PNHP

Medco CEO unrepetant for ethical lapses

Medco CEO unrepetant for ethical lapses

The Washington Post
May 6, 2004
Letter to the Editor
Rebates, Not Kickbacks

Steven Pearlstein’s April 28 Business column, “Kickbacks Hit Where It Hurts,” mischaracterized the settlement reached by Medco Health Solutions and a multistate task force of state attorneys general and the Justice Department.

The suggestion that Medco “agreed to settle charges that it got more than $400 million in kickbacks from Merck in 2001” is incorrect. Although we receive rebates — that fact is disclosed to our clients — it was never an issue and it was not a “charge.” In fact, in their news conference the attorneys general said they did not want to interfere with the process of obtaining rebates, as rebates lower costs. The agreement is specific to disclosures around rebates.

The rebates received from Merck — or any of the other 70 or so pharmaceutical manufacturers with whom we negotiate for rebates and discounts — are not “kickbacks.” Government clients often directly negotiate with pharmaceutical manufacturers to receive rebates.

This practice is not unique to pharmacy benefits managers: Rebates are even an integral part of the prescription drug benefits program for Medicare that Congress recently enacted. Rebates are recognized by our clients, our competitors, and even attorneys general and the Department of Justice, as critical tools in reducing drug costs for the hundreds of clients and millions of members we serve nationwide.

DAVID B. SNOW Jr.
Chairman, President and Chief Executive
Medco Health Solutions
Franklin Lakes, N.J.

http://www.washingtonpost.com/wp-dyn/articles/A5845-2004May5.html

And…

Wharton School of the University of Pennsylvania Strategic Management

Medco Health Solutions, the largest pharmacy benefits management company in the United States, last week settled lawsuits brought by state and federal authorities by agreeing to stop switching patients over to more expensive drugs not prescribed by their doctors (these drugs were favored by Medco because of private “rebate” agreements with drug manufacturers). Medco also pledged to begin disclosing its rebate practices to employers, doctors and patients.

http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&id=978

And…

The American Heritage Dictionary

rebate: A deduction from an amount to be paid or a return of part of an amount given in payment.

kickback: A return of a percentage of a sum of money already received, typically as a result of pressure, coercion, or a secret agreement.

http://www.bartleby.com/61/

Comment: A strong case can be made that private rebates not fully disclosed are, in fact, kickbacks. Some may consider this to be a nitpicking, semantic argument. But what should alarm us all is that Medco’s Snow trivializes their abusive practices, for which they are being punished, by suggesting that the patients and employers who were cheated actually benefited because the kickbacks were really only rebates (with disclosure issues regarding the nefarious substitution of higher cost drugs for lower cost drugs).

David Snow should be issuing a public apology for the egregious abuses of his company. Instead he releases a statement implying that the only blame lies with others who use the pejorative term, “kickback,” when Medco was actually following sound business practices through the rebate program.

This seemingly trivial dispute has major policy implications. The Medicare bill prohibits the government from being the direct purchaser of drugs, but instead requires that middlemen, such as pharmacy benefit managers like Medco, maintain control of the pharmaceutical benefit. Not only do they add middlemen administrative costs, but they also expose us to the compromised ethics of unrepentant executives who believe that kickbacks awarded for making lucrative drug substitutions are actually good business practices since, really, they’re only “rebates.”

VA buys drugs cheaply, many veterans benefit

Baltimore Sun, Business
VA buys drugs cheaply, many veterans benefit
Medicare? Since the VA gets the best prices on medicines, the Bush administration is being urged to adopt a VA-style program for Medicare.
By Cyril T. Zaneski, Sun Staff
Originally published May 5, 2004

America’s best discount drugstore is run by the federal government.

The Department of Veterans Affairs throws the weight of federal buying power and a law mandating discounts on medicine into price negotiations with drug manufacturers.

“We’re the big gorilla,” said George T. Patterson, executive director and chief operating officer of the VA Office of Acquisition and Materiel Management. “We get the drop-dead best prices in the world.”

The VA drug benefit is a life preserver for vets like Vernon Chapin, 76, a retired plumber and Army veteran from Lutherville. Chapin pays a total $56 a month for eight prescriptions to keep his blood pressure, diabetes and other health woes in check. Other veterans who have service-related illnesses or injuries get free medicine for those ailments.

“I shudder to think what would happen to me without the VA,” Chapin said. “I’d be making a choice between eating and taking my drugs.”

