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Chicago Tribune
March 23, 2003
Seniors spurning pilot Medicare PPO effort
By Bruce Japsen

A new and highly touted Bush administration effort to help Medicare patients pay for prescription drugs is a bust so far.

Three months into a much-anticipated pilot program, less than 1 percent of the elderly and disabled Medicare recipients eligible have signed up.

The initiative targeted up to 11 million Medicare patients in 23 states… to sign up for preferred provider organizations (PPOs).

Unlike health maintenance organizations, PPOs allow subscribers to visit doctors outside of their networks, a key reason they have become the most popular health plan.

The Bush administration figured the PPOs’ popularity would mean that the pilot program would go over well with the elderly and disabled covered under the federal Medicare health insurance program.

On its face, the premium charged by the PPO seems like a bargain. The monthly charge is between $40 and $75 on top of the $58.70 monthly Medicare premium.

In contrast, most seniors who want prescription coverage have to buy supplemental policies priced at $200 or more a month, join an HMO that restricts their choices or pay out of their own pocket.

Why the lack of enthusiasm?

Among other things, most PPO plans do not cover the latest and typically more expensive brand-name prescriptions some seniors say their doctors are prescribing. They do pay for generic versions of brand-name drugs, but sometimes those versions are not yet available.

The fact that seniors have not embraced the pilot could be a setback for Bush health advisers who saw the program expanding to cover even more of the nation’s 40 million Medicare patients in health plans operated by private companies.

For now, Bush official Scully says, the PPO pilot is budget neutral, using existing Medicare funds that prevent the plans from offering brand-name coverage. Should Congress pass the president’s reform bill, Scully said, plans would compete for a larger chunk of money, and a much richer benefit with brand-name coverage will be available.

Tom Scully, administrator for the Centers for Medicare & Medicaid Services:

“The health plans need to do a better job of marketing because the only way you get people to switch is through a lot of marketing.”

http://www.chicagotribune.com/business/chi-0303230063mar23,1,4556174.story

Comment: Question of the day: How many red flags can you count here?

A very fundamental flaw in the Bush administration’s reasoning is that PPOs in the private market were not chosen because of their popularity, but rather they were chosen when the indemnity plans were withdrawn from the market and individuals were left with a choice of PPOs or HMOs. Although integrated HMOs such as Kaiser remain popular, network middleman HMOs ultimately have proven to be less popular than PPOs since the HMOs have been more restrictive and less dependable. Patients do prefer to have the greater choice of providers that PPOs offer compared to HMOs, with the added option of obtaining care outside of the provider list even though with increased cost sharing.

The primary advantage that PPOs offer over indemnity plans is that PPOs contract rates with providers, theoretically controlling costs. But once the market is saturated with PPOs (and HMOs), rates must reflect the true costs of delivering care plus a modest profit or the health care market will collapse. Ironically, Medicare also “contracts” rates with providers, but without the need to have restrictive provider lists since non-contracted providers must still adhere to Medicare-dictated rates (with a minor adjustment). Thus if benefits and cost sharing in the PPOs and traditional Medicare were comparable, there would be absolutely no reason to choose a PPO, because of the restrictive provider lists and the greater administrative waste (with the need to increase beneficiary cost sharing).

The reason that the PPOs in this pilot program are not selling well is that the program is “budget neutral.” Since the PPOs receive the same reimbursement as the costs in the traditional Medicare program, not only do they have to target their marketing to a healthy subset of Medicare beneficiaries, they also must be certain that their prescription drug “carrot” used to entice patients is a very low-cost (Spartan) program. Medicare beneficiaries recognize the inadequacies of these minimal prescription plans and do not want to give up their free choice of providers in exchange for this very minimal benefit.

Tom Scully suggests that the problem is inadequate marketing on the part of the plans. He certainly exposes his blind faith in the market when he suggests that an inferior product needs only the blessing of Madison Avenue to displace our popular Medicare program.

Particularly disconcerting is the fact that Scully states that, under the president’s reform bill, plans would “compete for a larger chunk on money” for more generous prescription coverage. The president’s plan for traditional Medicare offers only negligible prescription benefits (nearly worthless discount cards, $600 maximum for poverty-level beneficiaries, and an approximately $6000 deductible catastrophic coverage for the wealthy). Scully’s comments suggest that the administration is willing to pay more to the plans than the amount allocated for the traditional program. That certainly belies their claim that the private plans will reduce costs.

