpayers’ dollars to help for-profit health companies — even though many studies have shown they are more costly, less efficient and even more dangerous to patient care than the regular public system.

“There needs to be a real outright honesty with Canadians,” she said. “The government should just come out and say, ‘We are going to promote for-profit health-care service delivery.’ “

Clearly angry by the charge, Pettigrew shot back: “You choose your words, and I’ll choose mine Mrs. Desjarlais. I have been making my position very clear and I am as honest with Canadians as you are. I know you like to be virtuous. I like to be very frank and honest as well.”

http://www.canada.com/saskatoon/starphoenix/story.asp?id=9D3D1B4E-2D2D-430E-AB6D-2C457D42A7B1

Comment: Two major themes permeate our health care reform efforts in the United States. Of greater importance, we clearly see the need to establish a method of financing health care that will enable access to affordable, comprehensive care for everyone. We believe that the single payer model of universal social insurance would be the most effective. The other issue that we address is the perverse incentives created by including for-profit corporations and their passive investors in the health care delivery system. As Mrs. Desjarlais indicated, “many studies have shown they are more costly, less efficient and even more dangerous to patient care than the regular public system.”

Our first task will be to establish an equitable, publicly funded and publicly administered, universal health insurance program. Then we can tackle the much more difficult problem of misuse of our resources that is designed to benefit investors.

Canada has already accomplished both of our goals, although there is still more for them to do. But it would be tragic if Canadian politics were effective in rejecting the “virtuous” in favor regressing to “frank” for-profit health-care service delivery.

Canada's health minister supports privatization

The StarPhoenix (Saskatoon)
April 28, 2004
Ottawa opens up medicare
By Mark Kennedy

The federal government will not stand in the way of provinces that want to “experiment” with medicare by hiring for-profit private companies to deliver medical services within the publicly funded system, says Health Minister Pierre Pettigrew.

The declaration came Tuesday after an appearance before a House of Commons committee, where Pettigrew was grilled by MPs over his government’s commitment to enforcing the Canada Health Act and to allowing more privatization.

Pettigrew was remarkably blunt in his responses to MPs, providing what was likely the most direct statement in recent years by a federal health minister about private-sector delivery of medicare.

“Public administration is the principle, not public ownership. There’s a difference between public ownership and public administration.”

At the committee, New Democrat MP Bev Desjarlais pushed Pettigrew for a clear answer on whether the Liberal government will stop the growing trend of provinces using private firms to deliver medicare to patients.

But Pettigrew repeatedly stressed that the Canada Health Act does not forbid this.

It was also a hot political topic that Roy Romanow addressed in his royal commission report on health care two years ago. He warned about the “potential risks to the integrity and viability of our health-care system that might result from an expanded role for private providers.”

In a heated exchange Tuesday, Desjarlais told Pettigrew he is supporting the use of taxpayers’ dollars to help for-profit health companies — even though many studies have shown they are more costly, less efficient and even more dangerous to patient care than the regular public system.

“There needs to be a real outright honesty with Canadians,” she said. “The government should just come out and say, ‘We are going to promote for-profit health-care service delivery.’ “

Clearly angry by the charge, Pettigrew shot back: “You choose your words, and I’ll choose mine Mrs. Desjarlais. I have been making my position very clear and I am as honest with Canadians as you are. I know you like to be virtuous. I like to be very frank and honest as well.”

http://www.canada.com/saskatoon/starphoenix/story.asp?id=9D3D1B4E-2D2D-430E-AB6D-2C457D42A7B1

Comment: Two major themes permeate our health care reform efforts in the United States. Of greater importance, we clearly see the need to establish a method of financing health care that will enable access to affordable, comprehensive care for everyone. We believe that the single payer model of universal social insurance would be the most effective. The other issue that we address is the perverse incentives created by including for-profit corporations and their passive investors in the health care delivery system. As Mrs. Desjarlais indicated, “many studies have shown they are more costly, less efficient and even more dangerous to patient care than the regular public system.”

Our first task will be to establish an equitable, publicly funded and publicly administered, universal health insurance program. Then we can tackle the much more difficult problem of misuse of our resources that is designed to benefit investors.

Canada has already accomplished both of our goals, although there is still more for them to do. But it would be tragic if Canadian politics were effective in rejecting the “virtuous” in favor regressing to “frank” for-profit health-care service delivery.

Can we afford not to insure the uninsured?

Can we afford not to insure the uninsured?
ARNOLD BIRENBAUM
(Original publication: March 8, 2004)

The Journal News
The online information source for Westchester, Rockland, and Putnam

(The writer, a Larchmont resident, is a professor of pediatrics at Albert Einstein College of Medicine, Bronx.)

Sen. Bill Frist, U.S. Senate majority leader and a thoracic surgeon, recently predicted that many of the 43 million in America without insurance will remain uninsured. Dr. Frist believes that it is too expensive for the government to cover the entire population of the United States, particularly following the new expansion of Medicare-based drug benefits, the creation of financial incentives for managed-care plans to enroll senior citizens, and the taxes lost through the promotion of health savings accounts.

As a man with religious faith in the free market, he has seen a rosy future, but it does not work for the uninsured.

Other public leaders with less of a will to believe have seen further and call for action now with regard to the uninsured. In January, the Institute of Medicine, one of three congressionally chartered national academies functioning since 1970 as an adviser to the federal government, issued “Insuring America’s Health: Principles and Recommendations,” the last in a series of five reports on uninsurance — a social condition resulting from the rising cost of health care and increased family stress, as well as the individual health risks of having one out of seven Americans without insurance. These well-crafted studies and their recommendations were subject to review by national experts.

The status quo second, even third-class status for the uninsured is an unsustainable option for our society. What we see now are the lowlights of our health-care system.