The VA’s muscular approach to drug purchasing is the envy of private employers and insurers struggling with rocketing prescription prices that are the highest in the world. The VA, by contrast, pays roughly half of U.S. retail pharmacy prices.

VA volume buying power – the agency negotiates for itself, the Department of Defense, the Public Health Service and the Coast Guard – is the model for Maryland and other states forming multistate pools to leverage better drug prices for Medicaid recipients and state employees. It is also the model favored by congressional Democrats and consumer advocates for the massive new Medicare drug program.

A group of Senate Democrats, including Barbara Mikulski of Maryland, called on the Department of Health and Human Services last week to adopt a VA-style program for Medicare. The Medicare benefit crafted by Republicans and signed into law by President Bush last year bars the department from using Medicare’s 41 million beneficiaries to leverage lower prices from drug companies. The law instead turns to private companies to cut deals with manufacturers. The benefit, which starts in 2006, carries a $530 billion price tag for its first decade.

“Rather than using the purchasing power of Medicare’s 41 million beneficiaries, the new law fragments the population, diluting the ability to negotiate lower prices,” the senators wrote HHS Secretary Tommy Thompson. “This is not only a waste of limited taxpayer resources, it is also a cruel betrayal of Medicare beneficiaries who are struggling with astronomical drug bills.”

The administration opposed efforts to give Medicare negotiating power akin to the VA’s for fear that its huge volume would become a national price control and deprive pharmaceutical companies of cash needed for drug research and development.

The VA represents a much smaller buying pool. While there are 24.5 million veterans, only 6.1 million of them were treated at VA medical centers last year, with 4.5 million getting prescriptions. The VA filled about 200 prescriptions last year, spending about $3 billion a year on drugs, up from $750 million in 1991.

Some worry that the VA’s successful drug program is in danger of being swamped by growing numbers of veterans seeking refuge from rising prices of medication elsewhere.

Tens of thousands of veterans who face spiraling copayments and premiums in their private health plans are lining up for the VA drug benefit. If enough are allowed to tap the benefit – as they were promised when they joined the military – some fear they could sink VA’s shaky overall health care budget.

About 20 percent of the veterans who use the VA each year do so solely because of its drug benefits, according to an agency survey. But nearly 90 percent of the approximately 164,000 veterans who sought enrollment to the VA system last year wanted the drug benefit above all, according to the VA inspector general. Those veterans are barred from the system by an agency decision in January 2003 to save money by closing its doors to “high-income” applicants who make more than $25,000 a year and do not have service-related health problems.

Edward L. Clark, an Army veteran from Greencastle, Pa., is among those blocked from the system. Clark, 57, sought VA benefits when his income from selling telecommunications equipment went into a tailspin and he could no longer afford $500 a month for private insurance. “Now I’m going to take my chances without insurance or medication,” he said. “If I get sick, I’ll go to an emergency room.”

With both Democrats and Republicans vying for the votes of veterans in this election year, Congress is considering legislation that would help veterans such as Clark by opening the VA drugstore to more veterans.

The effort to expand access to the benefit has raised two questions. The first is whether to lift a VA rule requiring veterans who want the prescription benefit to be examined by a VA physician, even though the patient may have valid script from his own doctor. The cost of the re-examinations totaled $1.3 billion in 2001, the inspector general reported.

“This policy, in effect, denies veterans their pharmaceutical benefit,” Dr. Conelio R. Hong of Norwich, Conn., told the House Veterans Affairs’ health subcommittee in March. Veterans make “medically unnecessary” appointments and then wait months to see a VA doctor, Hong said. The wait is long enough that many drop off the list, he said.

Then there is a question of how the federal government will pay for providing drugs to more veterans. Taxpayers and VA patients roughly split the VA average prescription cost – $13 for a month’s supply of pills at the VA pharmacy. Veterans pay a $7 co-pay; taxpayers pay the rest. Some worry that widening access to the benefit will lure millions more veterans and stress the agency’s ability to provide health care.

“An expansion of pharmaceutical benefits would increase demand on the system. An increase in demand would necessitate shifting scarce resources away from treating veterans,” Carl William Blake, associate legislative director of the Paralyzed Veterans of America, told the House panel.

“Now is not the time, when the VA is not being given the resources it needs to meet the needs of veterans and service members who are returning from Iraq and Afghanistan, to force the VA to treat fewer veterans or charge them more for services.”

