Quote of the Day

The group that got health care passed is packing up and going home

By Harold Pollack
The Washington Post, January 5, 2014

Harold Pollack: [S]ingle-payer folks … might ask: “Wouldn’t we have a better system if we had a single payer? Why didn’t HCAN [Health Care for America Now] and its friends push for that?”

Richard Kirsch [chief executive of HCAN]: What’s the expression: “If wishes were horses, beggars would ride?”

Yes — if we could wave a magic wand and design a rational health-care system that would control costs while providing much better access, we wouldn’t design our current one. The ACA was the best that we could get through the American political system. The fact that we failed in every previous instance in the past 100 years reflects the reality that there hadn’t been a reform designed to deal with the realities of American politics….

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/05/the-group-tha…

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Implementing health reform: Four years later

By Timothy Jost
Health Affairs, January 2014

How did things go so wrong [for the Affordable Care Act]? Why is there so much bad news?….

More devastating for the future of the ACA, however, were the 2010 midterm elections. Republicans picked up sixty-three seats in the House, swinging control of the chamber from the Democrats to the Republicans. Before the 2010 elections, Democrats controlled fifty-two state legislative houses and the Republicans thirty-three; after the elections, Republicans controlled fifty-three and the Democrats thirty-two. Before the 2010 election there were twenty-six Democratic and twenty-four Republican governors, and after there were twenty Democrat and twenty-nine Republican. Many saw the election as a referendum on the ACA.

http://content.healthaffairs.org/content/33/1/7.full

By Kip Sullivan, J.D.

Was the Affordable Care Act politically feasible? Was it “the best” America could do in 2009 and 2010? Was single-payer legislation more or less feasible than the ACA? It is still too early to pronounce on the fate of the ACA, but it is not too early to discuss the political feasibility question. We have much to learn from looking back at the muffled debate about that issue among universal coverage advocates prior to the enactment of the ACA.

Since the modern American single-payer movement was formed in the late 1980s, many supporters of universal coverage have claimed that single-payer is not politically feasible. Those who made this argument (Bernstein and Marmor refer to them as “political yes buts” http://healthaffairs.org/blog/2008/08/28/medicare-for-all-why-we-should-…) never explained why multiple-payer “solutions” would be more feasible than single-payer. In the worldview of the “yes buts,” only single-payer proponents had to answer that question. If, on any given day, single-payer proponents could not point to 60 votes in the US senate or majority votes in the US House or in state legislative chambers, the conversation was over: Single-payer was not politically feasible and had to be taken off the table to make room for more “realistic” legislation.

This simple counting-noses definition of “political feasibility” avoided two issues that many observers inside and outside the single-payer movement consider paramount: Any legislation that proposes to achieve universal coverage, or even to cut the uninsured rate substantially, is not politically feasible, or at minimum is no more feasible than single-payer legislation, if

(1) it doesn’t simultaneously reduce health care spending or
(2) is so complex it cannot be implemented within a reasonable period of time.

This definition of feasibility asks not merely whether a given legislative body can be pushed into enacting a given bill. This definition asks as well, once the bill is enacted, is it politically sustainable? By this more realistic definition of political feasibility, a bill might have enough votes to pass a given legislative body, but if the bill can’t contain costs or can’t be implemented within a reasonable period of time, it shouldn’t be assumed to be politically sustainable and therefore should not be assumed to be more politically feasible than other approaches.

Sustainability depends ultimately on how the public perceives legislation after it is enacted. If the public punishes lawmakers who voted for the putative “universal coverage” legislation and rewards legislators who are hostile to government doing anything to help the uninsured and to lower health care costs, the legislation may die on the vine or be repealed.

One would think that this definition of political feasibility would have appealed naturally to the Democrats and their supporters who pushed the ACA because it asks them to take into account the impact of the ACA on voters’ perceptions of Democrats. In other words, it asks Democrats to consult their own self-interest in the course of picking a solution to a problem. It is a noble thing to suffer retribution at the polls for a bill that does good things for people when you know it’s going to work. But it is foolish to suffer retribution for a bill you suspect, or should suspect, will fail, or at minimum, will perform far below the expectations your rhetoric about the bill has created.

When in June 2009, congressional Democrats unveiled the health care “reform” bills that would become the ACA, I and many others were filled with apprehension. Our concern was not that some version of these bills might not pass. To the contrary, our concern was that it might pass (and thereby demonstrate it was “politically feasible” in the narrow sense of the phrase) but not be politically sustainable. In a June 2009 comment on this blog entitled, “Democrats’ hype about health care reform will hurt them,” I said:

“President Obama and Democratic congressional leaders are playing a dangerous game with health care reform. They are raising the public’s expectations sky high before figuring out how to meet those expectations. They are promising to give us the moon – significant cuts in health care costs and universal coverage or something close to it – but even at this late hour they have failed to publish anything resembling a detailed plan to do that. And the hints they have given us about the ‘reforms’ they are likely to endorse indicate they haven’t got a clue how to cut costs.”
https://pnhp.org/blog/2009/06/04/democrats%E2%80%99-hype-about-health-car….

I wanted a real debate about the political feasibility of the Democrats’ multiple-payer solution versus our single-payer proposal, and I thought the most effective way to make my argument was to appeal to Democrats’ self-interest, not just their altruism. Although I doubted the altruism of some members of Congress, I didn’t doubt the altruism of the vast majority of ACA supporters — I knew their desire to minimize the suffering inflicted on this country by our health care system was real. What I questioned was their understanding of how expensive and complex the ACA was going to be. If they didn’t understand that, how could they grasp what a political liability the ACA would be for Democrats? How could they intelligently evaluate the risk that future Congresses might not have enough Democrats in them to protect the ACA from underfunding or outright repeal?

But the debate about political feasibility that I and many others hoped for never came to pass. The single-payer and multiple-payer wings of the American universal coverage movement never discussed whether the ACA would be more feasible — that is, be more likely to pass AND be more sustainable — than a single-payer. We never debated whether the simplicity and efficiency of a single-payer made it more feasible, or at least no less feasible, than the costly and insanely complicated ACA. ACA proponents simply pronounced single-payer “off the table” on the ground that powerful opponents would have made a majority vote in Congress impossible. And that was that.

Four years have now passed since the enactment of the ACA. The sky is clotted with chickens coming home to roost. Evidence that the ACA was never as sustainable as its proponents implied is all around us. This evidence includes evidence of the damage the ACA has inflicted on Democrats. Timothy Jost’s article in the January 2014 Health Affairs contains an excellent summary of the unhappy history of the ACA. One of the most important paragraphs in his paper is the one quoted above in which he notes the damage Democrats suffered during the 2010 elections and that many believe this damage was due in part to the enactment of the ACA in March of 2010. Jost also predicts more bad news for the ACA as a substantial portion of the people insured through exchanges discover their choice of provider has been restricted and their out-of-pocket payments are very high. We are going to see more heartwarming stories about sick people finally getting the medical care they deserve, thanks to the ACA, but it will not be enough to forestall more damage to Democrats (especially if Republicans manage to nominate candidates who can refrain from discussing “legitimate rape” and similar subjects).

