PNHP

Change players or rules?

Change players or rules?

Commercial Health Insurance: Smart Or Simply Lucky?

By Marsha Gold
Health Affairs
November/December 2006

Rapid growth in health costs threatens to reduce coverage and financial protection by making health insurance increasingly expensive. Policy-makers who perceive that they can rein in the rapid growth in spending within public insurance programs such as Medicare and Medicaid by transferring responsibilities to commercial health insurers will be disappointed. Analysts comparing historical growth in per capita spending for Medicare and private insurance between 1970 and 2000–when the former was mainly a government-run program and the latter was provided by commercial health insurers–found that, on average, the private sector grew no more slowly than Medicare and in fact grew faster on some measures. It is a serious mistake to assume that the cost problems plaguing our health system can be solved by changing the players rather than the rules of the game.

http://content.healthaffairs.org/cgi/content/full/25/6/1490

Comment:

By Don McCanne, MD

In commenting on the move of commercial insurers into our public programs – Medicare and Medicaid – Marsha Gold has made it clear that cost problems will not be solved by merely changing the players when the rules of the game need to be changed.

Since cost issues are not limited to our public programs but involve our entire health care system, it is clear that none of the players are globally effective, and that the rules absolutely must be changed. But when you think about the new rules that we need, the commercial insurers, as we know them, will be utterly incapable of playing by those rules.

We not only need to change the rules, but we need to change the players by substituting the one single player we need – single payer.

Lewin Group analysis of Sen. Wyden's plan

Cost and Coverage Estimates for the “Healthy Americans Act”

Prepared By: John Sheils, Randall Haught, Evelyn Murphy
The Lewin Group
December 12, 2006

(The Healthy Americans Act is a bill being introduced by Sen. Ron Wyden of Oregon.)

Executive Summary (excerpts):

The “Healthy Americans Act” (HAA) establishes a centrally financed system of private health insurance for all Americans except those covered through Medicare or the military. Participants would chose from a selection of private plans offered through newly created regional purchasing organizations called “Health Help Agencies” (HHA’s). All Americans would have coverage at least as comprehensive as the health coverage now provided to members of Congress and federal workers, although an actuarially equivalent substitution of HMO and Health Savings Account (HSA) plans is permitted.

Employers would be required to “cash-out” their health plans by terminating their existing health coverage and paying the amount saved to their workers in the form of increased wages. The current tax exemption for employer provided health benefits is eliminated to strengthen incentives for families to seek lower cost coverage. However, a new “health premium” tax deduction is created so that these wage increases do not increase federal personal income tax payments. To maintain incentives to control costs, the deduction is fixed and can not be increased by purchasing more costly coverage.

All HAA participants would pay premiums through their annual income tax filings. The program would fully subsidize the premium for those below 100 percent of the federal poverty level (FPL), with the premium phasing-in for people living between 100 percent and 400 percent of the FPL. People who do not have enough income to pay taxes are assumed to be eligible for the program with full subsidies, thus eliminating the need to apply separately for assistance as under the current Medicaid program. Employers also would be required to pay an assessment ranging from 2 to 25 percent of the national average premium for the minimum benefits package, depending upon firm size and revenues per worker.

E. Private Employer Impacts (excerpts):

Private employer health spending under the HAA is reduced under the HAA by $309.8 billion, from $428.8 billion under current law to $119.0 billion under the program.

We assume that the savings to employers would be passed-back to workers in the form of increases in wages. This reflects the HAA requirement that employers “cash-out” their benefits plans. It also reflects economic theory and research indicating that changes in employer benefits for health care are, in the long run, passed back to workers in the form of wages or some other form of compensation such as pensions or disability insurance.

This reflects that the employer’s true cost of employing workers includes all compensation costs including: wages less employer payroll taxes, health benefits, pensions, and other non-cash benefits. In competitive labor markets, eliminating the health benefits (or any other form of compensation) would bid-up other forms of compensation such as wages so that aggregate compensation levels are largely unchanged.

http://wyden.senate.gov/Healthy_Americans_Act/HAA_Cost_Coverage_Report.pdf

Sen. Wyden’s plan (with links to the Act and other documents):
http://wyden.senate.gov/media/2006/12132006_Healthy_Americans_Act.htm

Comment:

By Don McCanne, MD

Sen. Wyden’s proposal is an individual mandate to purchase private health plans. Much has been written about the flaws of such models, and no attempt will be made to address most of those issues here. Rather only one serious fundamental flaw in the application of economic theory will be discussed.

The theory is that in competitive labor markets, total compensation is determined by the market, but the distribution between payroll and other benefits such as health plans and pensions does not influence the total compensation. Thus termination of a health benefit program results in an increase in wages that has the same monetary value.

In Sen. Wyden’s proposal, not only does it assume this theory to be true, it also provides back-up enforcement by requiring that employers increase wages by the same amount of the health benefit that will be terminated under this Act, but only for the first two years. After that, the competition of labor markets resumes, but without the complication of a health benefit program. Employees are on their own for accessing and funding their health plans.

