PNHP

Health-care fix is Medicare for all

Health-care fix is Medicare for all

Letter to the Editor
The Telegraph (Nashua, NH)
Monday, January 11, 2010

The current health care bills should be rejected. With 45 million people uninsured, 45,000 deaths annually due to lack of insurance, and nearly a million medical bankruptcies a year, a four-year delay in medical reform is unacceptable. Medicare was in place eleven months after passage in 1965.

More disturbing, after spending $1 trillion in the next decade, over 20 million Americans will still be without insurance coverage. Worse, the number of people with skimpy coverage will be rising dramatically. The bills reinforce this with various inadequate coverage levels of 60 to 90 percent of total health care costs.

Taxpayers should be concerned about the 40 percent excise tax on “Cadillac” health plans costing more than $23,000 per family, not indexed for inflation.

The City of Portsmouth paid about $24,500 for a family policy in 2009, and at the current rate of increase each year, would pay $74,079 in 2020. The extra tax per policy would rise quickly from $600 this year to over $20,000 in 2020.

A health policy approaching $100,000 per year is unbelievable and repugnant. Physicians for a National Health Program endorses Medicare For All. When passed, a small tax matched by your employer, provides you with full coverage, without co-payments, deductibles, out-of-pocket costs, or rejection because of preexisting conditions.

Peace of mind for your family, your children and your grandchildren comes from a lifetime program of automatic insurance coverage. We believe that government-involved health care is preferable to Wall Street-run health care. We believe everyone should be covered equally, and any savings should be used to reduce premiums, not to drive up the price of insurance stocks and CEO bonuses.

Every other industrialized country provides health insurance coverage to all of their citizens. Bankruptcies are unheard of, and in most, the citizens never see a bill.

We need to move away from a multitude of plans with a dizzying array of options four years from now, to a single plan which covers everyone now

Thomas Clairmont, MD
Portsmouth, N.H.

http://www.nashuatelegraph.com/opinion/letters/528329-263/health-care-fixis-medicare-for-all.html

It's the financing, stupid!

A second opinion on Gawande’s ‘Cost Conundrum’

By Claudia Chaufan
The Social Medicine Portal, Jan. 7, 2010

I must confess that I was disappointed to see Dr. Atul Gawande’s mantra that more or more expensive care is not necessarily better care go unchallenged even by the otherwise outstanding Amy Goodman’s “Democracy Now.” Unchallenged, that is, when this rather obvious (or at least very reasonable) observation was presented as the critical explanation for why the United States spends more in health care, per person, than any other country in the world, even as it leaves millions uninsured or underinsured, leads thousands to bankruptcy, and allows 45,000 people — 15 times the number murdered in 9/11 — to die for lack of health insurance. Nor was he challenged when he presented his views of Massachusetts as a sound model for health care reform, even as he granted that the program had “failed to control costs.” In fairness to the interviewers, Dr. Steffie Woolhandler’s statement that the center of the Massachusetts program did not hold were shown briefly. Yet to the already confused listener or viewer, the showcase of “opposing expert views” must have felt like the usual “he said, she said” — not awfully enlightening and at best leading to skepticism about both positions.

So back to Dr. Gawande, it appears that he is smart enough to realize that certain forms of payments, like fee for service, lead practitioners to provide more care (which sometimes, but by no means always, may be unnecessary), whereas salaried doctors do not have that incentive (incidentally, salaried doctors are the norm in “socialized medicine”-type systems). And yet, Gawande is not perspicacious enough to ask himself why is it that Canada, Taiwan, France, or Japan, where fee for service reigns supreme, still spend a fraction of even what our cheapest and best run hospitals do. While I am not arguing in favor of fee for service — quite the contrary, I, like many, agree that it at least a very inefficient and administratively burdensome form of payment — I am just pointing out that given this rather banal observation, it is clear that fee for service cannot be the whole story of our high health care costs.

At any rate, had Gawande (or his interviewers) asked this critical question, rather than continuing in the all-too-American exercise of navel-gazing by comparing one (low-cost) American hospital with another (high-cost) American hospital, he might have studied a well-run, or even the best run, American hospital’s costs against the costs of some hospitals in other countries. And he surely would not have failed to see, as it appears he has, that even Switzerland, that comes second after the United States in health care costs (even if Swiss costs are substantially lower, by around 40 percent, than the U.S.’s), and has “private insurers,” bans profit making from the financing of medically necessary care. Right! It’s the financing, stupid!

The same is the case with the health care of all other industrialized economies. So even when Europeans, or the Japanese, talk about “private” insurers in health care they rarely, if ever, mean “for-profit” insurers. Private insurers are essentially tightly regulated subsidiaries of government, and if they are ever caught “cherry-picking” they are forced to transfer some of their money to another insurer that covered sicker patients or, as the Swiss do, lower their premiums during subsequent months, unimaginable in the America private health insurance scenario.

Admittedly, some readers might puzzle: “Why would insurers even be in business if not to become filthy rich?” Well, at least one reason is that if they do a good job and attract many members, then they can sell for-profit insurance for the “over and above” services (private hospital rooms, cosmetic surgery, etc.). And note, when Swiss insurers, who prior to 1994 were pretty much like American insurers, failed to meet their part of the social contract (i.e. were becoming filthy rich at the expense of everybody else’s suffering), they got their lesson: price controls and mandated benefits that they had to provide at no profit if they wanted to remain in business.

And had Gawande delved into the politics of health care (and not merely the Pollyannaish version of its history), he surely would not have failed to discover that the coming into being of the National Health Services (NHS) was anything but a “historical accident” (and if it was, then anything can be, and the expression is meaningless). It is surely true that the physical structures, the public hospitals, were “already there” after World War II, a war during which hospitals had been built that provided publicly funded medical care for servicemen. Yet it is equally true, and arguably much more important, that around 1948 there was a confluence of critical political forces, not the least of which was the landslide victory of Labor over the Conservative Party.

How did this unexpected victory happen, despite the popularity won by Conservative British Prime Minister Winston Churchill as a “war leader”? It appears that as “national security” concerns subsided and hunger and unemployment began to take their toll over an impoverished population, Britons concluded that Labor, not Conservatives, would be more inclined and capable to guarantee “bread and butter” issues — what were increasingly seen as basic social rights, such as full employment, income security, public education, and health care. Popular demand for guaranteed basic rights was further strengthened by the success of socialist British Minister of Health Aneurin Bevin to secure the support of the medical establishment: in a masterful move, Bevin decided that offering well paid practitioners who agreed to join the NHS generous salaries would free them “from the necessity to drum up business from rich clients to pay for their basic income” (Glennerster 2007: 51). So if the birth of the NHS was a “historical accident,” it was certainly a very complex one.

So Gawande’s conclusion, given the glaring omission in his theory, is unsurprising: it is U.S. doctors, and their “culture,” that are the source of our high costs – doctors, that is, who respond to a perverse systems of incentives, which according to Gawande, is the way U.S. doctors are paid: more for doing more yet not better.

