PNHP

Lowest rate of health spending increases still very high

Lowest rate of health spending increases still very high

Recession Contributes To Slowest Annual Rate Of Increase In Health Spending In Five Decades

Anne Martin, David Lassman, Lekha Whittle, Aaron Catlin and the National Health Expenditure Accounts Team
Health Affairs
January 2011

In 2009, US health care spending grew 4.0 percent — a historically low rate of annual increase — to $2.5 trillion, or $8,086 per person. Despite the slower growth, the share of the gross domestic product devoted to health spending increased to 17.6 percent in 2009 from 16.6 percent in 2008. The growth rate of health spending continued to outpace the growth of the overall economy, which experienced its largest drop since 1938. The recession contributed to slower growth in private health insurance spending and out-of-pocket spending by consumers, as well as a reduction in capital investments by health care providers. The recession also placed increased burdens on households, businesses, and governments, which meant that fewer financial resources were available to pay for health care. Declining federal revenues and strong growth in federal health spending increased the health spending share of total federal revenue from 37.6 percent in 2008 to 54.2 percent in 2009.

http://content.healthaffairs.org/content/30/1/11.full#aff-5

Comment: 

By Don McCanne, MD

How much are we spending on health care?

For 2009:

National health expenditures: $2.5 trillion

Percent of GDP: 17.6%

Spending per person: $8,086

Although the title of this article and the news reports stemming from it tout the fact that this is the slowest increase in health care spending in five decades, the 4.0 percent increase is well in excess of inflation and remarkably high considering that it occurred during the Great Recession.

Perhaps the most impressive number that demonstrates this increased spending on a background of the recession is the percent of federal revenues that were directed to federal health spending. Federal revenues decreased 18.2 percent while federal health spending increased 17.9 percent. Thus the federal revenues directed to federal health spending increased from 37.6 percent in 2008 to 54.2 percent in 2009. Over half of the recession-impacted federal revenues were spent on federal health programs!

These numbers demonstrate that even a severe recession was unable to reduce the increase in health care spending to anywhere near the rate of inflation nor the growth in GDP (gross domestic product).

Since the cost containment measures in the Patient Protection and Affordable Care Act (PPACA) are so weak, there is little hope for truly significant relief from escalating costs in the foreseeable future. Yet just the administrative savings alone of a single payer system would be much more effective, and there is no reason that an improved Medicare covering everyone couldn’t adopt some of the modest but beneficial cost-saving measures of PPACA so long as they have no detrimental policy impacts.

Instead of repealing PPACA, we need to retain the beneficial measures, but then replace the flawed financing component with one that will work – an improved Medicare for all.

Healthcare CEOs doing just fine without healthcare law repeal

By National Nurses Movement
DailyKos, Wed Jan 05, 2011

If the Obama health care bill is just a “government takeover,” why are healthcare industry CEOs being rewarded with so much money?

The alleged expropriation of healthcare by big government is, of course, a major story line of the right and the new leadership of the House which is planning the useless exercise of a vote to repeal the law.

But if the private companies who actually do control our health are hurting so badly, why are they shelling out so much to their top executives?

A report from Kaiser Health News out today exposes lavish pay packages for some of the biggest players in the private healthcare industry.

Here’s what a few top executives banked the past two years according to KHN:

• Billy Tauzin, PhRMA — $9,098,585
• Scott Serota, Blue Cross/Blue Shield — $7,214,668
• Charles Kahn III, Federation of American Hospitals — $4,513,714
• Karen Ignani, America’s Health Insurance Plans — $3,791,261
• Richard Umbdenstock, American Hospital Association – 3,818,426
• Stephen Ubl, Advanced Medical Technology — $2,389,423
• James Greenwood, Biotechnology Organization — $2,418,690

As KHN notes, most of these execs supported either the entire law or key aspects of the law.