Whether through union efforts or in the open job market, compensation is negotiated, at least theoretically. That includes wages and often health benefits and pensions. It does not include food. It does not include housing. It does not include transportation. It does not include any other basic needs. Those needs fall under the category of personal responsibility – use your wages wisely to meet those needs.

Now health care is shifted away from being considered as part of the compensation package, over into this realm of personal responsibility.

Have wages kept up with the costs of basic needs? There certainly has been a redistribution from wage earners to the wealthy. The minimum wage has not been increased for many years. Consumer debt continues to expand. Personal savings are now a negative. Personal insolvency continues to grow. Yet employers are not providing wage increases that are indexed to food, nor to housing, nor to transportation. Now that they are no longer in charge of health coverage, they will feel no obligation to index wages to health costs either.

The Lewin report contends that price competition between health plans, and greater administrative efficiencies will lower costs significantly. If the consolidated efforts of employers have been unable to control costs and waste, how can individual purchasers ever expect to exert market pressures to achieve these efficiencies?

The last section of the Act list many other potential sources of cost savings. Reading the list, the savings potential for many is simple rhetoric, not supported by fact. Some of them would actually increase costs. The Act excludes more effective cost measures such as those of the single payer model.

The point is that costs will continue to increase and wage earners will have to face those costs alone. Employers will have divorced themselves from the problem and will not make an exception for health care anymore than they already do for food, housing and transportation.

Wyden’s plan falls apart since it depends on price competition of health plans, which in turn depends on shifting more unaffordable costs directly to those who need care.

The shocking extent of underinsurance

Changes in Financial Burdens for Health Care National Estimates for the Population Younger Than 65 Years, 1996 to 2003

Jessica S. Banthin, PhD; Didem M. Bernard, PhD
JAMA
December 13, 2006
JAMA. 2006;296:2712-2719.

Context: Policymakers as well as physicians need to understand how rapidly rising health care costs are affecting specific groups of patients.

Objective: To estimate the number and characteristics of individuals in the United States faced with very high financial burdens for health care.

Design, Setting, and Population: Data from a nationally representative sample of civilian, noninstitutionalized US individuals younger than 65 years from the Medical Expenditure Panel Surveys were used to calculate 2 measures of financial burden as a function of tax-adjusted family income. Total burden included all out- of-pocket expenditures for health care services, including premiums.
Health care services burden excluded premiums and, when applied to the insured population, was used to identify the underinsured. We defined the underinsured as insured persons with health care service burdens in excess of 10% of tax-adjusted family income.

Main Outcome Measures: Total and health care services burdens exceeding 10% and 20% of family income in 1996 and 2003.

Results: In 2003, there were 48.8 million individuals (19.2%) living in families spending more than 10% of family income on health care, an increase of 11.7 million persons since 1996. Of these individuals, about 18.7 million (7.3%) were spending more than 20% of family income. In 2003, individuals with higher-than-average risk of incurring high total burdens included poor and low-income persons and those with nongroup coverage, aged 55 to 64 years, living in a non– metropolitan statistical area, in fair or poor health, having any type of limitation, or having a chronic medical condition. Applying our definition of underinsured to the insured population, an estimated 17.1 million persons younger than 65 years were underinsured in 2003, including 9.3 million persons with private employment-related insurance, 1.3 million persons with private nongroup policies, and 6.6 million persons with public coverage.

Conclusions: Our analysis identifies patients at greatest risk of health-related financial burdens that may adversely affect their access and adherence to recommended treatments. Our study also highlights the high costs associated with nongroup health insurance policies.

Author Affiliations: Division of Modeling and Simulation, Center for Financing, Access and Cost Trends, Agency for Healthcare Research and Quality, US Department of Health and Human Services, Rockville, Md.

http://jama.ama-assn.org/cgi/content/abstract/296/22/2712?etoc

Comment:

By Don McCanne, MD

Not more numbers! Don’t we have enough to make the case for national health insurance?

These numbers are important. Let’s see if we can make some sense of them.

This study indicates that the financial burden on families of medical costs has continued to grow worse. We should look at the most recent year studied, 2003, to get a better idea of the extent of the problem as we experience it today.

This is not a study of the numbers of uninsured (we already know those numbers), nor is it a study of the numbers with inadequate insurance or underinsurance (we don’t know those numbers). Rather, it is a study of the numbers of individuals under 65 who experienced financial hardship in a single year because their health care costs were greater than our health care financing system was capable of protecting against. It is not a study of the potential risks, but rather it is a study of actual financial harm done.

Most can agree that spending more than 10% of family income on health care constitutes a financial hardship, except perhaps for the very wealthy. So how many individuals experienced this hardship in one year – 2003? 48.8 million individuals, or 19.2% of our population!

One-fifth of all Americans! If you were to average that out, that means that everyone of us would have a year of financial hardship due to medical bills within the next five years, and every five years. Of course, disease is not evenly distributed, so those who remain healthy will not have a problem, but those with medical disorders will have multiple years of hardship.

Spending 20% of family income would certainly be disastrous for almost all of us. How many individuals spent that in 2003? 18.7 million or 7.3% of our population! That’s a disaster!

