By Malinda Markowitz, RN
Mercury News, 2/16/07

As the hearings on the governor’s health proposal begin this week, many politicians and interest groups want us to believe there’s a public consensus in favor of an insurance-based reform model.

But Californians may recall another time when many of the same experts united behind a sweeping change.

In 1996, Gov. Pete Wilson and legislators from both parties enthusiastically pushed through a plan to deregulate energy in California. They promised huge savings for consumers in reduced rates. As everyone knows, it didn’t quite work out.

Instead, there were huge increases in prices and reduced supplies, followed by blackouts affecting millions of Californians. There was a near-bankruptcy for the state and a recall election. Enron and others made millions, until the roof caved in.

Then, as now in health care, the private market was touted as the solution, a fool’s gold that became a nightmare. Let’s not let it happen again. Instead, we should examine proposed legislation that will achieve universal care through a simple, single-payer system.

Gov. Schwarzenegger’s proposal, as well as versions by the leaders of the state Assembly and Senate, also see the private market as the cure for our health care meltdown. All three plans are premised on a massive expansion of the role of HMOs and insurance companies. Schwarzenegger even wants to deregulate what few requirements health insurers have now.

But like energy deregulation before it, we’re being promised snake oil. Just consider a little reported comment from one HMO chief executive, Stephen Hemsley of UnitedHealth. He called the Schwarzenegger plan “an interesting set of proposals that represent real opportunities for our business.”

Schwarzenegger’s plan would force all individuals to buy health insurance if they don’t already have it, and tax businesses to purchase insurance for employees who aren’t covered. There’s even a tax on doctors and hospitals, also to pay for more insurance.

But there’s no limit on premium increases that rose by 87 percent the past six years. Most individuals and families will likely opt for cheaper plans with bare-bones benefits and huge out-of-pocket costs for medical care they actually use, in addition to the premiums the state would force them to pay. And that’s at a time when medical bills account for half of personal bankruptcies and a third of credit card debt.

For anyone opting out, the proposed penalties are severe, from withheld wages to tax penalties to an inability to enroll children in school. What’s next, debtor’s prison?

Similarly, since the proposed payroll tax is less than half of what most businesses now pay for benefits, there’s an obvious enticement for employers to reduce coverage. Californians could lose what they have now, or pay a lot more for fewer services and less care.

As with the energy marketers before them, the insurers stand to make a killing. HMOs, which hardly need the help, are expected to reap hundreds of millions more dollars from the additional 4 million to 5 million new customers marched into their offices. It was just such profiteering that created our current health care crisis by sacrificing quality, access and affordability for higher revenues and profit.

Rather than trying to stampede everyone into accepting a plan that could make the present mess worse, our legislators should support a more universal, comprehensive solution that bypasses wasteful insurers.

State Sen. Sheila Kuehl will introduce the California Universal Health Care Act this month. This legislation sets up a single-payer system with one public entity that pays all the bills, with health care delivered by our present system of doctors, hospitals and clinics. It’s genuinely universal, controls costs, guarantees choice of physician, ends insurance industry waste and denial of care, and assures a single standard of quality care for all. It does nothing to increase insurance profits, but works a whole lot better for the rest of us.

MALINDA MARKOWITZ is a registered nurse at Good Samaritan Medical Center in San Jose and secretary of the California Nurses Association. She wrote this article for the Mercury News.

JACK E. LOHMAN
Capital Times, Madison, WI
February 16, 2007

Of all of our health care needs, government protection of insurance company mega-profits should not be on the list of needed reforms.

But that apparently won’t stop President Bush, who is now proposing an annual $7,500 single and $15,000 family tax credit for citizens who are either unemployed or whose employer has dumped their health insurance. This would enable them to purchase directly from the insurance company to help them retain their profits.

Bush also made his usual plug for health savings accounts, for which Wall Street, the credit card industry and bankruptcy attorneys will forever be in his debt.

Tax credits are not the answer. We should be providing health care directly to the patient, not through third-party insurance companies.

Follow the money. These are taxpayer assets being given to the insurance industry for non-health care services – when the insurance industry shouldn’t be getting a penny of our health care dollars. Much of their services are an unnecessary part of the process and are largely dispensable. They consume 20 percent of health care dollars yet provide absolutely zero health care benefits to the patient.

