PNHP

Younger adults are uninformed on Medicare, but they do care

Younger adults are uninformed on Medicare, but they do care

The Henry J. Kaiser Foundation
Harvard School of Public Health
Press Release
June 19, 2003
New Survey Finds Most Seniors Favor Reforms that Build on Existing Medicare
Program, But Younger Adults Are More Favorable Toward Private Plans

Eighty percent of seniors have a favorable impression of Medicare and more than six in ten (62%) say the program is well-run. About seven in ten (72%) of those ages 65 and over feel seniors should continue to get their health insurance through Medicare rather than through private plans (16%), and 63% favor offering prescription drug coverage through Medicare over offering all benefits including drug coverage through private plans (23%). When it comes to their own insurance coverage, seniors are far more likely to prefer the current Medicare program over private plans (63% vs. 19%).

Younger adults 18-64 are less likely than seniors to have a favorable view of Medicare and to think that it is well-run: 45% of those under 65 say their view is favorable, 23% unfavorable, and one-third don’t know; and just over a third (36%) say it is well-run (31% say not well-run and 32% don’t know). They are generally less familiar with Medicare, with more than half (55%) of adults ages 18-64 incorrectly saying Medicare covers prescription drugs (vs. 16% of seniors) and less than three in ten (28%) knowing that people on Medicare can choose any doctor or hospital they want (vs. 73% of seniors).

A majority of the public (54%) favors a plan that provides seniors with a benefit that is as generous as what most workers get even if it costs taxpayers more, while 38% choose a less generous benefit at a lower government cost. After hearing arguments against their initial position (would you still favor if it meant giving up further tax cuts; still oppose if some seniors would not fill prescriptions because of the cost), 65% favor the more generous plan and 22% the cheaper plan.

http://www.kff.org/content/2003/20030619a/Final_Medicare_Survey_Release.pdf

Comment: You cannot have escaped the news that this latest KFF/Harvard-Blendon poll has demonstrated that most seniors prefer the traditional Medicare program, whereas younger individuals would prefer private plans. But the comments above, selected from their press release, reveal a couple of very important facts.

Younger adults express their opinions based on inadequate and even incorrect perceptions of the Medicare program. Another point is that when they are provided with merely a short phrase that improves their understanding of the policy issues, they change their opinion to one more supportive of beneficial reform.

Although seniors do have a better understanding of the Medicare program, it is still surprising to see that a small but significant minority still don’t understand that the traditional Medicare program does offer free choice of providers and that outpatient prescription drugs are not a benefit of the program.

A well-functioning democracy requires an informed electorate. With solid facts, they’ll do the right thing. We have a lot of work to do.

"Death spiral" of traditional Medicare

Kaiser Daily Health Policy Report
June 18, 2003
House Ways and Means Panel Approves Medicare Reform Bill

The House Ways and Means Committee on June 17 voted 25-15 to approve an approximately $413 billion, 10-year bill (HR 2473) that would attempt to increase participation of private plans in Medicare and offer all beneficiaries a drug benefit, the Wall Street Journal reports (Rogers, Wall Street Journal, 6/18).

The bill also would establish direct price competition between traditional Medicare and private health plans beginning in 2010.

The House bill includes a provision that would increase payments to existing Medicare+Choice health plans up to 3% to 16% above fee-for-service payments in their area, the Journal reports. The increased payments would take effect before 2006, creating an “investment window” in which Republicans believe private plans could compete profitably but also use the increased subsidies to reduce premiums or increase benefits packages to make them more attractive to beneficiaries, according to the Journal.

http://www.kaisernetwork.org/daily_reports/rep_hpolicy_recent_rep.cfm?dr_cat=3&show=yes&dr_DateTime=18-Jun-03

Comment: The fundamental principle that competition reduces costs applies only to a truly free marketplace. Medicare and the private Medicare options do not adjust their costs based on free market forces. In this legislation, the Republicans are suggesting that a free market is created by offering more private plans, and, especially, by requiring the traditional Medicare program to compete with the private plans. But they apparently don’t really believe it.