PhRMA, the drug company trade lobby, and Tauzin  famously cut a deal with the White House to lock down backing for the bill by the pharmaceutical industry, the 800-pound gorilla in healthcare profits. In exchange, the White House blocked progressive proposals to support drug reimportation as a way around the outrageous price gouging of the drug industry. 

Tauzin, so artfully chronicled by Michael Moore in “SiCKO,” is a former Congressman who was  rewarded with the top job in PhRMA after leading passage of the Bush administration’s Medicare drug deal which created windfall profits for the drug giants. He has since decided to take the money and run, leaving his post last June.

The insurance companies played it both ways.  The insurers supported the bill long enough to assure the administration and top Democrats would scuttle first single payer reform, then even the public option, while including the individual mandate requiring all those without coverage to buy private insurance. The result – tens of millions of new customers, and hundreds of millions in added profits, hardly an indication they were being “taken over” by the government.

Of course the ever greedy insurers sought to hedge their bets by also running ads attacking other parts of the law and backing many of its opponents, apparently ignoring the irony that some of those they were supporting would be promoting the legal challenge to the insurers’ beloved individual mandate. 

Private hospitals, expecting lots of additional revenue, were also key advocates of the law. CEOs of some of the biggest hospital chains in the country, including for-profit s like Tenet Healthcare, and non-profits like Kaiser Permanente, have been among its biggest champions.

Also on board were those profiting from medical technology programs, as almost all the reform advocates push information technology as the supposed solution to medical errors and cost savings, despite the enormous cost of such technology and its frequent misapplication too often used to displace the expertise and judgment of professional caregivers which can lead to worse patient care. 

Finally, there’s the biotech industry which, as KHN notes, also favored the law, winning in exchange a highly dubious 12-year exclusivity for brand name biologic drugs and a tax credit to boot.

Do we really need to replay the same debate over the current law over and over? Will that solve any of the still very real problems that exist? Notably the tens of millions of Americans who remain uninsured, many of whom will not be covered even if the law goes into full effect. And the millions more who are slammed daily by un-payable medical bills and ever rising costs that the bill does so little to address.

Reminders of the continuing healthcare crisis come regularly. To name just three:

• The U.S. ranks just 22nd in health well-being among major industrialized countries, according to a UNICEF report issued in December.
• Growing numbers of parents with premature babies, or children born with special needs, according to another KNH report, are being socked with huge bills for neonatal care because the health professionals are deemed to be “out of network.”
• Only 58 percent of private sector employees have access to paid sick leave, according to a report out this week from the Institute for Women’s Policy Research. 

Among the consequences of the sick leave report, many sick employees come to work because they can’t afford the unpaid lost time, especially in a deep recession, or they avoid taking sick time for fear of employer retribution. They thus risk aggravating their illness and facing more serious sickness, more lost time, and higher health costs, and they increase the likelihood of infecting others in their workplace.

It’s time to move on. Let’s end the fiction that the current law was a government takeover. Let’s stop replaying the fruitless debate of the past two years over the false issues the right loves to exploit.

And let’s find ways to address the continuing health problems plaguing so many by working instead:

To  really reign in skyrocketing costs, that are primarily driven by the very same profiteering private companies whose executives are being paid so much, and

Guarantee healthcare for all Americans, best done by expanding the most cost effective, real universal program Medicare to cover everyone.

http://www.dailykos.com/story/2011/1/5/181958/6884

Lowest rate of health spending increases still very high

Recession Contributes To Slowest Annual Rate Of Increase In Health Spending In Five Decades

Anne Martin, David Lassman, Lekha Whittle, Aaron Catlin and the National Health Expenditure Accounts Team
Health Affairs
January 2011

In 2009, US health care spending grew 4.0 percent — a historically low rate of annual increase — to $2.5 trillion, or $8,086 per person. Despite the slower growth, the share of the gross domestic product devoted to health spending increased to 17.6 percent in 2009 from 16.6 percent in 2008. The growth rate of health spending continued to outpace the growth of the overall economy, which experienced its largest drop since 1938. The recession contributed to slower growth in private health insurance spending and out-of-pocket spending by consumers, as well as a reduction in capital investments by health care providers. The recession also placed increased burdens on households, businesses, and governments, which meant that fewer financial resources were available to pay for health care. Declining federal revenues and strong growth in federal health spending increased the health spending share of total federal revenue from 37.6 percent in 2008 to 54.2 percent in 2009.

http://content.healthaffairs.org/content/30/1/11.full#aff-5

How much are we spending on health care?

