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Health Affairs
January/February 2002
by Katharine Levit, Cynthia Smith, Cathy Cowan, Helen Lazenby , and Anne Martin
(The authors are in the National Health Statistics Group, Office of the Actuary, at the Centers for Medicare and Medicaid Services in Baltimore.)

“Historical spending trends through 2000 along with historical medical inflation and employment reports for the first half of 2001 indicate that the acceleration in health care costs will likely continue. This stands in stark contrast to recent reports of an increasingly sluggish U.S. economy. Pressure will mount on both public and private payers to finance accelerating health care costs out of decelerating incomes and revenues. Increased job layoffs in the slowing economy will lead to a less competitive job market, reducing private employers’ incentive to shoulder rising health care costs, potentially increasing the number of uninsured persons. Competition may force employers to shift a larger share of rising costs to workers, who may no longer be able to afford accelerating out-of-pocket costs. Fewer employers may offer health insurance, and the recently unemployed are often left without coverage. Shrinking tax revenues will likely force government to evaluate health care priorities at a time when the need for coverage is rising. These national health spending estimates may well mark the end of an era of reasonably affordable health care cost growth.”

The Des Moines Register
January 4, 2002
A single-payer national plan makes more and more sense by Register Editorial Board

“Americans should consider establishing a national health-insurance system that covers everyone.”

“A single-payer, national health-insurance system would give the government more clout to control costs. It would free Americans from the fear of losing health care when they lose their jobs. It would free businesses from scrambling to find health coverage for their workers, at ever higher costs.”

“The current health-care hodgepodge in this country is a failure.”

http://www.dmregister.com/news/stories/c5917686/16786298.html

The Washington Post
January 6, 2002
by David S. Broder

” …. as long as somewhere between 39 million and 44 million Americans are without health insurance of any kind, it will be impossible to solve the problems of cost and quality in the health care system. It is also clear that tinkering around the edges cannot, for long, withstand the adverse trends that are at work, let alone reverse them. This is an issue that cannot wait for the war on terrorism to end. It needs attention from the president and Congress. And it needs it now.”

http://www.washingtonpost.com/wp-dyn/articles/A64872-2002Jan4.html

The Boston Globe
January 4, 2002
by Diane E. Lewis

Mark Abate, a health care and group benefits consultant at William M. Mercer Inc., noted that “some employers were considering a market-driven approach in which employees would receive catastrophic or high deductible insurance for unexpected health care expenses and a health care spending account for more routine expenses. In all, 29 percent of companies with 20,000 or more workers and 17 percent of all of the companies polled indicated they were somewhat or very likely to establish that plan within two years.”

http://www.boston.com/dailyglobe2/004/business/Surveys_say_companies_health_care_costs_will_rise+.shtml

Comment:

To see how these plans may work, we can look at an example provided by the Pacific Business Group on Health for their new “Breakthrough Plan with Definity Health”:

“An employee is seriously injured, and her medical expenses total $20,000. The first $1,000 is paid by the employee’s PCA and applied toward the deductible. The employee pays the next $500 of the plan deductible. After a total of $1,500 has been spent on primary medical services, the deductible is met and the health coverage feature covers all remaining costs. If the employee chooses preferred network providers, co-payments and deductibles are likely to be low. If she chooses providers from outside the network, her cost-share will be somewhat higher, but care will still be provided. At the end of the calendar year, the employer will establish a new PCA with a $1,000 contribution.”

(Note that the $1500 deductible used in this example is much smaller than many analysts expect will be the norm.)

Source: http://www.pbgh.org/breakthrough/default.asp

Caveat emptor!

These plans are being promoted as a pain free method of meeting medical expenses. First the savings account is depleted, and then the patient pays the remainder of the plan deductible. After that, the “health coverage feature covers all remaining costs.” But look at what is omitted by this “catastrophic coverage” that “covers all remaining costs.” If the patient is lucky enough to have had contracted network providers care for her serious injuries (often a chance occurrence), then she will still have to pay “co-payments and deductibles.” If the providers are outside of the network, she will be responsible for all uncovered costs. Those that have used PPO products are aware of the severe financial penalties for using out-of-network providers.

A visit to the website of WellPoint’s Blue Cross of California is revealing (http://www.bluecrossca.com/index.asp) . WellPoint has been an innovator in insurance products that has helped to place it in the leadership role as a business model for health care coverage. Blue Cross of California offers only one product to complement medical savings accounts, and that is an EPO or exclusive provider organization. This plan has the same restrictions as PPOs except that there is virtually no coverage for services by providers outside of the exclusive provider list. Don’t make the mistake of going to the “wrong” doctor or “wrong” hospital! A new version is to be introduced soon and you can be assured that it will be another very successful business product for WellPoint.

Although considerable concern has been expressed over the large deductibles of these MSA-catastrophic plans, the catastrophic backup being offered should be sounding all alarms. And yet these plans are destined to become the standard based on the initial response of business interests!

Let’s put at end to policies that are designed solely to create successful business models for the insurance industry, and let’s instead adopt policies that are designed to establish equity in access and coverage for patients.

Kip Sullivan responds to the message on catastrophic plans for MSAs:

“What the press isn’t telling the public is that Definity and other defined contribution plans are using managed care tactics. A Definity official told me Definity uses utilization review and profiling, but not gatekeeping. Of course, choice of doc is limited. An article in HR Today indicates Vivius uses capitation. I suspect that means Vivius also uses UR. I would say we have gone from bad to worse if we go from manage-care plans with low deductibles to managed-care plans with large deductibles.”

