PNHP

Austerity and the Unraveling of European Universal Health Care

Austerity and the Unraveling of European Universal Health Care

By Adam Gaffney, M.D.
Dissent, Spring 2013

A great human disaster is now unfolding in the many Eurozone countries that have agreed to slash spending, wages, and living standards to meet the demands of fiscal austerity. One facet of this story that has received far too little attention, however, is the effect of these measures on the health of these nations.

Austerity derives from the Greek austeros, for harsh or severe; but, in the area of health care, it has veered into the cruel: health expenditures dwindle, hospital budgets shrink, health care needs rise, and human suffering worsens. Suicide is on the rise; basic hospital supplies are missing; potentially life-saving surgeries are delayed; the rate of new HIV infections increases; drug shortages are ubiquitous; the prevalence of mental illness spikes. And these are just the obvious results.

The effects of austerity on health care are both immediate and long-reaching. Deep cuts in public health spending clearly exacerbate the suffering caused by the prolonged economic depression. At the same time, the cuts contribute to a more pernicious, slow-moving, and decidedly political process.

For austerity is being wielded to initiate the unraveling of one of the great and humane achievements, indeed inventions, of modern Europe: the universal health care system. To understand why this is the case, let us take a brief look at how Europe came to have what it has today, before we return to the dangers of the present course.

Although the idea that all human beings, whether rich or poor, deserve health care can in some senses be traced to antiquity, it was only in the late nineteenth century, under the combined economic and political pressures of industrialization, working-class organization, and left-wing mobilization, that governments enacted forms of “social insurance.”

Under the government of Otto von Bismarck, Germany was the first to set up a system of “compulsory” health insurance, which obligated industrial employers to provide insurance for their low-paid workers. The health insurance system was funded and administered by workers and employers through the so-called “sick funds.” The Bismarckian system is typically credited with initiating the European tradition of universal health care, and it certainly provided a model for other countries, as with Britain in 1911 and France in 1928.

The truly universal health care system, however, was in general a post–Second World War development and was usually the consequence of the work of labor and left-wing parties. Most Western European nations took one of two paths: gradual expansion of coverage until the system could fairly be called universal or the more abrupt creation of a truly socialized national health service. In Great Britain, the 1946 passage of the National Health Service Act brought about the British National Health Service. Financed through general taxes, it provided health care as a right, with medical services free at the point of service.

Most other nations, however, took a more incremental path. France, for instance, built upon its 1928 National Health Insurance system, passing successive pieces of legislation that covered larger and larger proportions of the population until, in 2000, the remaining 1 percent of the nation that was uninsured received coverage. Germany likewise built upon its nineteenth-century Bismarckian system to create a system of truly universal coverage.

Greece was relatively late to the game. In 1934, it established a Social Security Organization that covered urban and industrial workers, which was expanded to agricultural workers in 1961. But it was the 1983 legislation of the newly elected Socialist Party that put into place a National Health Service (NHS), founded on the principles of universal access. Along similar lines, Spain built upon a 1942 health insurance law with successive expansions of coverage. This culminated in the 1980s, when through a number of measures the Spanish Socialist Party converted the health care system to a tax-based system with universal access and a largely public provision of care.

No doubt, as they entered the twenty-first century, all of these systems had their own flaws, their own inefficiencies, even their own inequities and injustices. But for the first time in human history, the poorest individuals could avail themselves of some of the most advanced medical care in the world without worry that their illness would bankrupt their family, and without the stigma of charity. A true right to health care had been legislated into existence. Universal health care, from this perspective, represented a truly massive and historical achievement.

Needless to say, there has been resistance to these initiatives and programs from the time of their enactment. Margaret Thatcher tried to introduce market-based reforms into the NHS in the 1980s with so-called “managed competition,” in which health authorities were to function as buyers of care from competing groups of providers. Overall, however, this was quite unpopular, and during the 1997 elections the Labour Party promised an end to managed competition and other Thatcherite reforms. Similar efforts occurred elsewhere. In the 1990s, for example, a conservative government in Spain managed to legislate certain “reforms” that, among other things, raised co-payments for care.

Still, the overall success of the universal model of health care was difficult to deny. It was clear that the United States, which lacked a universal system and which had worse outcomes despite paying much more, was not the model to emulate. And in 2000, when the World Health Organization issued its first ever ranking of the world’s health care systems (albeit with controversial methodology), the two top spots went to France and Italy, with Spain in seventh and Greece in fourteenth.

Although cost control was (and certainly remains) everywhere an issue, it was clear that those nations with a more market-based health care system, such as the United States, saw costs rise far faster. It was, in short, difficult to argue with success, and universal health care remained very popular among voters.

Crisis and Opportunity

The economic crisis of 2008 opened a historic window of opportunity for those who would move away from universalism. The long-growing and clearly unsustainable housing bubble – and all the economic distortions it had created – popped, to consequences worse than most had imagined, with punishing recessions and sky-high unemployment that have yet to resolve in such nations as Greece and Spain.

These less competitive Eurozone nations, tied to a single currency whose masters had not read, or did not believe in, John Maynard Keynes’s theory on the fundamental importance of monetary and fiscal expansion in times of crisis, were particularly crippled. Although Greece had had significant budgetary problems even prior to the crash, most other nations didn’t. Indeed, despite all the later talk about the unsustainability of its welfare state, Spain was actually running a budget surplus before the crash.

Developing nations seeking “bailouts” are accustomed to the International Monetary Fund’s “conditionality” demands for fiscal contraction, and in particular, for reduced social and health care spending. But now it was the newly indebted nations of Western Europe that were being asked to slash their public sector and undergo internal devaluation, this time by the so-called “troika” – the European Central Bank, the European Union, and the IMF. Those who had never been inclined to universal health care in the first place, and who had sought to chip away at it even when it seemed to be working reasonably well, had a new and powerful ally. The attack on the European welfare state began in the “periphery.”