For 2009:

National health expenditures: $2.5 trillion

Percent of GDP: 17.6%

Spending per person: $8,086

Although the title of this article and the news reports stemming from it tout the fact that this is the slowest increase in health care spending in five decades, the 4.0 percent increase is well in excess of inflation and remarkably high considering that it occurred during the Great Recession.

Perhaps the most impressive number that demonstrates this increased spending on a background of the recession is the percent of federal revenues that were directed to federal health spending. Federal revenues decreased 18.2 percent while federal health spending increased 17.9 percent. Thus the federal revenues directed to federal health spending increased from 37.6 percent in 2008 to 54.2 percent in 2009. Over half of the recession-impacted federal revenues were spent on federal health programs!

These numbers demonstrate that even a severe recession was unable to reduce the increase in health care spending to anywhere near the rate of inflation nor the growth in GDP (gross domestic product).

Since the cost containment measures in the Patient Protection and Affordable Care Act (PPACA) are so weak, there is little hope for truly significant relief from escalating costs in the foreseeable future. Yet just the administrative savings alone of a single payer system would be much more effective, and there is no reason that an improved Medicare covering everyone couldn’t adopt some of the modest but beneficial cost-saving measures of PPACA so long as they have no detrimental policy impacts.

Instead of repealing PPACA, we need to retain the beneficial measures, but then replace the flawed financing component with one that will work – an improved Medicare for all.

Moody's reports negative outlook for private insurers

Outlook negative for insurers: Moody's

By Melanie Evans
ModernHealthcare.com
January 4, 2011

Health insurers’ outlook continues to be negative as the sector faces new regulations, heightened political pressure and a weak economy, which are expected to squeeze earnings, one major ratings agency said.

Moody’s Investors Service said in a report that insurance provisions of the Patient Protection and Affordable Care Act that go into effect this year could limit insurers’ income. Analysts described 2011 “as a transition year” for insurers as companies grapple with new medical-loss ratio regulations, which require 85% of large group premiums and 80% of small group and individual premiums to be spent on patient care.

Flat Medicare Advantage reimbursement levels for 2011, to be followed by cuts next year, could squeeze insurers’ margins, the report said. Insurers have moved to diversify to increase revenue and income not affected by changes under the reform law, analysts said. The sector also faces greater oversight and political pressure regarding insurers’ premium increases.

Insurers also face threats to enrollment from the economy, according to the report. The weak job market and possible further layoffs in the public sector this year could leave more households without employment, the source of health insurance for many, the report said. Struggling employers and households may not be willing or able to pay for care even as providers seek pay increases to increase revenue.

http://www.modernhealthcare.com/article/20110104/NEWS/301049965/-1#

And…

US Healthcare Insurers: Outlook Remains Negative

Moody’s Investor Service
December 29, 2010

…Despite better than expected results in 2010, Moody’s has maintained its negative outlook for the U.S. healthcare insurance sector due to regulatory, political, and economic threats that combine to place downward pressure on future earnings. Our expectations for 2011 for the sector as a whole include lower earnings, flat-to-low membership growth, and strategies increasingly focused on diversification. The negative sector outlook represents our view of credit conditions facing health insurers over the next 12 to 18 months; it provides a framework against which to consider issuer-specific ratings and research. 1. Regulatory Issues ¡ The healthcare reform law passed in early 2010, has already imposed a number of challenges for health insurers. During 2010, most changes required insurers to provide additional benefits while allowing them to adjust premiums appropriately. However, in 2011, two key provisions of the law — minimum medical loss ratio (MLR) regulations and changes to Medicare Advantage…

The remainder of this 9 page report can be purchased for $550.00 at this link:
http://moodys.alacra.com/research/moodys-global-credit-research—PBC_129845

Comment: 

By Don McCanne, MD

We hear much about the private health insurance industry from Health and Human Services (HHS) and from America’s Health Insurance Plans (AHIP) and the private insurers themselves. This report is of interest because it provides a perspective on for-profit health insurers from a consulting firm for investors.