Well let’s forget about the uninsured for a minute and look at those of us who have insurance. Let’s not even count the insurance premiums that we or our employers are paying, but let’s look exclusively at the out-of-pocket expenses that we are paying for health care. This will give us a better idea of just how well our insurance is working.
How many paid more than 10% of family income for health expenses not covered by their insurance? Of those younger than 65, 17.1 million individuals! Underinsurance is a national epidemic that engulfs many more everyday!

There are some very important numbers from the tables in the article that do not appear in the abstract above.

What percent of middle-income Americans spent more than 10% of family income on health care? The answer? 22.7%!! That is almost as much as the 23.7% of low-income families that spent over 10% on health care. Health care costs are not just a problem for the poor, they are very much a problem for middle-income America!

One very small number from the charts may say the most about our flawed system of financing health care. What percent of high-income Americans spent more than 20% of their incomes on health care? One- fifth of their high incomes is a lot of money. Well, it was only 0.6% But think about that. One out of every 167 high-income Americans had to spend over 20% of their incomes on health care. If our health care financing system cannot reliably protect the wealthy, then it is a flawed system indeed.

Maybe the wealthy don’t care. The chances are 166 out of 167 that they won’t experience major medical debt in any given year, and they will likely outlive those odds. But middle-income Americans should be very, very afraid!

Insurance broker fraud

Only wreckage remains when insurance agents breach trust You think you're covered? You might be surprised, and at the worst possible time.

By Mark Morris
The Kansas City Star
December 11, 2006

Insurance agent misconduct and fraud is widespread and getting worse, according to experts interviewed by The Kansas City Star.

Among the most common abuses: agents who steal a client’s premiums by failing to forward them to the insurance company. Bad agents also sell unlicensed products or coverage that is unsuitable. And some are just crooks, no better than a policyholder who commits insurance fraud.

“A disturbing and growing number (of agents) won’t hesitate to bilk their own clients in order to pad their own lifestyle or bail out an agency that’s in trouble,” said James Quiggle, a spokesman for the Coalition Against Insurance Fraud, a nationwide advocacy group supported by insurance companies, regulators and consumer groups.
“It’s a front-and-center problem for regulators all over the country.”

To be sure, most agents are honest, according to experts who have studied the insurance industry.

http://www.kansascity.com:80/mld/kansascity/16210675.htm

Comment:

By Don McCanne, MD

Health care injustice is not only tragic, it is also infuriating when it is due to criminal misdeeds of entrusted advisors. But the problem of dishonest insurance agents is negligible compared to the problems inherent in the way individual plans are marketed and sold. It is the honest, ethical agents who are trying to do their best for their clients who are the real problem, though through no fault of their own.

Insurance agents have a difficult task. They must help their clients purchase plans that are affordable, that provide adequate financial protection, that will cover preexisting disorders, that will ensure that providers are accessible, and they must be certain that the insurer is reliable and capable of assuming risk. Truth told, there are no health insurance products that meet all of these standards. So the agent is in a position of assisting his/her client in selecting a compromised product, and may not even be able to provide any product if costs are prohibitive or medical underwriting prevents coverage.

Insurer administrative costs are already outrageous, yet the insurance agents add still another layer of pure administrative costs that provide no medical benefit. Under our fragmented system of financing health care, the services of an agent are essential whether that function is performed by an independent agent or an agent of the insurance company. It’s simply more waste. But worse, the need for competitive premiums results in products that fall short on the goals of comprehensive, affordable coverage for any and all applicants.

What we need is a single insurance product that covers all reasonable, beneficial services, and one in which enrollment is automatic for everyone for life. We wouldn’t need brokers to help us do that if we had a single payer program of national health insurance.

Robert Gumbiner on single payer

A Solution to America’s Health Care Crisis: Curing Our Sick Health Care System

By Robert Gumbiner, M.D., with Alis Gumbiner

I am proposing the federal government as the single payer of health care in this country. Only the federal government has the ability to fund one large risk pool through a payroll deduction. As the single payer, the federal government could negotiate hospital and physician payments even more effectively than it does now with Medicare. In addition, the federal government could negotiate prices for prescription drugs.

A single pool of funds, collected and administered by the government, would expand Medicare and replace Medicaid, SCHIP, the Veteran’s Administration, and private health insurance, including the health care aspect of Worker’s Compensation Insurance. Also eliminated would be the tax credit – or subsidy – given to companies for providing private health insurance to their employees. In other words, the current, inefficient patchwork of payment systems would disappear, to be replaced by one nationwide program available to every citizen.

http://www.healthcarecure.org/

Comment:

By Don McCanne, MD

What is remarkable about this quote in support of single payer is its source: Robert Gumbiner was the founder of FHP, one of the nation’s largest managed care companies.

Dr. Gumbiner received fame (some might say infamy) for his innovations in developing systems that controlled health care costs. In his book, he describes his successes and failures, and his evolving thoughts about how to best address the problem of affordability, currently the nation’s leading concern about health care. His bottom line is that we must enact a national single payer program, and that conclusion is coming from a manager’s perspective.