That’s a shameful waste.

We need administration; not insurance. We should totally eliminate the unnecessary costs that are consumed by marketing, broker commissions, huge executive salaries, and high corporate profits.

None of these would exist under a single-payer system like Canada’s. With a strong political will we could mimic Canada’s system and extend health care to 100 percent of the public, and we’d spend the same amount of dollars we are spending today to cover only 85 percent of the people.

To boot, we can do it without Canada’s wait times! The money saved would be spent on more doctors and more nurses to serve more patients.

The state must implement a universal health care system, and the proposal by Sen. Mark Miller, D-Monona, and Rep. Chuck Benedict, D- Beloit, provides the mechanism to bring health care to all residents by July 1, 2008.

The logical approach would be to contract with an administrative service, like Medicare does with WPS in Madison, and any of the current insurance companies would be candidates to serve the state in that capacity.

But whenever waste is trimmed people are displaced, and some of those people can be used in administering the new program and others retrained for more critical jobs like nursing, medical technologists, and even by moving some into higher paying programming positions that will be needed to convert our massive paper-based medical records system to an electronic patient database.

There are other health care proposals, but none are as extensive and none are as simple.

With added complexity comes costly administration, the very thing we must eliminate if we are to afford the system. With single-payer, the patient receives services and the administrator writes the check. It’s that simple.

We’d incorporate BadgerCare and Medicaid patients and funds, and we’d cut worker compensation and auto insurance rates in half because the medical portions of those are handled by the universal system. And we’d not be hampered by federal laws that prohibit negotiating for lower drug prices, so our single-risk pool would enable us to maximize the economies of scale.

The Miller-Benedict proposal is not just the best system for the public, it is also the most business friendly proposal on the table. It will attract more companies and more jobs to the state than the others, and fewer businesses and jobs will be lost. Initially it would be funded by a payroll tax and the transfer of funds from the other systems it replaces.

What’s not to like about that?

Our current problem is not funding, it is political.

Some politicians claim that the government can’t do anything right and they will fight to privatize the system. I’d probably buy that argument were it not for the fact that government-run entities cannot give campaign contributions and private corporations and their executives can. And they do, because the last thing in the world they want to see is our health care system made more efficient.

But it is time for politicians to put politics aside and do what’s right for the people.

By PAUL KRUGMAN
Op-Ed Columnist
New York Times
Published: February 16, 2007

Is the health insurance business a racket? Yes, literally — or so say two New York hospitals, which have filed a racketeering lawsuit against UnitedHealth Group and several of its affiliates.

I don’t know how the case will turn out. But whatever happens in court, the lawsuit illustrates perfectly the dysfunctional nature of our health insurance system, a system in which resources that could have been used to pay for medical care are instead wasted in a zero-sum struggle over who ends up with the bill.

The two hospitals accuse UnitedHealth of operating a “rogue business plan” designed to avoid paying clients’ medical bills. For example, the suit alleges that patients were falsely told that Flushing Hospital was “not a network provider” so UnitedHealth did not pay the full network rate. UnitedHealth has already settled charges of misleading clients about providers’ status brought by New York’s attorney general: the company paid restitution to plan members, while attributing the problem to computer errors.

The legal outcome will presumably turn on whether there was deception as well as denial — on whether it can be proved that UnitedHealth deliberately misled plan members. But it’s a fact that insurers spend a lot of money looking for ways to reject insurance claims. And health care providers, in turn, spend billions on “denial management,” employing specialist firms — including Ingenix, a subsidiary of, yes, UnitedHealth — to fight the insurers.

So it’s an arms race between insurers, who deploy software and manpower trying to find claims they can reject, and doctors and hospitals, who deploy their own forces in an effort to outsmart or challenge the insurers. And the cost of this arms race ends up being borne by the public, in the form of higher health care prices and higher insurance premiums.

Of course, rejecting claims is a clumsy way to deny coverage. The best way for an insurer to avoid paying medical bills is to avoid selling insurance to people who really need it. An insurance company can accomplish this in two ways, through marketing that targets the healthy, and through underwriting: rejecting the sick or charging them higher premiums.