Even the Republicans seem to understand that market competition isn’t working. Otherwise, why do they have to offer Medicare + Choice HMOs payments that are 3% to 16% above the fee-for-service payments? Every study has confirmed that the private Medicare options have cost more than the traditional program when corrections are made for the fact that the private plans have been successful in selectively marketing to a comparatively healthy subset of Medicare beneficiaries. Efforts to set up competitive Medicare models failed when no insurer would agree to participate. The reason for reinforcing the private options with larger payments is to create a larger private sector that would eventually replace the traditional program. At the current level of funding, the private Medicare sector is shrinking, rather than growing.

Why should we be concerned about giving the traditional Medicare program a stimulus to become “more efficient” by forcing it to compete with private plans? The answer is quite complex, but briefly, healthier patients would end up in the private plans, leaving chronically ill, high-cost patients in the traditional program. These higher costs, in the Republican competitive model, would be passed on to the beneficiaries in the traditional program in the form of higher premiums. This premium “death spiral” would force them out of the traditional program, destroying Medicare as we know it. A private plan Medicare system would deprive patients of choice of their physicians and hospitals, would waste resources in administrative excesses, and, perhaps worst of all, would be subjected to the political forces that would result in diminution of the public funding component of Medicare, severely impairing the equitable nature of this system. For low-income individuals, the inevitable result would be inadequate benefits and unaffordable cost sharing.

Families USA has posted an explanation of the how forcing Medicare to compete would result in the death spiral for the traditional program:

http://www.familiesusa.org/site/PageServer?pagename=Medicare_Central_private_example&JServSessionIdr007=t1imducywy.app5b

“Death spiral” of traditional Medicare

Kaiser Daily Health Policy Report
June 18, 2003
House Ways and Means Panel Approves Medicare Reform Bill

The House Ways and Means Committee on June 17 voted 25-15 to approve an approximately $413 billion, 10-year bill (HR 2473) that would attempt to increase participation of private plans in Medicare and offer all beneficiaries a drug benefit, the Wall Street Journal reports (Rogers, Wall Street Journal, 6/18).

The bill also would establish direct price competition between traditional Medicare and private health plans beginning in 2010.

The House bill includes a provision that would increase payments to existing Medicare+Choice health plans up to 3% to 16% above fee-for-service payments in their area, the Journal reports. The increased payments would take effect before 2006, creating an “investment window” in which Republicans believe private plans could compete profitably but also use the increased subsidies to reduce premiums or increase benefits packages to make them more attractive to beneficiaries, according to the Journal.

http://www.kaisernetwork.org/daily_reports/rep_hpolicy_recent_rep.cfm?dr_cat=3&show=yes&dr_DateTime=18-Jun-03

Comment: The fundamental principle that competition reduces costs applies only to a truly free marketplace. Medicare and the private Medicare options do not adjust their costs based on free market forces. In this legislation, the Republicans are suggesting that a free market is created by offering more private plans, and, especially, by requiring the traditional Medicare program to compete with the private plans. But they apparently don’t really believe it.

Even the Republicans seem to understand that market competition isn’t working. Otherwise, why do they have to offer Medicare + Choice HMOs payments that are 3% to 16% above the fee-for-service payments? Every study has confirmed that the private Medicare options have cost more than the traditional program when corrections are made for the fact that the private plans have been successful in selectively marketing to a comparatively healthy subset of Medicare beneficiaries. Efforts to set up competitive Medicare models failed when no insurer would agree to participate. The reason for reinforcing the private options with larger payments is to create a larger private sector that would eventually replace the traditional program. At the current level of funding, the private Medicare sector is shrinking, rather than growing.

Why should we be concerned about giving the traditional Medicare program a stimulus to become “more efficient” by forcing it to compete with private plans? The answer is quite complex, but briefly, healthier patients would end up in the private plans, leaving chronically ill, high-cost patients in the traditional program. These higher costs, in the Republican competitive model, would be passed on to the beneficiaries in the traditional program in the form of higher premiums. This premium “death spiral” would force them out of the traditional program, destroying Medicare as we know it. A private plan Medicare system would deprive patients of choice of their physicians and hospitals, would waste resources in administrative excesses, and, perhaps worst of all, would be subjected to the political forces that would result in diminution of the public funding component of Medicare, severely impairing the equitable nature of this system. For low-income individuals, the inevitable result would be inadequate benefits and unaffordable cost sharing.