But Richard “Rick” Jones, national legislative director for another veterans’ advocacy group, AMVETS, maintains that all vets have a right to the benefit. AMVETS and other groups are backing a proposal that would allow veterans to fill prescriptions written by their own doctors if they cover the VA cost of the medication, which is usually half the price of drugs at retail pharmacies and less than discounts offered by Canadian Internet drug stores.

“It would fulfill a promise made to all who have performed service honorably to the nation,” Jones said. “And it would grant access to the benefit without hurting other vets.”

The VA draws its purchasing power from Public Law 102-585 – passed by Congress and signed by President George H.W. Bush in 1992, an election year. The law assures discounts for the VA.

“At the end of each year, we find out about sales from across the commercial sector, average the price of each drug and deduct 20 percent from that,” said Patterson, a registered pharmacist who heads the operation that administers over 1,500 contracts for over $10 billion worth of medical and surgical products. Patterson’s office buys more than $6 billion worth of pharmaceuticals a year for the “big four” – the VA, DOD, the Coast Guard and Public Health Service.

“And we often negotiate prices even lower than the 20 percent discount,” he said. “The law is a big hammer.”

Congress passed the law in response to a VA budget crunch caused by rising drug prices, Patterson said. “Our good friends in the pharmaceutical industry started raising our prices off the planet, and Congress acted,” Patterson said.

The law was just the start of VA efforts to save money on drug purchasing. To further boost its purchasing power, the agency moved in the late 1990s to a single national preferred drug list, or formulary. Previously, each of 172 VA hospitals had its own drug list.

The VA also focuses heavily on prescribing generic drugs. Sixty-five percent of the drugs prescribed by VA physicians are generic. They account for only 8 percent of the agency’s total drug bill. Brand name drugs – 35 percent of the agency’s prescriptions – account for 92 percent of the tab.

Despite the discounts, the VA never has difficulty getting drugmakers to sell their products to the agency, Patterson said. One reason that VA is so attractive to drug companies is that VA medical centers offer the drug manufacturers a pool of young doctors – a coveted group that promises a long-term use of the products.

The other is that the federal government is a well-heeled customer. “The business is coveted,” Patterson said. “It’s good clean business. We pay our bills.”

—————————————————–

Examples of how VA saves money on drugs

Drug name, VA price, Costco.com, Canadameds.com

Wellbutrin SR (150 mg), $61.77 (60 pills), $97.99 (50 pills), $69.77 (60 pills)

Zocor (40 mg), $20.22 (30 pills), $125.27 (30 pills), $82.32 (30 pills)

Pravachol (40 mg), $150.47 (90 pills), $278.59 (100 pills), $80.32 (30 pills)

Viagra (100 mg), $144.15 (30 pills), $163.27 (18 pills), N/A

Copyright © 2004, The Baltimore Sun

Click here to view the article at BaltimoreSun.com.

Quentin Young on the solution to outrageous drug prices

USA TODAY, Editorial/Opinion
5/4/2004
Follow Canada’s example
By Quentin Young

Forget about importing Canadian drugs. We need to import Canadian drug prices.

How does Canada and most other developed nations get 40% to 80% discounts on brand-name drug prices? The same way the Department of Veterans Affairs does: It uses its purchasing power to negotiate lower prices. This is a healthy use of market forces to secure the best deal.

Each of these nations has universal health coverage. In contrast, Americans are saddled with a screwy for-profit insurance system and suffer the world’s highest out-of-pocket health costs, and drug purchases top the list.

High drug prices have serious consequences for the sick. Prescriptions go unfilled. Patients cut pills in half to make them “last longer.” The undertreatment of diabetes and hypertension leads to amputations, strokes, heart failure and other devastating complications. The hundreds of dollars a month needed to treat chronic conditions are big factors in personal bankruptcy.

In addition to harming many patients, high drug costs batter businesses, which bear much of the cost of workers’ medications. There is increasing disgust by business leaders with drug firms’ exorbitant profits, which are four-fold higher than those of every other sector of the economy. Overpriced drugs raise costs for U.S. industry, compromising our international competitiveness.

The drug industry is dominated by a handful of giant global corporations that spend more on marketing than research and, year after year, make at least as much in profits. The claim that they need high prices to cover high research costs is bogus. The government has guaranteed their profits by extending their 20-year patents and protecting them from real competition.