None of us have a crystal ball. I don’t claim that if Democrats and groups supporting the ACA had used the opportunity presented to us in 2009-2010 to promote HR 676 instead of the ACA that HR 676 would have passed by March 2010 or even by now. I’m reasonably sure something good would have been enacted — for example, an expansion of traditional Medicare and Medicaid to more people (Bob Kuttner makes a similar argument here http://www.huffingtonpost.com/robert-kuttner/obamacare-republicans_b_429…).

I am, however, absolutely certain about one thing: The universal coverage movement in America would be in a much better position to bring the long fight for universal coverage to a successful conclusion than we are now. There are several reasons why I’m so sure about that.

First, whether we had won big or won some incremental improvements in 2010, the public would have been exposed to a debate about a real solution to the health care crisis as opposed to a debate about make-believe cost containment schemes such as exchanges, “accountable care organizations” and punishing hospitals for “excess” readmissions.

Second, the health insurance industry would be receiving less money from the taxpayer and would be, therefore, less powerful than they are now. The insurance industry has been driving away private-sector customers in droves over the last few decades. If public purchasers — state and federal governments — had long ago stopped throwing money at Aetna et al. with legislation like the ACA, schemes to overpay Medicare Advantage plans, and legislation privatizing state Medicaid programs, the industry would by now be a shadow of its former self and a much less potent opponent of universal coverage.

Third, the political environment for health care reform would be less toxic than it is today, not because conservatives wouldn’t be leveling the same extreme charges they level at all forms of health care reform no matter how innocuous, but because the public would be less vulnerable to extremism and ultimately less cynical about real reform.

ACA proponents may disagree with my assessment of where we might be today if they had joined ranks with the single-payer movement and had fought for HR 676. What they can’t deny is they refused to engage in a real debate about the political feasibility (narrowly defined) AND sustainability of the ACA versus single-payer. They might have learned something if they had.

Emergency visits seen increasing with health law

By Sabrina Tavernise
The New York Times, January 2, 2014

Supporters of President Obama’s health care law had predicted that expanding insurance coverage for the poor would reduce costly emergency room visits because people would go to primary care doctors instead. But a rigorous new experiment in Oregon has raised questions about that assumption, finding that newly insured people actually went to the emergency room a good deal more often.

The study, published in the journal Science, compared thousands of low-income people in the Portland area who were randomly selected in a 2008 lottery to get Medicaid coverage with people who entered the lottery but remained uninsured. Those who gained coverage made 40 percent more visits to the emergency room than their uninsured counterparts during their first 18 months with insurance. …

In remarks in New Mexico in 2009, Mr. Obama said: “I think that it’s very important that we provide coverage for all people because if everybody’s got coverage, then they’re not going to the emergency room for treatment.” …

“I suspect that the finding will be surprising to many in the policy debate,” said Katherine Baicker, an economist at Harvard … and one of the authors of the study….

http://www.nytimes.com/2014/01/03/health/access-to-health-care-may-incre…

Comment:

By Kip Sullivan, JD

Last Friday the New York Times, the Wall Street Journal and other media outlets trumpeted the news that a recent study shows that low-income people newly insured through Medicaid use 40 percent more emergency room services than a control group of low-income people who remained uninsured. In a sane world, this finding would not have deserved any coverage, much less headlines on front pages. The conditions that would cause Medicaid enrollees to visit the ER more than the uninsured have been known for a long time, and it’s well known that some of these conditions have been getting worse. The conditions include:

•  the uninsured use roughly half as many health care services as the insured,

•  the uninsured are in worse health than the insured and have more unmet medical needs, and

•  Medicaid enrollees have much more trouble finding primary care doctors and specialists who will take Medicaid than the privately insured.

Anyone familiar with these facts could have predicted that if the State of Oregon were to offer Medicaid coverage to 10,000 of its poor people those people would make more visits to emergency rooms than an uninsured control group. But the media’s fascination with this paper suggests the study’s results were indeed surprising to “many in the [health] policy debate,” as Ms. Baicker asserted.

How do we explain the surprise? I nominate the overuse myth – the conventional wisdom that the main reason America’s per capita health care costs are double those of the rest of the industrialized world is that doctors order, and patients demand, great volumes of unnecessary medical services. The overuse myth has led far too many policymakers on the left and the right to think that emergency rooms are vastly overused. Liberals like Obama use the myth to claim better coverage will reduce all that unnecessary ER use and free up money to insure the uninsured. Conservatives use the myth to decry more coverage. According to conservatives, better coverage will just encourage poor people to consume even more unnecessary care. As conservative blogger Avik Roy wrote on the Forbes blog about the new study, “Because Medicaid was nearly free to the program’s enrollees, those enrollees ended up seeking – and receiving – lots of inappropriate care.”

http://www.forbes.com/sites/theapothecary/2014/01/02/new-oregon-data-exp…

In fact, researchers have determined (with the luxury of hindsight, it should be noted) that only 10 percent of Medicaid enrollees go to emergency rooms for non-urgent matters, which is close to the 7 percent rate seen in the privately insuredhttp://www.hschange.com/CONTENT/1302/.

Like all sturdy myths, the overuse myth has a kernel of truth to it – some overuse of medical services does occur. But underuse is far more common than overuse, even among the insured, possibly four times worse according to a 2003 study by Elizabeth McGlynn et al. in the New England Journal of Medicine. Even for some expensive procedures like heart surgery underuse is far worse than overuse.

The media’s surprise at the new study’s finding and reporters’ and right-wing bloggers’ eagerness to report the political winners and losers of this story concealed the real problems, notably:

•  Because America sequesters its poor people in a separate program called Medicaid, it has never found the political will to pay the providers who care for poor people anywhere near as much as we pay providers for taking care of everyone else;

•  this policy has made it difficult for Medicaid recipients to find doctors;

•  this difficulty is further aggravated by the widespread use of managed care in Medicaid programs which forces recipients to pick doctors from “preferred” lists; and

•  Despite these facts, Oregon sought to increase coverage under Medicaid while doing little to increase the supply of primary care providers or the resources available to those who treat Medicaid enrollees.

In a sane world, we wouldn’t be debating whether a rich nation should be attempting to insure a minor portion of its uninsured through a separate and underfunded program for the poor. But if we must debate whether to do that, the least we can do is focus on the real issues, not promises of cost containment based on a false assumption, in this case, that overuse is our main problem and underuse, high prices and excessive administrative costs are nonexistent or trivial.

The truth is we are going to need to put more money into primary care in this country, and it will have to come from somewhere. Single-payer supporters propose that it come from reduced prices and reduced administrative waste. By clinging to their pet version of overuse, managed-care and high-deductible advocates dodge the issue. Managed care advocates claim that even within the underfunded world of Medicaid greater access to primary care can be paid for without harm to patients by reducing overuse via capitation, report cards, pay-for-performance, ACOs and other vaguely defined “changes to the delivery system.” High-deductible advocates claim consumption of medical services by poor people can be reduced without harm (because the foregone services weren’t necessary), and the savings can be directed to lower taxes or a lower deficit. Neither claim is credible.