Families USA has posted an explanation of the how forcing Medicare to compete would result in the death spiral for the traditional program:

http://www.familiesusa.org/site/PageServer?pagename=Medicare_Central_private_example&JServSessionIdr007=t1imducywy.app5b

Vulture PacifiCare is circling CalPERS

Los Angeles Times
June 18, 2003
CalPERS Members Object to Rate Hike
By Debora Vrana and Ronald D. White

The California Public Employees’ Retirement System is facing a growing member revolt as the giant pension fund Tuesday approved a nearly 17% rate increase in health insurance payments for next year.

Although rising health-care costs are straining many employees and employers nationwide, the situation at CalPERS is especially dire. As one of the nation’s largest buyers of health care, CalPERS for many years used its clout to obtain favorable rates from insurance carriers.

But now its members are balking at escalating costs, and some of the public agencies they work for – already under stress because of the state’s budget problems – are privately threatening to pull out of CalPERS health plans and find cheaper medical coverage on the open market. Those agencies, most of which are clustered in Southern California, tend to have relatively younger and healthier workforces than others.

In turn, any exodus from CalPERS’ health plans would leave those left in the system vulnerable to ever bigger rate increases in the future – a scenario that analysts call “the death spiral.”

http://www.latimes.com/business/la-fi-calpersmo18jun18,1,3674659.story?coll=la-headlines-business-manual

The Orange County Register June 18, 2003 PacifiCare goes after CalPERS members By Nancy Luna

PacifiCare Health Systems launched a campaign Tuesday to woo a large chunk of public agencies in the California Public Employees’ Retirement System, which could raise premiums today by 18 percent.

The Cypress-based health- care organization was dumped last year when CalPERS raised premiums by 25 percent.

http://www2.ocregister.com/ocrweb/ocr/article.do?id=44166&section=BUSINESS&subsection=BUSINESS&year=2003&month=6&day=18

Comment: CalPERS has not only had to face the general increases in health care costs, but it also covers a population that has greater health care expenses because of increasing age and a greater incidence of chronic disease. Last year, in an attempt to reduce the scale of cost increases, CalPERS terminated more expensive contracts, including PacifiCare’s. Now PacifiCare is back with a vengeance, attempting to cherry pick the portion of CalPERS’ contracted agencies that have lower costs because of regional market and other demographic differences. Removing lower cost beneficiaries from CalPERS can only result in even greater premium increases, threatening the affordability of CalPERS’ plans.

Even one of the nation’s largest purchasers of health plans is not immune to the death spiral. Although PacifiCare has become a vulture, this is not to criticize it for seeking revenge at having been cancelled, but rather it is to recognize that this smart move in the marketplace enhances investor value at the cost of patients being dumped into the swirl of the death spiral.

Splitting patients into separate pools, even very large pools such as CalPERS, will always result in inequities. Only a single, universal pool can prevent adverse selection, cost shifting, and the other inequities of multiple plans and programs, public and private. Establishing a monopsony (single purchaser) would not only end these inequities, but it would also establish a mechanism of effective negotiation for fair payment for the providers. We can control costs while making certain that an adequately funded health care system is there when we need it.

To Your (Corporate) Health

President Bush’s drive to get himself re-elected and electroshock the economy back to life took a new turn last week as Congress, in a heralded display of “bipartisan” politics, embraced a scheme to pay for drugs under Medicare. The idea is for the elderly to pay up to half the cost of drugs in a complicated, stepped program that would cost $400 billion. The government would pay the money to the pharmaceutical industry, which would conduct the program. “It’s a traditional contortionist effort to try to show you’re doing something when the real agenda is to protect corporate drug interests,” said David Himmelstein of Physicians for a National Health Program. “Bush wants to do it though private drug-management firms that take a big cut of anything before giving any benefits. Most seniors still wouldn’t be able to afford drugs, prices would still be high, and they’d be spending a large chunk of federal money to do this.”