Now, while doctors may certainly be part of the problem, and while paying more for doing more, even if it is not good and frequently not necessary, is obviously a bad thing, why Gawande chooses to ignore the critical and obvious fact that no other industrialized economy, and many industrializing ones (like Taiwan), leaves over 70 percent of its population (even if Gawande has only counted 50 percent) at the mercy of profit seekers when it comes to financing medically necessary care, is anybody’s guess. (Elsewhere I have laid out, and many other excellent policy analysts, like PNHP doctor Don McCanne, have done so as well, why the only way to eliminate financial barriers to medically necessary care is treating health care as a social right and financing it collectively through a tax-based or social insurance system, incidentally the only way to allow the choices that matter – of doctors and medical establishments, not “health plans” or “preferred providers” lists).

But maybe had Gawande acknowledged the obvious, I suspect that his New Yorker article, where he insists that whether insurance is public or private (we are not told whether the profit motive matters) is not that important after all, would not have never become “required” reading in the White House. Indeed, he even might have been kicked out of the sanctuaries where our health care future is being written (or cooked!), as was the case with many brave doctors (Dr. Margaret Flowers comes to mind), who keep on insisting that our politicians put pe
ople before profits.

http://www.socialmedicine.org/2010/01/07/health-activism/its-the-financing-stupid-a-second-opinion-on-gawandes-cost-conundrum/

It’s the financing, stupid!

A second opinion on Gawande’s ‘Cost Conundrum’

By Claudia Chaufan
The Social Medicine Portal, Jan. 7, 2010

I must confess that I was disappointed to see Dr. Atul Gawande’s mantra that more or more expensive care is not necessarily better care go unchallenged even by the otherwise outstanding Amy Goodman’s “Democracy Now.” Unchallenged, that is, when this rather obvious (or at least very reasonable) observation was presented as the critical explanation for why the United States spends more in health care, per person, than any other country in the world, even as it leaves millions uninsured or underinsured, leads thousands to bankruptcy, and allows 45,000 people — 15 times the number murdered in 9/11 — to die for lack of health insurance. Nor was he challenged when he presented his views of Massachusetts as a sound model for health care reform, even as he granted that the program had “failed to control costs.” In fairness to the interviewers, Dr. Steffie Woolhandler’s statement that the center of the Massachusetts program did not hold were shown briefly. Yet to the already confused listener or viewer, the showcase of “opposing expert views” must have felt like the usual “he said, she said” — not awfully enlightening and at best leading to skepticism about both positions.

So back to Dr. Gawande, it appears that he is smart enough to realize that certain forms of payments, like fee for service, lead practitioners to provide more care (which sometimes, but by no means always, may be unnecessary), whereas salaried doctors do not have that incentive (incidentally, salaried doctors are the norm in “socialized medicine”-type systems). And yet, Gawande is not perspicacious enough to ask himself why is it that Canada, Taiwan, France, or Japan, where fee for service reigns supreme, still spend a fraction of even what our cheapest and best run hospitals do. While I am not arguing in favor of fee for service — quite the contrary, I, like many, agree that it at least a very inefficient and administratively burdensome form of payment — I am just pointing out that given this rather banal observation, it is clear that fee for service cannot be the whole story of our high health care costs.

At any rate, had Gawande (or his interviewers) asked this critical question, rather than continuing in the all-too-American exercise of navel-gazing by comparing one (low-cost) American hospital with another (high-cost) American hospital, he might have studied a well-run, or even the best run, American hospital’s costs against the costs of some hospitals in other countries. And he surely would not have failed to see, as it appears he has, that even Switzerland, that comes second after the United States in health care costs (even if Swiss costs are substantially lower, by around 40 percent, than the U.S.’s), and has “private insurers,” bans profit making from the financing of medically necessary care. Right! It’s the financing, stupid!

The same is the case with the health care of all other industrialized economies. So even when Europeans, or the Japanese, talk about “private” insurers in health care they rarely, if ever, mean “for-profit” insurers. Private insurers are essentially tightly regulated subsidiaries of government, and if they are ever caught “cherry-picking” they are forced to transfer some of their money to another insurer that covered sicker patients or, as the Swiss do, lower their premiums during subsequent months, unimaginable in the America private health insurance scenario.

Admittedly, some readers might puzzle: “Why would insurers even be in business if not to become filthy rich?” Well, at least one reason is that if they do a good job and attract many members, then they can sell for-profit insurance for the “over and above” services (private hospital rooms, cosmetic surgery, etc.). And note, when Swiss insurers, who prior to 1994 were pretty much like American insurers, failed to meet their part of the social contract (i.e. were becoming filthy rich at the expense of everybody else’s suffering), they got their lesson: price controls and mandated benefits that they had to provide at no profit if they wanted to remain in business.

And had Gawande delved into the politics of health care (and not merely the Pollyannaish version of its history), he surely would not have failed to discover that the coming into being of the National Health Services (NHS) was anything but a “historical accident” (and if it was, then anything can be, and the expression is meaningless). It is surely true that the physical structures, the public hospitals, were “already there” after World War II, a war during which hospitals had been built that provided publicly funded medical care for servicemen. Yet it is equally true, and arguably much more important, that around 1948 there was a confluence of critical political forces, not the least of which was the landslide victory of Labor over the Conservative Party.

How did this unexpected victory happen, despite the popularity won by Conservative British Prime Minister Winston Churchill as a “war leader”? It appears that as “national security” concerns subsided and hunger and unemployment began to take their toll over an impoverished population, Britons concluded that Labor, not Conservatives, would be more inclined and capable to guarantee “bread and butter” issues — what were increasingly seen as basic social rights, such as full employment, income security, public education, and health care. Popular demand for guaranteed basic rights was further strengthened by the success of socialist British Minister of Health Aneurin Bevin to secure the support of the medical establishment: in a masterful move, Bevin decided that offering well paid practitioners who agreed to join the NHS generous salaries would free them “from the necessity to drum up business from rich clients to pay for their basic income” (Glennerster 2007: 51). So if the birth of the NHS was a “historical accident,” it was certainly a very complex one.

So Gawande’s conclusion, given the glaring omission in his theory, is unsurprising: it is U.S. doctors, and their “culture,” that are the source of our high costs – doctors, that is, who respond to a perverse systems of incentives, which according to Gawande, is the way U.S. doctors are paid: more for doing more yet not better.

Now, while doctors may certainly be part of the problem, and while paying more for doing more, even if it is not good and frequently not necessary, is obviously a bad thing, why Gawande chooses to ignore the critical and obvious fact that no other industrialized economy, and many industrializing ones (like Taiwan), leaves over 70 percent of its population (even if Gawande has only counted 50 percent) at the mercy of profit seekers when it comes to financing medically necessary care, is anybody’s guess. (Elsewhere I have laid out, and many other excellent policy analysts, like PNHP doctor Don McCanne, have done so as well, why the only way to eliminate financial barriers to medically necessary care is treating health care as a social right and financing it collectively through a tax-based or social insurance system, incidentally the only way to allow the choices that matter – of doctors and medical establishments, not “health plans” or “preferred providers” lists).

