PNHP

Jacob Hacker’s “Health Care for America”

Jacob Hacker’s “Health Care for America”

Health Care for America

A proposal for guaranteed, affordable health care for all Americans building on Medicare and employment-based insurance

by Jacob S. Hacker
The Economic Policy Institute
EPI Briefing Paper #180
January 11, 2007

As health care costs have skyrocketed and the proportion of Americans with stable benefits has eroded, health insecurity has become a shared American experience, felt by those who thought they had it made as well as those just struggling to get by.

This growing problem is pushing health care reform back onto the agenda of American politics after more than a decade of neglect. And yet, nothing guarantees that this debate will end differently than previous battles.

To avoid the dismal fate of previous reform campaigns, a successful agenda must take seriously the political constraints and organizational realities that have hamstrung reform efforts in the past. Limits on public budgets, resistance to measures that might be seen as taking away what Americans already have, and the embedded realities of the present system all stand squarely in the path of grand policy redesigns–from single-payer national health insurance, to individual mandates requiring that everyone purchase private coverage, to a universe of individualized Health Savings Accounts. Instead, the most promising route forward is to build on the most popular elements of the present structure–Medicare and employment-based health insurance for well-compensated workers–through a series of large-scale changes that are straightforward, politically doable, self-reinforcing, and guaranteed to produce expanded health security.

Health Care for America embodies this strategy. It would extend insurance to all non-elderly Americans through a new Medicare-like program and workplace health insurance, while creating an effective framework for controlling medical costs and improving health outcomes to guarantee affordable, quality care to all. It is at once comprehensive, realistic, consistent with American values and beliefs, and grounded in the best elements of the present system. It combines employer and personal responsibility with a strong public commitment to ensuring that American workers and their families and American employers can afford coverage. It promises better care, lower costs, more choice, healthier citizens, and immensely stronger guarantees for workers and their families. And it promises real savings for employers and state governments–without unraveling existing sources of health security, without forcing workers to obtain coverage on their own, and without pressuring patients into Health Savings Accounts or tightly managed health maintenance organizations (HMOs).

What Health Care for America would do is simple: every legal resident of the United States who lacks access to Medicare or good workplace coverage would be able to buy into the “Health Care for America Plan,” a new public insurance pool modeled after Medicare. This new program would team up with Medicare to bargain for lower prices and upgrade the quality of care so that every enrollee would have access to either an affordable Medicare-like plan with free choice of providers or to a selection of comprehensive private plans.

At the same time, employers would be asked to either provide coverage as good as this new plan or, failing that, make a relatively modest payroll-based contribution to the Health Care for America Plan to help finance coverage for their workers. At a stroke, then, no one with a direct or family tie to the workforce would remain uninsured. The self-employed could buy into the plan by paying the same payroll-based contribution; those without workplace ties would be able to buy into Health Care for America by paying an income-related premium. The states would be given powerful incentives to enroll any remaining uninsured.

http://www.sharedprosperity.org/bp180.html

For the PDF version of “Health Care for America:”
http://www.sharedprosperity.org/bp180/bp180.pdf

Comment:

By Don McCanne, MD

Jacob Hacker is gifted, really (though some might contend that “gifted political scientist” is an oxymoron). Jacob Hacker cares about people. He knows that we must do something to make health care accessible and affordable for everyone.

His proposal does not break new ground in health policy. He has merely combined various concepts that have been under consideration for some time. What is very different about this proposal is that the design features comply with the perceptions of most Americans as to how they want our health care to be financed. It is just possible that he may have crossed the threshold of political feasibility.

There are some very good features in his proposal. It establishes a new and improved Medicare that competes with the existing private plans in the employer-sponsored and individual markets. Employers and individuals who are concerned about replacing their private plans with a government-run program would have the option of continuing with their current standard coverage. It is estimated that about half would switch to the Health Care for America program. It is likely that, with time, the public program would establish its superiority resulting in a massive shift in enrollment. That would bring us very close to a single payer system without having to dump it on the nation all at once. When you read his report, you will recognize that there are many other features that would help to ensure an equitable and affordable system for all.

From the perspective of a single payer advocate, there are some problems. Leaving the private insurers in place perpetuates the administrative waste of those insurers and the administrative burden on the providers. Intense regulatory oversight of the private insurers would be even more imperative since they would increase their efforts to game the system through surreptitious favorable selection and other clandestine market expediencies. The public program would likely concentrate lower-income individuals initially, risking a political transformation into a welfare program. Also his plan includes features of both an employer mandate and an individual mandate, each with its own policy problems, though he does ameliorate the impact to a certain extent with some of the other features of his plan. From a single payer perspective, it would be far better to totally cut the link between financing and coverage. A system of equitable tax funding of the entire risk pool is more efficient than a system of premiums linked to the individual. Other potential problems are evident in the report.

This is a very important contribution to the national dialogue on reform. The report should be downloaded since it will surely become a prominent part of our debate.

Since PNHP’s mission is to inform rather than to negotiate compromise, we will continue to point out specific policies in his model that could be improved. That said, Jacob Hacker’s proposal is a very welcome addition at a time that all options should be on the table. It is such a compelling model that it may shove all others off of the table – except single payer – then we can get down to a serious discussion about reform that really works.

On the Governor’s Health-Care Plan

More insurance is not the answer

By Deborah Burger
San Francisco Chronicle
Thursday, January 11, 2007

While Gov. Arnold Schwarzenegger deserves credit for finally responding to the state’s imploding health-care crisis, his plan as designed has major flaws, most notably forcing the uninsured to buy what for many will mostly likely be substandard, unaffordable health plans that primarily serve to further enrich big insurers.

Some provisions in the governor’s package are welcome — notably the intent to end the disgraceful denials of coverage based on age or health status, and his pledge to assure access to health services for the undocumented.

However a plan that begins by criminalizing the uninsured with no controls on skyrocketing premiums and, at this point, no standards on what those health plans will include, is a train wreck waiting to happen. Let us hope that the state would establish uniform and comprehensive benefits for all.