Why should taxpayers support more expensive private plans while being denied prescription coverage in our own public Medicare program? The least expensive solution that would provide comprehensive prescription coverage for everyone would be to add it as a benefit to our traditional Medicare program.

Kaiser Commission on Medicaid and the Uninsured
March 2003
The New Middle-Class of Uninsured Americans – Is it Real?
by John Holahan, Catherine Hoffman, and Marie Wang

Summary

We conclude that data from the Census Bureau’s 2002 annual report Health Insurance Coverage: 2001 has been misinterpreted when the majority of the newly uninsured are characterized as either middle- or high-income people. Using household income brackets that do not account for the composition of the household or the effect of general inflation on income when studying changes over time can create misunderstanding about who the uninsured are, as well as the effectiveness of different policy options intended to decrease the number of uninsured.

While we found that the number of high-income uninsured (400%+ of poverty or $56,512 for a family of three in 2001) grew by about 300,000 due to a loss of employer-sponsored coverage, this is substantially less than unadjusted data from the Census Bureau’s report might indicate. We also found nearly a 300,000 decline in the number of middle-income Americans who lacked health insurance, largely because there were 800,000 fewer middle-income Americans. Many middle-income Americans lost jobs and/or income, contributing to the substantial increase in the number of people with incomes below 200% of the poverty level-where the likelihood of employer-sponsored coverage is much lower and uninsured rates are much higher. Most of the growth (1.3 million) in the uninsured was borne by low-income Americans with incomes less than 200% of the poverty level.

http://www.kff.org/content/2003/4090/4090.pdf

Comment: The tenor of this report seems to indicate that it is reassuring that the increase in the numbers of uninsured has been primarily in the low-income sector, and not in the middle- and high-income sectors as previously reported based on unadjusted Census Bureau data. Rather than a decline in the rate of insurance in the middle-income sector, there has been a decline in income with a large shift to the low-income sector and a concomitant loss of employer-sponsored coverage. The obvious conclusion is that many middle-income Americans not only lost their insurance, but they also lost their incomes – doubly bad news.

The authors make the point that this difference is important from a policy perspective. Generally, many employers of low-income individuals do not have adequate financial resources to provide insurance coverage for their employees. Studies of tax credits and association health plans indicate that they would fall far short of the need. Thus, policies designed to enhance public programs for low-income individuals seem to be in order. If so, we should be increasing eligibility and funding for these programs, especially Medicaid. But the exact opposite is taking place.

We simply won’t get it right until we are prepared to accept the fact that we desperately need to pool all of our existing resources into one publicly-administered program. That would work just fine for all of us.

The Boston Globe
3/21/2003
Editorial
The Medicare cure

The Bush administration is so eager to shift Medicare recipients into HMOs that one might assume private insurers have a better record than Medicare at curbing the growth in health costs. In fact, neither the government insurance program for the elderly nor the private sector has excelled at holding down costs, but a recent report found that Medicare does a substantially better job than the insurers.

(Also)… a 2002 study… found that Medicare beneficiaries are generally more satisfied with their health care than are privately insured people under age 65.

So the question remains: Why would the Bush administration be encouraging Medicare recipients to join HMOs by offering them better prescription-drug benefits than they would get under a plan for those who stay in Medicare?

The answer is that the administration knows there is great popular pressure to add a prescription drug benefit to Medicare. If this were done through the traditional Medicare program, it would give government enormous buying power to drive down drug prices with the pharmaceutical companies. Splitting off Medicare recipients into smaller HMOs addresses one of the drug industry’s great fears: that a single agency with the power of the entire Medicare population would be able to force down the exorbitant prices now charged for many essential medicines.

A healthy pharmaceutical industry is crucial to progress in developing life-saving drugs. But at a time when hospitals, doctors, and Medicare recipients themselves have had to make sacrifices, the drug industry should do its part, too. The Health Affairs report makes a strong argument for putting a drug benefit right where it belongs, in Medicare, with its superior record of controlling costs and satisfying its beneficiaries.

http://www.boston.com/dailyglobe2/080/editorials/The_Medicare_cure+.shtml

Comment: The primary goal of the Bush administration is to reduce public (tax) funding of the Medicare program. Strengthening Medicare with a bona fide prescription benefit would complicate that task because public support of our program of social insurance would be even greater. But the Bush administration also supports policies that greatly benefit their friends in the insurance and pharmaceutical industries.