Like denial management, however, marketing and underwriting cost a lot of money. McKinsey & Company, the consulting firm, recently released an important report dissecting the reasons America spends so much more on health care than other wealthy nations. One major factor is that we spend $98 billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting — costs that don’t exist in single-payer systems.

And this is just part of the story. McKinsey’s estimate of excess administrative costs counts only the costs of insurers. It doesn’t, as the report concedes, include other “important consequences of the multipayor system,” like the extra costs imposed on providers. The sums doctors pay to denial management specialists are just one example.

Incidentally, while insurers are very good at saying no to doctors, hospitals and patients, they’re not very good at saying no to more powerful players. Drug companies, in particular, charge much higher prices in the United States than they do in countries like Canada, where the government health care system does the bargaining. McKinsey estimates that the United States pays $66 billion a year in excess drug costs, and overpays for medical devices like knee and hip implants, too.

To put these numbers in perspective: McKinsey estimates the cost of providing full medical care to all of America’s uninsured at $77 billion a year. Either eliminating the excess administrative costs of private health insurers, or paying what the rest of the world pays for drugs and medical devices, would by itself more or less pay the cost of covering all the uninsured. And that doesn’t count the many other costs imposed by the fragmentation of our health care system.

Which brings us back to the racketeering lawsuit. If UnitedHealth can be shown to have broken the law — and let’s just say that this company, which is America’s second-largest health insurer, has a reputation for playing even rougher than its competitors — by all means, let’s see justice done. But the larger problem isn’t the behavior of any individual company. It’s the ugly incentives provided by a system in which giving care is punished, while denying it is rewarded.

By ROBERT H. FRANK
New York Times
Published: February 15, 2007

In his State of the Union address, President Bush proposed tax cuts to make health insurance more affordable for the uninsured. The next day, Stephen Colbert had this to say on his show on Comedy Central: “It’s so simple. Most people who can’t afford health insurance also are too poor to owe taxes. But if you give them a deduction from the taxes they don’t owe, they can use the money they’re not getting back from what they haven’t given to buy the health care they can’t afford.”

Just so. As health economists have long known, market incentives induce private insurers to spend vast sums to avoid people who may actually require health care. This problem is mitigated (though not eliminated) by employer-provided group policies. Because Mr. Bush’s proposal would steer people toward individual policies, it would actually strengthen the incentive to shun unhealthy people. Such people can now keep their insurance by not changing jobs. But no private company would want them as individual policyholders at a price anyone could afford.

That Mr. Bush’s proposal will not shrink the ranks of the uninsured is not its most serious problem. Far more troubling is its embrace of a system under which we spend more than twice as much on health care, on average, as the 21 countries in which life expectancy exceeds ours. American costs are so high in part because the reliance on private insurance multiplies administrative expenses, currently about 31 percent of total outlays.

Most health economists agree that government-financed reimbursement is the only practical way to control these expenses, many of them stemming from insurers’ efforts to identify and avoid unhealthy people. Canada’s single-payer health system, which covers everyone, spends less than 17 percent on administrative expenses.

Annual health spending in the United States currently exceeds $2 trillion. A single-payer system that did nothing more than reduce administrative expenses to the levels of other countries would save roughly $300 billion annually.

Some critics worry that expensive but ineffective medical interventions may proliferate if health care becomes a federal responsibility. But Victor Fuchs, a respected health economist at Stanford University, and Dr. Ezekiel Emanuel, chairman of the department of clinical bioethics at the National Institutes of Health, have outlined a single-payer plan that would limit such interventions far more effectively than the current system. (A copy of their plan is on the links page of my Web site, www.robert-h-frank.com.)

If the single-payer system embraced by virtually all other developed countries is clearly the best solution, why doesn’t the United States adopt it? Some analysts concede its merits, but characterize it as either unaffordable or politically unrealistic. But why should a policy that promises better results for less money be considered a nonstarter?

There are two obstacles, which could both be overcome by intelligent political leadership. One is that the single-payer system would require additional tax revenue. In the current climate, that’s a tough political hurdle, to be sure. Yet how complicated would it be to explain to voters that because the single-payer plan would reduce costs substantially, every additional tax dollar would be offset by an even larger reduction in private insurance spending? Given that such a system is so much cheaper over all, calling it unaffordable makes no sense.