In a state where health insurance typically runs up to $12,000 a year for a family of four, it’s a safe bet that many will gamble with their health and opt for the cheapest plan available. As defined by the governor’s proposal, those plans would require families to spend up to $10,000 a year in out-of-pocket medical costs. In other words, the average consumer will have to pay for presumably all of their health services in addition to the premiums the law will force them to pay.

If it sounds as if someone is making out like a bandit, that bandit has a name – the insurance industry. Insurers will gain millions while consumers will receive little in return. A mandate on individuals to buy insurance is the centerpiece of the Massachusetts health plan as well. The experience there to date does not recommend this approach. Many people are choosing not to sign up, even with the tax penalties, because they cannot afford the plans, and due to funding problems, the state has cut back on public education about the program. That’s in a state with 500,000 uninsured as compared to California’s 6.5 million uninsured.

A second area of concern is the proposal to shift some $2 billion in tax funds that now goes to hospitals to cover indigent care and use it to buy coverage for the uninsured. It takes money used for direct delivery of care, and hands it to insurance companies, which take 25 percent to 30 percent off the top for wasteful administrative expenses.

Moreover, the proposal has an ugly underside: Because 70 percent of those funds go to public hospitals and clinics, the proposal will starve the public sector of desperately needed revenue, hastening the closure or privatization of more public facilities. This could have a particularly deleterious effect on low-income communities where most public hospitals are located.

That demonstrates the biggest fundamental problem with the governor’s entire package: A market-based system always puts increased revenues and profits over the health and well-being of those patients it is supposed to serve. As was the clear intent of a number of the free-market architects of the plan, it reinforces and expands the role of the market in health care, the very source of the present crisis. If the governor’s goal is truly universal health coverage, improved quality and effective cost controls, the state should embark on the same tried-and-true course taken by every other industrialized nation, either a national health system, or a single-payer approach as embodied in the single-payer bill, SB840 authored by state Sen. Sheila Kuehl. Kuehl’s bill was vetoed by the governor last year. It will be reintroduced this year.

Under a single-payer system, such as Medicare, one public entity collects all the financing and pays for all medical services through the existing private-care delivery system, with adequate funding for our doctors, hospitals, clinics, and other care.

It’s the only plan that assures everyone is covered with one high standard of benefits and care, as opposed to good care for the wealthy only. It assures choice of physician, reduces administrative waste, provides commonsense budgeting, and ends insurance industry interference in the form of high premiums, high deductibles and denials of care.

Americans spend twice as much per person on health care as the other 21 wealthiest countries, yet World Health Organization data shows Americans live the shortest time in good health and have poorer patient outcomes in category after category from infant mortality to life expectancy to doctor visits.

Being number 21 is hardly good enough. By enacting the single-payer Kuehl bill this year, we could finally have the plan Californians need and deserve.

Deborah Burger, R.N., is the president of the California Nurses Association.

PNHP Research: The Case for a National Health Program

Over the past two decades, PNHP research has influenced health policy and focused debate on the need for fundamental health care reform.

1. Administrative costs consume 31 percent of US health spending, most of it unnecessary.

  1. Woolhandler, et al “Costs of Health Administration in the U.S. and Canada,” NEJM 349(8) Sept. 21, 2003.

2. Medical bills contribute to half of all personal bankruptcies. Three-fourths of those bankrupted had health insurance at the time they got sick or injured.

  1. “Illness and Injury as Contributors to Bankruptcy,” Himmelstein et al, Health Affairs Web Exclusive, February 2, 2005.
  2. “Medical Bankruptcy in the United States, 2007: Results of a National Study,” Himmelstein, D.U., Thorne, D., Warren, E., Woolhandler, S. (2009), Am J Med, 122, 741-746.
  3. “Medical Bankruptcy Fact Sheet,” Himmelstein, D.U., Thorne, D., Warren, E., Woolhandler, S. (2009).
  4. “Medical Bankruptcy Q&A,” Himmelstein, D.U., Thorne, D., Warren, E., Woolhandler, S. (2009).

3. Taxes already pay for more than 60 percent of US health spending. Americans pay the highest health care taxes in the world. We pay for national health insurance, but don’t get it.

  1. Woolhandler, et al. “Paying for National Health Insurance — And Not Getting It,” Health Affairs 21(4); July/Aug. 2002.

4. Despite spending far less per capita for health care, Canadians are healthier and have better measures of access to health care than Americans.

  1. Lasser et al. “Access to Care, Health Status, and Health Disparities in the United States and Canada: Results of a Cross-National Population-Based Survey,” American Journal of Public Health; July 2006, Vol 96, No. 7.

5. Business pays less than 20 percent of our nation’s health bill. It is a misnomer that our health system is “privately financed” (60 percent is paid by taxes and the remaining 20 percent is out-of-pocket payments).

  1. Carrasquillo et al. “A Reappraisal of Private Employers’ Role in Providing Health Insurance,” NEJM 340:109-114; January 14, 1999.

6. For-profit, investor-owned hospitals1-4, HMOs,5 nursing homes6,7 and home health care agencies8 have higher costs and score lower on most measures of quality than their non-profit counterparts.