Medicare’s Rollout vs. Obamacare’s Glitches Brew

By David Himmelstein and Steffie Woolhandler
Health Affairs Blog, January 2, 2014

The smooth and inexpensive rollout of Medicare on July 1, 1966 provides a sharp contrast to the costly chaos of Obamacare.

We won’t rehearse the chaos part here, just the costs.

As of March, 2013, federal grants for Obamacare’s state exchanges totaled $3.8 billion.  Spending for the federal exchange is harder to pin down because funding has come from multiple accounts, including: the $1 billion Health Insurance Implementation Fund; DHHS’ General Departmental Management Account and General Departmental Management Account; CMS’s Program Management Account and the Prevention and Public Health Fund.  CMS estimates fiscal 2014 spending for the federally-operated exchanges at $2 billion.  So it’s safe to say that the costs of getting the exchanges up and running, and (hopefully) enrolling 7 million people in the program’s first year will exceed $6 billion.

Bear in mind that the exchanges won’t actually pay any medical bills, just sign people up for coverage.  So billions more in overhead costs will show up on the books of the private insurers and state Medicaid programs that will actually process medical claims.

Back in 1966, Medicare started paying bills for 18.9 million seniors (99 percent of those eligible for coverage) just 11 months after Pres. Johnson signed it into law.  Overhead costs for the first year totaled $120 million (equivalent to $867 million in 2013).  But that figure includes the cost of processing medical bills, not just the enrollment costs

Moreover, Medicare and Medicaid (which was passed at the same time) displaced several smaller federal health assistance programs, saving about $376 million on their overhead costs (2013 dollars).

Signing up most of the elderly for Medicare was simple; they were already known to Social Security Administration, which handled enrollment.  To find the rest, the feds sent out mailings to seniors, held local meetings, and asked postal workers, forest rangers and agricultural representatives to help contact people in remote areas.  The Office for Economic Opportunity spent $14.5 million to hire 5,000 low income seniors who went door-to-door in their neighborhoods.

Despite predictions of chaos, and worries that the newly-insured seniors would flood the health care system, there were few bottlenecks.  Hospitals continued to operate smoothly and no waiting lists materialized.  The only real “glitch” was that many hospitals in the Deep South initially refused to integrate their facilities – which Medicare required for certification and payment.  But by the end of the first month, 99.5 percent of hospitals had signed on.

Obamacare’s start-up has been rocky because complexity is “baked in” to the design, just as simplicity was “baked in” to Medicare.  Obamacare’s exchanges must coordinate thousands of different plans, with premiums, co-payments, deductibles and provider networks that vary county-by-county; Medicare offered a single, uniform plan.  The exchanges must calculate subsidies for each applicant after first verifying income, family size and immigration status; Medicare offered free hospital coverage, with a minimal ($22) uniform premium for doctor coverage.  Instead of setting up a new bureaucracy to collect premiums from millions of enrollees and funnel them to private insurers, Medicare relied on the existing payroll and income tax system to garner funds.

Obamacare’s byzantine complexity reflects the contortions required to simultaneously expand coverage and appease private insurers.  And private insurers will exact a steep ongoing toll.  Medicare’s overhead is just 2 percent, vs. an average of 13 percent for private plans (on top of the Exchanges’ costs, roughly 3 percent of premiums).  A single payer plan that excluded private insurers could save hundreds of billions in transaction costs.

Medical quality improvement experts often advise hospitals to “avoid workarounds”; fix system defects rather than force doctors and nurses to sidestep problems like faulty equipment, understaffing, or illegible handwritings.  This advice is equally valid for health reform.  To avoid glitches and wasteful expense, design the system right; eliminate private insurers and cover everyone under a single payer program.

http://healthaffairs.org/blog/2014/01/02/medicares-rollout-vs-obamacares…

PNHP’s press release: https://pnhp.org/news/2014/january/medicare%E2%80%99s-1966-glitch-fre…

“Obamacare is a giant workaround crafted to keep private insurers at the center of the health care system,” said co-author Dr. David Himmelstein, a primary care physician, professor of public health at the City University of New York and lecturer in medicine at Harvard Medical School.

“The simple single-payer, Medicare-for-all approach would save more than $400 billion annually on bureaucracy, enough to give every American first-dollar coverage. But to get those savings you have to break private insurers’ stranglehold on health care and on Washington,” he said, adding, “The glitches in Obamacare’s rollout don’t come from government incompetence, but from political cowardice.”

Delivery Matters: the high costs of for-profit health services in Alberta

By Diana Gibson
Parkland Institute, April 2012
In Alberta and across Canada, the private for-profit healthcare sector is being positioned as a solution to wait times and the financial challenges facing the health care system. Consequently, for-profit delivery of healthcare is increasing.
(T)his report explores the delivery of clinical services, specifically arthroplasty or total hip and knee replacements, through private, for-profit clinics. It includes a case study of Calgary’s Health Resource Centre (HRC) that specifically examines the cost, quality, access and other implications of expanding this form of provision and places it in the context of national and international research. (The Health Resource Centre, based in Calgary and owned by Networc Health Inc., was Alberta’s flagship private surgical facility until it went bankrupt in 2010.) It also examines a wait-list reduction pilot project, the Alberta Hip and Knee Replacement Project, which includes for-profit and not-for-profit providers, allowing for a comparison of the two models.
The Alberta Hip and Knee Replacement Project
In 2004 the provincial government initiated a pilot project to address a myriad of challenges within the arthroplasty field. One of the key elements of this pilot project was to address wait times as directed by the Premier’s Advisory Council on Health and its Framework for Reform. A partnership was carved out between Alberta Health – which contributed $20 million in funding – three regional health authorities (and their clinical partners including HRC), the Alberta Orthopedic Society, the Alberta Bone and Joint Institute and physicians from across the province.
The trial illustrated that with improved management practices (such as centralized intake and assessment), realignment of resources, and collaboration and cooperation across the delivery path, costs can be reduced, wait times can be decreased and benefits to patients enhanced within the public, not-for-profit system. Specifically, the trial reduced overall wait times from family doctor through to surgery by 90 per cent (from 19 months to approximately 11 weeks).
Risks and Opportunities of HRC
The surgeries were more expensive, but came with significant risk in other areas as well: the dependency between the parties became detrimental to both; the relationship created expensive duplication of capital and lack of control over infrastructure planning; and the private contract meant a serious lack of accountability and transparency. Additional risks identified in international studies include lower quality of services and poorer articulation with the broader health community.
Comparing For-Profit to Non-Profit
The Alberta government acknowledged that the for-profit surgeries would cost more but justified this with the wait-time reductions were worth the cost. The examination of the performance of HRC in contrast with the public non-profit elements of the pilot project helps to illuminate the wait-list issue. The analysis above reveals that the public partners in the Alberta Hip and Knee pilot are still working well, with wait-time advances at lower cost than the HRC and without the risks.
The wait-list reduction achievements of this project were attained despite, not because of, for-profit involvement in the trial. It was the specialized or focused nature of the clinic, not the investor-owned nature, which increased patient access and enabled innovation. This is consistent with international evidence from Canada and abroad demonstrating that wait lists are actually lengthened as a result of the existence of for-profit entities delivering clinical health care services.
What advocates of for-profit delivery suggest is that the removal of patients from the public queue will shorten the queue. What they fail to note is that the removal of health professionals from the public delivery system will slow down the system and result in the queue growing even longer.
The Alberta Hip and Knee pilot project demonstrates the capacity of the public health system to evolve and innovate in such a way that costs are maximized, wait lists are reduced, and patient outcomes are improved. The pilot set the stage for province-wide learning and provided a platform for a revolution in hip and knee surgical practices. Gains from the pilot continue to be made through the Transformational Improvement Program (TIP), which specifically addresses wait lists. Results to date show improvements in length of stay at almost every site, as well as gains in other key indicators of quality such as patient satisfaction and early mobilization after surgery. The rewards are substantial. They include higher volumes of surgeries as more bed days become available, greater satisfaction as patients move more quickly from referral to surgery, and reinvestment of the efficiency savings in ways that can further improve care quality and safety. Our public health system is more than able to meet the needs of our citizens when the political will exists and resources are allocated.
Conclusion
It matters who delivers clinical services. The spectacular fall from grace of HRC is a fascinating study in the ills of health care privatization, the risks to patient care, and the need to reiterate the importance of our publicly financed and delivered health care system. The case study of HRC is very consistent with international studies, validating the conclusion that for-profit incursions into the health care system are risky, costly and lack the accountability Canadians expect, demand and deserve.
The success of the public partners in the pilot project on wait-time reductions in Alberta clearly shows that public solutions can achieve the same wait-list targets at less cost and much less risk to the public.
http://parklandinstitute.ca/downloads/reports/HRC-Report.pdf