Spain Steps Away

In
Spain, talk about the “unsustainability” of universal health care rose in the early years of the crisis. While some cuts were going to be inevitable given the demands of the troika, the conservative “People’s Party,” elected to power in the Spanish parliament in November of 2011, went further. In the face of the demands of the troika to slash health care expenditures, the party proceeded to pass, by royal decree (thereby avoiding parliamentary debate), a new health care law that represented perhaps one of the largest changes in Spain’s national health service since its establishment in the 1980s.

The law did several things, such as increase co-payments and limit the ability of illegal immigrants to access the health care system. Most radically, however, it quietly shifted the nation away from a truly universal scheme, financed through taxation, to a contributory one. Pensioners, for instance, could have access to the system only if they had contributed to it, while those over age twenty-one who had not contributed to the social security system needed to demonstrate an absence of income to obtain access to health care.

In fairness, the system remained by and large a universal one, particularly if compared to, say, the United States. But the meaning of what had transpired was clear enough. “Spain’s public health service is to shift from one that provides universal coverage through general taxation,” reported Aser García Rada in the British Medical Journal, “to a system funded through social security contributions.”

Crucially, however, these changes were carried out in conjunction with huge global spending cuts in health care. In Catalonia, for instance, as García Rada reported, the nationalist party, after its victory in the 2011 regional elections, moved quickly to reduce the health care budget by 10 percent, to cut the salaries of some forty thousand public health professionals, and to close a third of its hospital beds and 40 percent of its operating rooms. Waiting times for care rose, and the situation became so bad that surgeons at one university hospital offered to operate on cancer patients for free. Hospital management, however, citing the various other associated costs of operations, denied them this opportunity.

Mark Weisbrot at the Center for Economic and Policy Research estimated that in the United States these cuts would be comparable to a 25 percent reduction in total Medicaid spending. The reduced clinical activity, delays in payments, long waiting lists, and reduced health care investment will have two effects. First, the health of the population is likely to worsen. But second, these cuts have a certain self-fulfilling logic: as quality deteriorates, public support for the system declines, the system becomes more vulnerable to further attacks, and the cycle can restart. Universal health care in Spain has not been undone; its unraveling, however, has begun.

‘Humanitarian Crisis’ in Greece

Greece entered the crisis in worse budgetary shape than Spain, and also with a less advanced health care system. The health of its population was therefore all the more precarious when austerity hit.

The cuts came hard and quick. With each bailout there were further demands for deep reductions in health care spending, with the IMF requesting a cut in public health spending from 10 percent of GDP to less than 6 percent. Health care spending – from both private and public sources – fell from $25 billion in 2010 to $16 billion in 2011. In 2011, the minister of health called for a 40 percent reduction in hospital budgets, despite a 24 percent rise in public hospital admissions between 2009 and 2010. And by 2012, Greece was estimated to be spending more on interest payments on its debt than on education and health care combined.

The results were soon evident. Doctors have reported shortages of basic hospital supplies, ranging from gloves to cotton wool. Nurses have complained about huge increases in their patient loads. Waiting times increased, with one physician telling the New York Times that breast cancer patients were waiting three months to have their tumors excised. Despite large increases in the rates of depression, spending on mental health actually fell by 45 percent. Significant reports of drug shortages came in from across the country. Co-payments for drugs were increased, while at the same time hospitals and pharmacies began demanding cash payments for drugs, so as to avoid the risk and wait for reimbursement.

Simultaneously, access to public health services was sharply limited. The loan agreements that Greece has signed with international lenders have resulted in major changes to the health care system. Greece had not had a fully universal system of health care even prior to the crash. Individuals and their employers would contribute to a government-supported fund, and these individuals thereby received access to the public health system. Those who lost their jobs received benefits for a year and thereafter could still receive some treatment if unable to afford health care. But under the new deal, Greeks had to start paying for more of their health care costs out of pocket once their benefits expired. At the same time, the ranks of those without benefits swelled, creating a dangerous situation.

Reliance on “street clinics” and charitable care, which previously had been used primarily by illegal immigrants without access to the public system, became more common. One charitable clinic, as reported in the medical journal Lancet, described a rise in the proportion of Greeks that utilized its services from 3 percent to 30 percent. Reuters carried a story about another clinic that relied on donated drugs, run by volunteer doctors and nurses who saw sixty patients a day.

This, of course, was all occurring at time when the social, medical, and mental health needs of the population were expanding rapidly. A 2012 study suggested a more than doubling in the rate of major depression in Greece between 2008 and 2011, particularly among the young and those, not surprisingly, in financial distress. Reports of rising suicide rates in 2011 were particularly concerning given Greece’s traditionally low rate. The government’s public health agency reported significant increases in new HIV infections. Illegal drug use became more prevalent. The deputy health minister described a large “new category” of homeless – those unemployed by the crisis and evicted thereafter.

Other European countries made similar, if less dramatic, cuts. Portugal, for instance, pushed through a large increase in co-payments as part of an agreement with the troika. Co-payments were also introduced in Italy, while the Italian Health Pact of 2011–2012 required a reduction in the number of hospital beds and admissions.

The common factor to all these reforms is that they take these nations’ health care systems away from universalism, both in letter and spirit. Even more frightening, particularly for nations such as Greece and Spain, has been the fact that they haven’t worked. Slashing public sector spending has, as widely predicted, merely intensified the recession. Unemployment thus remains at Great Depression levels. As GDP falls further, so too does tax revenue. With no headway made in deficit reduction, countries need more bailouts, the troika demands more cuts, and social services such as health care deteriorate further.

***

Austerity has been both an economic and human disaster, and it only remains to be seen how many lives are ruined – or indeed, lost – before the responsible parties recognize it.