Although the regulatory changes that the insurance industry faces as a result of the Patient Protection and Affordable Care Act bring bad news to investors, in a sense this is good news for patients because some of the greed has been squeezed out of the system. Moody’s seems to be an expert on greed since they charge $550.00 for a 9 page report that apparently only tells us what we already knew. (I must confess that I made an exception in not reading the full report that was used as the source of today’s quote since I couldn’t bring myself to pay that fee.)

We could have had better news. The savings that is good news for patients is only minuscule when you consider the much larger amount that we could have saved by changing to a single payer national health program – an improved Medicare for all.

Moody’s reports negative outlook for private insurers

Outlook negative for insurers: Moody’s

By Melanie Evans
ModernHealthcare.com
January 4, 2011

Health insurers’ outlook continues to be negative as the sector faces new regulations, heightened political pressure and a weak economy, which are expected to squeeze earnings, one major ratings agency said.

Moody’s Investors Service said in a report that insurance provisions of the Patient Protection and Affordable Care Act that go into effect this year could limit insurers’ income. Analysts described 2011 “as a transition year” for insurers as companies grapple with new medical-loss ratio regulations, which require 85% of large group premiums and 80% of small group and individual premiums to be spent on patient care.

Flat Medicare Advantage reimbursement levels for 2011, to be followed by cuts next year, could squeeze insurers’ margins, the report said. Insurers have moved to diversify to increase revenue and income not affected by changes under the reform law, analysts said. The sector also faces greater oversight and political pressure regarding insurers’ premium increases.

Insurers also face threats to enrollment from the economy, according to the report. The weak job market and possible further layoffs in the public sector this year could leave more households without employment, the source of health insurance for many, the report said. Struggling employers and households may not be willing or able to pay for care even as providers seek pay increases to increase revenue.

http://www.modernhealthcare.com/article/20110104/NEWS/301049965/-1#

And…

US Healthcare Insurers: Outlook Remains Negative

Moody’s Investor Service
December 29, 2010

…Despite better than expected results in 2010, Moody’s has maintained its negative outlook for the U.S. healthcare insurance sector due to regulatory, political, and economic threats that combine to place downward pressure on future earnings. Our expectations for 2011 for the sector as a whole include lower earnings, flat-to-low membership growth, and strategies increasingly focused on diversification. The negative sector outlook represents our view of credit conditions facing health insurers over the next 12 to 18 months; it provides a framework against which to consider issuer-specific ratings and research. 1. Regulatory Issues ¡ The healthcare reform law passed in early 2010, has already imposed a number of challenges for health insurers. During 2010, most changes required insurers to provide additional benefits while allowing them to adjust premiums appropriately. However, in 2011, two key provisions of the law — minimum medical loss ratio (MLR) regulations and changes to Medicare Advantage…

The remainder of this 9 page report can be purchased for $550.00 at this link:
http://moodys.alacra.com/research/moodys-global-credit-research—PBC_129845

We hear much about the private health insurance industry from Health and Human Services (HHS) and from America’s Health Insurance Plans (AHIP) and the private insurers themselves. This report is of interest because it provides a perspective on for-profit health insurers from a consulting firm for investors.

Although the regulatory changes that the insurance industry faces as a result of the Patient Protection and Affordable Care Act bring bad news to investors, in a sense this is good news for patients because some of the greed has been squeezed out of the system. Moody’s seems to be an expert on greed since they charge $550.00 for a 9 page report that apparently only tells us what we already knew. (I must confess that I made an exception in not reading the full report that was used as the source of today’s quote since I couldn’t bring myself to pay that fee.)