And…

Neat, Plausible, and Wrong: The Myth of Health Care Unsustainability

Canadian Doctors for Medicare
February 2011
Which Costs Are Rising?
While the cost of Medicare has not grown as a percent of GDP over the last 35 years, there have been significant increases in total health care system costs over the same period, and those increases have accelerated in the last decade. Overall health spending in Canada has risen from about 7% of GDP in 1975 to about 10.7% in 2008. In 2010, heath care spending was estimated to be about 12% of GDP.
If Medicare costs are stable, and public sector costs are rising slowly, why are total health care costs increasing rapidly? The real cost driver is precisely the thing that critics of Medicare tout as the solution: private health care.
Currently 30% of all health care spending is in the private sector, up from 24% in 1975. That growth is the result of significant increases in costs in the private health care sector, including out-of-pocket spending and the costs of private insurance.
http://www.canadiandoctorsformedicare.ca/images/stories/Neat_Plausible_and_Wrong.pdf

In spite of the overwhelming body of evidence to the contrary we still hear over and over again that the private sector always produces higher quality at lower costs – whether in health care financing through private insurers, or in health care delivery through investor-owned facilities. Canada has provided us with yet another real-life experiment that confirms, once again, that the opposite is true.
The Alberta government understood that private care would cost more than in the public sector, but they agreed to it in an effort to reduce wait times. However, not only did the private sector provide care at higher costs, they had intruded into the loosely-integrated public system, creating the potential of increasing wait times in the public sector (explained above).
Fortunately, with a coordinated effort to attack this problem – coordination that only happens in the public sector – Alberta was able to reduce its wait times for orthopedic procedures from 19 months down to 11 weeks – in spite of, rather than due to, involvement of the private sector.
Also, quite ironic but very instructive, not only did care cost more when delivered by the private, for-profit Health Resource Centre, the extra costs were not enough and the business model failed – ending in bankruptcy.
In health care financing and delivery, public and non-profit institutions can always provide greater value and efficiency than the for-profit private sector, but it requires a government that is supportive of their public financing system.
In 2005, Conservative Premier Ralph Klein of Alberta wrote in the Calgary Herald, “Let me be blunt. We have unacceptable waiting lists in our publicly funded, rationed health-care system, and all the money in the world is not going to eliminate them… In simple terms it means that if you are in pain or suffering and cannot wait in line, you should be able to buy the health care you need.”
The Calgary Herald published my response which stated, “Ralph Klein states that ‘all the money in the world’ is not going to eliminate waiting lists, unless the source of the funds is private instead of public. What nonsense. Excessive queues are eliminated by making minor, selective adjustments in the system’s capacity. Responsible stewards of any health-care system, public or private, will make these adjustments. The difference is the public system would be adapted to accommodate everyone, whereas private systems accommodate only those who can pay.”
Of course, Alberta didn’t listen to me and continued on with its efforts to privatize. However, they did involve the public sector in queue reduction, with considerable success. But by including the private sector, the experiment was much more expensive, and resulted in further losses through the HRC bankruptcy.
Although these reports are about Canada’s Medicare system, the conclusions could apply to our Medicare as well, if we expanded it into a single payer national health program. It would be less expensive and more effective than what we have, provided we also elect stewards who believe in and support public systems.

Orszag: Defined Contributions Define Health-Care Future

By Peter Orszag
Bloomberg, December 6, 2011

Over the next decade, we are likely to see a shift in health insurance in the U.S.: So-called defined-contribution plans will gradually take over the market, shifting the residual risk of incurring high health-care costs from employers to workers.

The market today is dominated by “defined-benefit” plans, under which companies determine a set of health-insurance benefits that are provided for employees. These will gradually be replaced by defined-contribution plans, under which companies pay a fixed amount, and employees use the money to buy or help pay for insurance they choose themselves.

The fundamental driver of this shift is the effort by American businesses to reduce their exposure to health-care costs. But the recent health-care-reform law may accelerate the shift.

The change in health insurance is already well under way in coverage for retirees. In the early 1990s, in response to accounting changes and rising costs, companies began to re- evaluate retiree health plans, and some capped the amount they were willing to pay at a multiple of existing costs. Over time, as those limits were reached, most companies declined to raise them, thereby effectively creating defined-contribution retiree health-insurance plans, with the company’s contribution set by the cap. Exchanges have been created to allow retirees to use these employer contributions to purchase their own health insurance.

For current workers, the precursor to a defined- contribution approach is the “consumer-driven” health plan. This typically has higher deductibles and co-payments than a traditional plan has, and it is often tied to a health savings account. It typically still provides generous insurance for catastrophic cases.

Some insurers are already anticipating the shift. Bloom Health Corp. will begin offering defined-contribution exchanges in 2012. Bloom, based in Minneapolis describes itself as “a leader in the defined-contribution health benefits marketplace,” and says it is “committed to assisting employers of all sizes move toward an employer-sponsored system that has effective cost predictability for employers and increased choice and personalization for employees.” In September, the company announced that Health Care Service Corp., Blue Cross Blue Shield of Michigan and WellPoint (WLP) Inc. had purchased a majority of its equity.

The inevitable transition to defined-contribution health insurance may get a little push from the new health-care-reform law. Indeed, the legislation may have a larger impact on the type of health-insurance plan that employers offer than on their decision about whether to drop health-care benefits altogether.

If most employers do retain their health plans, the state insurance exchanges created under the new federal health-care law will make the basic idea of a defined-contribution health plan more prevalent, and thus may speed its adoption. The regulations written to carry out the new law will determine how things play out. If defined-contribution plans that are sufficiently generous count as employer-based coverage – as is generally expected – the trend toward such plans will probably accelerate.