Medicare negotiates prices with physicians, hospitals, laboratories and other health care providers. The drug companies, however, are exempted from this process in the new Medicare drug bill, ensuring that drug prices will continue to skyrocket.

The U.S. health system is in disarray. The economic mess, epitomized by the drug-cost crisis, makes a convincing case for a single-payer national health insurance system. Such reform would make prescribed drugs an ensured benefit and drive down expenditures by allowing the government to bargain for the best prices and highest quality.

Quentin Young, M.D., is national coordinator of Physicians for a National Health Program (www.pnhp.org).

http://www.usatoday.com/news/opinion/editorials/2004-05-04-oppose_x.htm

Editorial opinion of USA TODAY (concluding remarks):

Two in three Americans favor lifting the ban on reimporting drugs, an Associated Press poll in February found. Still, taking advantage of foreign price controls amounts to putting a Band-Aid on a deep wound.

Letting the free market work is a better remedy for making prescription drugs more affordable for all Americans.

http://www.usatoday.com/news/opinion/editorials/2004-05-04-our-view_x.htm

For an article on the federal buying power of the VA (“America’s best discount drugstore is run by the federal government.”):

http://www.baltimoresun.com/business/bal-bz.vadrugs05may05,0,902614.story?coll=bal-business-headlines

Comment: The United States has much more of a “free market” in pharmaceuticals than any other nation, and everyone agrees that the market has been very ineffective in providing affordable access to drugs for tens of millions of patients with significant health care needs. You almost feel embarrassment for the editorial staff of USA TODAY when you read that they propose the really dumb solution of allowing the continuation of the market model that utilizes measures designed to excessively benefit the pharmaceutical industry while avoiding its responsibilities to a major segment of the nation’s patients.

In negotiations with a single-payer national health insurance program, pharmaceutical firms would be assured of fair profits and adequate funds for research. We need their industry, but we don’t need their excesses. Let’s set up our own public insurance program and then negotiate with them. They’ll get a fair deal, and we will too.

Follow Canada's example

USA Today, Editorial/Opinion
5/5/04
Follow Canada’s example
By Quentin Young

Forget about importing Canadian drugs. We need to import Canadian drug prices.

How does Canada and most other developed nations get 40% to 80% discounts on brand-name drug prices? The same way the Department of Veterans Affairs does: It uses its purchasing power to negotiate lower prices. This is a healthy use of market forces to secure the best deal.

Each of these nations has universal health coverage. In contrast, Americans are saddled with a screwy for-profit insurance system and suffer the world’s highest out-of-pocket health costs, and drug purchases top the list.

High drug prices have serious consequences for the sick. Prescriptions go unfilled. Patients cut pills in half to make them “last longer.” The undertreatment of diabetes and hypertension leads to amputations, strokes, heart failure and other devastating complications. The hundreds of dollars a month needed to treat chronic conditions are big factors in personal bankruptcy.

In addition to harming many patients, high drug costs batter businesses, which bear much of the cost of workers’ medications. There is increasing disgust by business leaders with drug firms’ exorbitant profits, which are four-fold higher than those of every other sector of the economy. Overpriced drugs raise costs for U.S. industry, compromising our international competitiveness.

The drug industry is dominated by a handful of giant global corporations that spend more on marketing than research and, year after year, make at least as much in profits. The claim that they need high prices to cover high research costs is bogus. The government has guaranteed their profits by extending their 20-year patents and protecting them from real competition.

Medicare negotiates prices with physicians, hospitals, laboratories and other health care providers. The drug companies, however, are exempted from this process in the new Medicare drug bill, ensuring that drug prices will continue to skyrocket.

The U.S. health system is in disarray. The economic mess, epitomized by the drug-cost crisis, makes a convincing case for a single-payer national health insurance system. Such reform would make prescribed drugs an ensured benefit and drive down expenditures by allowing the government to bargain for the best prices and highest quality.

Quentin Young, M.D., is national coordinator of Physicians for a National Health Program (www.pnhp.org).

Click here to view the article at USAToday.com.

Follow Canada’s example

USA Today, Editorial/Opinion
5/5/04
Follow Canada’s example
By Quentin Young

Forget about importing Canadian drugs. We need to import Canadian drug prices.

How does Canada and most other developed nations get 40% to 80% discounts on brand-name drug prices? The same way the Department of Veterans Affairs does: It uses its purchasing power to negotiate lower prices. This is a healthy use of market forces to secure the best deal.