But maybe had Gawande acknowledged the obvious, I suspect that his New Yorker article, where he insists that whether insurance is public or private (we are not told whether the profit motive matters) is not that important after all, would not have never become “required” reading in the White House. Indeed, he even might have been kicked out of the sanctuaries where our health care future is being written (or cooked!), as was the case with many brave doctors (Dr. Margaret Flowers comes to mind), who keep on insisting that our politicians put people before profits.

http://www.socialmedicine.org/2010/01/07/health-activism/its-the-financing-stupid-a-second-opinion-on-gawandes-cost-conundrum/

Is Stanford tainted by accepting Pfizer money?

Using a Pfizer Grant, Courses Aim to Avoid Bias

By Duff Wilson
The New York Times
January 11, 2010
Stanford University on Monday will announce plans to develop new continuing education programs for doctors that will be devoid of the drug industry influence that has often permeated such courses.
The work is being done with a $3 million grant — from the drug maker Pfizer.
Dr. Philip Pizzo, dean of the Stanford medical school, says Pfizer will have no say on how the three-year grant will be spent. The university plans to set up unbiased programs of postgraduate education on the Stanford campus rather than the industry-selected topics of the past that have been presented to rooms full of doctors at hotels and resorts.
“It’s a fundamental change,” Dr. Pizzo said Sunday, criticizing the drug industry for poisoning educational programs with marketing messages and doctors for “complicity” in taking speaker fees and expenses-paid trips. He called the grant “a novel rebooting.”
Pfizer, in a statement, said it wanted to help redefine how continuing medical education was financed to ensure the independence and patient benefit of the programs, which most doctors are required to take to maintain their state medical licenses.
“The announcement is self-satirizing,” said Dr. Adriane Fugh-Berman, a Georgetown University medical professor who has researched and written about industry influence in continuing medical education. “Pfizer’s interest in better ways to manipulate physicians is well-known.”
Dr. Fugh-Berman said that Pfizer has major products in two of the four areas that the Stanford press release suggested might be pursued: smoking cessation and heart disease.
Dr. Arnold S. Relman, a former editor of The New England Journal of Medicine, a Harvard professor emeritus, an outspoken critic of industry conflicts and a friend of Dr. Pizzo, said he could not understand the rationale behind the arrangement.
“If it is true — a big, big if — but if it is true that this money is being given without any strings at all and without any obligation on the part of Stanford to please Pfizer, then it’s arguable that it’s O.K.,” Dr. Relman said.
“But it’s just not a good idea for a profession that says it wants to be independent and trusted, a reliable source of information to the profession and the public about drugs, to take money from the drug company under any conditions.”
http://www.nytimes.com/2010/01/11/business/11drug.html?ref=health

This tempering of the contingencies attached to Pfizer’s grant to Stanford’s continuing medical education program (CME) seems like a very small anecdote in the overall picture of health care reform, but it has greater significance than would appear at first blush.
Stanford’s Dean Philip Pizzo has a well deserved reputation for taking principled stands on the ethics of medical education and health care in general. This agreement to accept the Pfizer grant only on the condition that its use in their CME program be exclusively controlled by Stanford, without further input by Pfizer, is another step towards Dr. Pizzo’s goal of a system largely freed from the albatross of ethical compromise.
Are there any reasons that Stanford should not have accepted these funds? The first and most obvious reason is that this expense for Pfizer will be passed on to patients in the form of higher drug prices, already a serious problem that policy makers face.
Also, since Pfizer can deduct this as a business expense, the tax subsidies that we are providing are being turned over to Pfizer, which has control over how to distribute those funds. Do we really believe that a private, investor-owned pharmaceutical corporation has a greater ethical sense and wisdom in determining the use of our taxpayer funds than would our own public stewards? Likely Stanford will make very good use of the funds, but of the options for use of the taxpayer-funded component, is that the best use? It doesn’t seem right to turn that decision over to Pfizer, especially when it appears that the CME programs may still support Pfizer products, but only if Stanford decides so (certainly an ethical problem if and when it comes time to renew the Pfizer grant).
CME programs provide a social good: better health care for everyone. Public funding would prevent such ethical compromises and would help to ensure that CME programs have a mission to improve patient care rather than a mission to advance the pecuniary interests of pharmaceutical and medical-tech firms.
The ethical premise behind the concept of a single payer national health program – an improved Medicare for all – resets the primary mission for our entire health care system from one of private entrepreneurialism to one of service for the benefit of patients.
Dean Pizzo is to be admired for trying to achieve the best under the confines of our current dysfunctional system. You work with what you have, until you have something better.
The greater significance of this anecdote is that the rules under which we operate are wrong, and we need to change them, not just work within their confines as Congress is trying to do. We need a single payer monopsony that belongs to all of us – the people of this nation.

Denial of Care Profits: $73 million for CIGNA’s retiring CEO

By Donna Smith, National Nurses Movement
January 7, 2010

It’s hard for most of us to imagine a lifestyle supported by a $73 million retirement bonus. It’s even harder to imagine a whole nation’s healthcare controlled by those who have benefited so wildly from denying healthcare to those who need it.

But Cigna’s Edward Hanway knows well what it feels like to rest in the lap of luxury thanks to all those profits he helped secure as he led one of the nation’s for-profit insurance giants through some very successful times. And as we lumber toward a new piece of healthcare legislation with new promises of expanded health insurance coverage and mandate for both individuals and employers to purchase private health insurance plans, insurance companies will have even more control over our healthcare – and the denials of care that make companies like Cigna pay out such obscene bonuses.

According to CIGNA’s press releases, Hanway had served in leadership capacities with America’s Health Insurance Plans, and the Alliance for Health Reform. “He is an outspoken advocate at the national level for greater transparency regarding health care quality and cost information available to consumers and a strong proponent of national quality standards for health care providers. He is recognized as a leader in the effort to improve the quality, accessibility and affordability of health care in the United States. Through the years, Hanway has been active in a wide range of issues and initiatives associated with health, education and international business.”

BEFORE you read further…National Nurses United, the new national union for RNs, is asking nurses and patients to demand Congress remove the mandates that would force Americans to purchase products from the CIGNA’s of the world. Call Rep. Pelosi (415-556-4862) and Sen. Reid (702-388-5020) and tell them to strip this bill of the CIGNA-mandates immediately!

Under Hanway’s leadership, Cigna also did what for-profit insurance companies do so very well to enhance the profits that become multi-million dollar bonuses. They denied care to thousands upon thousands of policyholders, and the company profits were protected.