There is another problem, as Congressional Quarterly points out, that could end up hurting, not helping, the elderly. Should the government program appear to be too generous, corporations may drop altogether the drug coverage in their medical plans. Corporations currently are cutting back on these costly programs. A December 2002 study from Kaiser Family Associates and Hewitt Associates shows that 13 percent of companies dropped drug coverage over the last couple of years, and 44 percent required employees to increase their share of the cost. The AFL-CIO argues that workers who took wage concessions in labor negotiations so as to get drug coverage once they retired will get screwed.

So in some respects, politicians who are coming to the rescue of the needy elderly actually are just rewarding the pharmaceutical giants, which always have been generous campaign givers, with yet another giant economic boondoggle.

Add that to the $80 billion a year being spent to “democratize” Iraq and the gift of $555 billion over 10 years to the top 1 percent of taxpayers, through the dividend tax refund. (Just that tax break itself exceeds the total of proposed increases for education, health research, defense, and prescription drugs, according to the Center on Budget and Policy Priorities, a mainstream think tank.)

Meanwhile, it turns out that getting our hands on Iraqi oil isn’t going to provide us with needed future energy supplies. Now we’ve got to have more natural gas. Alan Greenspan, chairman of the Federal Reserve system, told a congressional committee last week that he was worried that soaring natural gas prices would contribute to the “erosion” of the economy. Natural gas is a more or less clean fuel in great demand by industry to help it meet air pollution standards. Greenspan urges the U.S. to import more gas as a “safety valve” in case domestic production can’t do the job. That means building more terminals for liquefied-natural-gas tankers hauling gas in its frozen form from the Caspian Sea area and from Australia, Indonesia, and the Russian Far East. Tankers are an extremely dangerous means of transporting gas. If a terrorist successfully attacked one of them, the explosion would be enormous, on the order of a nuclear bomb, some experts have said. At any rate, importing gas by this means will be expensive, and building ports along the East and West coasts will be highly controversial. With that in mind, the best way of importing gas is to carry it by pipeline from Alaska and the Canadian Arctic down through the Mackenzie delta and into the Midwest. A Mackenzie delta pipeline plan has been on and off for literally a quarter of a century.

Greenspan also said, “I do think an overall policy of energy cannot dismiss the issue of nuclear power.” This vague statement was immediately taken by nuclear proponents on Capitol Hill as Greenspan’s endorsement for more nuke plants. Nuclear power was basically discarded in this country in the late 1970s after the Three Mile Island accident. It always has been more expensive than coal and viewed as both dangerous and controversial, if only because of the nightmarish quandary over what to do about radioactive wastes.

Bottom line: Why did we go to war in Iraq?

Uninsurance: Costs, and value lost (IOM report)

Institute of Medicine
The National Academies Press

Hidden Costs, Value Lost
Uninsurance in America

The best available estimate of the value of uncompensated health care services provided to persons who lack health insurance for some or all of a year is roughly $35 billion annually, about 2.8% of total national spending for personal health care services.

The Committee’s best estimate of the aggregate, annualized cost of the diminished health and shorter life spans of Americans who lack health insurance is between $65 and $130 billion for each year of health insurance forgone.

Estimates of the cost of the additional health care that would be provided to the uninsured once they became insured range from $34 to $69 billion per year, assuming no structural changes in the systems of health care financing or delivery, average scope of benefits, or provider payment.

Conclusion

This report and the work of the Committee on the Consequences of Uninsurance not only provide information about the costs resulting from the lack of coverage and some of the costs and benefits of expanding it to everyone, it also presents us with an ethical dilemma. In light of the information and analyses that the Committee has developed about choices we have not made as a society, as well as those we have made to invest heavily in health care, we cannot excuse the unfairness and insufficient compassion with which our society deploys its considerable health care resources and expertise. Providing all members of American society with health insurance coverage would contribute to the realization of democratic ideals of equality of opportunity and mutual concern and respect. By tolerating a society in which a significant minority lacks the health care and coverage that most Americans enjoy, we are missing opportunities to become more fully the nation we claim to be.

http://books.nap.edu/books/030908931X/html/index.html

N.C. Blue Cross evades those who most need coverage

The Charlotte Observer
June 5, 2003
Blue Cross last-resort coverage reaches few
By Emery P. Dalesio

While North Carolina’s largest health insurer technically remains its insurer of last resort, it covers only 82 of 29,000 North Carolinians estimated to be otherwise medically uninsurable, a new report says.