No funds for children's insurance, only for HSAs for the rich

Congress Punts on Children’s Health Care in Favor of Tax Shelter for Wealthy Statement of Robert Greenstein, Executive Director

Center on Budget and Policy Priorities
December 7, 2006

It is stunning that as one of its final acts, Congress chose to attach to the tax extenders bill a provision making Health Savings Accounts more lucrative as tax shelters for wealthy individuals even as Congress refused to provide funds needed to ensure that up to 600,000 low-income children keep their health insurance through the State Children’s Health Insurance Program in 2007.

It has been known all year that without additional SCHIP funding, 17 states would face SCHIP shortfalls in 2007. The Administration included a proposal in its budget to address these shortfalls.
Various bills to resolve the problem were introduced in Congress. But when decision time came, Congressional leaders declined to act.
Coverage for up to 600,000 low-income children will be at risk as a result.

When it came to making HSAs more lucrative as tax shelters, by contrast, Congressional negotiators charted a different course. They took a special-interest HSA bill that had never been considered on the floor of either the Senate or House and attached it to the same bill to which they declined to attach the needed SCHIP resources.

To say this is disappointing would be an understatement. Congress has provided another windfall for Uncle Scrooge — and a lump of coal for Tiny Tim.

http://www.cbpp.org/12-7-06health-stmt.htm

Background on SCHIP shortfall:
http://www.cbpp.org/6-5-06health2.htm

Background on HSA expansion:
http://www.cbpp.org/9-26-06health2.htm

Comment:

By Don McCanne, MD

Is this really the message that voters sent Congress last month?

Inside Track: An Irreverent Read on Vermont Politics

by Peter Freyne
Vermont Political History
12.06.06
Seven Days

Health Care Reform Hero? — Full disclosure: This writer admits to being an AARP member. Aging gracefully. That means we get the magazine. And the latest edition, which arrived last Thursday, was a hot one!

It had nothing to do with actor Robert DeNiro on the cover. It had everything to do with the full-page photo of Vermont Gov. Jim Douglas inside. Seated in blue business suit and red tie, the Green Mountain guv was surrounded by a half-dozen Holsteins.

Face it, the guy is on a roll. GOP Jim just won a third consecutive term at the top in the land where America’s left shines the brightest with the likes of Bernie Sanders, Patrick Leahy and Howard Dean, the Democratic party chairman.

The Vermont governor, along with actors DeNiro, Marlo Thomas and David Hyde Pierce, was chosen by AARP for a 2007 IMPACT Award as one of “10 People Who Make the World a Better Place.”

What a life! How does he do it? In leftist, Democratic/ Progressive Vermont, how does a Republican who supported Richard Nixon as a Middlebury College senior and Vermont House candidate in 1972, and George W. Bush in 2000 and 2004, keep winning elections in Vermont, year after year? And guess what Douglas won the AARP IMPACT Award for? Sitting down, are you?

Vermont’s Gov. Douglas was recognized for his leadership on health-care reform! Hello?

Writes veteran New York magazine writer Joe Treen for the January/February 2007 edition of AARP, which bills itself as the “World’s Largest Circulation Magazine”:

. . . in May, after two years of negotiations, Governor Jim Douglas signed groundbreaking legislation that makes affordable health insurance available to everyone in the state. The new universal health care law, considered the most progressive in the country, also includes a series of cost-saving reforms. It is particularly important in the Green Mountain State, which has 61,000 uninsured citizens and a growing senior population. While the bill was clearly a bipartisan effort, much of the credit goes to Douglas, 55, for refusing to give up. “This was such a key issue,” he says. “The need was so great in terms of containing costs and providing coverage to uninsured Vermonters that we just couldn’t fail.”

Yes, indeed. There’s no business like show business, is there? A few other AARP readers in the Green Mountains couldn’t believe it, either. One was Bruce Cunningham of Hinesburg. Bruce has been an independent advocate and Statehouse regular for decades. His issues include antismoking and underage drinking. OK, a bit of a health nut. Nothing wrong with that, right? He gave Joe Treen a call at his New Jersey residence.

Cunningham told yours truly he politely informed the AARP freelancer that he had gotten the story on the IMPACT award-winning Vermonter terribly wrong. That anyone in Vermont could tell him Gov. Jim Douglas’ real impact was as the leading opponent of health-care reform.

Cunningham later told “Inside Track” that Treen “seemed very happy to talk to me.” Heck, one senior citizen to another, right? None of us is getting any younger.

“He also sounded appreciative of my pointing out that Gov. Jim Douglas was mainly an obstructionist,” said Bruce. “My overall impression was that [Treen] was interested in finding the truth.”

Cool.

We let the weekend pass and then gave him a call on Monday. Joe Treen appears to be a successful magazine-writing pro and, indeed, sounded like a decent baby-boom-generation kind of guy when we gave him a jingle.

However, he wasn’t exactly exuding enthusiasm for getting the story right. Rather, Ol’ Joe was a bit defensive.

Treen told “Inside Track” that after getting the call from Cunningham he “went back and re-looked at the story to make sure it was not off the mark.”

By that he meant he was not considering Gov. Douglas’ veto of the landmark health-care reform bill the Democrats and Progressives passed in 2005. He was only focusing, he said, “within the narrow focus of 2006.” Republican Gov. Jim Douglas may have vetoed reform in 2005, but in 2006, argued Treen, “he kept negotiators at the table.”