  1. Himmelstein, D and Woolhandler, S “The high costs of for-profit care,” Commentary, Can. Med. Assoc. J., June 8, 2004
  2. Devereaux, PJ “Payments at For-Profit and Non-Profit Hospitals,” Can. Med. Assoc. J., Jun 2004; 170
  3. Devereaux, PJ “Mortality Rates of For-Profit and Non-Profit Hospitals,” Can. Med. Assoc. J, May 2002; 166
  4. Himmelstein, et al “Costs of Care and Admin. At For-Profit and Other Hospitals in the U.S.” NEJM 336, 1997
  5. Himmelstein, et al “Quality of Care at Investor-Owned vs. Not-for-Profit HMOs” JAMA 282(2); July 14, 1999
  6. Harrington et al “Does Investor Ownership of Nursing Homes Compromise the Quality of Care?” American Journal of Public Health; Vol 91, No. 9, September 2001
  7. Comondore, et al “Quality of care in for-profit and not-for-profit nursing homes: systematic review and meta-analysis,” BMJ 2009;339:b2732-b2732
  8. Cabin W et al “For-Profit Medicare Home Health Agencies’ Costs Appear Higher And Quality Lower When Compared To Nonprofit Agencies,”Health Affairs, August 2014

7. Immigrants1 and emergency department visits2 by the uninsured are not the cause of high and rising health care costs. Immigrants also subsidize Medicare’s trust fund.3

  1. Mohanty et al. “Health Care Expenditures of Immigrants in the United States: A Nationally Representative Analysis,” American Journal of Public Health; Vol 95, No. 8, August 2005
  2. Tyrance et al. “US Emergency Department Costs: No Emergency,” American Journal of Public Health; Vol 86, No. 11, November 1996
  3. Zallman et al,   “Immigrants contributed an estimated $115.2 billion more to the Medicare Trust Fund than they took out in 2002-09,” Health Affairs, June 2013

8. 45,000 annual deaths are associated with lack of health insurance1. That figure is about two and a half times higher than an estimate from the Institute of Medicine (IOM) in 2002. The uninsured do not receive all the medical care they need — one-third of uninsured adults have chronic illness and don’t receive needed care2. Those most in need of preventive services are least likely to receive them.

  1. Wilper, et al “Health Insurance and Mortality in U.S. Adults,” American Journal of Public Health; Vol. 99, Issue 12, Dec 2009 
  2. Wilper, et al “A National Study of Chronic Disease Prevalence and Access to Care in Uninsured U.S. Adults” Ann Intern Med, Aug 2008; 149: 170 – 176.

9. The US could save enough on administrative costs1 (more than $350 billion annually) with a single-payer system2 to cover all of the uninsured.

  1. Woolhandler, et al “Costs of Health Administration in the U.S. and Canada,” NEJM 349(8) Sept 21, 2003
  2. “Proposal of the Physicians’ Working Group for Single-Payer National Health Insurance,” JAMA 290(6): Aug 30, 2003

10. Competition among investor-owned, for-profit entities has raised costs, reduced quality in the US

  1. Himmelstein DU, Woolhandler S. “Competition in a publicly funded healthcare system.” BMJ 2007;335:1126-1129 (1 December), doi:10.1136/bmj.39400.549502.94
  2. Hellander I, Himmelstein DU, Woolhandler S. “Medicare overpayments to private plans, 1985-2012: Shifting seniors to private plans has already cost Medicare US$282.6 billion.” International Journal of Health Services 2013;43(2):305–319. doi: http://dx.doi.org/10.2190/HS.43.2.g

11. The Canadian single payer healthcare system produces better health outcomes1,2 with substantially lower administrative costs3,4 than the United States.

  1. Guyatt GH, et al. “A systematic review of studies comparing health outcomes in Canada and the United States.” Open Medicine (2007); 1(1): E27-35.
  2. Lasser KE, Himmelstein DU, Woolhandler S. “Access to Care, Health Status, and Health Disparities in the United States and Canada: Results of a Cross-National Population-Based Survey.” American Journal of Public Health (July 2006); 96(7): 1300-1307.
  3. Himmelstein DU, Lewontin JP, Woolhandler S. “Who administers? Who cares? Medical administrative and clinical employment in the United States and Canada.” American Journal of Public Health. (1 Feb. 2006); 86(2):172-178.
  4. Woolhandler S, Campbell T, Himmelstein DU. “Cost of Health Care Administration in the United States and Canada.” New England Journal of Medicine. (21 August 2003); 349(8).

12. Computerized medical records1-3 and chronic disease management4 do not save money. The only way to slash administrative overhead5 and improve quality6,7 is with a single payer system.

  1. Woolhandler, et al. “Hope And Hype: Predicting The Impact Of Electronic Medical Records,” Health Affairs, September/October 2005; 24(5): 1121-1123.
  2. Himmelstein, et al “Hospital computing and the costs and quality of care: a national study,” Am J Med, Vol 123, Issue 1, Pages 40-46, Jan 2010
  3. McCormick, D, Bor, DH, Woolhandler, S, Himmelstein, DU, “Giving Office-Based Physicians Electronic Access To Patients’ Prior Imaging And Lab Results Did Not Deter Ordering Of Tests,” Health Affairs, March 2012, 31(3): 488-496.
  4. Geyman, J “Disease Management: Panacea, Another False Hope, or Something in Between?,” Ann Fam Med 2007;5:257-260. DOI: 10.1370/afm.649.
  5. Woolhandler, et al “Costs of Health Administration in the U.S. and Canada,” NEJM 349(8) Sept. 21, 2003
  6. Schiff, et al “A Better Quality Alternative” JAMA, 272(10); Sept. 12 1994
  7. Schiff, et al “You Can’t Leap a Chasm in Two Jumps,” Public Health Reports 116, Sept / Oct 2001

13. Alternative proposals for “universal coverage” do not work. State health reforms over the past two decades have failed to reduce the number of uninsured1.

  1. Woolhandler, et al “State Health Reform Flatlines,” International Journal of Health Services, Volume 38, Number 3, Pages 585-592, 2008

The truth about health savings accounts (HSAs)

HSA Funding: Are Health Care Consumers Leaving Money on the Table?

By Thomas Cochrane, CFA
A Vimo Research Group Report
January 4, 2007

This Vimo ReportTM will discuss funding trends that have emerged within the HSA market over the past several years. From Vimo’s perspective, HSA funding levels are a key indicator of the health of the consumer directed movement. By focusing on recent enrollment statistics, it is clear that there is a significant gap between high deductible health plan enrollment and HSA adoption. Not surprisingly, it is also evident that HSA asset levels are deficient.

Both indicators point to a troubling trend within the budding CDH industry. Inadequate HSA funding levels will be especially detrimental to the healthcare consumer if the trend continues over time.