Each of these nations has universal health coverage. In contrast, Americans are saddled with a screwy for-profit insurance system and suffer the world’s highest out-of-pocket health costs, and drug purchases top the list.

High drug prices have serious consequences for the sick. Prescriptions go unfilled. Patients cut pills in half to make them “last longer.” The undertreatment of diabetes and hypertension leads to amputations, strokes, heart failure and other devastating complications. The hundreds of dollars a month needed to treat chronic conditions are big factors in personal bankruptcy.

In addition to harming many patients, high drug costs batter businesses, which bear much of the cost of workers’ medications. There is increasing disgust by business leaders with drug firms’ exorbitant profits, which are four-fold higher than those of every other sector of the economy. Overpriced drugs raise costs for U.S. industry, compromising our international competitiveness.

The drug industry is dominated by a handful of giant global corporations that spend more on marketing than research and, year after year, make at least as much in profits. The claim that they need high prices to cover high research costs is bogus. The government has guaranteed their profits by extending their 20-year patents and protecting them from real competition.

Medicare negotiates prices with physicians, hospitals, laboratories and other health care providers. The drug companies, however, are exempted from this process in the new Medicare drug bill, ensuring that drug prices will continue to skyrocket.

The U.S. health system is in disarray. The economic mess, epitomized by the drug-cost crisis, makes a convincing case for a single-payer national health insurance system. Such reform would make prescribed drugs an ensured benefit and drive down expenditures by allowing the government to bargain for the best prices and highest quality.

Quentin Young, M.D., is national coordinator of Physicians for a National Health Program (www.pnhp.org).

Click here to view the article at USAToday.com.

Why is U.S. spending so high, and can we afford it?

Health Affairs
May/June 2004
U.S. Health Care Spending In An International Context
Why is U.S. spending so high, and can we afford it?
By Uwe E. Reinhardt, Peter S. Hussey and Gerard F. Anderson

From the ‘Abstract’:

Using the most recent data on health spending published by the Organization for Economic Cooperation and Development (OECD), we explore reasons why U.S. health spending towers over that of other countries with much older populations. Prominent among the reasons are higher U.S. per capita gross domestic product (GDP) as well as a highly complex and fragmented payment system that weakens the demand side of the health sector and entails high administrative costs. We examine the economic burden that health spending places on the U.S. economy.

From the section ‘Pricing Low-Income Americans Out Of Health Care’:

This prospect (projected premium for family coverage of over $20,000 one decade from now) puts U.S. policymakers at a crossroads.

One approach would be to persuade the upper half of families in the nation’s income distribution to help purchase adequate health insurance for families in the lower third. One may call it the “universal health insurance” road. It would, of course, involve added taxes and transfers flowing through government budgets, which would bring with them additional government regulation, especially if the aim were to structure the U.S. health system as a one-tier system in which sick people have roughly the same health care experiences regardless of their own ability to pay.

The alternative option would be to embrace as official policy, both in employment-based health insurance and in public insurance programs, a multi-tier health system in which a person’s health care experience would be allowed to vary by his or her ability to pay for health care. In such a system families in the upper half of the income distribution would have a noticeably superior health care experience than families in the lower half would have. This is certainly already the case for U.S. families with good health insurance and those without it.

The emerging political battle at this crossroads is unlikely to be styled in stark terms such as “rationing by income class” or “one-class” versus “two-class” medicine. Instead, it will be styled as a debate over “market competition versus government regulation”; as a simple, technocratic quest for greater “efficiency”; or as the dubious dichotomy of “rationing versus markets,” even though textbooks in economics instruct the reader that market prices are just another way of rationing scarce commodities, on the basis of ability and willingness to pay. At its core, then, the debate over health care, in the United States as elsewhere, is less a pure macroeconomic issue than an exercise in the political economy of sharing.

http://content.healthaffairs.org/cgi/content/abstract/23/3/10?etoc

Comment: This article answers the questions posed in only 16 pages. It should be downloaded and retained as a resource that can be used to dismiss the myths on affordability while defining precisely the actual economic issues that we are facing.

Download this article now. It should be read in its entirety and retained as an essential reference in your health policy library.