Although universal health care was a relatively recent achievement, it quickly came to be considered an intrinsic feature of the European welfare state. It is not, however, immutable. Universal health care everywhere arose through the process of political struggle, and it can be similarly unmade. It was generally the creation of parties of t
he Left, and was more likely to emerge, and to emerge earlier, in those countries with a strong tradition of labor unionism. As the balance of power shifts, it is not only possible, but indeed probable, that those elements that were fundamentally opposed to universal health care from its very conception will emerge to challenge it.

The greatest bulwark against these challenges remains its broad popularity, and it is for this reason that the attacks do not come head on. The best analogy in the United States is with Medicare and Social Security, also popular programs entirely discordant with the political philosophy of the Right. The right wing uses the cause of cost-containment and deficit reduction, combined with allegations of inefficiency, to chip away at the margins of these programs, to promote privatization and reductions in benefits, while at the same time avoiding a frontal rhetorical attack.

Similarly, those who would undo universal health care in Europe begin by increasing the barriers to access (such as increased user fees or the denial of care to illegal immigrants), by cutting expenditures and reducing quality, by subtly changing the system away from universalism with changes in financing or benefit eligibility. Not to recognize that such measures could amount to the first step in a long process of unwinding the right to health care would be a dangerous mistake.

There is yet another mistake that we must avoid. Perhaps because we wish to avoid self-congratulation or complacency with the status quo or perhaps because every system has faults and inefficiencies and imperfections, we can sometimes fail to recognize a true advance or accomplishment. Even as we try to improve it, we should accept the historical importance of universal health so that we can understand what we would lose were it to end.

You don’t need a doctor to know that there are not many things worse than suffering from a serious illness or injury. One thing that is worse, though, is suffering while knowing that effective care for that condition exists, but is inaccessible or unaffordable; or suffering and receiving some treatment, but at the cost of bankruptcy; or suffering while knowing that the illness could actually have been prevented with better, or earlier, care. True universal health care confers an individual right to be protected from these terrible eventualities. It is therefore all the more urgent that we both protect and expand it.

Adam Gaffney is a board-certified internist, a fellow in pulmonary and critical care medicine, and a member of Physicians for a National Health Program.

http://www.dissentmagazine.org/article/austerity-and-the-unraveling-of-european-universal-health-care

Stanford Business Professor Jeffrey Pfeffer on Administrative Waste

The Reason Health Care Is So Expensive: Insurance Companies

By Jeffrey Pfeffer
Bloomberg Businessweek, April 10, 2013

As Congressional budget battles heat up—or roll along, depending on your time perspective—the cost of health care in America receives a lot of attention. Unfortunately most of the discussion is largely off the mark about where the preventable, unnecessary costs really are.

The thing that few people talk about, and that no serious policy proposal attempts to fix—the arrangement that accounts for much of the difference between health spending in the U.S. and other places—is the enormous administrative overhead costs that come from lodging health-care reimbursement in the hands of insurance companies that have no incentive to perform their role efficiently as payment intermediaries.

More than 20 years ago, two Harvard professors published an article in the prestigious New England Journal of Medicine showing that health-care administration cost somewhere between 19 percent and 24 percent of total spending on health care and that this administrative burden helped explain why health care costs so much in the U.S. compared, for instance, with Canada or the United Kingdom. An update of that analysis more than a decade later, after the diffusion of managed care and the widespread adoption of computerization, found that administration constituted some 30 percent of U.S. health-care costs and that the share of the health-care labor force comprising administrative (as opposed to care delivery) workers had grown 50 percent to constitute more than one of every four health-sector employees.

What remains missing even in the discussion of the enormous administrative burden is not just how large, both in absolute dollars and as a percentage of health costs, it is, but also how few incentives there are for insurance companies to stop wasting their and everyone else’s time.

Unless and until we as a society pay attention to the enormous costs and the time wasted by the current administrative arrangements, we will continue to pay much too much for health care.

(Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at Stanford University’s Graduate School of Business.)

http://www.businessweek.com/articles/2013-04-10/the-reason-health-care-is-so-expensive-insurance-companies

Comment:

By Don McCanne, M.D.

Individuals who understand the single payer model will find nothing new here from a policy perspective. What is important about this article is that it is a precise statement about administrative waste, coming from a professor at Stanford University’s Graduate School of Business, and published in Bloomberg Businessweek.

There is hope that others may finally understand how we can control spending while improving value in health care, and then join together to act on it. The Harvard/CUNY professors cited by Pfeffer – PNHP’s David Himmelstein and Steffie Woolhandler – stand ready to provide guidance on the reform that we so desperately need.

Medicare for all long overdue

By Tom Reed
Chico Enterprise-Record, Letters, April 10, 2013

The Enterprise-Record has recently published a number of news articles and letters to the editor blaming Obamacare for projected increases in health care costs. These articles and letters really miss the point.

Health care costs have, over the past quarter century, increased at more than twice the rate of overall inflation without any help whatsoever from Obamacare. The real culprit is a fragmented, irrational health care financing and delivery system more dedicated to corporate profits than public health. Anyone who doubts this should read Steven Brill’s devastating article, “Bitter Pill,” published in the March 4 edition of Time magazine.

While Obamacare is not culpable for causing increases in health care costs, it is culpable for not preventing them. Conservatives are right when they say Obamacare lacks effective cost controls. However, their proposed solutions involve a deluded reliance on “market forces,” which will not work, and will in fact only serve to make an already bad situation even worse.

The real solution, hinted at in Brill’s article, is a single-payer system of “improved Medicare for all,” which would provide universal, comprehensive coverage for all Americans, with effective cost controls. Legislation to establish such a system (HR 676), has been introduced in the House of Representatives by John Conyers (D-Mich.). Efforts to establish a system of improved Medicare for all deserves the support of all Americans genuinely concerned with controlling health care costs, and not simply perpetuating fantasies about the “free market” as a rationale for corporate greed.