We could have had better news. The savings that is good news for patients is only minuscule when you consider the much larger amount that we could have saved by changing to a single payer national health program – an improved Medicare for all.

California and New York lessons for Medicaid expansion under PPACA

Cuomo Targeting Medicaid Spending

By Jacob Gershman
The Wall Street Journal
January 4, 2011

Gov. Andrew Cuomo is aiming to reduce the state’s Medicaid spending by billions of dollars, exceeding the size of cuts to the program proposed in past years, according to individuals with knowledge of his budget.

The Cuomo administration is considering a cut of about $2.1 billion out of the state’s projected spending on Medicaid in the upcoming fiscal year. With federal matching funds, the cut comes to more than $4 billion.

http://online.wsj.com/article/SB10001424052748704111504576060280154691892.html

And…

Brown to propose broad list of budget cuts

By Kevin Yamamura
The Sacramento Bee
January 3, 2011

(Gov. Jerry Brown) will propose Medi-Cal (Medicaid) savings by requiring patients to provide co-payments for services, limiting doctor visits and reducing rates paid to health providers. In Healthy Families (CHIP), which provides subsidized care for low-income children, he wants participants to pay more in premiums and co-payments while eliminating vision care.

“These would be shocking cuts if we hadn’t seen them before, but we have seen them before,” said Anthony Wright, executive director of Health Access California. “This is what’s left to cut outside of the wholesale dismantling of core programs. These are bad cuts that will impact millions of Californians.”

http://www.sacbee.com/2011/01/03/3295079/brown-to-propose-broad-list-of.html

Comment:

By Don McCanne, MD

A substantial increase in eligibility qualification for the Medicaid program is a crucial measure in the Patient Protection and Affordable Care Act (PPACA), designed to decrease the numbers of Americans without insurance coverage. Now the newly-elected Democratic governors of the two most populous states in the nation intend to sharply reduce funding of their Medicaid programs. What does this say about the wisdom of the PPACA policy of using Medicaid to expand coverage?

Gov. Brown’s proposal to impose financial penalties for accessing care, placing caps on doctor visits, and further slashing payments in this already critically underfunded program can only be disastrous for the low-income patients enrolled.

Once again, this is not change we can believe in. We desperately need an improved Medicare that covers everyone.

Medicare for all is the best prescription for nation's health care woes

By Dr. John Cavacece
Grand Rapids Press, Jan. 3, 2011

With the elections and the old year in the rearview mirror, debate will rage about whether to repeal the health care reform law. Some of the many opposed to the law will use the same misinformed scare tactics that got them elected, saying that we can’t afford it, that it puts too much control in the hands of the government, and that medical progress, like open heart surgery in every hospital in Grand Rapids, will be hindered.

All of these assertions will distract people from fixing the real tragedy of our health care system: 50 million people without access to health care, a health care industry that continues to make obscene profits at the expense of the health of all of us, and a misleading and false claim that we have the best quality health care in the world. The truth is we are last of 19 industrialized nations in quality measures such as preventable death at age 75 and infant mortality. This lack of quality exists despite the fact that we spend almost twice as much per capita as the next highest spending nation.

The new health care law is not perfect. It does offer coverage to previously uncovered young adults through their parents’ policies. It will force insurance companies to cover those with pre-existing conditions. It does expand Medicaid to cover those with very low incomes.

On the flip side, the law fails to go far enough. The mandate will give the insurance companies millions of new customers, but the insurers, having sold what amounts to a defective product to those customers, will be able to continue to increase their co-pays and deductibles, insuring that the insurers maintain their profit margins.

In 2019 there will still be 23 million Americans without insurance, and thus without access to quality health care.

The law doesn’t do enough to ensure that our health system focuses on the kind of care that is most needed, e.g. primary care. Primary care has proven not only to improve the quality of health care, but also to cut costs as well.