U.S. Health Care Spending In An International Context

Click here to download the .PDF version of this article

Costs & Competition
U.S. Health Care Spending In An International Context
Uwe E. Reinhardt, Peter S. Hussey and Gerard F. Anderson

Using the most recent data on health spending published by the Organization for Economic Cooperation and Development (OECD), we explore reasons why U.S. health spending towers over that of other countries with much older populations. Prominent among the reasons are higher U.S. per capita gross domestic product (GDP) as well as a highly complex and fragmented payment system that weakens the demand side of the health sector and entails high administrative costs. We examine the economic burden that health spending places on the U.S. economy. We comment on attempts by U.S. policy-makers to increase the prices foreign health systems pay for U.S. prescription drugs.

Health Affairs, Vol 23, Issue 3, 10-25
Copyright © 2004 by Project HOPE
DOI: 10.1377/hlthaff.23.3.10

M. Livingston on higher health insurance rates for women

Martha Livingston, Ph.D., Associate Professor of Health and Society, SUNY College at Old Westbury, responds to the message on the insurance industry effectively classifying female gender as a preexisting disorder:

I’m going to bring this to my last women’s health class of the semester tonight; what better way to illustrate the points we’ve been making all semester?

Years ago I had a button, which I’m planning to have duplicated, that says:

“Life: a preexisting condition spread by sexual contact which is invariably fatal.”

Being female is a preexisitng disorder?

The Hartford Courant
April 22, 2004
ConnectiCare Joining Gender Trend
By Diane Levick

ConnectiCare plans to start charging thousands of women higher health insurance rates than men – a difference ranging from 3 to 40 percent – in an effort to even up the score with competitors.

Anthem Blue Cross and UnitedHealth Group already use gender rates for small employers here, and it is not known yet whether other managed care companies will follow suit.

The impact of gender rates alone on a small employer depends on the make-up of the workforce. An employer with a predominantly female workforce could end up paying more than under the old system. A business with mostly male workers who are young to middle-aged would pay less than if unisex rates
were applied.

… ConnectiCare and other insurers who don’t gender-rate could attract a disproportionate share of employers with more women than men – the higher cost groups.

Employers, though, could still buy ConnectiCare insurance with unisex rates through the Connecticut Business and Industry Association’s Health Connections program (CBIA).

ConnectiCare’s decision is “marketing genius” because it still allows access to its unisex rates through CBIA, said Bob Feen, president of The Benefits Group Inc. in Cheshire, which sells health insurance and other employee benefits.

With the choice of accessing ConnectiCare directly or through CBIA, small employers and their benefits brokers “can pick which model works best for them,” Feen said.

http://www.ctnow.com/business/hc-connecticare0422.artapr22,0,6833223.story

Comment: The perversity of allowing decisions on health care financing to be made in the marketplace by the private insurance industry could not be better exemplified than by this decision that basically dictates that being born female is a preexisting disorder!

Market decisions by private insurance interests can never lead to an equitable, affordable, universal system of funding care. We desperately need to establish our own public system of social insurance.

Reinvention of health insurance in the consumer era

JAMA
April 21, 2004
Reinvention of Health Insurance in the Consumer Era
By James C. Robinson, PhD, MPH

The new products and policies will test the limits of US individuals’ willingness to assign responsibility for financing health care to those individuals who use it and exempt those who do not.

On the positive side, a shift in decision-making responsibility from the employer to the employee and from the insurer to the enrollee will create a social consciousness of the imperative to establish priorities as to who will receive which services now, which later, and which never. A greater sense of personal responsibility among patients for their own health and health care will attenuate some forms of cost inflation and support the prevention and treatment of many chronic conditions. But individual patients require financial subsidies, valid information, and empathetic support if they are to grapple successfully with the difficult challenges of illness and medicine. During the long term, the insurance industry will need to combine its contemporary focus on consumers with a commensurate focus on physicians, administrative simplicity, and the social pooling of risk if it is successfully to balance limited resources and unlimited expectations in health care.

http://jama.ama-assn.org/cgi/content/full/291/15/1880

Comment: Success will require “administrative simplicity” and “the social pooling of risk.” But those will never come from the insurance industry. We’ll have to accomplish those by adopting our own public program of universal insurance.

Kaiser Permanente follows the market

Contra Costa Times
Apr. 29, 2004
Kaiser adds deductibles to some insurance plans
By Judy Silber

Kaiser Permanente is the last large insurer to add deductibles to individual insurance plans purchased by people without coverage through work. By forcing consumers to pay for more of their care, deductibles lower monthly premiums…

“If we don’t follow the market, people will lose access to health care”, said Christine Paige, Kaiser’s senior vice president of marketing. “We have members who have been here their entire lives. We don’t want to abandon them as the market changes.”