In any case, the bottom line is that a shift toward defined-contribution plans seems likely. I’d be willing to bet $1 that most large U.S. employer health-care offerings in 2020 will be defined-contribution plans. Any takers?

(Peter Orszag is vice chairman of global banking at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.)

http://www.bloomberg.com/news/2011-12-07/defined-contributions-define-health-care-ahead-commentary-by-peter-orszag.html

One of the more important tools to enable the transfer wealth up the income ladder is to shift from defined benefit programs to defined contributions. With a defined contribution, a set dollar amount is contributed to the program regardless of what the future benefits may cost, whereas with a defined benefit program, the projected costs of the program must be fully funded so the benefits will always be there when needed.

In the case of pension plans, a defined contribution allows the employer to shift the risk of wage inflation and the risk of living longer from the employer to the employee. The latter is particularly a problem since many individuals will outlive the funds accumulated in their defined contribution pension plan. It is true that they could use those funds to buy an annuity, but fewer funds would be available because it is not a defined benefit plan, and converting to an annuity burns up even more of the retirement funds to pay for sales and administrative costs plus the costs of insuring against the risk of living longer.

How does this move wealth up the income ladder? Defined benefit pension plans were considered to be a standard part of the well-earned employee benefit package. These defined benefit plans were actually paid for by foregone wage increases. In the last couple of decades, contributions to the pension plans were limited by changing to defined contribution, yet wages remained flat. The foregone wages never came back. Workers suffered a net loss, while employer/owners kept the difference, thus an upward transfer of wealth.

Now we are seeing this same inequitable concept being applied to employer-sponsored health plans. Traditional health plans provided generous benefits and often had an actuarial value of 90 percent (the plan paid 90 percent of health care costs and the worker paid 10 percent). We are now seeing a decline in actuarial value. The most obvious contributing factor is the relatively abrupt increase in the adoption of high-deductibles for employer-sponsored plans, but also benefits covered are diminishing, often through less transparent, innovative changes to the plans. Once again, benefits are being reduced but without a commensurate return of forgone wages.

Particularly alarming in Peter Orszag’s article is the investment of WellPoint and Blue Cross Blue Shield of Michigan in Bloom Health Corporation. Bloom Health is “a leader in the defined-contribution health benefits marketplace.” They are committed to a system that has “effective cost predictability for employers,” but exposes employees to the ever higher costs and risks of health care.

This ongoing shift to defined contribution in health care is not limited to businesses. In a recent message, we reported that the Institute of Medicine is recommending that the essential health benefits for the state insurance exchanges under the Affordable Care Act “should be defined as a package that will fall under a predefined cost target rather than building a package and then finding out what it would cost.” “Predefined cost target” is a defined contribution.

Even Medicare is vulnerable. The New York Times, in a recent editorial, stated that for Medicare, “serious analysis and testing of premium support are clearly worth pursuing.” Premium support is a defined contribution that would be used to purchase a private Medicare plan. Medicare beneficiaries would be responsible for paying for the balance of the premium for whatever coverage they could get. Further, with tight control of the defined contribution, an increasing percentage of health care costs would be shifted to Medicare patients in the form of higher out-of-pocket spending.

What do all of these have in common? They are all methods of perpetuating the private insurance industry, while shifting risks from the insurers to the insured individuals. They reduce the financial commitment of employers and the government, but increase the financial burden for workers, their families, and retirees – most of us. However, it is a jobs program – for personal bankruptcy attorneys, as if our health care system didn’t give them enough work already.

Defined contribution is a nefarious conspiracy directed at the masses to benefit the well off. We can counter by demanding an end to a system dominated by private insurers and replacing it with a single, publicly-financed and publicly-administered national health program – an improved Medicare for everyone.

(After we fix Medicare, we may want to think about greatly reinforcing our publicly-financed, publicly-administered, defined benefit Social Security program so we wouldn’t have to put up with the abuses of our private, defined contribution pension plans. Really.)

Medicare Advantage Premiums To Fall 4% Next Year

By Phil Galewitz
Kaiser Health News, September 15, 2011

The Obama administration on Thursday said the nearly 12 million senior citizens enrolled in Medicare health plans will see their monthly premiums drop by an average of 4 percent while benefits remain stable next year.

Enrollment in the plans, which now have about a quarter of all Medicare beneficiaries, is expected to grow by 10 percent in 2012, said Jonathan Blum, deputy administrator for the Centers for Medicare and Medicaid Services.

He attributed the premium drop to the agency’s strong negotiations with plans as well as the companies’ continuing desire to serve the market.

Dan Mendelson, the chief executive of consulting firm Avalere Health, said plans are lowering premiums because their costs have fallen as their members have used fewer services in the midst of the economic downturn.

The plans were targeted by Democrats who complained that the government pays more per capita for beneficiaries in the private plans than it spends on those in traditional Medicare.

Federal payments were frozen to Medicare Advantage plans this year and are dropping by less than 1 percent in 2012.

The health care law softens the impact of Medicare Advantage cuts in 2012 by providing billions of dollars for quality bonuses for highly rated plans that received four or five stars in a government grading system.

In a policy shift last fall, HHS decided to lower the bar for bonuses. Average-quality plans garnering just three or three-and-a-half stars would also get bonuses, although at a lower percentage than top-tier plans.

The HHS decision means that nearly 90 percent of Medicare Advantage enrollees are in plans now eligible for a bonus. Under the tougher approach Congress took in the health law, only about 33 percent would have been in plans getting the extra payments.

http://www.kaiserhealthnews.org/Stories/2011/September/15/medicare-advantage-premiums-fall-next-year.aspx

The Obama administration is countering Republican claims that the Affordable Care Act stole money from Medicare. They are trumpeting the facts that Medicare Advantage premiums are 4 percent lower, and enrollment is expected to be up by 10 percent. We really need to get past the deceptive rhetoric on both sides to understand what really is going on.

The Medicare Advantage program began as a fraud. These private plans were paid 113 percent of the costs of the traditional Medicare program so that they could offer extra benefits to entice individuals away from the public program. Once a sufficient number of individuals joined the private plans, funding for the public program would be slashed and patients would flee into the private plans. Only then would the public learn that the next planned step would be to shift to a Ryan-type voucher (premium support), which would dump much more of the costs onto patients.

The Affordable Care Act included a provision to gradually reduce these Medicare Advantage overpayments. The scheduled reduction for 2012 will be less than 1 percent. But members of the Obama administration have been listening to the insurers and the Republicans. They decided that this very modest reduction might make them more vulnerable to Republican attacks as we enter an election year. So what did they do?

They replenished the reductions with billions of dollars in quality bonuses designed for top tier 4 and 5 star plans, but they expanded the program to include 3 star plans. That way, plans covering 90 percent of Medicare Advantage enrollees would receive additional payments. A quality bonus for almost every plan is nothing more than a blanket payment increase. They have preserved this gift to the private insurers and then have the gall to claim that the programs are stronger and more popular as a result of their “strong negotiations” with the plans! Strength in politics seems to be proportional to the size of the gifts of cash, especially appalling when you realize that this is our tax money.