By the way, Treen didn’t come to Vermont and did not speak to the Vermont reform advocates.

One of those is “Vermont Health Care for All” activist Deb Richter M.D. Dr. Deb said she first howled in disbelief when she saw that AARP gave our guv a national award for his leadership on health-care reform.

“Is that a scream?” she asked.

But once Richter, like others, got over the initial shock, it made perfect sense to her. Perfect sense, that is, for AARP to find Jim Douglas so likable.

After all, the insurance industry has no greater friend in Vermont than our Republican governor, who, if he had his way, would open Vermont’s borders to every last cherry-picking one of them. In fact, close your eyes, and Jim Douglas could turn into a friendly insurance salesman in about two seconds flat!

As it is, Americans pay the highest portion of earnings of any workforce in the modern world on health care and for-profit health insurance. That’s because in the good ol’ USA, there’s a big fat layer of cost added to our medical bills in order to keep the insurance companies happy. It’s called profit.

“Does it surprise you,” asked Dr. Richter, “that AARP would endorse someone who keeps the insurance industry in good health?” Remember, she pointed out, “AARP sells health insurance.” Lots of health insurance. And AARP “stands to gain billions” from the “4 percent kickback” they get from the Medicare Part D portion of every insurance policy they’ll sell.

Good point, eh?

The modest, watered-down 2006 legislation that the Democrats defend as progress, and the guv won the big award and the big reelection for signing, “was a temporary solution for some folks. I wouldn’t begrudge that,” said Dr. Richter. “The point is, they had the opportunity to do something even bigger. The tragedy,” she told “Inside Track,” “is the fact that they stopped the conversation with this bill.”

And that may be its greatest accomplishment of all — stopping the health-care reform conversation. Congratulations, Guv. Well done!

“For some of my patients,” said Richter, “this will be a good thing. But the problem is, the other 95 percent, who have unbelievable premiums and high co-pays and deductibles, are left hanging.”

OneCare single payer video

OneCareNow.org

Teams in more than 365 California cities are conducting grassroots educational and public awareness “action” events–one event per day, in a different city, for one year–to demand quality, affordable healthcare for all Californians.

http://www.onecarenow.org/index.html

Comment:

By Don McCanne, MD

The OneCareNow campaign is designed to inform the citizens of California about the advantages of single payer reform and Sen. Sheila Kuehl’s legislation to enact it. Although SB 840 was vetoed by Gov. Schwarzenegger, it will be re-introduced in the next legislative session.

The OneCareNow campaign has produced a 22 minute video explaining the advantages of single payer reform. The video is of value not only for Californians, but for the entire nation in that it describes the imperative for a single payer solution, albeit from the California perspective.

The video, The Healthcare Solution: California OneCare, can be viewed on YouTube at the following link (save this link to share with others):

http://youtube.com/watch?v=jB0Vn_BppwM

Public and private spending in Canada and the United States

Health care spending to reach $148 billion this year

Canadian Institute for Health Information
December 5, 2006

The public and private shares of total health care spending have remained fairly steady over the past decade. This year, the public share is expected to account for 70.3% of total health care spending, in line with the 70/30 ratio of public/private spending seen over the last ten years.

http://secure.cihi.ca/cihiweb/dispPage.jsp?cw_page=media_05dec2006_e#2

Full report: National Health Expenditure Trends, 1975-2006
http://secure.cihi.ca/cihiweb/dispPage.jsp?cw_page=PG_592_E&cw_topic=592&cw_rel=AR_31_E

From a “Quote of the Day” earlier this week:

Mining data from the National Health Expenditures Accounts, Mr. (Thomas) Selden found that public expenditures on health care — Medicare, Medicaid, military health care and federal employee benefits — accounted for $888 billion of the $1.96 trillion spent on health care in 2004. Adding in the aforementioned subsidies (tax exemptions for employer-sponsored plans), and premiums paid for public-sector employees, the total comes to $1.2 trillion, or 61 percent.

Uwe E. Reinhardt, the James Madison professor of political economy at Princeton, suggests adding 5 percent for the federal mandate that hospitals provide free health care to the uninsured. “So government accounts for about two-thirds of health care spending,” Mr. Reinhardt said.

https://pnhp.org/news/2006/december/private_plans_pay_so.php

Comment:

By Don McCanne, MD

The policy lesson? Do not let anyone ever again claim that the new taxes required to fund a single payer system would require an intolerable drain on the economy. We are already paying those taxes, and the economy has not suffered as a result.

This does not mean that we don’t need new tax policies. Changes should be made to improve equity and increase transparency in our public financing of health care. The fairness and efficiency that a single payer system would bring us have been goals that have been elusive under our current fragmented system of funding health care.

Transparency in Health Care Insurance

By Kip Sullivan
Z Magazine

Comedian Jon Lovitz used to do a skit for “Saturday Night Live” in which he played Tommy Flanagan, the pathological liar. Lovitz’s character was always telling tall tales that made him look good. When a tale would become so outrageous even he suspected he was about to be exposed, Flanagan would stop for a moment, then, with a huge grin, he would blurt out a new fib and proclaim, “Yeah, that’s the ticket.”