Most disturbing, the law allows the same profit-hungry, inefficient health care industry to keep a stranglehold on all decisions. This is only to be expected, since former health industry executives helped write the bill, the health industry supplied six lobbyists for each member of Congress who worked on it, and that same industry donated tens of millions to congressional campaigns in exchange for the lawmakers’ complicity.

The simple remedy lies in a tried and true system that has offered dependable, efficient health care to all of its patients for 45 years: Medicare. By simply improving and expanding Medicare to cover all of our citizens and appropriately funding its efforts, instead of portioning them out to private insurance companies who make sure they take their cut first, we would have one system, not a crazy quilt of hundreds of plans.

It would make the question “Will I be able to afford basic health care?” obsolete.

Doctors and nurses believe this is the best way to go. Doctors realize that they have more power to make decisions that benefit their patients under an improved and universal Medicare system than a restrictive, arbitrary private insurance system.

The people know this is the answer. Business owners should jump at the chance for such a system to relieve them of the burden of covering their employees in a simple, fair way.

It makes too much sense, which is why the health care industry doesn’t want you to hear about it and why Medicare-for-all advocates were not even allowed at the table when the bill was being formed.

It’s time that all should know about it. We need compassionate government that provides health care for all. What we don’t need is an insurance industry that continues to make profit at the expense of our citizen’s health. We need to preserve what’s good in the new law but move beyond it to an improved and expanded Medicare for all. We need to speak for those who cannot speak for themselves.

John Cavacece, D.O., practices family medicine in Grand Rapids. He is a member of Physicians for a National Health Program.

http://www.mlive.com/opinion/grand-rapids/index.ssf/2011/01/guest_commentary_medicare_for.html

How to eliminate insurance costs

Chicago Tribune, Jan. 3, 2011

Dr. Lisa A. Rone (Dec. 24), in response to PPO requirements for pre-authorization for psychiatric care, suggests that the Illinois Psychiatric Society work with insurance companies, including Blue Cross and Blue Shield of Illinois, to resolve coverage issues.

But Blue Cross and Blue Shield is only one of more than 1,000 insurance companies in the US, each offering many separate insurance plans; and requiring pre-authorization for psychiatric care is only one of hundreds of ways in which those insurance companies interfere with medical decisions.

We need to get rid of insurance companies, not negotiate with them. Under a single-payer health care system, Improved and Expanded Medicare for All, everyone would have access to mental health care, as well as to all other necessary care. Decisions about treatment of mental illness, like all other medical decisions, would be in the hands of patients and doctors, not in the hands of insurance company bureaucrats. We would save the money needed to make the system financially sustainable not by denying care, but by negotiating fair prices for all goods and services, and by greatly decreasing the bureaucracy – such as the bureaucracy created for pre-authorizations and their denial – that currently consumes more than 30 percent of all health care dollars.

Anne Scheetz, MD, FACP, Chicago

http://www.chicagotribune.com/news/opinion/letters/chi-110103scheetz_briefs,0,6576949.story

U.S. far from having finest health system

The Coloradoan, Jan. 3, 2011

I am writing in response to “U.S. has world’s best health-care system.” It was said that “we have, without a doubt, the finest health-care system in the world.”

In the United States, we do have the finest nurses, physicians and technology in the world. The system, however, is far from the finest. Each year in the United States, the system drives 700,000 families to bankruptcy from medical bills (the majority of whom have medical insurance). Every year, the system leaves 50 million people uninsured. Every year, the system allows 45,000 people to die from lack of access to basic medical care. Our system charges nearly twice as much per capita to accomplish these statistics. The system is neither fair nor fiscally sound. The good news is that the solution exists in a uniquely American proposal put forth by an organization endorsed by more than 18,000 medical providers in our country. Learn more about the proposal at Physicians for a National Health Program (www.pnhp.org).