The analysts, working for the state Insurance Department, reserved some of their sharpest criticism for the company’s track record with a program meant to cover those with cancer, multiple sclerosis, and other expensive and debilitating conditions.

Blue Cross has been North Carolina’s insurer of last resort for most of its history, though state law doesn’t require it to shoulder that responsibility. Blue Cross entered into an unwritten promise in 1991 to offer a last-resort policy to stave off legislative efforts to create a high-risk health insurance pool, a move the nonprofit then feared would endanger its tax breaks, the report said.

Blue Cross “is not currently honoring the spirit of the agreement or understanding that was originally reached in 1990-’91,” the report said.

Most states have created high-risk health insurance pools, funded with taxpayer money or tax-deductible assessments on insurers, to pay the medical bills of people profit-seeking insurers won’t touch.

http://www.charlotte.com/mld/observer/business/6016760.htm

Comment: Creating separate high-risk pools is utter nonsense. Not only have the state programs failed to function adequately, they also defeat the purpose of risk pooling. The high costs of the few need to be diluted in the pool covering the low costs of the many. The risk pool that makes the most sense is the pool that includes everyone. Short of that, private health plans will always devise methods of avoiding adequate coverage for those who need it the most.

Instead, we need to establish our own universal, public pool. Then we’ll all have access to decent health care.

Letter about Belgian Health System

Bangor Daily News, 6-13-03

Dr. Sandra Hutchison’s op-ed, “Remembering OHIP [Ontario Health Insurance Plan]” (BDN, June 5) reminded me of my own experience with “universal health care extended to all” and with its “reliability and availability.”

After completing my residency in New Haven, Conn., in 1964, I practiced pediatrics for six years in Brussels, Belgium. The government had recently established a single-payer health care system that covered 100 percent of the population and respected principles such as freedom to choose your doctor, direct access to specialists, and no interference by the system in medical decisions.

As a physician, I enjoyed the “simplicity and efficiency” of the system. My patients and I enjoyed the “freedom from pecuniary concerns.” Payments for my services were prompt, never questioned, never lowered and never denied. I never called the insurance system for permission to provide care and they never called me; they never asked for and I never sent them a report of any kind. I never had a secretary or a receptionist. With part-time help from my wife, I managed a busy practice well enough without managed care.

The Belgian health system has been in place, basically unchanged, for 40 years. In 2000, it spent $2,269 per inhabitant and 8.7 percent of the gross national product, compared with $4,631 and 13 percent in the United States. My friends and colleagues in Belgium assure me that health care they receive or provide is excellent and dependable.

Robert M. Gossart, M.D.

Salisbury Cove

Op-Ed About Canadian Health System

Remembering OHIP

In response to Betsy P. Chapman’s May 23 op-ed on health care reform: I remember many things about growing up Canadian, but an ineffectual and inaccessible health care system is not one of them. In fact, I remember almost nothing about the health care system offered free of charge to every resident of the province by the Ontario Health Insurance Plan (OHIP), except that it wove itself into the fabric of my life as a strong, invisible thread. Its reliability and availability was a given.

When I or one of my four siblings needed medical attention, there was never any thought of money – payments or co-payments. My mother called to make an appointment with the family physician whose office was across the street. And we went, usually that day or the next, depending on how serious the ailment. When we arrived at the office, we met with no army of receptionists and office workers as there are here in Maine, positioned to do the work of sustaining the weighty bureaucracy put into place so that the HMO system to function. Our doctor’s nurse-wife simply waved her hand as we showed her our OHIP cards and ushered us in.

I don’t remember ever waiting very long to see the doctor, and when I did, he didn’t asked me whether it was a “sick” visit or a “well” visit, but simply what it was that I needed from him. And he stayed with me as long as was needed to give it. The relationship went on like this for 20 years. My parents aged with him, and his children grew up as we did.