Many employers and individual policyholders seem to view CDH as some sort of cost containment panacea.

Vimo’s view is that treating consumer directed plans solely as cost containment tools misses the point almost entirely. Americans should be focused on the fact that the triple tax advantages of HSAs make them the most powerful qualified savings vehicles available. In addition, the point of CDH is not to avoid spending money on health care, but rather to replace insurance with highly tax advantaged savings accounts that are owned and controlled by individuals.

http://www.vimo.com/reports/hsafunding.pdf

Comment:

By Don McCanne, MD

This report from the consumer-directed health industry provides us with a rare instance of when bad health is good news.

Also the report exposes HSAs for what they really are: powerful tax-advantaged savings vehicles for the wealthy.

U.S. health care puts profit over people

By JOANNA GARRITANO
GUEST COLUMNIST
Seattle Post-Intelligencer

Though elected officials and experts alike are perplexed about how to solve the current health care crisis, it isn’t difficult to recognize the health care problems facing Americans. The 47 million Americans without health care coverage are not the only ones who confront tremendous barriers to health in this country. Businesses, families, workers and people of all ages are finding U.S. health care too expensive and unresponsive to their needs.

Why is this happening?

Modern medicine has morphed from a healing profession into a business where the primacy of profit takes precedence over greater human needs. Trusting relationships with medical professionals have taken a back seat to efficiency standards as patients are rushed through doctors’ offices.

With just enough time to peer into a few orifices and change a prescription or two, doctors race to keep up with market demands. Market-driven medicine tears at our moral fabric as people are seen as commodities — mere bodies to insure rather than complex individuals with diverse human needs. Sharp market strategies, though suitable when shopping for goods, will always fall short in defining the value of health, or the value of life, for that matter.

With the resources and ingenuity of the American people, we certainly can do better. Yet, we are fooled into believing that more expensive means better care. The truth is that we spend twice the cost per capita compared with other developed nations, yet are ranked 37th in overall quality, according to the World Health Organization. Americans face higher infant and maternal mortality rates and a shorter life span than our counterparts in other industrialized nations that offer comprehensive health coverage for all their residents.

Why do we tolerate this unstable and unjust situation?

The answer: There is still profit to be made maintaining the status quo. However dismal the health care situation has become for individuals and families, the for-profit health care industry still churns out billions in profits. In a democratic nation founded on principles of “liberty and justice for all,” the health and well-being of the many should not come second to the financial benefit for the few.

Close to home, Gov. Chris Gregoire has recognized the disastrous effects that the current health care system is having on Washington residents. In 2006 she charged a team of state officials, the Blue Ribbon Commission on Health Care Costs and Access, to seek solutions at the state level. The recommendations from the BRC will influence legislation in 2007 and direct health care changes in the years to come.

Though the commission should be acknowledged for attempting to address cost and monitor quality, its recommendations fall far short of offering any tangible solutions to the most pressing issue — how to provide affordable high-quality health care for everyone.

It is incumbent upon us all to demonstrate the political will to fundamentally challenge the system in which administrative waste and profiteering are allowed to stand in the way of human health and well-being. Single-payer publicly funded health insurance with privately delivered health care may just be the solution we are looking for.

Joanna Garritano, M.D., is an emergency department physician at Virginia Mason Medical Center, Seattle, and chairwoman of Physicians for a National Health Program, Western Washington.

We can afford to go for the gold: universal health care

The money is already in the system — let’s just do it!

By ANA MALINOW
Guest Columnist
Houston Chronicle

Advocates for children and elected officials are meeting this week in more than 35 cities nationwide with the admirable goal of increasing children’s health insurance coverage.

Unfortunately, the centerpiece of their discussions — the state programs for low-income children (S-CHIP and Medicaid) — offers little hope of universal care for children.

As a physician, I know that the best way to provide comprehensive, universal care to children is to provide it to all Texans: through a single-payer “Medicare for All” system for the state.

Because I am a pediatrician who faces the reality of our state’s health crisis day in and day out, I know intimately the futility of such band-aid programs. The advocates who fight to maintain and defend them do great work to promote child well being: I benefit from their efforts every day. But despite good intentions, the efforts of incremental health system reformers have failed to herald meaningful steps toward universal coverage — either for children or for our nation as a whole — because they do not address the reason so many Texans are uninsured in the first place: skyrocketing health care costs. Even S-CHIP, the largest coverage expansion in a generation, made only a small dent in the number of uninsured children because the government program could not keep up with eroding private coverage. Although 5 million children have been added since 1997, the number of uninsured children still stands at 9 million.

Even if every uninsured child in Texas eligible for CHIP or Medicaid were to be covered, half of the 1.4 million uninsured children would remain uninsured. More than 5 million Texans would still lack health insurance. Expansion of public programs would do nothing to curb costs of premiums for small-business owners in Texas, who have seen increases up to 75 percent in the past three years. Focusing on expanding current programs deludes us into thinking we are fixing the problem of the uninsured. In reality, it does little more than entrench us further in a failed, expensive, unjust health care system.

There is an alternative. Our current system allowing private insurers to cover the healthy and profitable while screening out everyone else allows one-third of our health spending to be diverted to needless bureaucracy and paperwork. Eliminating the private insurance companies and replacing them with a single public payer would save more than $350 billion per year, enough to provide coverage for all of the uninsured. Combined with what we’re already paying for health care, this is sufficient to provide comprehensive coverage to everyone without any additional spending.

I know what you’re thinking: Why reach for the “pie in the sky” when we actually have a chance with children? (Forget the fact that we’ve had this chance for years.) The answer is that S-CHIP and Medicaid don’t give us a chance to provide good coverage to children. They buy us an expensive and inadequate band-aid. And as long as we allow for-profit insurance companies, it will keep falling off like tape in water.