The health insurance industry is proving to be a master at the Jon Lovitz routine. For a quarter-century the industry and its apologists in business, politics, and academia told the public managed care would solve the health care crisis. When even diehard defenders of the industry realized in the late 1990s that managed care had flopped, the industry came up with a new excuse to justify its existence and to distract public attention from real health care reform. Of the several names bestowed on the new excuse, the most faddish is transparency in health care. “Yeah, transparency, that’s the ticket.”

Like “health maintenance organization” and “consumer-driven health plan” (to name two other misnomers coined by the insurance industry and their hangers-on), “transparency in health care” is terribly misleading. The phrase evokes glorious visions of a world in which:

  • Data on the quality of doctors and hospitals and other health care providers are published in great quantities (by whom is unclear)
  • This cornucopia of data forces providers to improve quality
  • The improved quality leads to lower costs

The odds against any of these steps occurring are great. The likelihood that all three will occur is zero. But the promoters of transparency dogma are powerful. Transparency evangelists come from the insurance and computer industries, big business, the Republican and Democratic parties, academia, and the world of corporate-funded think tanks. CEOs John Chambers (Cisco Systems), Steven S. Reinemund (PepsiCo), Frederick W. Smith (FedEx), and Ivan G. Seidenberg (Verizon) are just a few of the business executives who tout transparency. Senator Hillary Rodham Clinton (D-NY) is the most prominent Democrat in the movement. In 2005 she sponsored legislation promoting the computerization of all medical records (an essential component of the transparency fantasy) and held press conferences celebrating the magic of quality measurement with Senator Bill Frist (R-TN) and former Speaker Newt Gingrich.

Like managed care theology before it, transparency theology draws support from the elite because it is consistent with conservative fantasies about making “the health care market” work. The insurance industry and its conservative allies understand that if “market reform” fails to solve the health care crisis, greater regulation, possibly in the form of a single-payer (or Medicare-for-all) system, will come sooner rather than later.

George W. Bush is one of many conservatives who misrepresent what regulation or a single-payer system would mean (government will “tell your doctor how to practice medicine” is the usual misrepresentation) and then brandish that caricature as justification for their support. Bush’s opening remarks at a press conference in Minnesota last August, at which he endorsed “transparency in health care,” illustrate this tactic. “We’ve got an interesting debate in health care in America,” Bush intoned in front of an invited audience in a fancy hotel in a wealthy suburb of Minneapolis. “And I guess if I had to summarize how I view it, I would say there’s a choice between having the government make decisions or consumers make decisions. I stand on the side of encouraging consumers. I think the most important relationship in health care is between…the patient and the doc…. And health care policy ought to be aimed at bolstering the consumer, empowering individuals to be responsible for health care decisions–is kind of the crux about what we’re talking about.”

In Bush’s world transparency is the great weapon against further government involvement in the U.S. health care system, and transparency will be achieved by the publication of report cards on clinics and hospitals. The grades on these report cards will render doctors and hospitals transparent. Once transparency is achieved, a series of other events will occur, to wit: patients will “shop” for the best providers, quality will rise, costs will come down, and everybody but the crummy clinics and hospitals, which scored poorly on report cards, will be better off.

Bush announced he had selected Minnesota to endorse transparency in health care because it is the home of Community Measurement Project (CMP), a coalition of Minnesota’s largest health insurance companies that produces a report card on Minnesota providers. Bush told the executive director of the CMP, who was present at the event, that the CMP is a “leading edge” report card that will make providers transparent. The CMP report card (www.mnhealth.org) suffers from four defects:

  • It has very limited scope (it covers only a portion of Minnesota’s clinics and hospitals and attempts to measure only a tiny fraction of medical services offered by those providers)
  • It measures services at the “provider” level, not the individual doctor level
  • Grades tend to bunch up so that distinguishing one “provider” from another is impossible
  • The grades are inaccurate

A brief discussion of each of these defects shows how expensive it will be to fix them. First, the CMP report card is quite limited in the number of providers and services it purports to grade. It covers fewer than half of all clinics in the state and covers only child vaccination rates, well-baby visits to doctors, and treatments for six diseases (asthma, depression, diabetes, high blood pressure, cancer, and chlamydia) out of thousands of diseases and conditions for which people are treated these days. Obviously, collecting data on thousands of other medical services on all providers in the state will make this report card much more expensive.

Second, despite Bush’s talk about “you and your doctor,” there is no information about individual doctors on the CMP report card. Grades are available only for entire “provider networks”–groups of clinics and hospitals, some with dozens of clinics and hospitals in them. Common sense and research indicate that to the extent patients want information on medical quality, they want it for particular health care professionals, not for entire clinic-hospital chains. The reason data on individual doctors is not offered is that the CMP is not collecting data on enough patients to make a statistical analysis of individual doctors possible. In other words, if the total number of patients in CMP’s current database were broken down by doctor instead of by provider network, the sample sizes for the vast majority of doctors would be too small to permit rigorous analysis. Collecting data on many more patients means, obviously, greater expense.