The second obstacle is opposition from private insurers, who would be understandably reluctant to abandon multibillion-dollar annual profit streams. Those who stand to lose from policy changes always battle harder than those who stand to gain — an asymmetry that is exaggerated when losses would be concentrated and gains diffuse. So, yes, the insurance industry would bitterly resist.

But intelligent leadership could overcome that resistance. Whenever a pie gets bigger, everyone can get a larger slice than before. Because moving to a single-payer system would make the economic pie bigger, it should be possible for everyone, including the insurance industry, to come out ahead.

The first step is to acknowledge that insurance companies are not evil, that they invested in good faith under tax laws that favored employer-provided private health insurance. To put them out of business with an overnight switch would be unjust.

Even so, they are not entitled to a permanent license to operate a system that has become economically unsustainable. The move to a single-payer plan would save far more than enough to compensate insurance companies for lost profits. Compensation for losses could start at 100 percent, then be gradually phased out as companies shifted investments elsewhere.

Selling this argument in an era of 15-second sound bites would be challenging, but hardly impossible. Indeed, forceful advocacy of the single-payer approach offers a golden opportunity for any serious presidential candidate. Voters are fed up with rising insurance costs and dwindling coverage. On the merits, single-payer coverage is an unassailable solution to both problems. Its rationale is simple enough to articulate clearly during a long campaign. And if the proposal were devised so that everyone stood to win, corporate interests would have little reason to attack it.

Critics of the single-payer plan have long railed against the specter of socialized medicine, suggesting that it means being treated by government functionaries. Yet people who have experienced single-payer coverage firsthand seem unconcerned. When one of my sons needed surgery for a broken arm during a sabbatical in Paris, for example, the medical system we encountered was just as professional as the American one and far less bureaucratic. And in France, which spends half as much on health care as the United States and has more doctors and hospital beds per capita, everyone is covered.

We live in challenging times. Does a candidate who couldn’t persuade voters to embrace the single-payer approach deserve to be president?

Robert H. Frank, an economist at the Johnson School of Cornell University, is the author of “The Economic Naturalist,” which will be published this spring. Contact: www.robert-h-frank.com

Note from PNHP: The Fuchs Plan is actually not a single-payer plan. It is a quite regressive proposal that involves vouchers and maintaining the private insurance industry. A side from this error, Frank’s article is right on.

By ROBERT H. FRANK
New York Times
Published: February 15, 2007

In his State of the Union address, President Bush proposed tax cuts to make health insurance more affordable for the uninsured. The next day, Stephen Colbert had this to say on his show on Comedy Central: “It’s so simple. Most people who can’t afford health insurance also are too poor to owe taxes. But if you give them a deduction from the taxes they don’t owe, they can use the money they’re not getting back from what they haven’t given to buy the health care they can’t afford.”

Just so. As health economists have long known, market incentives induce private insurers to spend vast sums to avoid people who may actually require health care. This problem is mitigated (though not eliminated) by employer-provided group policies. Because Mr. Bush’s proposal would steer people toward individual policies, it would actually strengthen the incentive to shun unhealthy people. Such people can now keep their insurance by not changing jobs. But no private company would want them as individual policyholders at a price anyone could afford.

That Mr. Bush’s proposal will not shrink the ranks of the uninsured is not its most serious problem. Far more troubling is its embrace of a system under which we spend more than twice as much on health care, on average, as the 21 countries in which life expectancy exceeds ours. American costs are so high in part because the reliance on private insurance multiplies administrative expenses, currently about 31 percent of total outlays.

Most health economists agree that government-financed reimbursement is the only practical way to control these expenses, many of them stemming from insurers’ efforts to identify and avoid unhealthy people. Canada’s single-payer health system, which covers everyone, spends less than 17 percent on administrative expenses.

Annual health spending in the United States currently exceeds $2 trillion. A single-payer system that did nothing more than reduce administrative expenses to the levels of other countries would save roughly $300 billion annually.