In my recent times, the family practice has been eclipsed, to a large extent, by the walk-in clinic. Conveniently located in shopping malls or plazas, these clinics remain open to serve the public, free of charge, seven days a week, usually 12 hours a day. Again, the simple presentation of an OHIP card gives access to service which is prompt, efficient, and dependable. You can arrange to see the same doctor too. All you need to do is check his or her schedule for that day.

Now that they are older, my parents have had need, on occasion, for greater care than a walk-in clinic can provide (though my father still visits one each week to have his blood pressure monitored). Three years ago, my father was diagnosed with kidney cancer. The specialist thought he could be saved if the affected kidney was removed. It was a matter of weeks before the successful operation took place at one of Toronto’s topnotch hospitals. At the age of 80, he walked out of the hospital completely cured, and with a bill of only five dollars, for a private telephone he had requested for his room.

These days, as I take up my landed immigrant status, I remember with nostalgia the Canadian health care system which served me so well right up into adulthood. I remember with longing its simplicity, efficiency, and freedom from the pecuniary concerns that, in my view, so compromise the current health care system in Maine, with its many health provider “businesses.” Food or medicine – for people of any age in Canada, no choice needed or needs to be made.

I believe in the reciprocity between a society and its people, a lesson I learned growing up in Canada. I grew up in what I would, without hesitation, describe as a caring society. And I believe the new health care proposal represents a step toward establishing the same kind of caring society here in Maine, a society in which healthcare is an invisible thread in the fabric of life. In my opinion, universal healthcare extended to all, free of charge, is not only a good idea, but a basic human right . Its time has come.

Dr. Sandra Hutchison is an author, lecturer and journalist residing in Orono.

AMA to vote on single payor (sic)

The following resolution is being considered by the House of Delegates of the American Medical Association at their meeting in Chicago this week.

American Medical Association House of Delegates

Resolution: 121 (A-03)

Introduced by: Illinois Delegation

Subject: Single Payor

Referred to: Reference Committee A (Kevin T. Flaherty, MD, Chair)

Whereas, A major push for universal health coverage is now underway; and

Whereas, Some individuals in our country think that the best way to achieve universal coverage is through a single payor run by our federal government; and

Whereas, A single payor form of universal coverage will manifest all of the current problems of Medicare, but on a much larger scale; therefore be it

RESOLVED, That our American Medical Association vigorously oppose any single payor program of health care coverage. (Reaffirm HOD Policy)

Fiscal Note: No Significant Fiscal Impact

Received: 5/7/03

http://www.ama-assn.org/ama1/upload/mm/annual03/a121a03.doc

Comment: If we can’t even teach AMA members how to spell “payer,” how can we ever expect them to understand the complexities of the single payer model of reform?

Seriously, the AMA House of Delegates is considering a report on health insurance market regulation. The following recommendations from the report indicate that the AMA still doesn’t seem to grasp the fact that our insurance system should protect patients – all patients – and not private insurers.

Excerpts from the report:

(f) Guaranteed renewability regulations and multi-year contracts may include provisions allowing insurers to single out individuals for rate changes or other incentives related to changes in controllable lifestyle choices.

(g) Guaranteed issue regulations should be rescinded.

(h) Insured individuals wishing to switch plans should be subject to a lesser degree of risk rating and pre-existing conditions limitations than individuals who are newly seeking coverage.

(i) The regulatory environment should enable rather than impede private market innovation in product development and purchasing arrangements. Specifically: (ii) Benefit mandates should be minimized to allow markets to determine benefit packages and permit a wide choice of coverage options.

http://www.ama-assn.org/ama1/upload/mm/annual03/cms7a03.doc

Maine succeeds in adopting nonviable reform

Portland Press Herald
June 14, 2003
Innovative health bill embraced
By Josie Huang

State lawmakers embraced one of the nation’s most ambitious attempts at health-care reform Friday, passing a bill that promises affordable coverage to all Mainers within five years while controlling health-care spending statewide. National policy analysts have described the bill’s focus on access, cost and quality as groundbreaking at a time when other cash-hungry states are taking slower, more cautious steps.