Like the first two defects, the third defect–bunched up grades–is due to CMP’s effort to make report cards on the cheap. CMP issues only three grades (one, two, or three stars; which look like the glittery little plastic stars elementary school teachers use) and the vast majority of networks get two stars. Even if you wanted to know the grade of entire provider fiefdoms rather than of individual doctors, CMP grades rarely distinguish one fiefdom from the other .

The fourth and most important defect in the CMP report card is that it is grossly inaccurate, and–to make this defect more insidious–the inaccuracy is not mentioned or even hinted at in the CMP website. On the contrary, the first page of the website assures readers that the report card contains “accurate, comparative details on the quality of care at Minnesota’s provider groups.” The grades are inaccurate for several reasons. The two most important of which are failure to adjust the grades to reflect differences in patients that doctors have no control over and failure to ensure that patients the CMP says are patients of Network X really are patients of Network X.

The grades are not adjusted for differences in the patients seen by each network, notably, differences in their health, quality of insurance, and income. It is much easier for doctors who see primarily healthy, well-insured, and/or upper-income patients to score well on CMP’s report card than it is for doctors who see primarily sicker-than-average, poorly insured, and/or low-income patients. “Some communities… have more resources to influence outcomes than others,” said Dr. Randall Maxey, an Inglewood, California nephrologist, in a recent interview with American Medical News about report cards the Bush administration is preparing for physicians who treat Medicare beneficiaries. “I may treat you exactly correctly and give you the right pills, but if you have to choose between buying pills and giving your baby milk, that drug may lose out and my performance may be judged as poor because of it.”

Consider two of the CMP “quality measures” for diabetes: percent of diabetic patients who have their HbA1c count (a measure of blood sugar) under 8 percent and percent who have their cholesterol under 130. The Neighborhood Health Care Network (NHCN), a coalition of six clinics which serves primarily poor, uninsured people in the Twin Cities, ranked very low on this “quality” measure. Only 46 percent of the diabetics who visited NHCN doctors in 2004 had their blood sugar under the target level and (apparently coincidentally) only 46 percent had their cholesterol under 130. By comparison, the average for all provider groups for both measures was 65 percent. The 46 percent score was so low compared to the other provider groups that CMP gave MHCN one star.

What should readers make of this bad grade? By assuring readers that the report card is “accurate,” the insurance companies behind the CMP project lead readers to think NHCN is doing an inferior job of getting the sugar and cholesterol levels of its diabetics down. But because the CMP did not adjust NHCN’s grades to reflect the fact that NHCN doctors treat a sicker, less well-insured, and poorer population, we cannot conclude that NHCN’s doctors are inferior. Given the circumstances NHCN’s doctors are up against, it’s possible they are superior doctors and their low grades reflect forces they cannot overcome. NHCN doctors may have prescribed appropriate cholesterol-lowering medications (such as Lipitor or Zocor) to all their diabetics, for example, but because many of those patients had insurance with no drug coverage, or drug coverage that required co-payments they couldn’t afford, they failed to fill their prescriptions.

The inaccuracy of the CMP grades is aggravated by the sloppy methodology used to “assign” patients to networks. The CMP simply assigns patients according to which network patients used the most in the course of a year. So, for example, if you were a diabetic who made seven visits to doctors in one year, and four of those visits were to doctors in Network A and three were to doctors in Network B, Network A will take all the blame or all the credit for your cholesterol level.

Like the other three defects, this fourth defect is fixable, but only at great cost. The CMP could, in theory, decide to adjust grades on diabetes care, for example, to correct for differences in factors outside doctors’ control–patient age, sex, cholesterol, and blood pressure levels when the patient first visited the clinic, number of years diagnosed with diabetes, history of other diseases such as coronary artery disease, education level, income level, and presence of co-payments for prescription drugs, to name a few. But the cost of collecting all that data will be immense. And that’s just for the diabetes scores.

When he endorsed transparency and the Community Measurement Project last August, Bush claimed the CMP-like report cards would lead to a cut in total health care spending of 25 to 30 percent. That will never happen.

The insurance industry, cheered on by the transparency crowd, may crank out lots of cheap report cards suffering from the four defects of the CMP card. Or it may spend enormous sums of money to produce report cards that don’t have those defects. Whichever route they choose, costs are more likely to go up than down. The transparency hype will, however, have distracted attention from the only solution to the health care crisis–single-payer or Medicare for all.

Kip Sullivan is author of The Health Care Mess: How We Got Into It and How We’ll Get Out of It (AuthorHouse). He is on the steering committee of the Minnesota Universal Health Care Coalition.

Physicians, hospitals and quality

Hospital-Physician Relations: Cooperation, Competition, Or Separation?

Economic pressures are creating an adversarial climate in some areas and pushing physicians and hospitals together in others.

