Chapter – Page 1022

Tin-Plated Health Insurance

By Amy B. Monahan

President Bush has recently proposed ending the favorable tax treatment provided to employer-sponsored health insurance, and instead providing all Americans with a standard deduction for health insurance premiums, regardless of employment status or health insurance provider. This, the White House argues, will allow each family and worker to “choose the balance of wages and health insurance that is right for them, without the tax code distorting their decisions.” It is true that our current system distorts such decisions. By providing an exclusion for employer-provided health care without a corresponding exclusion for individually-purchased health insurance, our system favors the purchase of “overly expensive, gold-plated” employer-provided health insurance.

But the Bush plan doesn’t cure distortions in health insurance purchasing decisions, it just creates new ones. Bush’s proposal would encourage individuals to purchase the lowest cost insurance available. This is because the proposed standard health insurance deduction ($15,000 for family coverage, $7,500 for individual coverage) would be available, in full, to anyone who purchases health insurance, regardless of the cost of that insurance. As a result, the economically rational decision would be to seek the lowest priced health insurance policy. The amount by which the standard deduction exceeds the actual health insurance premium becomes a bonus tax deduction. The individual, meanwhile, ends up with a “tin-plated” health insurance plan that will generally require either a high deductible, high levels of cost-sharing, or limited coverage for services.

Why would the administration favor a tax policy that creates such incentives? It’s part of the broader ownership society health care movement, which aims to introduce individual responsibility and market incentives into health care. By creating this incentive to buy the lowest price health insurance policy available, the administration is encouraging the purchase of high deductible health insurance policies, which can be used in conjunction with tax-favored health savings accounts.

While touted as contributing to health care reform, ownership society health care policy also functions as a tax shelter for the wealthy. Under the President’s proposal, assume that a wealthy individual can buy high deductible health insurance for her family for $7,500. She can then deduct the full $15,000 standard deduction for health insurance. In addition, she can establish a health savings account and take an additional deduction of up to $4,500 each year. It ends up being a great tax break – provided she can afford to meet a high deductible each year. Lower-income individuals, on the other hand, faced with the same incentive to buy cheap insurance, may face out-of-pocket costs they cannot afford. Thus, under the Bush plan, the wealthy will get a tax break, while lower-income Americans will be encouraged to underinsure.

Amy B. Monahan is an associate professor of law at the University of Missouri-Columbia.

New Massachusetts Plan Already Starting to Crumble

Group calls for delay in part of universal health insurance law

By Alice Dembner
Boston Globe
1/25/2007

An advocacy group urged the state Wednesday to delay a key part of the new universal health insurance law, saying that a survey shows that many families cannot afford even subsidized insurance.

The Greater Boston Interfaith Organization, which pressed for passage of the law, said the state should not impose penalties for at least a year on low- and moderate-income people who fail to obtain insurance by the July 1 deadline.

Governor Deval Patrick declined to take a position on the proposed change, but he met with the group Wednesday, signaling growing concern among state leaders about the affordability of health insurance plans being established under the new law.

“We are committed to doing anything we can, working with providers, to deliver affordable options,” Patrick said in a statement after the meeting.

Administration and Finance Secretary Leslie Kirwan, who is overseeing implementation, said, “It’s very premature to talk about changing the law.”

Leaders of the interfaith group want the change to ease pressure on about 300,000 individuals earning up to $49,000 a year, who the advocates said face the greatest challenge in paying for insurance. The one-year delay would allow time to negotiate better, less-expensive insurance and could ultimately help ensure the success of the law, the group’s leaders said.

“You only get to do this once with the public, and if you get it wrong it’s going to blow up,” said the Rev. Hurmon Hamilton, pastor of Roxbury Presbyterian Church and president of the Greater Boston Interfaith Organization, a coalition of 65 religious congregations, labor unions, and community groups. “People will not permit the Commonwealth to force them into deeper debt.”

Senator Richard T. Moore, cochairman of the Legislature’s Committee on Health Care Financing, and Richard Lord, president of Associated Industries of Massachusetts, said the penalty delay is worth considering, particularly if insurers do not cut prices and if many people decline to sign up for subsidized plans.

“Assuming we validate … [the interfaith organization’s] numbers, we might want to ease the penalties for a year or two to see how the market shakes out,” said Moore.

But Representative Patricia A. Walrath, Moore’s counterpart in the House, said she doesn’t think the answer is eliminating the penalty for a majority of people.