Kaiser has set its deductibles relatively low compared with what’s offered by other insurers. Other insurers offer plans with deductibles as high as $5,000. But Kaiser’s deductible will be $1,500 for individuals, $1,000 or less for small employers and $1,000 initially for large firms.

But Karen Pollitz, a senior health policy researcher at the Health Policy Institute at Georgetown University, noted that deductibles contradict Kaiser’s mission of removing — rather than erecting — barriers to care.

“It’s too bad because Kaiser wrote the book on managing health care and disease,” Pollitz said. “I think they just made their task a lot harder.”

For people who don’t visit the doctor often, deductibles can lower overall out-of-pocket costs by decreasing the amount paid for monthly premiums.

But for those in need of care, deductibles add to their cost burden. Pollitz worries that will discourage people, especially those with chronic diseases, from seeking care.

Kaiser felt pressure to offer the deductible plans because it was losing members, Paige said. They (high-deductible plans) are an industry standard for the individual market, and employers are increasingly considering them as an option to stabilize premiums.

http://www.contracostatimes.com/mld/cctimes/business/8547735.htm

Comment: Rather than addressing health care costs, insurers and purchasers have narrowed their attention to the price of health insurance premiums in order to make health insurance affordable. The tragedy is that, as health insurance plans become more affordable, health care is becoming much less affordable for precisely those individuals with significant health care needs because of the dramatic increases in out-of-pocket expenses that they are facing.

Kaiser Permanente did not have much choice. Their competitors, especially Blue Cross and Blue Shield, have dominated the market with low-premium,high-deductible plans. Individuals with significant needs were selecting Kaiser because of its comprehensive coverage. By concentrating high-cost patients within their plans, Kaiser was faced with the prospect of driving premiums up even further and then losing market share because of unaffordable premiums (the “death spiral” of insurance premiums). Using standard market principles, they were forced to offer a competitive-market insurance product.

The marketplace, by making health plans affordable, has made health care unaffordable for those who need it. The unintentionally perverse, amoral nature of market dynamics has established the principle that the marketplace is not the proper environment to guide the financing of health care.

In sharp contrast, a universal program of social insurance would ensure that health care would be affordable for all who are in need. Isn’t that what we should be striving for?

Canada's Health Minister shifts and sides with the people

The Globe and Mail
April 29, 2004
Pettigrew clarifies health-care statements
By Campbell Clark and Brian Laghi

AND

Calgary Herald
April 29, 2004
From good to bad in hours
By Tom Olsen

Health Minister Pierre Pettigrew backtracked yesterday from his statements about allowing private health-care delivery…

Canada’s Health Minister Pierre Pettigrew:

“Unfortunately, I now realize that I have left the impression that I favour increased private delivery within the public health system. That was in no way my intent, nor is that the intent of the Government of Canada.

“To put it as plainly as I can, the ambition of the federal government is not to encourage private delivery even within the terms of the Canada Health Act. Quite the contrary, our ambition is to expand public delivery because, as Roy Romanow said it very well, public delivery provides Canadians with the best system possible.”

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040429/HEALTH29/TPHealth/

http://www.canada.com/calgary/calgaryherald/news/story.html?id=84d78fc4-0220-4ad5-aa0f-8f7b38c34cd7

Comment: Some construed yesterday’s message as an attack on the profits that can be realized in the health care delivery system. In my comment, I referred to “the perverse incentives created by including for-profit corporations and their passive investors in the health care delivery system.”

In discussing the problems with for-profit corporations, the operative term is not “profit” but rather “investor-owned corporations.” Profits are just as essential in health care as they are in any other sector of our economy. But the primary mission of health care providers should be to deliver the best possible health care services and products while retaining a fair profit.

The primary responsibility of a board of directors of an investor-owned corporation is to provide maximum shareholder value through stock appreciation and distributed dividends. And boards of for-profit corporations frequently reward themselves with significant ownership. This clear conflict of interest between shareholders and patients leads to a health care delivery system that, as Mme. Desjarlais indicated, is “more costly, less efficient and even more dangerous to patient care than the regular public system.”

It is a relief to see that Health Minister Pettigrew now sees that the Canadian citizens are quite serious when they say that they want a health care system dedicated to patients rather than investors.