The Boston Globe
January 4, 2002
by Diane E. Lewis

Mark Abate, a health care and group benefits consultant at William M. Mercer Inc., noted that “some employers were considering a market-driven approach in which employees would receive catastrophic or high deductible insurance for unexpected health care expenses and a health care spending account for more routine expenses. In all, 29 percent of companies with 20,000 or more workers and 17 percent of all of the companies polled indicated they were somewhat or very likely to establish that plan within two years.”

http://www.boston.com/dailyglobe2/004/business/Surveys_say_companies_health_care_costs_will_rise+.shtml

Comment:

To see how these plans may work, we can look at an example provided by the Pacific Business Group on Health for their new “Breakthrough Plan with Definity Health”:

“An employee is seriously injured, and her medical expenses total $20,000. The first $1,000 is paid by the employee’s PCA and applied toward the deductible. The employee pays the next $500 of the plan deductible. After a total of $1,500 has been spent on primary medical services, the deductible is met and the health coverage feature covers all remaining costs. If the employee chooses preferred network providers, co-payments and deductibles are likely to be low. If she chooses providers from outside the network, her cost-share will be somewhat higher, but care will still be provided. At the end of the calendar year, the employer will establish a new PCA with a $1,000 contribution.”

(Note that the $1500 deductible used in this example is much smaller than many analysts expect will be the norm.)

Source: http://www.pbgh.org/breakthrough/default.asp

Caveat emptor!

These plans are being promoted as a pain free method of meeting medical expenses. First the savings account is depleted, and then the patient pays the remainder of the plan deductible. After that, the “health coverage feature covers all remaining costs.” But look at what is omitted by this “catastrophic coverage” that “covers all remaining costs.” If the patient is lucky enough to have had contracted network providers care for her serious injuries (often a chance occurrence), then she will still have to pay “co-payments and deductibles.” If the providers are outside of the network, she will be responsible for all uncovered costs. Those that have used PPO products are aware of the severe financial penalties for using out-of-network providers.

A visit to the website of WellPoint’s Blue Cross of California is revealing (http://www.bluecrossca.com/index.asp) . WellPoint has been an innovator in insurance products that has helped to place it in the leadership role as a business model for health care coverage. Blue Cross of California offers only one product to complement medical savings accounts, and that is an EPO or exclusive provider organization. This plan has the same restrictions as PPOs except that there is virtually no coverage for services by providers outside of the exclusive provider list. Don’t make the mistake of going to the “wrong” doctor or “wrong” hospital! A new version is to be introduced soon and you can be assured that it will be another very successful business product for WellPoint.

Although considerable concern has been expressed over the large deductibles of these MSA-catastrophic plans, the catastrophic backup being offered should be sounding all alarms. And yet these plans are destined to become the standard based on the initial response of business interests!

Let’s put at end to policies that are designed solely to create successful business models for the insurance industry, and let’s instead adopt policies that are designed to establish equity in access and coverage for patients.

Kip Sullivan responds to the message on catastrophic plans for MSAs:

“What the press isn’t telling the public is that Definity and other defined contribution plans are using managed care tactics. A Definity official told me Definity uses utilization review and profiling, but not gatekeeping. Of course, choice of doc is limited. An article in HR Today indicates Vivius uses capitation. I suspect that means Vivius also uses UR. I would say we have gone from bad to worse if we go from manage-care plans with low deductibles to managed-care plans with large deductibles.”

The New York Times
January 3, 2002
by The Associated Press

“Discount prescription drug cards now available to older Americans offer only meager savings, particularly in urban areas, government figures suggest.”

“The administration countered that the GAO study is proof that the Bush plan is needed. By attracting more seniors, the Bush discount cards will allow companies to negotiate much more substantial savings, said Thomas Scully, administrator of the Centers for Medicare and Medicaid Services.”

Thomas Scully, CMS administrator:

“The voluntary drug cards that exist in the market for seniors don’t deliver any savings. Seniors are not organized at all. They’re the only people in the country who pay over-the-counter prices.”

http://www.nytimes.com/aponline/health/AP-Medicare-Drug-Cards.html

And from the National Journal:

“… with congressional election campaigns in full swing, Novelli (Bill Novelli, executive director of AARP) says that his group will aggressively remind lawmakers that prescription prices are still high, that millions of seniors have no help with those costs, and that the problem is getting worse. ‘We’re going to go in for the biggest possible package that we can,’ said Novelli. ‘We’re going to go for it.'”

Comment: And before the next elections, will we see Bush discount cards? Or a real Medicare prescription benefit? And will we be allowed in on the conversation when Mr. Scully explains to Mr. Novelli precisely what he meant when he said that seniors are not organized at all?

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The New York Times
Letters
December 28, 2001

To the Editor:

Disputes between companies and the families of the World Trade Center victims over health care coverage (front page, Dec. 26) reflect more than corporate penuriousness. They reflect America’s failure to adopt a national health care system that covers all Americans, one that is affordable and financed fairly, based on ability to pay.

The more than 40 million uninsured Americans can surely empathize with the victims’ families because they, too, need health care coverage. It’s time for our government to face this issue, not to be put off by the lobbying and campaign contributions of the insurance companies and others in the health care industry who insist that coverage exists to assure profits for companies rather than care for consumers.

RHODA H. KARPATKIN
New York, Dec. 26, 2001

http://www.nytimes.com/2001/12/28/opinion/L28INSU.html

Comment: Rhoda Karpatkin understands. She is the immediate past president of Consumers Union and has been an outspoken advocate of health care equity.