Tom Reed resides in Chico.

http://www.orovillemr.com/opinion/ci_22992883/letter-medicare-all-long-overdue

The Reason Health Care Is So Expensive: Insurance Companies

By Jeffrey Pfeffer
Bloomberg Businessweek, April 10, 2013

As Congressional budget battles heat up—or roll along, depending on your time perspective—the cost of health care in America receives a lot of attention. Unfortunately most of the discussion is largely off the mark about where the preventable, unnecessary costs really are. Yes, there is certainly over treatment, particularly of people in their last days of life. Yes, doctors under a fee-for-service arrangement do have financial incentives to do too much, and the fear of malpractice can lead to overtesting and overtreatment. As the recent article in Time by Steven Brill illustrated, pricing of medical care is neither invariably transparent nor sensible. And it would certainly be nice if care were better coordinated across functional specialties.

But the thing that few people talk about, and that no serious policy proposal attempts to fix—the arrangement that accounts for much of the difference between health spending in the U.S. and other places—is the enormous administrative overhead costs that come from lodging health-care reimbursement in the hands of insurance companies that have no incentive to perform their role efficiently as payment intermediaries.

More than 20 years ago, two Harvard professors published an article in the prestigious New England Journal of Medicine showing that health-care administration cost somewhere between 19 percent and 24 percent of total spending on health care and that this administrative burden helped explain why health care costs so much in the U.S. compared, for instance, with Canada or the United Kingdom. An update of that analysis more than a decade later, after the diffusion of managed care and the widespread adoption of computerization, found that administration constituted some 30 percent of U.S. health-care costs and that the share of the health-care labor force comprising administrative (as opposed to care delivery) workers had grown 50 percent to constitute more than one of every four health-sector employees.

What remains missing even in the discussion of the enormous administrative burden is not just how large, both in absolute dollars and as a percentage of health costs, it is, but also how few incentives there are for insurance companies to stop wasting their and everyone else’s time. Most large employers, including mine, Stanford University, are self-insured, which means they pay for their own medical claims. These large employers invariably hire health insurance companies to “administer” their health-care dollars, doing things such as paying claims. Employers typically reimburse the insurers the amount of money they pay out to health-care providers plus a percentage of these costs. In Stanford’s case, we pay Blue Shield 3 percent of the amount, about $3 million a year. (Note that the overhead costs of Medicare are less than one-third as much at slightly less than 1 percent.)

Because insurers are paid a fixed percentage of the claims they administer, they have no incentive to hold down costs. Worse than that, they have no incentives to do their jobs with even a modicum of competence. To take one small personal example, I have reached the age of Medicare eligibility but, because I continue to work full time, have primary health insurance coverage through my employer. Blue Shield, of course, wants to be sure it doesn’t pay for any claim it doesn’t have to, so I was asked to attest to the fact that I have no other insurance. No problem there, except such attestations seem to be required on almost a monthly basis—requiring my time on the phone (and on hold) with Blue Shield’s customer service, an oxymoronic term if there ever was one, and also requiring my doctor and laboratory to call me, call Blue Shield, or both, and thus also waste their time and resources.

This story and the many others of the same sort but even worse, magnified across the millions of people subjected to private health insurance companies, is why American health care costs so much and delivers so little. Unless and until we as a society pay attention to the enormous costs and the time wasted by the current administrative arrangements, we will continue to pay much too much for health care.

http://www.businessweek.com/articles/2013-04-10/the-reason-health-care-is-so-expensive-insurance-companies

Physician awarded damages for being excluded from insurer's network

L.A. jury sides with doctor in Anthem Blue Cross case

By Chad Terhune
Los Angeles Times, April 10, 2013

In a rare case, a Los Angeles jury awarded $3.8 million in compensatory damages to a Porter Ranch doctor who contended insurance giant Anthem Blue Cross retaliated against him for being a strong patient advocate.

The jury ruled late Monday in favor of Jeffrey Nordella, 58, an urgent-care and family-practice doctor who alleged that Anthem barred him from its network in 2010, when he applied to be a preferred provider. The damages could climb higher Friday, when the 12-person panel reconvenes and considers punitive damages against Anthem, a unit of insurance giant WellPoint Inc.

The jury found that Anthem, the state’s largest for-profit health insurer, violated Nordella’s right to “fair procedure,” and the company did so with “malice, oppression or fraud.” That latter finding prompted the hearing Friday in Los Angeles County Superior Court to determine punitive damages.

This case comes as health insurers, in a bid to hold down costs, are increasingly dropping doctors and hospitals and promoting smaller networks. Insurers typically try to negotiate lower rates with the fewer providers left in the network, who get higher patient volume in return.

Theresa Barta, a Newport Beach attorney who represents Nordella, said the insurance company contended it had 137 primary-care physicians in its network within 10 miles of Porter Ranch. At trial, Anthem could name only seven of those doctors, Barta said.

Because of frequent changes in its list of physicians since 2010, Anthem said, it could not retrieve all of the requested information. The company maintains that its doctor network was adequate when Nordella applied.

During closing arguments at trial, Barta said Anthem intentionally limits its physician roster to make it more difficult for PPO patients to get care, which reduces Anthem’s medical costs and boosts its profits.

http://www.latimes.com/business/la-fi-anthem-doctor-verdict-20130410,0,2796259.story

Comment:

By Don McCanne, M.D.

The intent of today’s message is not so much to use this opportunity to once again bash one of the nation’s largest private insurers (even if appropriate), but rather it is to demonstrate the perversity of one more example of placing the business interests of the insurer over the interests of patients.

Even though this court decision was in favor of a physician barred from Anthem Blue Cross’s network of physician providers, it confirms the principle that private insurers should be improving patient access to health care rather than impairing it, as in this now all too common instance of limiting access by narrowing their networks of health care professionals and institutions.

Once again, this demonstrates the irrationality of imposing expensive, intrusive, private third party administrators between patients and their health care professionals.