The interfaith organization made its case with data from a survey it conducted of 367 people with low and moderate incomes who attended the group’s workshops and shared details of their income and expenses. The information is the first on what state residents can afford, but it’s unclear whether the results are representative of the Commonwealth. Most of the people had insurance, but many were at risk of losing it because of unstable job situations.

Nearly one-half of those with incomes low enough to qualify for state-subsidized insurance did not have enough discretionary income to afford the monthly premiums, which range from $18 to $106 for an individual, the survey found.

Nearly 40 percent of those with incomes between 300 and 500 percent of the poverty level could not afford the $380 per month premium plus out-of-pocket costs discussed by state officials last week. Several state officials said they hoped to bring that cost closer to $250 per month, but the survey found that 28 percent of those eligible could not afford that lower cost either.

Bush's Health Care Proposals Inadequate: Critics

By Amanda Gardner
HealthDay Reporter
Wednesday, January 24, 2007

WEDNESDAY, Jan. 24 (HealthDay News) — President George Bush’s proposals on fixing the nation’s health insurance woes, outlined in Tuesday’s State of the Union speech, just don’t go far enough to solve the problem, many observers said.

“It’s just totally inadequate at addressing any of the fundamental issues,” said Dr. Oliver Fein, professor of medicine and public health at Cornell University and director of Physicians for a National Health Program. “Let’s deal with the question of does this have anything to do with universal coverage.”

Fein’s organization, along with the California Nurses Association, called the proposal “feeble.”

“The basic premise is increasing the marketability of health insurance, including changing the tax structure,” added Dr. A. Mark Fendrick, co-director of the University of Michigan’s Center for Value Based Insurance Design and a professor in the university’s medical school and School of Public Health. “But in expanding health insurance, we must address the issue of cost containment. That’s the larger issue. None of the proposals at hand basically say how we’re going to deal with cost growth.”

Others, however, were less critical of the proposal. In a prepared statement, Karen Ignagni, president and CEO of America’s Health Insurance Plans, said that “enacting common-sense tax incentives for individuals will go a long way toward helping millions secure and maintain the coverage they need. This plan also recognizes that states are an essential partner in any program to cover the uninsured.”

The proposal, unveiled in the president’s speech Tuesday night, was two-pronged and intended, Bush said, to “help more Americans afford their own insurance.”

The first component was a standard tax deduction for health insurance of $15,000 for families and $7,500 for single Americans, regardless of whether they buy their own health insurance or get it through work. According to the president, this reform would mean that 100 million Americans would benefit from lower tax bills, and it would put private health insurance plans within the reach of uninsured Americans.

However, “the administration estimates that 3 to 5 million people will benefit from this proposal,” Fein pointed out. “We’ve got 46.6 million uninsured. That’s going to leave 42 or 43 million still uninsured. This is not a real step toward universal coverage in any way shape or form.”

“And, as I read the proposal, it essentially will benefit people who have high incomes,” Fein continued. “This isn’t very beneficial for people who have low incomes.”

Karen Davis, president of The Commonwealth Fund, which focuses on research in health care issues, agreed with that assessment.

“About 95 percent of the uninsured would not benefit substantially from the tax deductions,” she said in a statement published Wednesday. According to Davis, one Commonwealth Fund report found that “more than 55 percent of the uninsured have such low incomes that they pay no taxes, while another 40 percent are in the 10 to 15 percent tax bracket.” Therefore, the proposed help in the form of tax breaks would not reach this population, she said.

Carol Pryor, a senior policy analyst at The Access Project, a Boston-based group that advocates access to health care, said, “Mr. Bush’s proposal is aimed at leaving more people on their own in the private sector to purchase insurance. And there’s a lot of research that shows that people in that market are likely to have higher deductibles and spend a greater percentage of their income on medical expenses and be less satisfied with their plans. So this proposal would shift more of the costs to consumers by forcing them into coverage with less comprehensive policies and it wouldn’t protect people that it claimed to protect.”

President Bush’s second proposal would provide federal funds to states to subsidize private insurance to people who earn too much to qualify for Medicaid.

Bush also called for expanding Health Savings Accounts and for helping small businesses through Association Health Plans.

The proposals came under general criticism for relying on private health insurance which, Fein said, “is, in fact, the most expensive form of insurance that we have in this country, has the highest administrative costs and gives the least money to providers.”