Others attach “first-in-the-nation” to the bill’s centerpiece, the state-sponsored Dirigo Health insurance program that would use the state’s buying clout to offer low-deductible but comprehensive health plans through private insurance carriers.

Democratic Sen. Sharon Treat, the bill’s chief sponsor in the Senate, said the program aims for the same goal of universal health care as a single-payer health-care system, a controversial measure being studied by a legislative panel. But, she said, Dirigo Health is not “disruptive to the current system we have.”

http://www.pressherald.com/news/statehouse/030614health.shtml?show_results#poll

Comment: Before we begin the celebration we should look at some of the details of Maine’s “universal” health care program. The following points were culled from numerous reports and, therefore, may not provide a precise or entirely accurate description. But they do provide a general perspective of this “first in the nation” program of “affordable coverage for all.”

* The system relies on private health plans which ensures that administrative waste will continue to be a prime feature of Maine’s health care system. Worse, using multiple private plans will perpetuate the inequities that are characteristic of a market that thrives on cost shifting, adverse selection, overt and covert manipulation of benefits and other measures that allow insurers to create inequities largely to benefit their own industry.

* Employers will be expected to contribute about 60% of the costs of the coverage. Maine has a large number of small businesses which already have had difficulties funding adequate health care programs for their employees. Many employers simply will not be able to afford the coverage.

* Lower income individuals who do not qualify for public programs nor meet the definition of poverty will still not be able to afford their portion of the premium, and, consequently, will not be able to participate.

* Medicaid expansion is another feature of the program. Expanding this chronically underfunded program will result in more cost shifting and greater impaired access because of a lack of participation by “unwilling” providers.

* A portion of the funding is through the state give-back provision of the latest tax-cut bill recently passed by Congress. This hardly constitutes a reliable long-term source of funding.

* Another portion of the funding is through an assessment on insurers which the governor states would not be passed on as higher premiums. But consumers always pay business overhead in one form or another.

* Participants would be charged “subsidized fees that would vary according to their ability to pay and the amount of coverage purchased.” Obviously this suggests that those with modest incomes cannot expect to have access to the same level of care as the more affluent would. Does this mean total hip replacements for the affluent and walkers for the poor?

* Part of the funding would be through the savings achieved through decreased utilization of emergency facilities. But the savings will be in marginal costs only which will prove to be a relatively paltry sum. And much of the savings will vanish if no attempt is made to establish evening and weekend clinics when the breadwinner is able to provide transportation for his/her family.

* Prices (not costs) will be controlled for one year only by a voluntary effort to cap price increases to 3.0% for physicians and 3.5% for hospitals. A transitional voluntary cap cannot have any significant long term impact on health care costs.

* If the Dirigo Health program fails, the Legislature is authorized to adopt a “high-risk pool model.” The performance of high-risk pool models in other states has been less than sterling. Very high costs, poor coverage, and long waiting lists have plagued these programs.

Maine is to be admired for its intense efforts to provide health care access for everyone. But the process began with the false premise that all vested interests must be included. Private health plans are the source of many of the problems in health care (administrative excesses, adverse selection, erecting financial barriers to care, limiting choice, inability to contain costs, creating inequities in coverage, etc., etc.). Public administration of the health care system was never a serious consideration, in deference to the health plans. Thus policies were developed to benefit the plans while sacrificing the goal of an affordable, comprehensive and truly universal system.

The California Health Care Options Project has demonstrated that reform models that build on the current system of private health plans and public programs are the most expensive models of reform, and they fail to achieve universality and equity. Dirigo Health is no exception. Maine’s program is particularly weak because it relies very heavily on voluntary compliance with many aspects of the program. Unfortunately, we will continue to hear about Maine’s struggles with its health care system because a program built on an infrastructure of wet noodles cannot possibly perform.

Those of you in Maine who are continuing to craft the single payer model, please do not leave your tables. Maine desperately needs your program, as will soon be evident.

** Legislative Alert** Private drug-only policies: Actuarial perspectives

(The legislative alert appears at the end of this message.)