But some of those denied care died as a result. Nataline Sarkisyan was but one. She was 17. She needed a new liver. Cigna said no until enough nurses and enough of the family’s friends and neighbors – and a few thousand concerned citizens – protested loudly enough to make some news coverage. Then Cigna reversed itself. Even in the face of Nataline’s impending death, Hanway did what he felt was best to do to minimize damage to Cigna – not to save a teenager’s life. The negative PR became a bit much. Wendell Potter, who worked as Cigna’s communications director at the time, has said since that he watched the whole mess unfold and was one of the people advising Cigna’s leadership to reverse the denial.

But the reversal came too late. Nataline died. December 20, 2007. And for her mom and dad, no Christmas will ever be the same. The Sarkisyan’s buried their only daughter while wrapped in the love and support of their Armenian community, the nurses of the California Nurses Association and thousands of bloggers and others who tried to somehow ease the unimaginable.

Nurses do not want to stand in hospital lobbies protesting with terrified families who are begging insurance companies to approve care. Nurses do not want to stand next to mothers and fathers, brothers and aunts at funerals for those who might have been saved if not for the delays and denials of care that insurance companies find so routine. Nurses want to care for patients, and nurses wanted to care for Nataline. Instead, they were left with caring for those left behind.

This year, on December 20, 2009, the Sarkisyan’s marked the anniversary with a church service and reception at their home. Liz Jacobs, RN, attended and recalled all the emotions of two years ago as they co-mingled with the images of a family very much still grieving.

The church was filled with hundreds of friends – almost all dressed in pink, Nataline’s favorite color, except for Hilda Sarkisyan, Nataline’s mother, who wore all black. Many thought back to that day two years ago when the family stood protesting and fighting in a hospital lobby – begging for their little girl to have a chance at life – rather then being at her bedside in what would be her final hours. Many felt grief about how close they all came to saving her life. Close, but so far.

Doctors gave Nataline a 60 percent chance at life if she had the transplant. As Hilda often reminds us all, “Cigna gave Nataline a zero percent chance.”

No doubt, Edward Hanway’s family did not spend that day or that holiday season as the Sarkisyan family did nor did they spend this December 20th in the same fashion. Retiring with $73 million makes scenarios like that forced on the Sarkisyan’s lives much less likely.

At this year’s memorial service, RN Jacobs noticed Nataline’s friends who had been so supportive and so involved in the protests to save their friend when they were all 17 years old are now moving on with their lives. All them are going off to college and starting their lives at 19 while Nataline’s family will never know if Nataline would have been in fashion design school, as she dreamed, or on to another aspiration.

Yet in the midst of her grief, Hilda Sarkisyan stands firm in telling all in her community and all she touches that left as things are right now, the insurance companies will continue to do this to more and more Nataline’s. There is nothing that will stop them.

Not in these United States and not in the highly touted health reform legislation. Our healthcare system is not the best in the world. This chart from National Geographic gives us more reason, as if we needed more, to worry for our patients and for our nation.

But today we mostly wonder what that great, big bonus might have done in terms of healthcare. If Nataline’s liver transplant was to cost an estimated $70,000, one-tenth of one-percent of Hanway’s bonus would have covered Nataline’s chance to live. And that’s not the company’s total profit by any means. That’s just Hanway’s retirement bonus. $73 million dollars. More than 1,000 Nataline’s might have been saved by that $73 million.

Nurses know there is a better way to spend healthcare dollars than on obscene retirement bonuses. And until there are no more hospital lobby protests or premature funerals for patients who might have lived if not for the profit and the greed of the insurance CEOs, retired CEOs and shareholders who do not stand at the bedsides of those to whom they deny, the nurses will fight.

Uwe Reinhardt on community rating and risk equalization in other nations

How the World Balances Health Care Risk

By Uwe E. Reinhardt
The New York Times
January 8, 2010

In last week’s post I used a stylized illustration to throw into sharp relief the economic and ethical dimensions of community-rated premiums for health insurance.

I am gratified by the many comments that post drew, and even more so by their quality. (In fact, I have shared these comments with my students in a course on health policy.) The comments show that there is no consensus on the merits of community rating in this country.

Remarkably, in virtually all other industrialized nations, this issue is hardly ever raised. Community rating there has long been widely accepted and is unlikely to be abandoned in the foreseeable future.

The health systems of Switzerland, the Netherlands and Germany are frequently cited as potential models for a reformed American health system. All three countries offer their citizens a wide choice of health insurers — none of which is a government-run health plan. Yet in all three countries full community rating is de rigueur.

Swiss citizens, for example, are required to purchase insurance coverage for a comprehensive health-benefit package from a large menu of private health insurance companies that compete for customers on the basis of the premium they charge for that coverage.

Profits cannot be earned on insurance for the basic package. Premiums do vary among competing insurers, but for a given insurer they can vary only by the deductible and coinsurance rates of the different policies. Neither the individual’s health status nor age affects the premium charged the individual by a given insurer. Health insurers ending up with an older or sicker enrolled risk pool then receive compensation from a risk-equalization fund.

Similarly, Dutch citizens are mandated to purchase insurance coverage for a comprehensive benefit package from a menu of private for-profit or not-for-profit insurers.

Roughly half of the cost of this coverage is financed by a payroll tax — that is, it is based roughly on ability to pay. The other half comes from competitively set premiums collected directly from those enrolled.

The payroll taxes are paid into a national risk-equalization fund that then pays a risk-adjusted amount to the insurance carrier chosen by a particular individual. Among health services researchers, this risk-adjustment mechanism has long been viewed as one of the most sophisticated in the world.

The part of the premium collected by Dutch insurers directly from individuals is fully community-rated. Although these premiums vary among insurers, a given insurer must charge all comers, healthy or not, young or old, the same premium, which is community-rated over that insurer’s pool of those insured.

Germany’s statutory health insurance system, covering about 90 percent of the population, also has a national risk-equalization fund, which is fed by a flat payroll tax on gross income of about 14 percent paid by all employees insured by that system.

The risk-equalization fund makes a risk-adjusted payment to the health insurer (which is a nonprofit “sickness fund”) of the individual’s choice. That payment from the risk-equalization fund, of course, does reflect the individual’s health status and age. But the individual’s payroll-tax payment into the risk-equalization fund is completely independent of the individual’s age and health status. It is based strictly on ability to pay.

I could continue to describe the health insurance systems of other European countries, or Canada, Taiwan, Japan, Korea, Australia or New Zealand. We would find that in none of these health systems does the individual’s or family’s contribution to health insurance reflect that individual’s age or health status.

Community rating is so acceptable in these countries because citizens there view it not only as part of a larger social contract, but also as a vehicle for life-cycle economic planning.

The vast majority of citizens in these countries view health care as a so-called “social good” that is to be shared on the basis of need by all on roughly equal terms and is to be financed largely on the basis of ability to pay.

By contrast, Americans have never agreed on a shared social ethic that should govern their health system, as the current debate over health reform has made visibly and audibly clear.