“All this ties in with the idea that consumers are going to make important health care decisions,” Fendrick added. “Allowing consumers to make their own health care spending decisions will likely save money in the short term, but the fact that people will buy less of essential medical services if left to their own decision-making may ultimately decrease health.”

However, despite their reservations, observers were happy that the issue of health care reform is now firmly on the table.

“The president is responding to the fact that there are now people out there really talking about universal coverage. That’s very exciting,” Fein said. “He couldn’t neglect putting something in the State of the Union, but to put forward a proposal that is basically unacceptable just doesn’t make a lot of sense. It doesn’t accomplish the goals.”

SOURCES: A. Mark Fendrick, M.D., co-director, University of Michigan Center for Value Based Insurance Design, and professor, U-M Medical School and U-M School of Public Health, Ann Arbor; Oliver Fein, M.D., professor of medicine and public health, Cornell University, and director, Physicians for a National Health Program; statement of Karen Ignagni, president and CEO, America’s Health Insurance Plans; statement of Physicians for a National Health Program and California Nurses Association; Jan. 24, 2007, statement, Karen Davis, president, The Commonwealth Fund; Carol Pryor, senior policy analyst, The Access Project, Boston

A vote for single-payer health

Dr. Ann Troy
Marin Independent Journal
Article Launched: 01/12/2007

LAST YEAR, Gov. Arnold Schwarzenegger vetoed a bill that would have established a single-payer system to provide health care for all Californians.

Under SB840, patients would choose their own doctors; doctors would remain private, able to practice the way they want and be paid fairly and simply on a fee for service basis; and California would save billions of dollars.

Instead, the governor has come up with a plan that would keep the insurance industry in health care – to the detriment of us all.

The United States is the only developed nation without a national health program. We spend double per capita what any other nation spends on health care, yet we have 50 million people, including 11 million children, without health insurance and the worst health-care statistics in the developed world.

How can this be? About 50 percent of every health-care dollar is spent on something other than health care. Insurance companies admit they spend about 30 percent of the money we pay in premiums on something other than health care – multimillion dollar salaries for their top executives, profits for their shareholders, advertising and sales, screening applicants and claims, and generating mountains of paperwork and endless hassles for doctors and patients alike. There also is the money we have to spend dealing with them – in the creation of intermediary bodies and in hiring staff to do our billing and to deal with authorizations.

In the 1960s, Canada and the United States spent about the same amount per capita on health care and had similar health-care statistics. By 1971, all of Canada had single-payer. Thirty-five years later, Canada spends less than half of what we spend per capita, and provides health care for all its citizens. On almost every measure, their health-care statistics are better than ours. Our infant mortality rate is 50 percent higher than theirs and our overall mortality rate is 30 percent higher. The World Health Organization ranks the U.S. 37th, at the bottom of the developed world.

If we get the insurance industry out of health care, we will have more than enough money to provide health care for all and to pay doctors and hospitals fairly for their services.

No longer will people have to change doctors every time they change jobs or their employer finds a cheaper health plan. Nor will they have to worry about losing their access to health care if they lose their job or develop a chronic condition. No longer will families struggle to pay astronomical insurance premiums nor worry about paying for prescription drugs. No longer will 50 percent of bankruptcies be due to medical debt.

All patients will have a medical “home.” Continuity of care will be improved and problems will be treated earlier (when easier to treat) or prevented altogether. Rates for vaccinations and health screening will go up. Public health and productivity will improve and social problems associated with untreated mental health problems and addictions will decrease.

If doctors are reimbursed fairly for their services, fewer of them will feel the need to practice at a frenzied pace and will spend more time with patients, providing better quality care.

Smaller companies and small businesses can’t afford to provide health-care benefits and can’t compete for the best workers. A single-payer system would improve all of this and decrease absenteeism and increase productivity. All of these advantages would attract businesses to California, generating more jobs and more tax revenue.

SB840, which was passed by the Legislature last year, will be reintroduced. We have an opportunity to have the best health-care system in the world, to enable all Californians to have access to care that citizens of every other developed nation take for granted, and to lead the country in much needed health-care reform. Let’s be courageous and make it happen.

Dr. Ann Troy is a pediatrician in private practice in San Rafael.

The State of Healthcare

By Katrina vanden Heuvel
The Nation
BLOG | Posted 01/23/2007 @ 5:12pm

According to the Bush administration, the new health care plan that the President will unveil in the State of the Union address tonight would cover three million people who are currently uninsured. Three million — out of forty-seven million. After years of dangerous inaction, this is what Bush rolls out to address a grave and growing crisis!