In a universal, publicly financed and publicly administered health care system, such as a single payer national health program, the third party – the government – covers all reasonable health care services and products provided by any legitimate health care professional or institution, with enough oversight to prevent deviancies such as fraud or price gouging.

It is so obvious, yet…

Online brokers want a cut of the action

In Obamacare, online insurance brokers see potential windfall

By Sarah Kliff
The Washington Post, April 8, 2013

Online insurance brokers see a potential windfall when the federal government doles out billions in subsidies to buy help Americans buy health insurance. And they are asking state governments to help them score it.

The online brokers want millions of new insurance customers to be able to use those subsidies to buy health coverage through their Web sites, rather than shop exclusively on the new exchanges being set up by states and the federal government.

“We have the expertise and already generate a tremendous amount of volume of sales,” says Gary Lauer, CEO of EHealth, the country’s largest online insurance broker. “The exchanges are spending a lot of money to enroll people, which is all fine, but we could do the same thing at no charge to the federal government.”

EHealth CEO Lauer does acknowledge that the site has financial motivations when it sells a health insurance plan. But he also contends that the federal regulations are strong enough to ensure that consumers get the same experience, no matter where they purchase coverage.

“We’re a profit-making company,” he said. “Our revenue source is the commission paid to brokers. It’s not an additional charge, it’s built into the premium, the same premium on the exchange. The only difference is the carrier will pay us a commission.”

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/08/in-obamacare-online-insurance-brokers-see-potential-windfall/

Comment:

By Don McCanne, M.D.

As Gary Lauer, CEO of EHealth states, “We’re a profit-making company.” Yes, they are a company that draws dollars (over 150 million of them in 2012) away from our heath care funds, and yet provides absolutely no services or products directly related to actual health care.

It is particularly irritating when he states that his firm can provide health insurance brokerage services for the exchanges being established under the Affordable Care Act “at no charge to the federal government,” because the charges are “built into the premium.”

Who pays those charges? The insurance companies certainly do not deduct these expenses directly from their profits. They weren’t born yesterday. As Lauer states, the charges are built into the premiums. Thus they are paid jointly by plan enrollees and by the federal government in the form of premium subsidies.

The expenses of these brokerages or of the state insurance exchanges wouldn’t even exist if we had one universal program instead of a multitude of private insurers, which in themselves generate tremendous administrative waste while imposing greater administrative burdens and costs on the actual providers of health care.

By insurance industry standards, maybe Gary Lauer’s compensation is modest ($1.67 million in 2012), but if he is providing us nothing of value, then any amount is too much.

Haven’t we had enough? Isn’t it time for an improved Medicare that covers everyone? Then Gary Lauer would have to get a real job.

The great health care sinkhole

By Robert S. Kiefner, M.D.
Concord Monitor (N.H.), April 3, 2013

The bizarre and tragic loss of a Florida man a few weeks ago, slipping to his death from his bedroom into a sinkhole, offers up a fitting metaphor for the great abyss between cost and value in health care and how it has the potential to swallow us up without warning.

The periphery of that huge health care sinkhole is occupied by guys in suits – insurance companies, Big Pharma, and overpaid hospital executives and their legions of lawyers and lobbyists. In Steven Brill’s recent Time magazine expose, “Bitter Pill,” he shows how the elite of a separate health care economy are all doing quite well, while middle-class folks with serious illness are going bankrupt as a consequence of being under insured or just plain priced out of the market.

Equipped with shovels on the edge of the great sinkhole, health care executives contend that they are filling up the hole. In reality they are digging it deeper to everyone’s peril.

In the world of for-profit medicine, doctors also need to be held accountable, particularly among sub-specialties, as the gap between the pay of primary-care physicians and specialists continues to grow.

The five minutes during which an orthopedic surgeon applies a cast to a broken wrist, a dermatologist freezes a couple of barnacles on someone’s face, or a radiologist interprets an MRI are still reimbursed vastly more than a family physician might charge for an hour of managing a patient with multisystem disease, sorting through the pharmacy the patient has brought into the office in a brown paper bag, and making referrals where necessary, all while being trying to enact evidence-based medicine and maintaining an awareness of cost/benefit ratios.

The much-reported deficiencies relating to the care of the mentally ill would certainly be better addressed if we applied a fraction of the reimbursement for a broken foot to the care of a broken mind.

While the Affordable Care Act attempts to improve the lot of primary-care physicians by marginally enhancing reimbursement and recognition of the effort going into a “Patient Centered Medical Home,” the attendant costs, regulations and overall bureaucracy effectively erode the gains. Indeed, the sheer number and complexity of rules and regulations generated by the Affordable Care Act and Accountable Care Organizations have made it well nigh impossible for solo physicians, lacking in resources, to venture into private practice.

And so we witness the ascent of great and powerful hospital executives, modern-day health overlords charged with developing local networks of care, financed by the now famous “Chargemaster” system described by Brill. Two-dollar Tylenols, $70 gauze pads – it’s enough to make you cry into your $50 “mucus recovery system,” aka Kleenex. But it all adds up to million-dollar CEO salaries, even in community hospitals. No doubt that these are bright, clever and caring people, but no hospital CEO deserves to make a multiple of the salary of the president of the United States.

The perversity is ratcheted up another notch when one contemplates the multimillion-dollar salaries of CEOs of health insurance companies. But instead of making money on gauze pads and Tylenol, they prey upon individuals and businesses. A family of four may expect to pay over $25,000 for a year of coverage, complete with an $8,000 deductible in some markets, given the lack of major cost controls in the ACA.

While Obamacare may have expanded the safety net by encouraging the expansion of Medicaid, coverage of kids up to the age of 26, enhanced coverage of preventive services, coverage in the presence of pre-existing conditions, and lack of lifetime limits, plenty of folks are still going to fall through the net and into bankruptcy or worse.