By Robert A. Berenson, Paul B. Ginsburg, Jessica H. May
Hospital-Physician Relations
Health Affairs
December 5, 2006

Because many services performed in hospitals can safely and conveniently be performed in ambulatory settings, physicians have become owners of entities directly competing with hospitals for patients in a new medical arms race. Hospitals and medical staff physicians face growing tensions as a result of physicians’ growing reluctance to take emergency department call and the consequences of hospitalists replacing physicians in the care of inpatients. Although there are increasing expectations that health system challenges will lead hospitals and physicians to collaborate, in many markets the willingness and ability for hospitals and physicians to work together is actually eroding.

http://content.healthaffairs.org/cgi/content/full/hlthaff.26.1.w31/DC1

Creating Accountable Care Organizations: The Extended Hospital Medical Staff

By Elliott S. Fisher, Douglas O. Staiger, Julie P.W. Bynum, Daniel J. Gottlieb

Many current policies and approaches to performance measurement and payment reform focus on individual providers; they risk reinforcing the fragmented care and lack of coordination experienced by patients with serious illness. In this paper we show that Medicare beneficiaries receive most of their care from relatively coherent local delivery systems comprising physicians and the hospitals where they work or admit their patients. Efforts to create accountable care organizations at this level–the extended hospital medical staff– deserve consideration as a potential means of improving the quality and lowering the cost of care.

Fostering local organizational accountability for capacity.

The most important reason, however, to focus on hospitals and their affiliated medical staffs is to establish accountability for local decisions about capacity. Higher spending across U.S. health systems is largely attributable to greater use of discretionary “supply- sensitive” services: visits, specialist consultations, tests, imaging services, and the use of institutional settings (rather than outpatient settings) for care. Patients’ preferences do not explain these differences in care, and responses to survey-based clinical vignettes reveal that physicians in higher-spending systems have developed a more intensive practice pattern in exactly these discretionary clinical settings.

These findings are most consistent with an underlying causal model that highlights our current lack of accountability for capacity. Because such a high proportion of decisions are in the “gray areas” of medicine, physicians adapt their practices to work with whatever resources are locally available (such as making more frequent referrals in systems with more specialists). And–in the current payment environment–they are always able to stay busy themselves by seeing their own patients more often. Local decisions that influence capacity (capital investments, recruitment, and physicians’ choices about practice location), therefore, are likely to be the first step in the causal chain leading physicians to adopt more-intensive practice patterns–and leading to the overuse of supply-sensitive services.

Comprehensive measures of longitudinal quality and costs at the hospital staff level would bring the impact of such decisions to light. Hospitals that recruited additional specialists or expanded their acute care facilities could expect to see those decisions reflected in their longitudinal performance measures. Similarly, decisions to invest in care management, reduce acute care capacity, forgo unnecessary specialist recruitments, or more effectively manage postacute care resources could result in improved quality and lower costs.

http://content.healthaffairs.org/cgi/content/full/hlthaff.26.1.w44/DC1

Gain Sharing: A Good Concept Getting A Bad Name?

Allowing physicians to share in the savings they help produce could lead to greater accountability in health care.

By Gail R. Wilensky, Nicholas Wolter, and Michelle M. Fischer

Gain sharing, of the type we have described, is envisioned as an important transitional strategy, leading U.S. health care to higher levels of accountability and improved performance. It would allow the physicians that produce the savings and that can do so in ways that maintain or improve quality of care to share in the results of their efforts, even when not formally aligned in IDSs (integrated delivery systems). Although safeguards need to be put in place to protect against abuses, the results of the current system are abundantly clear: continued unsustainable increases in spending and unacceptable levels of quality.

http://content.healthaffairs.org/cgi/content/full/hlthaff.26.1.w58/DC1

Hospitals And Physicians: Not A Pretty Picture

By Jeff Goldsmith

Hospital-physician relationships in the United States have deteriorated markedly in the past few years. An asymmetry of obligations to caring for the uninsured and inappropriate financial incentives have worsened the conflict between hospitals and physicians in many markets. Sadly, the resources and political bandwidth consumed by managing this conflict have been diverted from the fundamental challenge of providing universal health coverage–the root cause of much of this conflict.

http://content.healthaffairs.org/cgi/content/full/hlthaff.26.1.w72/DC1

Comment:

By Don McCanne, MD

A well functioning health care system continues to strive for optimal value. That requires balancing efforts to maximize quality while controlling spending. (Some suggest that access is a third variable, but access to appropriate services and facilities should be a given.)

What role should money play in achieving this balance? Should providers receive explicit financial rewards for meeting quality goals that should be expected as part of the individual’s professional duties? Should providers (physicians) receive explicit financial rewards merely for reducing another provider’s costs (hospitals)?

Terms such as fee-splitting and kickbacks are now out of vogue, but have the concepts left us? Is “gain sharing” merely a euphemism for kickbacks?

Gail Wilensky, in her drive to reduce health care spending in this nation, has been an advocate of erecting financial barriers to care, even though health outcomes may be impaired. Her insensitivity to the needs of patients seems to be consistent with her advocacy of kickbacks. Is greed really an acceptable driving force, as long as it achieves the goal of reducing health care spending?

Money should play a role in improving quality, but the way to do that is to allocate what funds are available to a health care system designed to achieve the highest quality that can be expected. Elliott Fisher and his colleagues describe a process that is based on system design to benefit patients rather than system design that acquiesces to greed.

What is sad is that, as Jeff Goldsmith has stated, we continue to accept the asymmetry of obligations to caring for the uninsured and inappropriate financial incentives, largely because we have failed to meet our fundamental challenge of providing universal health coverage — the root cause of much of this conflict.