Furthermore, younger and healthier people in these countries realize that, but for the grace of God, they might become chronically ill only a few years hence and that, in any event, one day they, too, will be older and sicker. By paying more than their actuarially expected cost for health insurance, young and healthy people in these countries join a club, so to speak, that offers them a valuable call option. That call option allows them to procure at age 55 health insurance at a premium much below their actuarially expected cost.

By contrast, Americans have been taught that health insurance is largely a private consumption item purchased year to year and customized to the individual’s circumstances. Indeed, the private health insurance industry in this country has never been able to offer individual Americans the kind of life-cycle health insurance citizens in virtually all other industrialized nations take for granted. With the exception of Medicare, all health insurance in the United States is basically temporary.

Curiously, however, although Americans often flatter themselves with the image of being self-reliant, rugged individualists, they actually tend to rely more than citizens in many other countries on government-run health insurance and pensions in their old age, or when they fall on hard times. It is what makes the creature called “American” so perplexing in the eyes of foreigners.

Furthermore, many Americans who oppose community-rated insurance in the current health-reform plan are themselves beneficiaries of community rating. I shall have something more to say about this oddity in my next post to this blog.

http://economix.blogs.nytimes.com/2010/01/08/how-the-world-balances-health-care-risk/

Posted response of Don McCanne, San Juan Capistrano, CA (response # 2):

Some of us were very disappointed when politicians rejected, up front, the administrative simplification of the single payer model of an improved Medicare for everyone. Nevertheless, in the decision to expand the role of private insurance, Congress still had the opportunity to create a rational system of social insurance which would have included important concepts such as community rating and risk equalization.

The concept of the insurance exchange provided that potential. Yet Congress erected firewalls which will prevent most individuals from purchasing plans within the exchange. They also delayed the initiation of the exchange for a few years, and it will require several more years after that to once again prove that our rejection of the concept of a truly effective social insurance program will perpetuate the inequities, inefficiencies and profound waste in our system.

Worse, in trying to patch together this dysfunctional system, Congress has decided that 20 million or so will be left out, a number destined to increase with continuing increases in health care costs. That’s roughly two-thirds the population of Canada, a country that we criticize merely because of its issues with queues for some elective services.

Proponents of this reform proposal say that we should pass it now, and we can fix it later. Unfortunately, this process almost assures that it will be at least another
decade before our nation takes another serious look at the policies required for an equitable and just health care financing system.

It’s too bad that we don’t have visionaries in power who can say that this isn’t going to work, and we have to move on with fixing it now. But then the citizens of the United States are used to living with our over-priced, dysfunctional system that accepts, as a given, financial hardship, physical suffering, and even death.

Further comment:  Although my published response acknowledges that social insurance programs that depend on private health plans, such as the European programs that Professor Reinhardt describes, can achieve important policy goals such as community rating and risk equalization, I cannot overemphasize the fact that our goal for reform should remain the golden standard of a single payer national health program – an improved Medicare program that includes everyone.

The single payer model has unique features, not found in an exchange of private plans, that improve efficiency, effectiveness, and equity while insuring that absolutely everyone is included.

Private health plans, especially those in the United States that have evolved throughout the past three-quarters of a century, provide a negative value in administration of our health care funds because of their high costs, inefficiency, inequity, and their inability to improve the resource allocation that is needed for a high-performance health care system. They are not a suitable vehicle for a social insurance program.

Although some who read the letter from PNHP to our Senators fixated on the negative message of rejecting the flawed proposal before Congress, many seemed to miss our positive message which is reframed in my comment above: We need “visionaries in power who can say that this isn’t going to work, and we have to move on with fixing it now.” (The PNHP letter stated, “… immediately move to consider… “)

now: at the present time or moment (Merriam-Webster)

immediately: without interval of time (Merriam-Webster)

“Now” and “immediately” are terms that we used to communicate the fact that we need to avoid the decade or so of inevitable torture that so many will experience as we watch this experiment with reform fail us miserably. We need a bona fide program of social insurance now… immediately!

As probation ends for 'Baucus 8,' group vows to press for single-payer health reform

FOR IMMEDIATE RELEASE
Jan. 8, 2010

Contact:
Margaret Flowers, M.D., mdpnhp@gmail.com
Carol Paris, M.D.
Mark Almberg, PNHP, (312) 782-6006, mark@pnhp.org
       
WASHINGTON – Members of the “Baucus 8,” a group of doctors and health advocates who were arrested at a Senate Finance Committee meeting last May for standing up and asking why single-payer proponents were not being allowed to testify, appeared at the H. Carl Moultrie Courthouse today for their final hearing following six months of probation and, for three of them, 40 hours of community service.

Dr. Pat Salomon, a retired pediatrician, commented on the circumstances that prompted their original action. “When we looked at the list of 41 people testifying in the three days of the Finance Committee’s roundtable on health care, we saw that not a single witness was an advocate of the principle that health care should be a fundamental human right for all in America, nor was there anyone to speak for the majority of the American people who support single-payer Medicare for All,” she said.

Senator Max Baucus, D-Mont., chair of the Senate Finance Committee, had convened the May 5 roundtable to kick off the public consideration of the 111th Congress’ legislative proposals for health care reform. Weeks before, the Leadership Conference for Guaranteed Health Care, a coalition of nurses, doctors, labor, faith, health advocate and community groups representing over 20 million people nationwide, had sent a request to the Finance Committee for one of its leaders testify.

When the request was denied, thousands of single-payer supporters across the nation contacted the committee to request that single payer be included in the discussion of health reform proposals, Salomon said.

“Despite the outpouring of requests, we were clearly told that we would be excluded,” said Katie Robbins of Healthcare-NOW. “This cemented our growing impression that the health care debate was at best, political theater, and that we would have to try a different tactic in order that the only really affordable health reform solution that addresses the real health care needs of 100 percent of our nation be heard.”

Robbins and the seven others then decided to stand up and speak out in a dignified way, one by one, at the Finance Committee and risk arrest for committing nonviolent civil disobedience. They were taken into custody by the Capitol Police, charged with “disruption of Congress” and released several hours later. Another five single-payer advocates were arrested the following week after taking similar action.

Kevin Zeese of ProsperityAgenda.US called the committee “pay to play” because, as he said, “Every seat at the roundtable was bought by the lobbyists. Sen. Baucus received nearly $2 million in campaign contributions from the health industry in 2008 and the entire Senate Finance Committee received over $13 million in 2008.”

“Congress and the White House keep calling the medical industry corporations ‘the stakeholders’ in this reform process,” said Dr. Margaret Flowers of Physicians for a National Health Program (PNHP). “But we know that the true stakeholders are those who provide and receive medical care, not those who profit off the current situation.”

Russell Mokhiber of Single Payer Action said, “After we were arrested, Senator Baucus admitted that it was a mistake to take single payer off the table. Clearly it was. Both the House and Senate bills would require Americans to buy a junk insurance at an inflated price. This bill is a bailout of the insurance industry. Instead of bailing out the private insurance companies, we ought to get rid of them and replace them with one public insurance pool. Everybody in, nobody out. Congress ought to defeat this monstrosity, start from scratch and pass single payer. We will get single payer sooner or later. Better sooner.”