There will be those in the great medical-industrial complex who would dispute the notion that U.S. health care is in desperate shape, who would offer their own numerical analysis to support the status quo. These are the people who use statistics the way a drunk uses a lamppost, for support rather than illumination.

While acknowledging and promoting the gains of the ACA, we need to resume the journey toward a single payer, where everyone enjoys the security and dignity of being covered by insurance. We’re not talking “free” care, just quality care at a truly affordable price. Where there are excessive profits, there cannot be compassionate and accessible care for all. Let’s fill in this enormous sinkhole, so that everyone gets a good and safe night’s sleep.

Dr. Robert S. Kiefner is a family physician in Concord.

http://www.concordmonitor.com/home/5359278-95/my-turn-the-great-health-care-sinkhole

Other nations' lessons on cost containment

Health Care Cost Containment Strategies Used In Four Other High-Income Countries Hold Lessons For The United States

By Mark Stabile, Sarah Thomson, Sara Allin, Seán Boyle, Reinhard Busse, Karine Chevreul, Greg Marchildon and Elias Mossialos
Health Affairs, April 2013

The past decade has been one of relative affluence for the countries we reviewed (Canada, England, France, and Germany), particularly when compared to the budget scenarios they face over the next few years. It may not be surprising, therefore, that health care costs grew relatively quickly during 2000–10 and that there is limited evidence of the success of recent cost containment strategies.

That said, the four countries discussed here continue to make use of public budgeting and price-setting mechanisms to contain costs in the health care sector, as they have in previous decades. The greater use of public budgeting and price-setting mechanisms, along with the much higher public shares of health care financing in these countries, remain the greatest contrasts between them and the United States.

Our review also revealed that in 2000–10 the four European countries moved away from strategies that simply shifted costs to households through across-the-board budget cuts, rationing of services, and increases in user charges. We found a growing focus on the cost-benefit ratio through the greater use of health technology assessment, activity-based funding with centrally set prices, and value-based approaches to paying for drugs. Although these policies may not drive down costs, they are likely to produce more efficient use of health care resources in the future.

Our review suggests that the four countries have had some success in using a variety of public policy tools and that the United States may wish to emulate their policies to reduce the growth rate in drug spending. The policies include relatively simple levers such as large-scale negotiations with pharmaceutical manufacturers and sellers as well as budget caps. Our review also suggests that the United States may wish to use more challenging tools, such as cost-effectiveness analysis that sets prices for new technologies based on the technologies’ relative value and value-based user charges.

It seems unlikely, however, that the US system will move toward the types of volume and price controls used in the countries examined here. Thus, although the United States is also moving toward policies aimed at changing the cost-benefit ratio and promoting economic efficiency, it is likely that the large gap in health care spending between the four countries in our study and the United States will remain.

http://content.healthaffairs.org/content/32/4/643.abstract?etoc

Comment:

By Don McCanne, M.D.

Cost containment strategies in the four nations studied – Canada, England, France, and Germany – depend largely on the government, especially through public budgeting and price setting. The authors point out that it is unlikely that the United States will move toward such policies, thus the large gap between our health care spending and that of these four countries will remain.

Also of note is the fact that other more recent cost containment innovations in these four countries have shown only limited evidence of success. It is still the government engagement that perpetuates their success.

Of great significance for the United States is the fact that these nations have moved away from strategies that simply shifted costs to households. Our emphasis on consumer-directed approaches that increase cost sharing through high deductibles, coinsurance, more restrictive provider networks, and our government efforts to reduce “entitlement” spending, are all moving in the wrong direction. Costs can be controlled without impairing access by erecting financial barriers.

The lesson is simple. We need beneficial public policies, designed to serve patients, to displace private sector policies (enabled by government complicity) that currently prioritize the interests of business stakeholders over those of patients.

For-profit insurers again flex lobbying muscle

By Sandra Fox
Pittsburgh Post-Gazette, April 7, 2013

Thanks to Steve Twedt and the Post-Gazette for the front-page coverage of the Medicare Advantage reversal by the Centers for Medicare and Medicaid Services (“Medicare Payment Cut Reversed,” April 3).

It is a story of the influence of the private for-profit insurance industry and its well-paid lobbyists in Washington who were able to reverse the government’s decision to reduce subsidies of private so-called “Medicare Advantage” plans. Now, instead of a planned 2.2 percent reduction, subsidies will increase by 3.3 percent. The U.S. government has been spending an average of 13 percent more per patient for Medicare recipients who chose one of the private Medicare Advantage options, as compared to those who opt for traditional Medicare. Now, the difference will be 16.3 percent more. So, how is this cutting waste out of Medicare?

If the government decides to make smart decisions on removing waste from Medicare, we can stop subsidizing the insurance industry altogether. Not only would we save billions of dollars a year, but we also would eliminate the restrictions on choice of doctors and hospitals imposed by health insurers.

Another way we can remove waste from Medicare is to negotiate lower drug prices with the pharmaceutical companies, as Medicaid and the VA already do.

Finally, we can pass “Expanded and Improved Medicare for All,” HR 676, which would implement these reforms, and use the savings to improve coverage, eliminate co-pays and deductibles, and cover all of us — cradle to grave.

Sandra Fox is co-chair, Western PA Coalition for Single-Payer Healthcare (www.WPaSinglePayer.org). She resides in Squirrel Hill, Pa.

http://www.post-gazette.com/stories/opinion/letters/for-profit-insurers-again-flex-lobbying-muscle-682393/

Obama administration intervenes to give $71.5 billion to overpaid, for-profit Medicare Advantage plans

Physicians group decries ‘backroom Medicare giveaway’

FOR IMMEDIATE RELEASE, April 9, 2013

Contact: Mark Almberg, (312) 782-6006, mark@pnhp.org

Medicare’s costs will jump by $7.43 billion next year – the equivalent of $149 for each of the nearly 50 million beneficiaries in the program – due to an unprecedented intervention last week by the Obama administration in the way privately run, for-profit Medicare Advantage (MA) plans, which are also known as Medicare HMOs, are paid by the government, a national physicians group reported today.