Some critics worry that expensive but ineffective medical interventions may proliferate if health care becomes a federal responsibility. But Victor Fuchs, a respected health economist at Stanford University, and Dr. Ezekiel Emanuel, chairman of the department of clinical bioethics at the National Institutes of Health, have outlined a single-payer plan that would limit such interventions far more effectively than the current system. (A copy of their plan is on the links page of my Web site, www.robert-h-frank.com.)

If the single-payer system embraced by virtually all other developed countries is clearly the best solution, why doesn’t the United States adopt it? Some analysts concede its merits, but characterize it as either unaffordable or politically unrealistic. But why should a policy that promises better results for less money be considered a nonstarter?

There are two obstacles, which could both be overcome by intelligent political leadership. One is that the single-payer system would require additional tax revenue. In the current climate, that’s a tough political hurdle, to be sure. Yet how complicated would it be to explain to voters that because the single-payer plan would reduce costs substantially, every additional tax dollar would be offset by an even larger reduction in private insurance spending? Given that such a system is so much cheaper over all, calling it unaffordable makes no sense.

The second obstacle is opposition from private insurers, who would be understandably reluctant to abandon multibillion-dollar annual profit streams. Those who stand to lose from policy changes always battle harder than those who stand to gain — an asymmetry that is exaggerated when losses would be concentrated and gains diffuse. So, yes, the insurance industry would bitterly resist.

But intelligent leadership could overcome that resistance. Whenever a pie gets bigger, everyone can get a larger slice than before. Because moving to a single-payer system would make the economic pie bigger, it should be possible for everyone, including the insurance industry, to come out ahead.

The first step is to acknowledge that insurance companies are not evil, that they invested in good faith under tax laws that favored employer-provided private health insurance. To put them out of business with an overnight switch would be unjust.

Even so, they are not entitled to a permanent license to operate a system that has become economically unsustainable. The move to a single-payer plan would save far more than enough to compensate insurance companies for lost profits. Compensation for losses could start at 100 percent, then be gradually phased out as companies shifted investments elsewhere.

Selling this argument in an era of 15-second sound bites would be challenging, but hardly impossible. Indeed, forceful advocacy of the single-payer approach offers a golden opportunity for any serious presidential candidate. Voters are fed up with rising insurance costs and dwindling coverage. On the merits, single-payer coverage is an unassailable solution to both problems. Its rationale is simple enough to articulate clearly during a long campaign. And if the proposal were devised so that everyone stood to win, corporate interests would have little reason to attack it.

Critics of the single-payer plan have long railed against the specter of socialized medicine, suggesting that it means being treated by government functionaries. Yet people who have experienced single-payer coverage firsthand seem unconcerned. When one of my sons needed surgery for a broken arm during a sabbatical in Paris, for example, the medical system we encountered was just as professional as the American one and far less bureaucratic. And in France, which spends half as much on health care as the United States and has more doctors and hospital beds per capita, everyone is covered.

We live in challenging times. Does a candidate who couldn’t persuade voters to embrace the single-payer approach deserve to be president?

Robert H. Frank, an economist at the Johnson School of Cornell University, is the author of “The Economic Naturalist,” which will be published this spring. Contact: www.robert-h-frank.com

Note from PNHP: The Fuchs Plan is actually not a single-payer plan. It is a quite regressive proposal that involves vouchers and maintaining the private insurance industry. A side from this error, Frank’s article is right on.

Congress of California Seniors Joins New Coalition, “It’s OUR Healthcare!”

By Gary Passmore
Director, Congress of California Seniors
February 14, 2007
CaliforniaProgressReport.com

At the instigation of our state political leadership, 2007 is shaping up to be the year of health reform in California. The central issue is how to provide quality, affordable coverage to more than six million Californians who are not covered by employer-based health insurance, public insurance programs (such as Medicare, Medi-Cal, or Healthy Families), or who purchase their own coverage.

In addition to expanded access, there are other key goals which are important to millions of Californians such as controlling costs that threaten the coverage of people with insurance, expanding prevention programs, and improving the quality and safety of health services.