And, of course, no Bush domestic proposal would be complete without a further gutting of the social compact — this time, “cutting Medicaid payments to public hospitals and other â€˜safety net’ providers by $3.9 billion over the next five years.” As Deborah Bachrach, a deputy commissioner in the New York State Health Department, told the New York Times, this cut would impact hospitals “that serve some of the lowest-income, most vulnerable patients.” This at a time when many such facilities are already struggling to survive.

The Bush tax cuts for the wealthy survive untouched — in fact, they receive a new deduction if they purchase their own plans. However, the continuing War on the Middle Class is beingâ€¦well, escalated. Workers who, according to the President, “choose overly expensive, gold-plated plans” through their employers will be taxed, while those who buy plans on their own will receive a deduction. As Columnist Paul Krugman suggested in a Times op-ed, who in our nation has one of those gold-plated plans? Krugman goes on to write, “The uninsured don’t need an â€˜incentive’ to buy insurance; they need something that makes getting insurance possibleâ€¦. Mr. Bushâ€¦is still peddling the fantasy that the free market, with a little help from tax cuts, solves all problems.”

“The President’s so-called health care proposal won’t help the uninsured, most of whom have limited incomes and are already in low tax brackets,” said Democratic Representative Pete Stark, Chairman of the Ways and Means Health Subcommittee. “But it will hurt middle-income Americans, whose employers will shift even more cost and risk to their employees.”

And as Gerald Shea, assistant to the president of the A.F.L.-C.I.O, told The Times, “It would throw into turmoil the employment-based system of health insurance, and it would impose a new tax on the middle class.”

Most experimentation (both good, not-so-good, and bad) with health care policy is happening at the state level. The often-touted Massachusetts plan — in the words of Doctors Steffi Woolhandler and David Himmelstein of Cambridge Hospital and Harvard Medical School — “offers empty promises and ignores real — and popular — solutions.” By requiring every resident of the state to have health insurance or pay a fine while doing nothing to control costs of insurance and care, or setting standards for coverage — Big Insurance wins, and consumers lose. And the middle-class which doesn’t qualify for subsidies but can’t afford insurance is further squeezed.

In California, Governor Arnold Schwarzenegger has proposed a similar plan. Again, the plan mandates coverage but, according to State Senator Sheila James Kuehl, “it doesn’t ensure that coverage will be comprehensive and affordableâ€¦. [it will] at best provide high-cost, low benefits plans for many Californians; it limits what employers pay but not what individuals must pay or what insurance companies can charge.”

Although Schwarzenegger has won praise for a “bipartisan approach,” in fact both his plan and that of Massachusetts Governor Milt Romney move in a direction Romney’s staff calls “a culture of insurance” and “personal responsibility.”

State Sen. Kuehl herself has a plan for universal coverage that I previously reported on here. Her proposal — SB 840 — would offer all Californians comprehensive care and the right for a patient to choose his or her doctor. It would replace insurance companies with a statewide trust fund that collects premiums paid by employers and individuals. The creation of a single fund reduces administration costs from nearly 30 percent of total health care costs to under 10 percent. With 80 percent of Californians wanting a government guarantee of affordable health care coverage, one hopes state legislators will take another look at the Kuehl plan.

The Washington Post reports that Pennsylvania Governor Edward Rendell has proposed a tax — on tobacco and businesses not offering health care coverage — in order to create state-subsidized private insurance for its 767,000 uninsured people. Vermont, Illinois, and Maine have all enacted legislation to expand coverage of uninsured residents as well, and at least eleven other states are “considering” doing the same.

Meanwhile, at the federal level, any real action to improve this unacceptable situation — worse than any other industrialized nation in the world — will have to overcome a lot of naysayers (not to mention powerful lobbying interests with their campaign dollars). Consider these statements from three representatives to The Washington Post:

“The truth of the matter is that dealing with this problem between now and the election is not realistic,” said Senator George Voinovich.

“Congress is not going to act in a major way to deal with this access problem in the next couple of years,” said Senator Jeff Bingaman. “That’s the unfortunate reality that we’re facing.”

“If we tried to adopt a universal health-care plan on the federal level, we probably wouldn’t have the votes,” said Representative Frank Pallone Jr.