I propose that child advocates at this week’s town hall meetings stop supporting changes that are guaranteed to fail. I propose that we stop thinking of universal health care as “pie in the sky,” as institutional forces once called the abolition of slavery, women’s right to vote and the Civil Rights Act. We can have whatever kind of health care system we want. We don’t need to spend more money, we already spend enough. We don’t need to sacrifice quality or ration care any more than we do now.

Texans — and all Americans — want a health care system that is affordable, accountable, accessible, comprehensive, universal and just. We have many examples: Medicare, the Veterans Administration, the rest of the industrialized world. The only lasting, affordable, feasible solution to our health care crisis is national health insurance — an expanded and improved Medicare for All, which continues to be publicly financed and privately delivered.

Child advocates this week and our new state and federal legislators should stop looking for piecemeal solutions and instead support a system where everyone pays into it equitably and every one takes out according to medical need; a health care system that excludes no one and is accountable to the people it serves; a health care system that is comprehensive and just, because that is what we as Americans, young and old alike, deserve.

Malinow, a pediatrician at Ben Taub General Hospital, is president of Physicians for a National Health Program. The Houston town meeting will be held from 9:30 a.m. to noon Thursday at Texas Children’s Hospital’s Feigin Center.

Gov. Schwarzenegger's health care proposal

California Governor Schwarzenegger’s Health Care Proposal

The Governor’s vision for health reform is an accessible, efficient, and affordable health care system that promotes a healthier California through prevention and wellness and universality of coverage. For the Governor’s vision to be realized, health care reform must reflect a “systems” approach that incorporates three essential building blocks in an integrated manner.

These building blocks are:
Prevention, health promotion, and wellness
Coverage for all Californians
Affordability and cost containment

http://gov.ca.gov/pdf/press/Governors_HC_Proposal.pdf

Comment:

By Don McCanne, MD

Gov. Schwarzenegger’s ten page proposal cannot be fully addressed here, but a brief discussion of the general concepts can give us a perspective as to whether this would achieve his stated goals of affordable health care for everyone. I’ll discuss the first and third building blocks first, and then his plan for coverage.

For prevention, health promotion and wellness, he recommends preventing diabetes and obesity, as if we really knew how to do that, and continuing our successful program to reduce the use of tobacco. He also recommends incentives/rewards to promote prevention, wellness, and healthy lifestyles. Although certainly we all agree that healthy lifestyles are important, as a public policy initiative, this building block will not add much to the foundation of a more effective and efficient health care system.

Affordability and cost containment are crucial to reform. But what does the governor offer? He would require that insurers and hospitals limit their administrative costs and profits to 15% of premiums paid. The current administrative waste is due to our fragmented system of financing health care, and he would do nothing to bring about the structural reform required. It will be very difficult to reduce the 31% spent on administration without an efficient system such as single payer. He recommends health savings accounts, which, if they do reduce spending, would do so by making beneficial health services unaffordable for many individuals with unfunded or depleted accounts. He states that health information technology will improve affordability, when there is already evidence that it will more likely increase costs. He suggests that pay-for-performance and reporting health plan performance will improve efficiency, though there is no real evidence for that. He maintains silence on important cost drivers such as lack of an adequate primary care infrastructure, an excess of non-beneficial high-tech services, and the highest prices of all nations. Without structural reform, this building block will not add much to our health care foundation.

The most important building block is his proposal to provide coverage for all Californians. He does this by expanding eligibility for Medi-Cal (Medicaid) and Healthy Families (SCHIP) for low-income individuals with means-tested premiums, providing subsidies for lower-income working uninsured to purchase coverage through a state pool, and enforcing an individual mandate for all others to purchase coverage. Specific proposals to cover the undocumented are also included.

Unfortunately, this block crumbles when you look at the mandated coverage. “The minimum health insurance benefit that must be maintained will be a $5,000 deductible plan with maximum out-of-pocket limits of $7,500 per person and $10,000 per family. For the majority of uninsured individuals, such coverage can be purchased today for $100 or less per month for an individual and $200 or less for two persons.” Considering that this proposal requires guaranteed issue and community rating, the premiums likely will be at least five or six times that much. And maximum-out-of-pocket limits are a fiction since they ignore non-covered and out-of-network services – often unavoidable. The total costs to individuals or families with significant health care needs can be in the tens of thousands of dollars. An insurance product that does not protect average-income Americans cannot serve as the foundation of an affordable, efficient health care system for all. This alone destroys the credibility of Gov. Schwarzenegger’s model.

There are a couple of other issues that should be mentioned. The 4% payroll tax for employers will likely result in crowd out – employers dropping their current plans because this payroll tax is much lower than the premiums paid for employer-sponsored plans. That tax will not be able to support adequate plans in the state-administered pool. Thus his budget-neutral funding breaks down.

Also the plan promises to significantly increase payment to Medi-Cal providers, at a cost to the state of $2.2 billion. The expanded eligibility under Medi-Cal will cost the state another $1.3 billion. With the mandate of budget neutrality, how do they intend to fund this $3.5 billion expansion? They are going to tax the gross revenues of hospitals at 4% and physicians at 2%, for a total of $3.5 billion. What is the net affect of this? Not only is the Medi-Cal rate increase confiscated by the state, but also the entire compensation for the new enrollees is confiscated. The fact that Schwarzenegger’s administration used a budget gimmick to require physicians and hospitals to provide free care to the expanded Medi-Cal population demonstrates the dishonesty that permeates this entire proposal.

Sen. Sheila Kuehl has an excellent op-ed in today’s Los Angeles Times that contrasts the proposals of Gov. Arnold Schwarzenegger, Senate President Pro Tem Don Perata, and Assembly Speaker Fabian Nuñez, with her own proposal for a single state fund (SB 840). For “A second, third and fourth opinion on healthcare:”
http://www.latimes.com/news/opinion/la-oe-kuehl9jan09,0,7944823.story?coll=la-opinion-rightrail

Gov. Schwarzenegger’s health care proposal

California Governor Schwarzenegger’s Health Care Proposal

The Governor’s vision for health reform is an accessible, efficient, and affordable health care system that promotes a healthier California through prevention and wellness and universality of coverage. For the Governor’s vision to be realized, health care reform must reflect a “systems” approach that incorporates three essential building blocks in an integrated manner.