Dr. Carol Paris, also of PNHP and a practicing physician in southern Maryland, said, “Wendell Potter, formerly of CIGNA and Humana, calls the legislation pending in Congress ‘The Private Health Insurance Profit Protection and Enhancement Act.’ And we agree, because the final legislation will benefit the medical corporations, further strengthening their ability to buy members of Congress, and will continue the expensive and complicated health situation that we have in this country right now which makes it difficult for patients and doctors to focus on health care.”

In fact, as an example of the revolving door between those who are lobbyists and those who are staff, several members of the group pointed to Liz Fowler, former vice president of public policy at WellPoint, one of the largest health insurers in the nation. Fowler left her lucrative position to work as the point person in the Senate Finance Committee to oversee the legislation, they said, and her name appears as the creator of a Baucus document titled “Framework for Comprehensive Health Reform” issued last September.

Mark Dudzic of the Labor Campaign for Single Payer said the group’s action has been vindicated by the subsequent actions in the Senate. “The current deplorable proposals for health care reform under consideration in Congress show what happens when you start bargaining by conceding all of the terrain to your opponent. Any shop steward in America would have done a better job than the leaders of the political party in control of overwhelming majorities in both houses of Congress.”

In addition to requesting that the eight be put on probation, the prosecutor insisted that the three defendants who lived in the Washington area also perform 40 hours of community service.

“I spend every day serving my community,” said Adam Schneider, who is employed by Health Care for the Homeless. “I’m proud of the stand we took and had no problem doing an extra 40 hours of service to my community. But if there was any justice in the world, Sen. Baucus and his corporate sponsors would have also been required to spend 40 hours with my clients to understand their desperate need for access to health care before they give a $500 billion bailout to the private health insurance industry.”

The group is unanimous that no matter what passes this year, the push for genuine health care reform is not over. Patients will continue to suffer and die needlessly, families will continue to face bankruptcy and foreclosure because of medical debt until we have a national publicly financed and privately delivered single-payer, Medicare-for-All health system. Such a system would be transparent and accountable to the public, unlike the current situation in which private insurers are experts at hiding information from the public and at violating their own written rules without recourse.

This year saw tremendous growth in a national movement for Medicare for All, they said. They vowed to continue to do whatever it takes, even facing arrest again, to get an honest and open-minded debate about what type of health system is best, so that people of the United States can be healthy and productive and stop worrying about what they will do if accident or illness strikes.

Obama demands tax on Cadillac plans

Obama Urges Excise Tax on High-Cost Insurance

By David M. Herszenhorn
The New York Times
January 6, 2010
President Obama told House Democratic leaders at a meeting on Wednesday that they should include a tax on high-priced insurance policies favored by the Senate in the final version of far-reaching health care legislation, aides said.
The White House has long expressed a preference for the excise tax on high-cost plans, which health economists say could be an important tool in controlling long-term health care spending for the government and for individuals and families.
http://www.nytimes.com/2010/01/07/health/policy/07health.html

And…

Taxing Cadillac Health Plans May Produce Chevy Results

By Jon Gabel, Jeremy Pickreign, Roland McDevitt and Thomas Briggs
Health Affairs
December 3, 2009 (online)
It’s often assumed that high-cost health insurance plans — sometimes called “Cadillac” plans — provide rich benefits to plan subscribers. Health reform provisions that treat these plans like luxuries may be misguided. Only 3.7 percent of variation in the cost of family coverage can be explained by benefit design (actuarial value). Benefit design plus plan type (HMO, PPO, POS, or high-deductible plans) explains 6.1 percent of this variation. Industry type and medical costs in the region also play a role. Most variation in premiums, however, remains largely unexplained.
Our inquiry suggests, however, that analysts should not equate high-cost plans with Cadillac plans, but that in fact other factors — industry and cost of medical inputs — are as important in predicting whether a plan is a high-cost plan. Without appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities.
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.2008.0430

And…

Nation’s Largest RN Organization Blasts Bid to Tax Benefits…

National Nurses United
Press Release
January 6, 2010
The nation’s largest union and professional organization of registered nurses today called on House members to hold the line in opposing a tax on workers’ healthcare benefits.
“It is unconscionable that workers and families with employer-sponsored health plans, who receive virtually no benefits from the proposed legislation, would have their health coverage taxed and seriously eroded,” said Deborah Burger, RN, co-president of the 150,000 member National Nurses United, formed last month through a unification of the California Nurses Association/NNOC, United American Nurses, and the Massachusetts Nurses Association.
“Advocates of the tax have made clear their intent: to force working people into cheaper, high deductible plans that provide less coverage and shift more costs to employees. The inevitable effect will be more people skipping needed medical care, enduring much higher out-of-pocket costs and risking financial ruin due to medical bills,” said NNU Co-president Karen Higgins, RN.
“Enactment of the tax, whose central premise is to control healthcare costs by reducing utilization of needed medical care while failing to control the pricing practices of the healthcare industry, would symbolize a central failing of the proposed legislation, ceding far too much to the insurers and the rest of the healthcare industry,” Burger added.
http://www.calnurses.org/media-center/press-releases/2010/january/nation-s-largest-rn-organization-blasts-bid-to-tax-benefits-urges-other-reforms-to-protect-patients-families-in-final-talks-on-healthcare-reform-legislation.html

What is the deal on the excise tax on high-premium “Cadillac” health plans, and why is President Obama pushing this tax so vigorously in the final stages of enacting health care reform?
Well, he is pushing it because his advisers tell him that it would help to achieve his first and foremost goal of slowing the increase in health care spending. The rhetoric being used implies that taxing high-premium plans would reduce the waste of paying for extravagant, non-essential benefits that are of little practical value. We’ll first dismiss this misperception and then follow with an explanation of why this form of cost management results in detrimental health outcomes.
The so-called Cadillac plans are merely plans with high premiums. The Health Affairs article by Jon Gabel and his colleagues demonstrates that only 3.7 percent in the variation in premiums can be explained by the actuarial value inherent in the benefit design. In most instances, the higher premiums are not due to “Cadillac” benefits, but they are due to other factors, such as the type of industry providing the employment and the medical costs in the region. In most instances, the higher premiums cannot even be explained. We can speculate that our reliance on our dysfunctional system of financing care through relatively unregulated private insurer pricing may be the most important culprit in providing Chevy plans at Cadillac prices.
So if the excise tax is going to push premiums down anyway, how could this be detrimental? Employers will not want to pay the excise tax, so they will demand from the insurers premiums that are at or below the tax threshold. Insurers will not simply reduce the premiums and continue to offer the same benefit packages. They will lower their benefits, lowering the actuarial value of the plans. There is absolutely no doubt that high and ever-increasing deductibles will be the norm.
A plethora of studies has demonstrated that individuals with high-deductible plans reduce their use of beneficial health care services. Although the RAND HIE data has been inappropriately misused to suggest that a reduction in beneficial services causes no harm, in fact many other studies have shown that health outcomes are worse when people don’t receive the health care that they should have.
The philosophy of controlling health care spending by shifting the financial burden to individuals and families is the most serious defect in the legislation before Congress. The excise tax on high-premium plans is only an example of this shift. The most glaring example is that the national standard proposed for basic plans has an actuarial value set at the unacceptably low level of 70 percent or even less. Making insured individuals pay money they don’t have to access care that is unaffordable is the worst way to control health care spending, that is, except for designing a program that deliberately leaves tens of millions of individuals with no insurance at all, just to satisfy budget hawks who understand only spending and not revenues.
Instead of enacting cruel policies that negatively impact patients on the demand side of the equation, we need to enact policies on the supply side that would benefit patients – all patients. That is precisely what a single payer national health program would be designed to do.
Isn’t it time that we told the lobbyists for the special interests and our elected leaders who revere them where they can stuff their Cadillacs?