The total cost to U.S. taxpayers will be $71.5 billion to $104.5 billion over the next decade, depending on the number of Medicare beneficiaries who enroll in the private plans, researchers at Physicians for a National Health Program said. That’s money that could keep traditional Medicare’s hospital trust fund safely in the black over the same period, eliminating any need for greater cost-sharing by beneficiaries, they said.

Enrollment in MA plans, currently at 13.1 million beneficiaries, was expected to dip sharply over the next few years in the wake of a reduction in government overpayments to the plans under the Affordable Care Act (ACA), but the researchers said enrollment may not decrease, due to this windfall and last year’s “quality bonus” payments: hence the variation in the estimated cost.

“Medicare Advantage plans have been overpaid by the federal government for years, wasting tens of billions of taxpayer dollars,” said Dr. David Himmelstein, professor at the City University of New York School of Public Health and co-founder of the physicians group. “Studies by the Government Accountability Office, MedPAC and many private groups have drawn attention to this overpayment. The Obama administration’s ACA acknowledged the overpayments by calling for cuts to these payments starting in 2014.

“But last week’s extraordinary rate-setting directive from Health and Human Services Secretary Kathleen Sebelius to the Centers for Medicare and Medicaid Services, in which she spurned historical practice and the advice of the CMS Office of the Actuary, will result in an obscene windfall to the private, for-profit insurers,” he said. “Simultaneously, this backroom Medicare giveaway is a heavy blow to taxpayers and the traditional, public Medicare program.”

In response to the CMS announcement, which was leaked shortly before 4 p.m. last Monday, stock prices for the nation’s five largest for-profit health insurers surged last week, yielding a $13.2 billion bonanza for investors. Stock prices increased from open of trading Monday, April 1, to close of trading Friday, April 5, by the following amounts: Cigna, $15.93; Humana, $8.93; UnitedHealth Group, $4.94; Aetna, $4.62; and WellPoint, $1.70. Aetna’s Coventry share prices jumped by $1.19.

UnitedHealth and Humana reaped the largest windfalls. (See Table 1.) Based on its share of the MA market (20 percent, including its purchase of XL Health Corp.), UnitedHealth will receive an extra $1.49 billion from Medicare for its Medicare Advantage plans in 2014, and $14.3 billion to $20.9 billion over the next decade, triggering a $5.04 billion surge in the value of UnitedHealth’s stock last week.

Humana (17 percent market share) will receive an extra $1.26 billion from Medicare for its Medicare Advantage plans in 2014, and $12.2 billion to $17.8 billion over the next decade. Humana’s stock surged $1.41 billion last week.

Other insurers will also reap huge rewards. WellPoint (4 percent market share) will receive an extra $297 million in payments from Medicare for its Medicare Advantage plans in 2014, and between $2.86 billion and $4.18 billion over the next decade. Former CEO Angela Braly received compensation and stock options of $20.6 million in 2012.

Aetna will receive at least an extra $223 million from Medicare for its Medicare Advantage plans in 2014 (excluding its 75 newly acquired Coventry plans), and $2.14 billion to $3.14 billion over the next decade. Coventry will receive extra payments of $149 million in 2014 and between $1.43 billion and $2.09 billion between 2014 and 2022.

Finally, Cigna, which almost entirely exited the MA market in 2010, re-entered the market with the purchase of HealthSpring’s 40-plus plans in 2011. Cigna will garner an additional $223 million in federal payments in 2014 and between $2.14 billion and $3.14 billion over the next decade as a result of the Obama administration’s action.

Dr. Ida Hellander, director of policy and programs at PNHP, said that in 2012 alone, privately run Medicare Advantage plans were overpaid $34.1 billion, or $2,526 per enrollee. She and Himmelstein were among the authors of a study last year showing that having Medicare Advantage plans compete with traditional Medicare does not save money, but costs taxpayers billions of dollars more each year.

For the present analysis, Hellander and Himmelstein used publicly available data from the New York Stock Exchange and Medicare’s Board of Trustees to calculate the impact of a 5.5 percent hike in Medicare Advantage payments on insurers’ stock valuation and future government spending.

Hellander said, “Medicare Advantage plans are siphoning off valuable health care dollars into private, for-profit hands and producing no better outcomes to show for it. It is time to stop putting profits over patient care and adopt an improved Medicare for All, a national single-payer system. Single payer would save enough on wasteful private insurance-related bureaucracy and profits to provide high-quality care for everyone.”

Dr. Andrew Coates, president of PNHP and an internist in upstate New York, commented on the findings. “Instead of making a cut to the overpayments, the administration has bent over backwards to take good care of the private Medicare Advantage insurers,” he said. “This behind-the-scenes maneuvering will not only swell the already unconscionable profits of the insurance companies, but will further impair the traditional, public Medicare program.”

Table 1.


Sources

Kaiser Family Foundation Medicare Advantage Enrollment Update 2013; Google Finance April 1 to April 5, 2013; Medicare Trustees Report 2012; Washington Post, April 2, 2013; 10-year total based on 2013-2022 total Medicare spending of $1.3 to $1.9 trillion on MA plans.

Notes

1. As a result of HHS Secretary Sebelius’ unprecedented intervention, and over the objection of the Actuary, MA spending in 2014 will increase 5.5 percent. Instead of a 2.2 percent reduction in payments as announced in February 2013, there will now be a 3.3 percent increase. MA spending for 2014 after the passage of the ACA but before the intervention was an estimated $135.2 billion; $67.1 billion on Part A and $68.1 billion on Part B. A 5.5 percent increase amounts to $7.43 billion in 2014.