The Boston Globe is quite correct with its comments on this one aspect of the complex Medicare issue. All other providers of health care services to Medicare beneficiaries must comply with the restrictions that the program places on allowable charges – charges that attempt to be both fair to the providers and fair to the taxpayers. Since pharmaceuticals have become a greater component of health services, it has become imperative that this industry also comply with the same standards of fairness. By making pharmaceuticals a full benefit of Medicare, the government will be in a position to set allowable charges, based on fairness to all.

The Boston Globe
3/21/2003
Editorial
The Medicare cure

The Bush administration is so eager to shift Medicare recipients into HMOs that one might assume private insurers have a better record than Medicare at curbing the growth in health costs. In fact, neither the government insurance program for the elderly nor the private sector has excelled at holding down costs, but a recent report found that Medicare does a substantially better job than the insurers.

(Also)… a 2002 study… found that Medicare beneficiaries are generally more satisfied with their health care than are privately insured people under age 65.

So the question remains: Why would the Bush administration be encouraging Medicare recipients to join HMOs by offering them better prescription-drug benefits than they would get under a plan for those who stay in Medicare?

The answer is that the administration knows there is great popular pressure to add a prescription drug benefit to Medicare. If this were done through the traditional Medicare program, it would give government enormous buying power to drive down drug prices with the pharmaceutical companies. Splitting off Medicare recipients into smaller HMOs addresses one of the drug industry’s great fears: that a single agency with the power of the entire Medicare population would be able to force down the exorbitant prices now charged for many essential medicines.

A healthy pharmaceutical industry is crucial to progress in developing life-saving drugs. But at a time when hospitals, doctors, and Medicare recipients themselves have had to make sacrifices, the drug industry should do its part, too. The Health Affairs report makes a strong argument for putting a drug benefit right where it belongs, in Medicare, with its superior record of controlling costs and satisfying its beneficiaries.

http://www.boston.com/dailyglobe2/080/editorials/The_Medicare_cure+.shtml

Comment: The primary goal of the Bush administration is to reduce public (tax) funding of the Medicare program. Strengthening Medicare with a bona fide prescription benefit would complicate that task because public support of our program of social insurance would be even greater. But the Bush administration also supports policies that greatly benefit their friends in the insurance and pharmaceutical industries.

The Boston Globe is quite correct with its comments on this one aspect of the complex Medicare issue. All other providers of health care services to Medicare beneficiaries must comply with the restrictions that the program places on allowable charges – charges that attempt to be both fair to the providers and fair to the taxpayers. Since pharmaceuticals have become a greater component of health services, it has become imperative that this industry also comply with the same standards of fairness. By making pharmaceuticals a full benefit of Medicare, the government will be in a position to set allowable charges, based on fairness to all.

Monterey County – The Herald
Mar 21, 2003
Doctors lament Natividad woes
By Joe Livernois

Dr. Pedro Moreno is frustrated.

Among the hundreds of patients he sees as a family practice physician at Natividad Medical Center is a 35-year-old man diagnosed with diabetes two years ago.

But the patient can’t afford the $50 monitor he needs to check his blood sugar. He can’t even afford the $4 to buy the test strips to place in the monitor.

“I haven’t been able to get him the care he needs,” said Moreno. “I feel completely powerless.”

Moreno and other doctors at Natividad Medical Center are hitting the streets to discuss the problems suffered by uninsured patients — and the problems the rest of society encounters because of the health-care crisis.

Natividad Medical Center, the county-operated hospital in Salinas, provides much of the health care to many of the approximately 80,000 Monterey County residents who are uninsured and the thousands of others covered by the state Medi-Cal program.

Natividad itself is in serious financial trouble and is expected to end its fiscal year with a $13 million operating deficit. On Tuesday, the Board of Supervisors will hold a public hearing on a proposal to close two clinics in Salinas affiliated with Natividad.

Moreno said the problems at Natividad are aggravated by the lack of insurance coverage. And he said the problems will only get worse for uninsured residents if the county is forced to shut down clinics or cut services at the county hospital.

The drain on Natividad is worsened because uninsured patients are flooding the hospital’s emergency room because they can’t afford to see regular physicians or specialists, (Dr. Marc) Tunzi said.

Moreno urged about 75 people at the Latino Network luncheon to lobby legislators to support national and state health-care reform proposals, including a single-payer insurance program now being consider by state Legislators.

http://www.montereyherald.com/mld/montereyherald/news/local/5448148.htm

Comment: The threat to the safety-net infrastructure is greater than ever. We can no longer dismiss the growing numbers of uninsured because, “They can go to County.”

Dr. Moreno clearly understands. The solution is comprehensive reform of health care funding through a single-payer insurance program.