Learn more about other successful health-care systems by reading T.R. Reid’s well-considered “The Healing of America.” We need to open our minds and hearts to a health-care system that provides access for all and promises our sons and daughters a fiscally sound and sustainable future.

Doug Whitman, M.D., pediatrician
Larimer County

http://www.coloradoan.com/article/20110103/OPINION03/101030309/1014/OPINION/U.S.+far+from+having+finest+health+system

California and New York lessons for Medicaid expansion under PPACA

Cuomo Targeting Medicaid Spending

By Jacob Gershman
The Wall Street Journal
January 4, 2011

Gov. Andrew Cuomo is aiming to reduce the state’s Medicaid spending by billions of dollars, exceeding the size of cuts to the program proposed in past years, according to individuals with knowledge of his budget.

The Cuomo administration is considering a cut of about $2.1 billion out of the state’s projected spending on Medicaid in the upcoming fiscal year. With federal matching funds, the cut comes to more than $4 billion.

http://online.wsj.com/article/SB10001424052748704111504576060280154691892.html

And…

Brown to propose broad list of budget cuts

By Kevin Yamamura
The Sacramento Bee
January 3, 2011

(Gov. Jerry Brown) will propose Medi-Cal (Medicaid) savings by requiring patients to provide co-payments for services, limiting doctor visits and reducing rates paid to health providers. In Healthy Families (CHIP), which provides subsidized care for low-income children, he wants participants to pay more in premiums and co-payments while eliminating vision care.

“These would be shocking cuts if we hadn’t seen them before, but we have seen them before,” said Anthony Wright, executive director of Health Access California. “This is what’s left to cut outside of the wholesale dismantling of core programs. These are bad cuts that will impact millions of Californians.”

http://www.sacbee.com/2011/01/03/3295079/brown-to-propose-broad-list-of.html

A substantial increase in eligibility qualification for the Medicaid program is a crucial measure in the Patient Protection and Affordable Care Act (PPACA), designed to decrease the numbers of Americans without insurance coverage. Now the newly-elected Democratic governors of the two most populous states in the nation intend to sharply reduce funding of their Medicaid programs. What does this say about the wisdom of the PPACA policy of using Medicaid to expand coverage?

Gov. Brown’s proposal to impose financial penalties for accessing care, placing caps on doctor visits, and further slashing payments in this already critically underfunded program can only be disastrous for the low-income patients enrolled.

Once again, this is not change we can believe in. We desperately need an improved Medicare that covers everyone.

Vermont: Creating a singular health system

Globe Editorial
The Boston Globe, Jan. 2, 2011

While Massachusetts grapples with its own health costs, the nation’s eyes will be on Vermont as it tries to do ObamaCare one better and switch to a single-payer health insurance system. The newly elected governor, Peter Shumlin, made single-payer a main campaign pledge. Now he has assembled a team of health officials grounded both in the realities of Vermont medical care and the pros and cons of comprehensive health reform. Shumlin’s special assistant for reform will be Anya Rader-Wallack, once an aide to former Vermont Governor Howard Dean and more recently deeply involved with the Massachusetts universal-coverage system.

Single payer, under which the government would take over all health insurance functions, has attracted many reform advocates because it simplifies health payments and reduces the overhead costs of a private insurance system that has to pay for marketing and, in some cases, shareholders’ dividends. Single-payer would also unlink insurance from employment, reducing a costly burden on companies and increasing workers’ flexibility in seeking new job opportunities. Hospitals and doctors have been wary of single-payer because two of the biggest payers in the current system — government-run Medicare and Medicaid — reimburse at rates that providers say are inadequate.

Any reform plan in Vermont will have to address that concern. More immediately, it will need waivers from the federal government to bring both Medicare and Medicaid into the one-payer system. The Obama administration should examine waiver requests closely to make sure they protect the needs of both patients and providers. But Vermont deserves the benefit of the doubt as it works its way toward becoming a laboratory of democracy on an issue — the unsustainably steep increase in health costs — that has proven intractable both for the nation at large and health-reform pioneer Massachusetts.

http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2011/01/02/vermont_creating_a_singular_health_system/

Drug firms providing kickbacks for co-pays and coinsurance

Coupons for Patients, but Higher Bills for Insurers

By Andrew Pollack
The New York Times
January 1, 2011

With drug prices rising and many people out of work, pharmaceutical companies are increasingly helping patients with their co-payments.