Although most seniors are covered by Medicare, we have a huge stake in the reforms being advanced. Of course we care deeply about people under age 65, but we also recognize the need to control health inflation to preserve the level of benefits under Medicare…and we are vitally concerned about quality care and consumer protections. Because of these concerns, we will speak out in the public debate which lies ahead. That is why the Congress of California Seniors has joined a broad-based consumer coalition to speak out on the needs of California families. The group is called “It’s OUR Healthcare!” and we will engage in a vigorous advocacy campaign to educate people and push policymakers for an effective solution…not a band-aid approach.

Very different ideas for dealing with health reform have been advanced, ranging from Senator Sheila Kuehl’s expansive single-payer universal coverage proposal to Senate President pro Tem Don Perata’s plan to create a large state pool for the uninsured combined with employer and individual mandates, and House Speaker Fabian Nunez’s call for insuring all California children and creating a public insurance pool for the uninsured to the Governor’s broad proposal to force greater shared responsibility, place closer restrictions on private health insurers, and expand public coverage. There are other legislative proposals to fix specific pieces of the problem.

In this mix are some ideas that are bad. Health savings accounts don’t help the vast number of uninsured people…they only drain resources needed to fix the access problem. Cutting back on existing consumer protections (such as hospital safety and HMO regulation) to lower costs would be a setback rather than an advance. And high deductible coverage or individual mandates that shift responsibility to families that cannot afford coverage accomplishes nothing.

The goal is not to pretend to solve the problem, but rather to guarantee that everyone gets the health care they need when they need it and at a price they can afford.

Last November, voters made clear that they expect bipartisan problem solving in Sacramento, and health coverage reform will test the capacity of our system to find workable compromises. Ultimately, political leaders may have to turn to the voters to make some of the decisions.

Whatever happens, we believe that the effective, lasting reforms will recognize that we must eventually move from an employer-based health insurance model to a broader tax-based model to keep American business competitive, to allow people to move between jobs or to change careers, and to allow families to live with greater security and peace of mind.

Background Information on Where We Stand

Principles of Concern to the Congress of California Seniors in the Implementation of Health Care Reform

1. Avoid actions that may negatively impact on Medicare or MediCal…cost structure, access, or quality.
2. Encourage cost controls to rein in health care inflation that threatens benefits to people already insured, including Medicare recipients. Focus especially on overhead costs and excess profits.
3. If single payer, universal health insurance is not immediately achievable, develop a system which begins to blend coverage into a few options and marshals all possible financial resources so that a reformed model can eventually “morph” into broad-based Medicare type universal coverage system with less disruption in the future.
4. Recognize that, in the not too distant future, health insurance must shift from an employer-based model to some form of broad tax-based model if the United States is to remain economically competitive.
5. Use public insurance programs to promote information technology (electronic medical records) and to force standardization of forms and reports.
6. Do not further restrict access to the courts or the legal system as a means of reducing costs.
7. Avoid repeal or diminution of consumer protections in HMO regulations, hospital staffing ratios and the like.
8. Maximize federal funding for coverage expansion and improved services through Medicare, Medicaid and Healthy Families.
9. Recognize that solutions such as health savings accounts rarely help the majority of those who are uninsured because of income tax liability disparities, and they reduce public revenues needed to expand access for those who cannot afford health coverage.
10. Don’t simply “cherry pick” easy-to-cover populations such as children or healthy young adults.
11. Develop different coverage options which recognize that people with diagnosed chronic diseases need access to special plans providing more services and are unlikely to get coverage in the private market.
12. Make any coverage as inclusive as possible by including chronic disease management, health prevention, mental health, oral health and vision care.
13. Recognize that good nutrition and quality home and community-based care giving for elderly and dependent adults can lower costs by reducing reliance on high cost in-patient hospital care, doctor visits and remedial therapy.
14. Build incentives into the funding system to promote robust discharge planning and stronger transition to long term care.
15. Avoid creating the appearance of a solution with limited coverage or high deductible plans that technically give people insurance but do not provide them with needed health care.

Gary Passmore has been the Director of the Congress of California Seniors, a nonprofit advocacy/education organization with over 500,000 members, whose goal is to advance the interests of seniors and their families since January of 2003. He is retired from active employment. In the 1970’s and 80’s, before coming to California, he served as the Chief Executive Assistant to the Governor of Missouri and was the State Budget Director for Missouri.