These building blocks are:
Prevention, health promotion, and wellness
Coverage for all Californians
Affordability and cost containment

http://gov.ca.gov/pdf/press/Governors_HC_Proposal.pdf

Comment:

By Don McCanne, MD

Gov. Schwarzenegger’s ten page proposal cannot be fully addressed here, but a brief discussion of the general concepts can give us a perspective as to whether this would achieve his stated goals of affordable health care for everyone. I’ll discuss the first and third building blocks first, and then his plan for coverage.

For prevention, health promotion and wellness, he recommends preventing diabetes and obesity, as if we really knew how to do that, and continuing our successful program to reduce the use of tobacco. He also recommends incentives/rewards to promote prevention, wellness, and healthy lifestyles. Although certainly we all agree that healthy lifestyles are important, as a public policy initiative, this building block will not add much to the foundation of a more effective and efficient health care system.

Affordability and cost containment are crucial to reform. But what does the governor offer? He would require that insurers and hospitals limit their administrative costs and profits to 15% of premiums paid. The current administrative waste is due to our fragmented system of financing health care, and he would do nothing to bring about the structural reform required. It will be very difficult to reduce the 31% spent on administration without an efficient system such as single payer. He recommends health savings accounts, which, if they do reduce spending, would do so by making beneficial health services unaffordable for many individuals with unfunded or depleted accounts. He states that health information technology will improve affordability, when there is already evidence that it will more likely increase costs. He suggests that pay-for-performance and reporting health plan performance will improve efficiency, though there is no real evidence for that. He maintains silence on important cost drivers such as lack of an adequate primary care infrastructure, an excess of non-beneficial high-tech services, and the highest prices of all nations. Without structural reform, this building block will not add much to our health care foundation.

The most important building block is his proposal to provide coverage for all Californians. He does this by expanding eligibility for Medi-Cal (Medicaid) and Healthy Families (SCHIP) for low-income individuals with means-tested premiums, providing subsidies for lower-income working uninsured to purchase coverage through a state pool, and enforcing an individual mandate for all others to purchase coverage. Specific proposals to cover the undocumented are also included.

Unfortunately, this block crumbles when you look at the mandated coverage. “The minimum health insurance benefit that must be maintained will be a $5,000 deductible plan with maximum out-of-pocket limits of $7,500 per person and $10,000 per family. For the majority of uninsured individuals, such coverage can be purchased today for $100 or less per month for an individual and $200 or less for two persons.” Considering that this proposal requires guaranteed issue and community rating, the premiums likely will be at least five or six times that much. And maximum-out-of-pocket limits are a fiction since they ignore non-covered and out-of-network services – often unavoidable. The total costs to individuals or families with significant health care needs can be in the tens of thousands of dollars. An insurance product that does not protect average-income Americans cannot serve as the foundation of an affordable, efficient health care system for all. This alone destroys the credibility of Gov. Schwarzenegger’s model.

There are a couple of other issues that should be mentioned. The 4% payroll tax for employers will likely result in crowd out – employers dropping their current plans because this payroll tax is much lower than the premiums paid for employer-sponsored plans. That tax will not be able to support adequate plans in the state-administered pool. Thus his budget-neutral funding breaks down.

Also the plan promises to significantly increase payment to Medi-Cal providers, at a cost to the state of $2.2 billion. The expanded eligibility under Medi-Cal will cost the state another $1.3 billion. With the mandate of budget neutrality, how do they intend to fund this $3.5 billion expansion? They are going to tax the gross revenues of hospitals at 4% and physicians at 2%, for a total of $3.5 billion. What is the net affect of this? Not only is the Medi-Cal rate increase confiscated by the state, but also the entire compensation for the new enrollees is confiscated. The fact that Schwarzenegger’s administration used a budget gimmick to require physicians and hospitals to provide free care to the expanded Medi-Cal population demonstrates the dishonesty that permeates this entire proposal.

Sen. Sheila Kuehl has an excellent op-ed in today’s Los Angeles Times that contrasts the proposals of Gov. Arnold Schwarzenegger, Senate President Pro Tem Don Perata, and Assembly Speaker Fabian Nuñez, with her own proposal for a single state fund (SB 840). For “A second, third and fourth opinion on healthcare:”
http://www.latimes.com/news/opinion/la-oe-kuehl9jan09,0,7944823.story?coll=la-opinion-rightrail

Private insurers deny individual coverage based on occupation

Health insurers deny policies in some jobs

Common medications also can be deemed too risky in California.

By Lisa Girion
Los Angeles Times
January 8, 2007

Health insurers in California refuse to sell individual coverage to people simply because of their occupations or use of certain medicines, according to documents obtained by The Times.

Entire categories of workers — including roofers, pro athletes, dockworkers, migrant workers and firefighters — are turned down for insurance even if they are in good health and can afford coverage, according to the confidential underwriting guidelines of four health plans.

Although Blue Cross of California, the state’s top seller of individual policies, does not exclude applicants based on occupation, three others do: Blue Shield of California, PacifiCare Health Systems Inc. and Health Net Inc. Actuarially speaking, they say, certain workers pose too big a risk.

All four health plans look at prescription drug use to decide to whom they will sell individual policies. Dozens of widely prescribed medications — including Allegra, Celebrex and Prevacid — may lead to rejection, according to the underwriting guidelines that the health plans provide to insurance brokers but not to the public.

In fact, eight of the 20 top-selling prescription drugs in the U.S., including No. 1 Lipitor, a cholesterol fighter that racked up $12.9 billion in global sales in 2005, make the lists of two health plans.

“This is something that has been actuarially determined to keep insurance affordable for a very, very broad range of people,” said David Olson, a spokesman for Woodland Hills-based Health Net.

“This isn’t cherry picking; this is ignoring whole orchards of people,” said Jamie Court, president of the Foundation for Consumer and Taxpayer Rights.