By the way, how much is that 4 percent reduction in premiums that the Medicare Advantage enrollees will be paying? It averages about $1.48 monthly per enrollee. That tough negotiating sure hit the insurers hard. $1.48! I can picture the insurers leaving the negotiations saying that they sure were hit hard this year, but they hope to do better in next year’s negotiations, as they collapse in hysterics right after the door closes.

One more important fact to keep in mind is that these extra insurance company bonuses are paid partly by our Part B premiums in the traditional Medicare program. Those of us who refuse to join the Medicare Advantage plans are paying higher premiums to buy more patient benefits, more insurer profits and more administrative services for those who have enrolled in the private plans. We now have an official government policy that requires us to pay more and get less if we don’t privatize ourselves!

Dishonesty is so prevalent in politics today that I think I almost understand the graffiti that we saw yesterday while hiking on our ridge trail: “The truth is a lie!”

Invisible Hands

By Kim Phillips-Fein
This book is about those determined few, those ordinary businessmen from companies of different sizes and from various industries, who worked for more than forty years to undo the system of labor unions, federal social welfare programs, and government regulation of the economy that came into existence during and after the Great Depression of the 1930s.
http://www.amazon.com/Invisible-Hands-Making-Conservative-Movement/dp/0393059308

And…

Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States

By Jacob S. Hacker and Paul Pierson
Politics and Society
June 2010
Too many economists and political scientists have treated the American political economy as an atomized space, and focused their analysis on individual actors, from voters and politicians to workers and consumers. But the American political economy is an organized space, with extensive government policies shaping markets, and increasingly powerful groups who favor winner-take-all outcomes playing a critical role in politics. Finding allies in both political parties, organized groups with a long view have successfully pushed new initiatives onto the American political agenda and exploited the opportunities created by American political institutions to transform U.S. public policy — through new enactments and pervasive policy drift. In the process, they have fundamentally reshaped the relative economic standing and absolute well-being of millions of ordinary Americans. Politics and governance have been central to the rise of winner-take-all inequality.
http://pas.sagepub.com/cgi/reprint/38/2/152
(The entire special June issue of Politics and Society is devoted to the Winner-Take-All article by Hacker and Pierson, and to six responses. It can be downloaded for free at: http://pas.sagepub.com/)

And…

One response to Hacker and Pierson: The Public’s Role in Winner-Take-All Politics

By Andrea Louise Campbell
Through its political dominance and cagey understanding of esoteric and complicated economic and regulatory policies, the top 1 percent has enjoyed stunning success in shaping public policy to its advantage. But it’s not enough to examine the strategies of the economic elite; to understand fully how they have achieved such a remarkable degree of inequality it is necessary to examine why ordinary citizens have failed to act as an effective counterweight. One chief problem is that citizens simply don’t pay attention to such complex policies; another is that even if they did, they can’t figure out what their stances should be, and no one is helping them. Low salience and great ignorance make for a disastrous democratic brew. The brilliant organizing strategies of the rich tell half the story; the lack of organization and hence information among ordinary Americans tells the other crucial half.
http://pas.sagepub.com/cgi/reprint/38/2/227

And…

Six Things to Know About Health Care Coverage

A Study of the Media and the Health Care Debate

Pew Research Center
Project for Excellence in Journalism
June 21, 2010
Conclusion
Last summer, as tempers flared in town halls throughout the country, CBS correspondent Wyatt Andrews described the environment as a “show of August heat.” And in many ways, it was the heat of the health care battle that most interested and influenced the media.
Coverage peaked when the public got the most passionate and when the politics got the most partisan. The press focused far more on the horserace aspects of the legislative struggle than on examining the system it was designed to reform. No one lavished more attention on the subject than the talk show hosts, who spend much of their time engaging in ideological warfare. And the terms that resonated in the media narrative, perhaps most notably “death panels,” were those that packed a polarizing punch.
All of which raises the question of the extent to which the media shed light versus heat when it came to health care reform. Certainly, many outlets did good work covering the numerous layers of the complex issue. But it’s also true that the public seemed consistently confused by the health care debate and had a difficult time sorting out fact from fiction.
http://www.journalism.org/node/20966

People who understand health policy have difficulty understanding why there has not been massive public demand for reform that will make health care affordable and accessible for all of us. Why did we settle for the most expensive model of reform when it falls so short of our goals – leaving tens of millions with impaired access and potentially exposed to financial hardship should they require health care? Today’s quotes are particularly important because they provide some insight as to what hit us.
Anyone who has been paying any attention at all is certainly aware of the proliferation of very well funded conservative and libertarian organizations. What is not commonly realized is the ability of these organizations and the individuals behind them to permeate the political process. They have been highly effective in transforming U.S. public policy.
The conservative/libertarian faction has certainly been very influential in assisting the creation of inequality-inducing policies and laws, but what has caught most of us off guard is the phenomenon of “drift,” as explained by Hacker and Pierson:
“A second mechanism, which we call ‘drift,’ is equally, if not more, important. Drift describes the politically driven failure of public policies to adapt to the shifting realities of a dynamic economy and society. Drift is not the same as simple inaction. Rather, it occurs when the effects of public policies change substantially due to shifts in the surrounding economic or social context and then, despite the recognition of alternatives, policy makers fail to update policies due to pressure from intense minority interests or political actors exploiting veto points in the political process. Thus, drift requires (1) policies whose effects change due to shifting circumstances, (2) recognition of this change, (3) availability and awareness of viable alternatives, and (4) nonmajoritarian reasons why those alternatives are not adopted.”
Ouch! We have drifted into a health care morass, and the rigid conservative/libertarian public policy agenda – gradually formulated over the past half century – has resulted in both Democrats and Republicans adopting policies that merely expand the the mess in the morass. (Keep in mind that the financing system in the Accountable Care Act was originally promoted by conservative economists and think tanks.)
Hacker and Pierson emphasize the precipitous rise of income confined at the very top, and they demonstrate it with impressive graphs and tables. For our purposes, it serves as a proxy for the public policy flaws that have perpetuated profound dysfunction in our tremendously expensive health care system.
We would like to think that the solution would be found in our democratic process. But we have an uninformed electorate that doesn’t even realize that they are victims of the failed public policies of the drift. The Pew report confirms that even the media focused on the heat rather than the light during the health care debate. How is the average citizen going to be able to understand health policy when the primary source for most is cable and network news and talk radio?
If you think that the average voter is smarter than that, look at the results this weekend of the Peter G. Peterson Foundation-sponsored AmericaSpeaks national town hall meetings. The majority believe that the answer to our high health care costs is simply to reduce spending by 5 percent. They also believe that we should increase retirement age for Social Security to 69. The prevailing public policy of government budget neutrality – with adjustments made primarily on the spending side and not on the revenue side – has trumped the public policies of social solidarity.
Drift works to the advantage of anti-government forces. Effective public policies – such as single payer – are merely left out of the conversation. And the rich get richer – much, much richer.
How do you counter drift? Educate and organize at the grassroots level. New public policies require action.