Uwe Reinhardt on community rating and risk equalization in other nations

How the World Balances Health Care Risk

By Uwe E. Reinhardt
The New York Times
January 8, 2010
In last week’s post I used a stylized illustration to throw into sharp relief the economic and ethical dimensions of community-rated premiums for health insurance.
I am gratified by the many comments that post drew, and even more so by their quality. (In fact, I have shared these comments with my students in a course on health policy.) The comments show that there is no consensus on the merits of community rating in this country.
Remarkably, in virtually all other industrialized nations, this issue is hardly ever raised. Community rating there has long been widely accepted and is unlikely to be abandoned in the foreseeable future.
The health systems of Switzerland, the Netherlands and Germany are frequently cited as potential models for a reformed American health system. All three countries offer their citizens a wide choice of health insurers — none of which is a government-run health plan. Yet in all three countries full community rating is de rigueur.
Swiss citizens, for example, are required to purchase insurance coverage for a comprehensive health-benefit package from a large menu of private health insurance companies that compete for customers on the basis of the premium they charge for that coverage.
Profits cannot be earned on insurance for the basic package. Premiums do vary among competing insurers, but for a given insurer they can vary only by the deductible and coinsurance rates of the different policies. Neither the individual’s health status nor age affects the premium charged the individual by a given insurer. Health insurers ending up with an older or sicker enrolled risk pool then receive compensation from a risk-equalization fund.
Similarly, Dutch citizens are mandated to purchase insurance coverage for a comprehensive benefit package from a menu of private for-profit or not-for-profit insurers.
Roughly half of the cost of this coverage is financed by a payroll tax — that is, it is based roughly on ability to pay. The other half comes from competitively set premiums collected directly from those enrolled.
The payroll taxes are paid into a national risk-equalization fund that then pays a risk-adjusted amount to the insurance carrier chosen by a particular individual. Among health services researchers, this risk-adjustment mechanism has long been viewed as one of the most sophisticated in the world.
The part of the premium collected by Dutch insurers directly from individuals is fully community-rated. Although these premiums vary among insurers, a given insurer must charge all comers, healthy or not, young or old, the same premium, which is community-rated over that insurer’s pool of those insured.
Germany’s statutory health insurance system, covering about 90 percent of the population, also has a national risk-equalization fund, which is fed by a flat payroll tax on gross income of about 14 percent paid by all employees insured by that system.
The risk-equalization fund makes a risk-adjusted payment to the health insurer (which is a nonprofit “sickness fund”) of the individual’s choice. That payment from the risk-equalization fund, of course, does reflect the individual’s health status and age. But the individual’s payroll-tax payment into the risk-equalization fund is completely independent of the individual’s age and health status. It is based strictly on ability to pay.
I could continue to describe the health insurance systems of other European countries, or Canada, Taiwan, Japan, Korea, Australia or New Zealand. We would find that in none of these health systems does the individual’s or family’s contribution to health insurance reflect that individual’s age or health status.
Community rating is so acceptable in these countries because citizens there view it not only as part of a larger social contract, but also as a vehicle for life-cycle economic planning.
The vast majority of citizens in these countries view health care as a so-called “social good” that is to be shared on the basis of need by all on roughly equal terms and is to be financed largely on the basis of ability to pay.
By contrast, Americans have never agreed on a shared social ethic that should govern their health system, as the current debate over health reform has made visibly and audibly clear.
Furthermore, younger and healthier people in these countries realize that, but for the grace of God, they might become chronically ill only a few years hence and that, in any event, one day they, too, will be older and sicker. By paying more than their actuarially expected cost for health insurance, young and healthy people in these countries join a club, so to speak, that offers them a valuable call option. That call option allows them to procure at age 55 health insurance at a premium much below their actuarially expected cost.
By contrast, Americans have been taught that health insurance is largely a private consumption item purchased year to year and customized to the individual’s circumstances. Indeed, the private health insurance industry in this country has never been able to offer individual Americans the kind of life-cycle health insurance citizens in virtually all other industrialized nations take for granted. With the exception of Medicare, all health insurance in the United States is basically temporary.
Curiously, however, although Americans often flatter themselves with the image of being self-reliant, rugged individualists, they actually tend to rely more than citizens in many other countries on government-run health insurance and pensions in their old age, or when they fall on hard times. It is what makes the creature called “American” so perplexing in the eyes of foreigners.
Furthermore, many Americans who oppose community-rated insurance in the current health-reform plan are themselves beneficiaries of community rating. I shall have something more to say about this oddity in my next post to this blog.
http://economix.blogs.nytimes.com/2010/01/08/how-the-world-balances-health-care-risk/