2. As a result of $156 billion in MA cuts included in the ACA, the Medicare Trustees’ latest report (2012, Table IV, c1) projected an MA enrollment decline from 26.7 percent of beneficiaries in 2012 to a low of 16.2 percent of beneficiaries in 2018, resulting in MA spending of about $1.3 trillion between 2013 and 2022. But enrollment may not fall that much, and could increase, especially if the Obama administration keeps backpedaling on its commitment to stop the overpayments to Medicare Advantage plans (e.g. with over $8 billion in offsetting “quality” bonuses and now an unprecedented intervention into payment rate
-setting).  As a result, MA payments over the next decade could rise one-third or more, topping $1.9 trillion. A 5.5 percent increase on estimated MA spending of $1.3 trillion to $1.9 trillion equals $71.5 billion to $104.5 billion.

3. The estimate of $156 billion in MA cuts in the ACA is from the Congressional Budget Office’s letter of July 24, 2012, Table 2. www.cbo.gov/publication/43471

4. Historical stock prices and number of shares are from Google Finance accessed April 7, 2013.

5.  Market-share data is from the Kaiser Family Foundation’s Medicare Advantage Data Spotlight: Enrollment Update (2013), www.kff.org/medicare/upload/8323.pdf. Market share for Aetna’s Coventry, UnitedHealth’s XL Health Corp., and Cigna’s HealthSpring is based on enrollment at the time of acquisition.

****

Physicians for a National Health Program (www.pnhp.org) is a research and education organization of more than 18,000 doctors who advocate for single-payer national health insurance. To speak with a physician/spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 622-0996.

Dependent verification programs. What a crime!

Fraud in the Workplace? Evidence from a Dependent Verification Program

By Michael Geruso, Harvey S. Rosen
The National Bureau of Economic Research (NBER), April 2013

Many employers have implemented dependent verification (DV) programs, which aim to reduce employee benefits costs by ensuring that ineligible persons are not enrolled in their health plan as dependents. We evaluate a DV program using a panel of health plan enrollment data from a large, single-site employer. We find that dependents were 2.7 percentage points less likely to be reenrolled in the year that DV was introduced, indicating that this fraction of dependents was ineligibly enrolled prior to the program’s introduction. We show that these dependents were actually ineligible, rather than merely discouraged from re-enrollment by compliance costs.

http://papers.nber.org/papers/w18947?utm_campaign=ntw&utm_medium=email&utm_source=ntw

And…

Help Prevent Health Plan Enrollment Fraud

Blue Cross Blue Shield of Hawaii
Hawaii Medical Service Association

Health plan enrollment fraud occurs when a person or company intentionally misrepresents facts to improperly receive health care products and services. This includes adding a person who is not eligible for health plan coverage as a dependent on a health plan.

It is a criminal offense under state and federal laws to fraudulently enroll someone onto a health plan. Enrolling ineligible dependents can lead to increased health care costs for employers. Penalties include fines, immediate loss of health plan coverage, or imprisonment.

http://www.hmsa.com/community/awareness/fraud/employers.aspx

And…

Dependent Eligibility Verification Project

CalPERS

The initial phase of the DEV project includes an amnesty period that runs from now through June 30, 2013. If you have one or more dependents on your health plan, you will receive a letter with further details on the DEV project, including dependent eligibility criteria and an Amnesty Disenrollment Document. During the amnesty period, we encourage you to carefully review the definition on an eligible dependent and identify on the Amnesty Disenrollment Document all ineligible dependents who should be removed from your health plan.

http://www.calpers.ca.gov/index.jsp?bc=/member/health/dev.xml&pst=ACT&pca=ST

Comment:

By Don McCanne, M.D.

There are many circumstances in which a de facto dependent is not technically a dependent when it comes to enrollment in a health plan. Enrolling such individuals is considered a criminal offense. Many employers have instituted dependent verification programs in order to ferret out this fraud. Is this really what we want to be doing?

It seems ironic that at a time in our history when theoretically we are attempting to enroll as many individuals as possible in health insurance programs, we are pushing a program designed to disenroll individuals currently covered as dependents when they are not technically entitled to such coverage.

We are expanding yet more administrative excesses which are resulting in the opposite of our policy goals. That is, we are increasing the numbers of uninsured through application of these dependent verification programs.

Wouldn’t it be far simpler to have a system that automatically covers everyone, regardless of dependency status or any other criteria? Instead of advancing policies that make health care coverage a crime, shouldn’t we make health care a right for all?

'Bitter Pill' misses the target on solutions to the U.S. medical crisis

Brill glosses over the real solution to the cost of medical bills: a single-payer system which forces hospitals to be more efficient

By Jack Bernard
Time magazine, Letters, Feb. 23, 2013

As someone who has worked on all sides of the health care field (regulator, non-profit, for-profit) for 30 years, I was intrigued by the Steven Brill piece, “Bitter Pill: Why Medical Bills Are Killing Us.” On the analysis of the problem, Brill was mainly on target, but he missed the mark on most of his proposed solutions.

For example, hospital competition is not the answer to getting lower prices and never has been. For instance, coordination of services among hospitals within a region is a far more cost-effective way to minimize duplicative purchases of expensive technology. Furthermore, group purchases of supplies, pharmaceuticals and capital equipment by large hospital systems has been shown to drive down vendor prices by up to 20 percent versus pricing given to small independent hospitals.

Brill glosses over the real solution to the cost of medical bills: a single-payer system which forces hospitals to be more efficient. Medicare For All, incorporating quality measures, would eliminate all the “chargemaster” game-playing. The inefficient providers would be paid the same as the effective ones. With higher costs, they would be driven out. Likewise for the ones with poor quality. Plus, the 20+ percent administrative marketing costs currently charged by private insurance companies — versus just 3 percent with Medicare — could be put back into direct care where it belongs.

Jack Bernard resides in Monticello, Ga.

http://ideas.time.com/letters/bitter-pill-misses-the-target-on-solutions-to-the-u-s-medical-crisis/#ixzz2PqAs58zY