Studies show “guaranteed issue can price people out of the market, and, as public policy, it achieves the opposite goal of getting more people insured,” said Shannon Troughton, a spokeswoman for WellPoint Inc., the Indianapolis-based parent company of Blue Cross of California.

“The current system is broken and getting worse,” (Senate President Pro Tem Don) Perata said. “Instead of competing on the basis of cost and quality, we’re seeing health insurers denying coverage to the people who need it the most. This is scandalous.”

The problem with adding even one high-risk member to an insurance plan is that the costs go up for everybody, said Tyler Mason, a spokesman for PacifiCare, a division of Minneapolis-based UnitedHealth Group Inc. “It’s the whole risk-pool thing, and one affecting the hundreds.”

“This is one of the features of our polyglot system of health insurance,” Health Net’s Olson said. Health plans “have different approaches. Our view would be that’s a good thing.”

http://www.latimes.com/business/la-fi-reject8jan08,0,6430685,full.story?coll=la-home-headlines

Comment:

By Don McCanne, MD

Our polyglot system (sic) of health insurance is a good thing? Cream-skimming, cherry-picking policies are great for the insurers since it allows them to maintain their market presence through their ability to offer competitive premiums.

But protecting the markets for private plans is terrible when it is done so by destroying the risk pooling function of insurance. Policies that create intolerable financial burdens for those with health care needs are the opposite of what we should be striving for.

We desperately need an equitably-funded universal risk pool. The private insurers will fight it every inch of the way. Is our ethical obligation to insurers or to patients? Isn’t it time to shove the private insurers out of the way so that we can establish our own public program that actually protects the financial resources of patients?

Health Care for All: Big Business to the Rescue?

As unlikely as it seems, big business may be the force that brings about universal health insurance.

By Daniel Gross
AARP Bulletin
January 2007

“It’s an outrage that any American’s life expectancy should be shortened simply because the company they worked for went bankrupt and abrogated health care coverage. And now we have a company like Ford virtually being bankrupted by the problem of rising health care costs, and yet you’ve got tens of millions of people with no health insurance.”

These words of frustration weren’t uttered by a union leader standing on a picket line. Instead, they came from billionaire Wilbur L. Ross Jr., number 322 on the Forbes 400, the former chairman of the International Steel Group and a major investor in U.S. textile, coal and auto parts companies. Ross made much of his fortune in recent years by restructuring bankrupt industrial companies, many of which were swamped by the escalating costs of insuring their aging work forces. He sees a need for some kind of government involvement in health care, and he’s not alone.

As unlikely as it seems, big business could emerge as the force that finally brings about universal health insurance. In the first week after the November elections, the CEOs of General Motors, Ford and Chrysler met with President Bush to discuss issues they faced, including health care costs. That same week, America’s Health Insurance Plans, a trade group of large insurers, released a 10-year, $300 billion proposal to provide health insurance for all children and 95 percent of adults–through a combination of tax breaks for individual taxpayers and the expansion of government programs such as Medicaid.

“I think we’re getting to a tipping point where this country is going to be willing to move on health care,” said Wal-Mart CEO Lee Scott in an appearance on the Charlie Rose show last year. “Business and labor are going to have to participate and probably play even more of a leadership role than government … and then bring the political side along with them.”

To Ross, the solution to America’s health care crisis is relatively simple. “We need some form of universal coverage that would be funded centrally by the government, but delivered privately through existing mechanisms like HMOs,” he said. The program, he suggested, could be funded by a tax on imports.

The discussion is clearly being prompted by bottom line issues: Soaring health care costs are a major problem for business. Companies in the United States compete against rivals in developed countries (Japan, Germany and France) where the government funds health care, and against developing countries (China, India) where neither business nor society at large is responsible for health insurance. Either way, American companies that provide health insurance are at a competitive disadvantage.

In 2005 money-losing General Motors spent $5.3 billion to cover the health costs of 1.1 million employees, retirees and dependents. Ross noted that, on a per-car basis, General Motors spends more money on health insurance than on steel. But Old Economy behemoths like GM aren’t the only ones suffering. “Since the beginning of this decade, health insurance premiums for average employers have increased 87 percent, compared with overall inflation of 18 percent,” said Joel Miller, vice president of operations at the Washington-based National Coalition on Health Care (NCHC), a nonprofit alliance of business, unions and consumer groups. These higher costs cut into operating margins and reduce the capacity of businesses to grow.

Thus far, the response from business has been to pass costs on to employees and reduce coverage. According to U.S. Census statistics for 2005, nearly 47 million Americans lacked health insurance, up from 40 million in 2000. And only 60 percent of Americans had job-based coverage, down from 63.6 percent in 2000–this after five straight years of robust economic growth.

Business leaders have traditionally been reluctant to call for a national effort to confront the issue. “We have people who map the genome or conquer the Internet who seem rather timid about speaking out on what’s good for the country,” said Andy Stern, president of the 1.8 million-member Service Employees International Union.

That reluctance began to change in 2004, when the NCHC–which includes large employers like Exelon, General Electric, Duke Energy and American Water–issued a report calling for comprehensive universal health coverage. The report laid out a range of options, such as expanding government programs like Medicare or letting people or businesses buy into the federal worker health plan. But while the organization’s corporate members endorsed the plan, its prominent CEO members haven’t publicly called for universal health care.

Experts like Drew Altman, president and CEO of the Henry J. Kaiser Family Foundation, say that personal ideology and lack of knowledge tend to block discussion on the subject. Case in point: Business leaders savaged the Clinton administration’s fruitless effort to create universal coverage in 1993. “Another factor,” said Altman, “is that these business leaders spend a small amount of time on the complex issue of health care. And many don’t really understand it.”