Drug companies say the plans help some patients afford medicines that they otherwise could not.

But health insurers and some consumer groups say that in many cases, the coupons are just marketing gimmicks that are leading to an overall increase in health care costs. That is because they circumvent the system of higher co-pays on costlier drugs that insurers use to encourage consumers to use less expensive products.

Any shift to brand-name drugs can have a big impact on health care costs.

At District Council 37, a union representing public employees in New York City, 59 percent of claims for statins in the year ended in June 2009 were for brand-name products that cost the plan $17.3 million. The other 41 percent of claims were for generic statins, which cost only $179,000. A year ago, the health plan eliminated the co-pay on generic statins to encourage more use of them.

For very expensive drugs, co-pay assistance is almost de rigueur, because in some cases co-payments can be up to 20 percent of the price of the drug. Novartis’s new pill for multiple sclerosis, Gilenya, costs $48,000 a year, compared with $30,000 to $40,000 for rival drugs, which are injected. Novartis is offering to cover the entire co-pay, up to $800 a month, which is 20 percent of the drug’s monthly cost.

Jazz Pharmaceuticals has quadrupled the price of its narcolepsy drug Xyrem, to about $30,000 a year, over the last five years, according to a recent report from the securities firm Jefferies & Company. To cushion patients, the company recently increased its co-pay assistance to as much as $1,200 a month.

Drug companies cannot offer co-payment assistance for patients in federal programs like Medicare because such offers are considered an inducement to use a drug and in violation of anti-kickback laws. Some companies have responded by contributing to, or even helping to set up, charitable foundations that can provide co-payment assistance legally.

Executives at insurers and pharmacy benefit management companies say they would like to counter the cards and coupons but are not sure exactly how to do so. One problem is that the information they receive from pharmacies does not specify whether the co-pay was made by the patient or by the drug company.

“The payer doesn’t know, and the P.B.M. doesn’t know,” said F. Everett Neville, chief trade relations officer at Express Scripts, a pharmacy benefits manager. “We have no ability to stop it and no ability to prohibit it.”

http://www.nytimes.com/2011/01/02/business/02coupon.html?_r=1&pagewanted=all

Comment: 

By Don McCanne, MD

Should a health care system be designed to ensure that patients receive appropriate medications that they should have to relieve symptoms or cure disease? Of course. Yet co-payments (a dollar amount) and coinsurance (a percentage of the cost) impose on the patient financial barriers to the medications – barriers which frequently are not surmounted, and thereby may result in impaired health outcomes.

With our fragmented system of financing health care those seeking greater profits will always find another way to achieve their goals. In this instance, the pharmaceutical manufacturers have found a way to reduce or eliminate these financial barriers to their products.

In providing cost-sharing assistance to the patient, the manufacturers are not specifically removing barriers to the most appropriate products, but rather are removing barriers to their most profitable products, irrespective of whether or not they are the best choice. Since these are more expensive products, that increases the drug costs of the private insurers. Those of us paying premiums to private insurers that cover drugs are paying for these excess costs.

These practices do not require collusion with the physicians and pharmacists since their marketing practices are effective in creating a demand for their products regardless of the appropriateness.

Note that these pharmaceutical industry subsidies of co-payments and coinsurance are illegal in federal programs such as Medicare because they are the equivalent of kickbacks. If we had a Medicare program that covered everyone and eliminated the private intermediaries such as the insurers and pharmacy benefit managers, then these kickbacks wouldn’t exist. Drugs would be prescribed based strictly on appropriateness, and would be priced to provide fair profits for the pharmaceutical firms and fair costs for Medicare.