WellPoint’s Kleinman Sees Health Insurer ‘Oligopoly’

By Alex Nussbaum
Bloomberg Businessweek
June 24, 2010
U.S. health insurers are “moving towards an oligopoly,” a process that this year’s health-care overhaul will accelerate, the investor-relations chief at WellPoint Inc. said today.
New regulations on administrative spending and premium increases will push some independent insurers out of business or into deals with bigger rivals, said Michael Kleinman, vice president for investor relations, at a Wells Fargo & Co. conference in Boston.
The insurance market is becoming an oligopoly, a market where supply and pricing are dominated by a few companies, “and health-care reform is going to move us in that direction more quickly,” Kleinman said. “There are going to be smaller insurers that are not going to be able to survive in this marketplace.”
Led by WellPoint, 12 health plans cover two-thirds of the enrollment in the U.S. commercial-insurance market, said Ana Gupte, a Sanford C. Bernstein & Co. analyst in New York, in a June 11 note to clients.
The health-care overhaul is likely to push at least 100 insurers with 200,000 members or less out of the business “as the plans are increasingly unable to invest in the infrastructure and technology to effectively manage care,” Gupte wrote.
“Insurance companies should see this reform as an opportunity to improve care and increase competition,” (said President Obama in remarks on June 22 touting the health-care overhaul).
http://www.businessweek.com/news/2010-06-24/wellpoint-s-kleinman-sees-health-insurer-oligopoly-.html

President Obama claims that this is an opportunity for insurers to increase competition, yet the very structure of the weakly regulated insurance markets established by the Affordable Care Act will concentrate the private insurers into an anti-competitive, oligopolistic market.
The insurers will keep 15 to 20 percent of the premiums to sell us plans that cover only 60 to 70 percent of our care, and they won’t really have to compete with each other to do that. And this outrageously expensive scheme allegedly was to promote competition?
Forget oligopolistic competition! Let’s throw out the middlemen and establish our own public monopsony – a single payer national health program. That’s market control that works for the benefit of us instead of the insurers.

Name Of Game In Health Care: Cheaper, Better, Faster

By Jennifer Rossa
The Wall Street Journal
June 13, 2010
Now that health-care reform legislation has been signed into existence in the U.S., venture investors say they are focused even more intently than before on companies with products that aim to lower the cost of health-care.
Leslie Bottorff, a general partner at Onset Ventures, said she anticipates there will be opportunities to invest in health-care providers, infrastructure, and technology, as they all provide ways to take costs out of the system without affecting how doctors are paid. “You can’t scale doctors,” she said, speaking on a panel at the Dow Jones Limited Partner Summit in New York.
“Cheaper, better, faster is absolutely the name of the game” now, Bottorff said.
http://blogs.wsj.com/venturecapital/2010/06/23/name-of-game-in-health-care-cheaper-better-faster/

So the venture capitalists are lining up ready to invest in companies with products that “aim to lower the cost of health-care.” How many pharmaceutical firms do you suppose are ready to market innovative new inexpensive drugs that will replace their older more costly products? How many medical device companies are ready to market new devices that will cost less and make obsolete their existing products which are highly profitable? But doctors, well you can’t scale them.
The venture capitalists are there for one reason only – to make money, as much as possible. Do they really believe that the pharmaceutical companies and medical device manufacturers don’t have the same goal? Money, money, money. Yeah. Forget about that “cheaper” part.

Fact Sheet: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans

U.S. Department of Health & Human Services
Accessed June 23, 2010
During the health reform debate, President Obama made clear to Americans that “if you like your health plan, you can keep it.”  He emphasized that there is nothing in the new law that would force them to change plans or doctors. Today, the Departments of Health and Human Services, Labor, and Treasury issued a new regulation for health coverage in place on March 23, 2010 that makes good on that promise.
Compared to their polices in effect on March 23, 2010, grandfathered plans:
* Cannot Significantly Cut or Reduce Benefits.
* Cannot Raise Co-Insurance Charges.
* Cannot Significantly Raise Co-Payment Charges.
* Cannot Significantly Raise Deductibles.
* Cannot Significantly Lower Employer Contributions.
* Cannot Add or Tighten an Annual Limit on What the Insurer Pays.
* Cannot Change Insurance Companies
http://www.healthreform.gov/newsroom/keeping_the_health_plan_you_have.html

And…

“Keeping the insurance you have” – Don’t believe it!

Comment by Don McCanne, MD
Quote of the Day
July 11, 2008
Pause for a minute. Think back to the insurance you had twenty years ago. Remember? Now do you still have precisely that same coverage? Unless you are over 85 and have been in the traditional Medicare program for the past twenty years, it is highly likely that you do not.
So why do you no longer have the better coverage that you had twenty years ago? You may have changed jobs, likely more than once, and lost the coverage that your prior employer provided. Your employer may have changed plans because of ever-increasing insurance premiums. Frequently your insurer introduces plan innovations such as larger deductibles, a change from fixed-dollar copayments to higher coinsurance percentages, tiering of your cost sharing for services and products, reduction in the benefits covered, dollar caps on payouts, and other innovations all designed to keep premiums competitive in a market of rapidly rising health care costs. You may have lost coverage when your age disqualified you from participating in your parents’ plan. You may have found that health benefit programs have been declining as an incentive offered by new employers. Your children may have lost coverage under the Children’s Health Insurance Program when your income, though modest, disqualified your family from the program. Your union may not have been able to negotiate the continuation of the high-quality coverage that you previously held. Your employer may have reduced or eliminated the retirement coverage that you were promised but not guaranteed. Your employer may have filed for bankruptcy without setting aside the legacy costs of their pensions and retiree health benefit programs. You may have decided to start your own small business and found that you could not qualify for coverage because of your medical history, even if relatively benign, or maybe your small business margins are so narrow that you can’t afford the premiums. You may have been covered previously by a small business owner whose entire group plan was cancelled at renewal because one employee developed diabetes, or another became HIV infected. Your COBRA coverage may have lapsed and you found that the individual insurance market offered you no realistic options. You may have retired before Medicare eligibility, only to find that premiums were truly unaffordable or coverage was not even available because of preexisting medical problems.
https://pnhp.org/news/2008/july/keeping-the-insurance-you-have-dont-believe-it

The opponents of reform, especially the Republicans in Congress, are making a big deal out of the fact that the Affordable Care Act breaks President Obama’s promise that you will be able to keep the insurance plan you have. The Obama administration is countering by publicizing the new regulations that will allow plans in place on March 23, 2010 to be grandfathered, supposedly assuring that you will be able to keep your plan if you had it on that date.
Actually, this is a silly debate. As explained in my comment two years ago, except for those individuals on Medicare or other financially sound retiree programs, almost no one gets to keep the insurance he or she has. Rather than stabilizing existing coverage, the regulations that would grandfather plans make it less likely, in an environment of increasing health care costs, that existing plans would continue to be offered without significant changes.
In an effort to make the insurance plans more affordable, further adjustments in deductibles and coinsurance are almost inevitable, and the ever-changing insurance marketplace will surely result in changes in insurance companies selected. Insurance price shoppers, who are mostly healthy, will be much more sensitive to size of the premiums than they would be to cost sharing; this is precisely what has happened throughout the individual market. These pressures would accelerate the decline in grandfathered plans.
This HHS report predicts an end to the individual market and a sharp decline in the small employer market. They claim that the large employer market will not see much change, but other studies have shown that large employers are already switching to plans with larger deductibles and other cost sharing simply to keep premiums affordable, and many are switching the insurers that they are using, thereby losing their eligibility for the grandfathered status. Besides, for the reasons mentioned in the July, 2008 comment above, almost no one will end up staying indefinitely in the same employer sponsored plan anyway.
“Keeping the insurance you have” was only a slogan used to market the reform proposal. It wasn’t a serious long term strategy. Instead of wasting time in another political dogfight – this time over grandfathering – we should move forward with supporting policies that will work for everyone – like a single payer national health program.