In addition, because most CEOs are focusing on creating returns for shareholders–and not on producing benefits for society at large–they tend to approach the question of rising health care costs as a business problem, not a social or political one. Some companies experiment with chronic disease management, ban smoking, invest in wellness programs, and depend on technology to manage costs. Others implement so-called “consumer-driven” reforms, like high-deductible policies or health savings accounts, which place responsibility for spending decisions in the hands of individuals, not insurers. The theory: Turning patients into consumers will help contain costs.

But now there are signs–including the NCHC report–that business is coming out of its shell and taking a receptive look at universal health care. Among the most vocal is Howard Schultz, chairman of Starbucks, which in May 2004 sponsored the Robert Wood Johnson Foundation’s “Cover the Uninsured Week.” “We can’t be the kind of society we aspire to be when we have 50 million people uninsured,” Schultz told Fortune recently. “It’s a blemish on what it means to be an American.”

Daniel Gross writes the Moneybox column for Slate and is a regular contributor to The New York Times.

Gov. Schwarzenegger must tackle the private insurers

Make health insurers play fair

Any plan to reform healthcare must tackle the biggest obstacle to insuring everyone — private insurers.

By Jamie Court and Judy Dugan
Los Angeles Times
January 5, 2007

When Gov. Arnold Schwarzenegger, on crutches, unveils his expected grand redesign of the state’s health insurance system Monday, he must tackle the biggest obstacle to insuring the uninsured: insurance companies.

For health coverage truly to be affordable and accessible, the governor and Legislature must force insurers to accept the following rules of fairness:

* A “take-all-comers” rule. Insurers today can deny a health policy to individual buyers in California for almost any reason. In Massachusetts, which recently required all citizens to carry health insurance, insurers have to take all patients, regardless of preexisting conditions. California insurers should be required to do the same.

* Charges set by community, not condition. California health insurers want to insure the healthy, not the sick, so they charge individuals who even might become sick astronomical premiums. Those who do become ill can see their premiums skyrocket or their policies canceled. It’s the opposite of Massachusetts and other states where health insurers must base premiums on broad characteristics such as age and regional healthcare costs — not on a buyer’s specific medical condition. The purpose of insurance, after all, is to spread the risk.

* Regulation of health premiums like auto premiums. California auto insurers must show that their profits are reasonable and ask permission of state regulators before raising premiums. The system has saved motorists tens of billions of dollars on their auto insurance since it was adopted in 1988. It’s the least the state should demand of health insurers, who now face little to no scrutiny of their profits or bloated administrative costs. As a result, health insurers that sell to individuals spend as little as 50 cents of every premium dollar on actual medical care.

* A ban on health insurance policies that set no limits on what patients can pay. A policy that pays only $300 a day for a hospital stay that costs as much as $10,000 a day may cost a lot less than comprehensive policies, but it is hardly worth the paper it is printed on. Fringe insurers have been held accountable in California courts for such “junk insurance,” but traditional insurers are moving toward similar “mini-policies.” All policies should have an out-of-
pocket maximum. If you’re left with half a million dollars in medical bills, as one California patient was recently after her husband’s death from cancer, then you’re not really covered.

* A “California Health Plan” offering universal access to public officials’ health coverage. The state employees’ retirement and benefits fund, CalPERS, has used its size and clout to cut drug costs and provide care without paying for insurers’ profit and overhead. Hundreds of thousands of state employees, including legislators and gubernatorial aides, have access to this directly state-funded system. If all Californians had access to this well-run, low-overhead plan, private insurers would be forced to drop prices and reduce overhead and profits if they wanted to compete.

http://www.latimes.com/news/printedition/opinion/la-oe-court5jan05,1,4392420.story?coll=la-news-comment

Comment:

By Don McCanne, MD

How many times have you heard from supporters of universal health care that every American should have the same coverage as members of Congress? They have the best insurance available today: Federal Employees’ Health Benefit Program (FEHBP).

California has used these same concepts to create a high-quality, comprehensive program for its public employees: CalPERS. California, led by the efforts of Gov. Schwarzenegger, is now tackling the difficult problem of covering the 6 million uninsured. Jamie Court and Judy Dugan of the Foundation for Taxpayer and Consumer Rights make the case that all Californians should be granted access to the well-run, low-overhead CalPERS program. How well would that work?

My daughter, a civil and environmental engineer, receives CalPERS coverage through her employer. Of the three types of plans offered (HMO, PPO, and EPO) she elected a PPO. Her plan has a $500 deductible, and provides 100% coverage after she has met stop-loss expenses of $3000. At her income level, a maximum out-of-pocket expense of $3000 would not be an unbearable burden (though it likely would be for low- to moderate-income individuals).

Using CalPERS coverage, she recently had an outpatient orthopedic procedure. Her orthopedist is in the insurer’s network, and prior authorization was obtained. Shortly after, she received the explanation of benefits from the CalPERS insurer. The total charges were $26,000 and the charges that were her responsibility were $16,000.

How could the best insurance available that covers all expenses after $3000 assess the patient a $13,000 penalty? I’ll leave it to you to guess how that might have happened, but I’ll describe it in the most positive word that I can come up with as a “technicality.” The important issue is not that there was a technicality, but that we continue to support a system that is rife with unnecessary and unfair technicalities.

The $13,000 penalty is currently being negotiated, but not with the CalPERS PPO. The technicality totally protects the insurer. My daughter’s only recourse is to negotiate with her health care providers a reduction in disallowed charges. The CalPERS insurer, the best there is, stands firm in its position that either the patient or the providers must bear the losses resulting from a technicality specifically designed to protect the insurer.

The role of private insurers is not amoral; it is immoral! They should be ejected from the health care equation. Those complacent with their CalPERS and FEHBP coverage need to take a closer look.

Jamie Court is a hero of mine. He has continued to stand up to the nefarious private insurance industry. I do respectfully differ with him in his conclusion in today’s article. We shouldn’t make CalPERS available to all Californians. We need to throw them out, and then cover all Californians, and the entire nation, with a comprehensive, single payer, public insurance program.

Technicalities are a strategic tool of private market plans, but not of public insurance. We should disqualify the private insurers on this technicality alone.