People without insurance find private insurance unaffordable and put off necessary visits to the doctor. While they may be young and relatively healthy, they sometimes, like most of the insured, need access to care. Additionally, the uninsured do not seek preventive care or screening for disease. When hospitalized, those without insurance may not receive all the tests that the insured get.

Clearly, the quality of care of the uninsured does not match that received by those with private or public insurance.

The presence of uninsured patients in the health-care system is now more than ever destabilizing since cross-funding is no longer available. Private insurance payments became less generous when medicine entered the era of managed care. Inpatient and outpatient providers had to offer deep discounts to gain contracts from insurance plans. Thinner margins made charity care less possible.

Consequently, there is a personal and societal price for lack of access. The authors of “Insuring America’s Health” estimate that the cost of poorer health and shorter lives is somewhere between $65 billion and $130 billion, a bill that comes due down the road. Some of this extraordinary cost is the result of discontinuities in coverage — gaps that arise when workers lose their coverage when they become unemployed or beneficiaries are removed from state Medicaid rolls.

Other countries do more with less money. Most of the advanced industrial nations to which the United States is compared have universal coverage, either through a social insurance system or progressive taxation. Currently, the United States spends almost 14 percent of its gross domestic product on health care, and that is expected to increase by 2013 to more than 18 percent! No other country comes close to this share of GDP.

How long can we afford to ignore the conclusion that these costs are unsustainable in the long run?

And, by all standard public-health measures (e.g., infant mortality, life expectancy), these systems of financing found in Canada, Great Britain, France or Japan, to name but a few countries, do just as well as we do, or better. Continuity of coverage means better access to health care. Changing jobs or losing jobs does not mean that a German citizen, for example, has to go without health insurance and access to care.

Our country, unlike other advanced societies, does not have in place safety nets that generate cost benefits to society as well as to its citizens. There is no universal entitlement to health-insurance coverage in the United States. The recent recession has led more employers to eliminate health-care benefits for their employees and/or their dependents. This trend will only lead to more churning and reduced access to needed care.

There are long-run savings from universalizing coverage, even with subsidies for low-income workers. Otherwise, we will pay for the neglect of the health care of the growing number the uninsured in coming decades.

What kind of a future is that, Senator? Shall the last to gain insight into our predicament be the Frist?

Prescription Drugs

Daily Health Policy Report
[Apr 22, 2004]

Prescription Drugs | Sen. Dayton Criticizes Action by FDA To Stop Busload of Seniors Who Purchased Medicines in Canada

In a letter to FDA Commissioner Lester Crawford, Sen. Mark Dayton (D-Minn.) on Wednesday criticized FDA’s inspection last fall of a bus of seniors returning from a trip to a Winnipeg, Canada pharmacy to buy prescription drugs, the Minneapolis Star Tribune reports. On Oct. 22, FDA agents boarded the “Rx Express” bus as it returned to Minnesota and inspected medicines that passengers had purchased in Canada (Diaz, Minneapolis Star Tribune, 4/22). After a “cursory review,” FDA agents decided that the drugs could be imported and did not seize any of the products, John Taylor, FDA associate commissioner, said. FDA permits the importation of prescription drugs for personal use, though the practice is technically illegal. The U.S. Customs Service requested the inspection, according to Taylor (Frommer, AP/Philadelphia Inquirer, 4/22). In his letter to Crawford, Dayton wrote, “Until the FDA action, those trips were unimpeded by Customs or other federal officials,” adding that the inspection “was extremely stressful to some of the elderly riders and has caused alarm among prospective riders” (Minneapolis Star Tribune, 4/22). Dayton donates his entire Senate salary to finance bus trips between Minnesota and Canada, during which riders can purchase medicines in Canada, where they often cost less than in the United States. In his letter, Dayton, who only recently became aware of the incident, asked FDA officials whether the inspection was “the beginning of a new practice of harassment and intimidation against elderly citizens who are traveling themselves to Canada to make their prescription drug purchases.” Taylor said that the inspection was “an unusual event,” adding, “This is not consistent with our current practice. I would not expect it to happen again” (AP/Philadelphia Inquirer, 4/22)

Click here to view this article at Kaisernetwork.org.

Toward Openness in Drug Purchases

Toward Openness in Drug Purchases
April 28, 2004
The New York Times

The veil of secrecy that shrouds the operations of the middleman companies that manage drug benefits for tens of millions of Americans was lifted a bit this week when the nation’s largest manager of pharmacy benefits agreed to greater transparency. If the settlement reached by that company, Medco Health Solutions, and litigators representing 20 states and the federal government becomes common practice, it may ease suspicions that the companies managing benefits make deals that favor their own financial interests rather than those of the patients or the health plans they serve.

In theory, the middleman companies are supposed to keep drug prices low by negotiating favorable deals with pharmaceutical manufacturers and passing on the savings to health plans, employers and other clients. But lawsuits filed by 20 states and the United States attorney in Philadelphia alleged that Medco had sometimes made deals to benefit itself and failed to pass on sufficient savings to its customers. Indeed, the suits contended that Medco, in return for higher rebates from manufacturers, had sometimes persuaded doctors to change patients’ prescriptions in ways that had actually increased the costs for the patients and their health plans. Medco was accused of pocketing a lot of the rebate money and failing to tell clients it had done so.

Without admitting any wrongdoing, Medco has agreed to pay a modest cash settlement and, more important, to change its business practices. The settlement prohibits Medco from seeking to switch drugs if the net result would be higher costs for the patients or the drug plans. Medco will also reveal to prescribers and their patients any financial incentives it receives for switching drugs. These and other requirements could help rein in these largely unregulated companies as they assume a major role in administering the new Medicare prescription drug benefit.

Copyright 2004 The New York Times Company