Insurance Industry Inflates Rates While Falsely Blaming New Health Care Law

Health Care for America Now! (HCAN)
June 2010
The health insurance industry argues that rising medical costs are to blame for runaway premiums, but it’s clear that they are constantly looking for excuses to raise rates and expand their cash flows.
Premium hikes have surpassed the growth of medical costs, wages and overall inflation. From 2000 to 2008, premiums for families enrolled in employer-sponsored health plans increased 97 percent, while rates for individuals in workplace health plans climbed 90 percent. During that same period, private insurers’ payments to health care providers rose only 72 percent, medical inflation increased 39 percent, wages grew 29 percent and overall inflation climbed 21 percent. Health insurers are basing increases on something other than medical inflation, wages or general inflation.
http://hcfan.3cdn.net/d8f62f1fc66d8e0224_q6m6bnff1.pdf

If you look beyond the inflammatory anti-private insurance rhetoric of this report (mostly appropriate, some perhaps not), you can find a few real numbers to help understand rising insurance costs. From 2000 to 2008, overall inflation increased 21 percent, but medical inflation increased 39 percent, while employer-sponsored insurance premiums increased 90 percent for individuals and 97 percent for families.
The fact that medical inflation grew faster than overall inflation supports the position of the private insurers that rising health care costs have necessitated higher premiums, but that isn’t the whole story.
Private insurers’ payments to health care providers increased at 72 percent, considerably higher than the rate of medical inflation. This supports the insurers’ position that failure of government reimbursement rates to keep up with medical inflation, especially in the Medicare and Medicaid programs, has resulted in a cost shift to the private insurers who are paying more to make up the differences. However, some economists have suggested that this merely represents a failure of the private insurance industry to hold down excessive price increases.
Even with medical inflation and public-to-private cost shifting, premiums have increased at a significantly higher rate. This likely represents both higher administrative costs and greater profits. If the insurance industry were efficient, the percent dedicated to administrative costs should actually decline since higher prices would reduce the percentage of premiums absorbed by each unit of administrative service.
Although the insurance industry has been evasive about the portion of premiums that are consumed by administrative services, the for-profit insurers have been required to report their profits and their medical loss ratios. From the 2009 data (included in this report) we know that their administrative costs are outrageously wasteful, and that their profits are at an all time high.
Today President Obama told representatives of the insurance industry to not raise their prices so high. Do you think that they will listen? It seems that he would be much more effective if he were to tell the public stewards of an improved Medicare for all to get the prices right.
The following is to clarify a legitimate concern of one of the qotd subscribers.
From the 6/22/10 message:
21% – general inflation
39% – medical inflation
72% – increase in private insurers’ payments to health care providers
90% & 97% – premium increases for individual and family health plans
General inflation and medical inflation refer to increased prices. Payments to providers and insurance premium increases refer to increased prices modified by increased volume and intensity of services.
Though the numbers should not be compared on a single scale, the principles are still the same as stated earlier. The rate of medical inflation (prices) has continued to increase in excess of the rate of general inflation. Insurance premiums have continued to increase in excess of the payments (prices x services) to providers.

Recent Premium Increases Imposed by Insurers Averaged 20% for People Who Buy Their Own Health Insurance, Kaiser Survey Finds

Kaiser Family Foundation
June 21, 2010
People who buy their own insurance report that their insurers most recently requested premium increases averaging 20 percent, according to a new Kaiser survey examining the experiences and views of people who buy health coverage in the non-group or individual market.
Most say they paid the increase, but 16 percent of all policyholders say they switched plans, either buying a less expensive policy from their current insurer or switching companies altogether. After these so-called “buy downs” are taken into account, people who faced a premium increase ended up paying 13 percent more than before.
Many people report being in plans with high deductibles, including one in four (26 percent) with an annual deductible of $5,000 or more and 6 percent with a deductible of $10,000 or more.
Overall, the average deductible reported for single coverage is $2,498, almost four times the $634 deductible reported on average for employer-sponsored PPO coverage.  Those with family coverage whose deductibles must be met on a per-person basis report an average deductible of $2,959, while those with a family deductible (the total spending required across the entire family before coverage kicks in) report an average of $5,149.
More than one in five (22 percent) say over the past year they or a family member covered by their plan did not get needed medical care because of the cost, and a similar share (20 percent) say they skipped filling a prescription due to cost.
Nearly four in ten policyholders (38 percent) report at least one problem getting their insurer to pay a bill.
“With people in the individual market being hit with average increases of 20%, the survey shows that the steep increases we have been reading about over the last several months are not just extreme cases,” Kaiser Family Foundation President and CEO Drew Altman said.
http://www.kff.org/kaiserpolls/posr062110nr.cfm

This survey is very important because it shows that outrageous insurance premium increases are not limited to the anecdotes that we have been hearing, but rather are a pervasive problem, inflicting the nation with an average 20 percent premium increase in the individual insurance market. Those who say that the Patient Protection and Affordable Care Act (PPACA) will fix this had better take a closer look.
With these increases, it is not surprising that many looked for less expensive plans, usually opting for higher deductibles. But look at the numbers. The average deductible for a family is now over $5000, and for some, $10,000 or more. In spite of all of the buy-downs to higher deductible plans, people still ended up this year paying an average of 13 percent higher premiums – paying more and getting less.
Will PPACA provide relief from these high deductibles that are impairing access to needed medical care? No. The plans will be required to have an actuarial value of only 60 percent, or 70 percent for the exchange plans eligible for premium credits. When the patients’ share averages 30 to 40 percent of the costs (plus the premium), it is inevitable that the plans will have high deductibles.
Will the cost sharing subsidies of the exchange plans adequately ameliorate the impact of the deductibles? No. Lower income individuals do not have adequate disposable income to meet their portion of the cost sharing, even with the subsidies. For those with incomes over 250 percent of the federal poverty level ($55,125 for a family of four), there are no cost sharing subsidies beyond the equivalent of a 70 percent actuarial value. The portion of the subsidized insurance premium that this family would still have to pay is $4438 (8.05 percent of income), so with a $5000 deductible, they would have to pay over 17 percent of their income before coverage begins (except for limited preventive services), and even then they would still have coinsurance payments plus costs for non-covered or most out-of-network services. By any definition, that is underinsurance, which will become the norm for the United States.
The problem is not the total cost of health care for our nation. We can afford it, though we are nearing our collective tolerance. The problem is the fragmented, dysfunctional financing system that results in tremendous inequities and runaway cost increases. A single payer national health program would fix this.