Posted response of Don McCanne, San Juan Capistrano, CA (response # 2):
Some of us were very disappointed when politicians rejected, up front, the administrative simplification of the single payer model of an improved Medicare for everyone. Nevertheless, in the decision to expand the role of private insurance, Congress still had the opportunity to create a rational system of social insurance which would have included important concepts such as community rating and risk equalization.
The concept of the insurance exchange provided that potential. Yet Congress erected firewalls which will prevent most individuals from purchasing plans within the exchange. They also delayed the initiation of the exchange for a few years, and it will require several more years after that to once again prove that our rejection of the concept of a truly effective social insurance program will perpetuate the inequities, inefficiencies and profound waste in our system.
Worse, in trying to patch together this dysfunctional system, Congress has decided that 20 million or so will be left out, a number destined to increase with continuing increases in health care costs. That’s roughly two-thirds the population of Canada, a country that we criticize merely because of its issues with queues for some elective services.
Proponents of this reform proposal say that we should pass it now, and we can fix it later. Unfortunately, this process almost assures that it will be at least another decade before our nation takes another serious look at the policies required for an equitable and just health care financing system.
It’s too bad that we don’t have visionaries in power who can say that this isn’t going to work, and we have to move on with fixing it now. But then the citizens of the United States are used to living with our over-priced, dysfunctional system that accepts, as a given, financial hardship, physical suffering, and even death.
Further comment: Although my published response acknowledges that social insurance programs that depend on private health plans, such as the European programs that Professor Reinhardt describes, can achieve important policy goals such as community rating and risk equalization, I cannot overemphasize the fact that our goal for reform should remain the golden standard of a single payer national health program – an improved Medicare program that includes everyone.
The single payer model has unique features, not found in an exchange of private plans, that improve efficiency, effectiveness, and equity while insuring that absolutely everyone is included.
Private health plans, especially those in the United States that have evolved throughout the past three-quarters of a century, provide a negative value in administration of our health care funds because of their high costs, inefficiency, inequity, and their inability to improve the resource allocation that is needed for a high-performance health care system. They are not a suitable vehicle for a social insurance program.
Although some who read the letter from PNHP to our Senators fixated on the negative message of rejecting the flawed proposal before Congress, many seemed to miss our positive message which is reframed in my comment above: We need “visionaries in power who can say that this isn’t going to work, and we have to move on with fixing it now.” (The PNHP letter stated, “… immediately move to consider… “)
now: at the present time or moment (Merriam-Webster)
immediately: without interval of time (Merriam-Webster)
“Now” and “immediately” are terms that we used to communicate the fact that we need to avoid the decade or so of inevitable torture that so many will experience as we watch this experiment with reform fail us miserably. We need a bona fide program of social insurance now… immediately!

Obama demands tax on Cadillac plans

Obama Urges Excise Tax on High-Cost Insurance

By David M. Herszenhorn
The New York Times
January 6, 2010

President Obama told House Democratic leaders at a meeting on Wednesday that they should include a tax on high-priced insurance policies favored by the Senate in the final version of far-reaching health care legislation, aides said.

The White House has long expressed a preference for the excise tax on high-cost plans, which health economists say could be an important tool in controlling long-term health care spending for the government and for individuals and families.

http://www.nytimes.com/2010/01/07/health/policy/07health.html

And…

Taxing Cadillac Health Plans May Produce Chevy Results

By Jon Gabel, Jeremy Pickreign, Roland McDevitt and Thomas Briggs
Health Affairs
December 3, 2009 (online)

It’s often assumed that high-cost health insurance plans — sometimes called “Cadillac” plans — provide rich benefits to plan subscribers. Health reform provisions that treat these plans like luxuries may be misguided. Only 3.7 percent of variation in the cost of family coverage can be explained by benefit design (actuarial value). Benefit design plus plan type (HMO, PPO, POS, or high-deductible plans) explains 6.1 percent of this variation. Industry type and medical costs in the region also play a role. Most variation in premiums, however, remains largely unexplained.

Our inquiry suggests, however, that analysts should not equate high-cost plans with Cadillac plans, but that in fact other factors — industry and cost of medical inputs — are as important in predicting whether a plan is a high-cost plan. Without appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.2008.0430

And…

Nation’s Largest RN Organization Blasts Bid to Tax Benefits…

National Nurses United
Press Release
January 6, 2010

The nation’s largest union and professional organization of registered nurses today called on House members to hold the line in opposing a tax on workers’ healthcare benefits.

“It is unconscionable that workers and families with employer-sponsored health plans, who receive virtually no benefits from the proposed legislation, would have their health coverage taxed and seriously eroded,” said Deborah Burger, RN, co-president of the 150,000 member National Nurses United, formed last month through a unification of the California Nurses Association/NNOC, United American Nurses, and the Massachusetts Nurses Association.

“Advocates of the tax have made clear their intent: to force working people into cheaper, high deductible plans that provide less coverage and shift more costs to employees. The inevitable effect will be more people skipping needed medical care, enduring much higher out-of-pocket costs and risking financial ruin due to medical bills,” said NNU Co-president Karen Higgins, RN.

“Enactment of the tax, whose central premise is to control healthcare costs by reducing utilization of needed medical care while failing to control the pricing practices of the healthcare industry, would symbolize a central failing of the proposed legislation, ceding far too much to the insurers and the rest of the healthcare industry,” Burger added.

http://www.calnurses.org/media-center/press-releases/2010/january/nation-s-largest-rn-organization-blasts-bid-to-tax-benefits-urges-other-reforms-to-protect-patients-families-in-final-talks-on-healthcare-reform-legislation.html

Comment:

By Don McCanne, MD

What is the deal on the excise tax on high-premium “Cadillac” health plans, and why is President Obama pushing this tax so vigorously in the final stages of enacting health care reform?

Well, he is pushing it because his advisers tell him that it would help to achieve his first and foremost goal of slowing the increase in health care spending. The rhetoric being used implies that taxing high-premium plans would reduce the waste of paying for extravagant, non-essential benefits that are of little practical value. We’ll first dismiss this misperception and then follow with an explanation of why this form of cost management results in detrimental health outcomes.

The so-called Cadillac plans are merely plans with high premiums. The Health Affairs article by Jon Gabel and his colleagues demonstrates that only 3.7 percent in the variation in premiums can be explained by the actuarial value inherent in the benefit design. In most instances, the higher premiums are not due to “Cadillac” benefits, but they are due to other factors, such as the type of industry providing the employment and the medical costs in the region. In most instances, the higher premiums cannot even be explained. We can speculate that our reliance on our dysfunctional system of financing care through relatively unregulated private insurer pricing may be the most important culprit in providing Chevy plans at Cadillac prices.

So if the excise tax is going to push premiums down anyway, how could this be detrimental? Employers will not want to pay the excise tax, so they will demand from the insurers premiums that are at or below the tax threshold. Insurers will not simply reduce the premiums and continue to offer the same benefit packages. They will lower their benefits, lowering the actuarial value of the plans. There is absolutely no doubt that high and ever-increasing deductibles will be the norm.

A plethora of studies has demonstrated that individuals with high-deductible plans reduce their use of beneficial health care services. Although the RAND HIE data has been inappropriately misused to suggest that a reduction in beneficial services causes no harm, in fact many other studies have shown that health outcomes are worse when people don’t receive the health care that they should have.

The philosophy of controlling health care spending by shifting the financial burden to individuals and families is the most serious defect in the legislation before Congress. The excise tax on high-premium plans is only an example of this shift. The most glaring example is that the national standard proposed for basic plans has an actuarial value set at the unacceptably low level of 70 percent or even less. Making insured individuals pay money they don’t have to access care that is unaffordable is the worst way to control health care spending, that is, except for designing a program that deliberately leaves tens of millions of individuals with no insurance at all, just to satisfy budget hawks who understand only spending and not revenues.

Instead of enacting cruel policies that negatively impact patients on the demand side of the equation, we need to enact policies on the supply side that would benefit patients – all patients. That is precisely what a single payer national health program would be designed to do.

Isn’t it time that we told the lobbyists for the special interests and our elected leaders who revere them where they can stuff their Cadillacs?