Nothing like negative, self-fulfilling prophecies to justify do-nothing proposals from our elected leaders.

The fact is there are 78 co-sponsors of HR 676 — the United States National Health Insurance Act introduced by Representatives John Conyers and Dennis Kucinich. There are 225 labor organizations supporting it as well. It would expand Medicare to every resident through savings from negotiated bulk procurement of medications; a tax on the top 5 percent of income earners; and a phased-in payroll tax that is lower than what employers currently pay for less comprehensive employee health coverage.

“There are only two real choices in the present healthcare debateâ€¦ commercially-based models which reinforce the insurance industry and fail to provide genuine universal and comprehensive care, and HR 676, a patient-based model which caregivers know is the most effective, humane approach,” said Deborah Burger, president of the California Nurses Association/National Nurses Organizing Committee.

“Solutions to the health care crisis based on increasing our reliance on private health insurance companies are bound to fail,” said Dr. Oliver Fein, director of Physicians for a National Health Program. “Insurance companies limit patients’ choice of doctor and hospital, and take money out of patient care and put it into marketing, bill collectors and claims deniers. We need a National Health Insurance program.”

At a time when our nation is spending $8.4 billion per month in Iraq it is clear that the resources are available where there is political will. Just as the President proposes that we continue to follow his course of folly in Iraq, so too will he ask us to stay a course which causes the number of uninsured to grow year after year, and makes access to comprehensive health care a privilege for the fortunate who can afford it.

Tonight, when President Bush offers his flawed prescription for improving the state of health care, respond by signing on to the only real solution: universal health care now.

Bush's Health Care Plan Deserves One Cheer, but One Cheer Only

PUBLIC RADIO’S MARKETPLACE COMMENTARIES:

By Robert B. Reich
Marketplace, January 24, 2007

http://www.robertreich.org/reich/20070124.asp

The President’s health-care proposal deserves one cheer for the following reason: It potentially de-couples health care from employment.

Under his proposal, everyone would be eligible for a tax deduction for health insurance up to $15,000 per family, $7,500 for a single person — regardless of whether the insurance is provided by the employer or purchased elsewhere. And there would no longer be any advantage to getting it at work because employer-paid premiums would be included in taxable income.

Get it? With this plan, you can just about kiss employer-provided health insurance good-bye.

And good riddance. It’s the biggest tax break in the whole federal tax system, costing the Treasury some $130 billion a year. But you’re not eligible for it when you and your family are most likely to need it — when you lose your job, for example. And the biggest beneficiaries are upper-income employees. The lower your pay, the less likely you are to get any employer coverage at all.

The current employer-based system doesn’t cover the self-employed — the largest and fastest-growing category of worker. And it creates perverse incentives. It encourages employers to seek out young, healthy employees who are unlikely to have health problems; reject older ones; and push married employees onto their spouse’s employer’s plans.

The President’s plan to de-couple health insurance from employment merits only one cheer, though, because it’s only the first step. Two cheers for the President or any politician who comes up with a way to get health insurance to lower-income people who can’t afford it on their own even with a tax deduction. It’s called universal health care. Every advanced nation has it except the United States.

The President punts on universal health care — putting the responsibility for America’s 47 million uninsured on the states. But state government budgets are already sagging under the weight of paying half the costs of Medicaid. The only way lower-income families will get the preventive care they need is through federally-subsidized health insurance. It’s a good investment over the long term. Preventive care will lower the nation’s overall health care tab because it will mean fewer expensive trips to emergency rooms by people with health crises that could have been caught and averted earlier.

Finally, three cheers for the politician who bypasses America’s inefficient private insurance market and establishes a single payer that provides all Americans with health insurance just as good as the health insurance their representatives in Congress receive free of charge. Note I said single payer, not single provider. Americans want to keep their choice of doctor and hospital. But a single payer — either through Medicare or the federal employee’s health insurance program — would avoid the current insanity by which private insurers spend hundreds of millions of dollars a year advertising and marketing to younger and healthier beneficiaries, and seeking to discourage older and riskier ones, or people with pre-existing medical conditions. America now has the only health-insurance system in the world designed to avoid sick people.

President Bush isn’t running again but the one cheer he deserves marks the start of the 2008 presidential race. Affordable health care will be the biggest domestic issue in the upcoming election. The candidate who gets three cheers on this will be our next President.

Bush’s Health Care Proposals Inadequate: Critics