The Henry J. Kaiser Family Foundation June 2003 Medicare Prescription Drugs Through Private Drug-Only Policies: A Discussion with Actuaries By Health Policy Alternatives, Inc.

… the Kaiser Family Foundation contracted with Health Policy Alternatives, Inc. to convene a panel of health actuaries familiar with the Medicare program and the prescription drug debate.

The objective was to explore the implications of providing prescription drug benefits to Medicare beneficiaries through private, drug-only plans from the perspective of the insurance industry and other potential plan sponsors such as PBMs (pharmacy benefit managers).

… there was consensus among the actuaries interviewed for this project that certain features of a Medicare stand-alone prescription drug proposal would be important to attracting the participation of insurers or PBMs.

1. Freedom to set premiums without arbitrary government limits.

2. Government subsidies of beneficiary premiums that do not erode over time.

3. A one-time beneficiary enrollment opportunity, with aggressive government marketing and beneficiary information efforts to achieve maximum beneficiary participation.

4. Shared risk with the government, at least in the initial years, preferably through risk corridors.

5. Ability to price premiums locally and not nationally.

6. Flexibility to exit the market (no guaranteed renewal as exists for Medigap insurers).

7. Some benefit flexibility, especially with respect to cost-sharing.

8. Flexibility to use cost containment measures, including formularies.

9. Preemption of most state laws and regulations to reduce costs of compliance and make it easier to market on a multi-state or national basis.

10. Government collection and distribution of premiums to reduce the administrative burden of plans, and maximize retention of enrollees.

Whether a Medicare drug-only product would be sustainable as a line of business would depend on plan experience and future government policy, especially maintenance of adequate government subsidies and limited enrollment opportunities.

http://www.kff.org/content/2003/6086/6086.pdf

Comment: In order for this program to work, our government must bear most of the risk, must provide administrative functions and marketing, and must grant flexibility and relief from regulations. The plans must also have the right to shift costs to the Medicare beneficiaries and limit or even deny benefits.

If the plans are insisting that we, as taxpayers, accept the risks and bear the administrative functions normally provided by insurers, and that we, as beneficiaries, grant the plans flexibility to significantly reduce our plan benefits in order to embellish their profits, then what function are they serving other than interjecting themselves as superfluous middlemen? Why on earth do the Republicans and the “bipartisan Democrats” continue to insist that we must use private insurers to administer our own Medicare program? This question should be asked not only of the proposed prescription drug benefit, but also of the private Medicare “carrier” HMOs and the proposed Medicare PPO programs.

Another quote from the report is instructive:

“Even the more enthusiastic of our participants had reservations, however, about participating in a government sponsored program. Based on their experiences with M+C and Medigap, they regarded the government as an unreliable business partner and worried that they could not count on ‘the rules of the game’ remaining constant.”

Which is the “unreliable business partner” here? The health plans promised higher quality at a lower cost. They delivered higher costs while failing to deliver on quality. And now they claim that the government is an “unreliable partner” because of the reluctance to increase funding of the wasteful administrative excesses of the plans.

The plan actuaries are correct. Without taxpayer funding of plan excesses, and without the “flexibility” to adjust profits by denying patients their benefits, the plans cannot justify their existence. So what justification can the politicians provide?

*** Legislative Alert ***

Last night the Senate Finance Committee approved legislation that “would offer Medicare beneficiaries a stand-alone prescription drug benefit delivered through private insurance companies. And they also would offer a new Medicare option that would use preferred provider organizations (PPOs) to deliver comprehensive health coverage.”

http://www.washtimes.com/national/20030613-124454-9969r.htm

Opponents of privatization have indicated that they will accept this compromise in order to deliver on the promise of prescription drug coverage. But this is “barn door” privatization legislation that will not be readily amenable to future legislative correction. Privatization of Medicare is too great of a price to pay for an inadequate and highly defective prescription benefit. We need health policies that protect patients, not insurers.

We must now make every effort to defeat this legislation on the Senate floor, and then go to work to elect legislators who will protect, improve and expand our single payer Medicare program. Affordable, comprehensive health care for everyone is a goal that we must not surrender.

Don McCanne, MD President, Physicians for a National Health Program www.pnhp.org