PNHP

Mandatory insurance isn’t reform

Mandatory insurance isn’t reform

Forcing consumers to buy policies without regulating the market won’t solve the healthcare crisis.

By Jamie Court
The Los Angeles Times
September 25, 2007

Is it the right of the government to impose an obligation to buy a private product that costs $12,000 a year for a family of four?

Gov. Arnold Schwarzenegger and Assembly Speaker Fabian NuƱez claim they are close to a deal on healthcare reform that will require every Californian to prove they have a private health insurance policy — but does not cap how much insurers can charge for it. Hillary Clinton’s health plan, released last week, would require all Americans to have health insurance, also with no cap on premiums.

The goal of universal healthcare plans, including the one Clinton designed while first lady, has been to rein in waste and profiteering, then redistribute the savings to the public in the form of guaranteed healthcare. But these new “post-partisan” plans have been stripped of all effective cost containment. They simply force businesses, individuals and taxpayers to pick up the tab. Apparently, if you can’t beat the medical-insurance complex, join it. If it passes, the new system could be in place next year.

Under the proposed California compromise, employers will have to pay a share, but the ultimate responsibility lies with the individual. Policies for the poor would be subsidized, but taxpayers surely would be overcharged to boost corporate profits: Insurance premiums have increased 78% since 2001, compared with a 17% increase in inflation.

Health insurance is so unaffordable today precisely because no one is watching costs. With regulation of all medical charges, insurance would be cheaper and people might want to buy it. But Sacramento politicians already refused to standardize what doctors, hospitals, drug companies and insurers charge.

Californians are ready for market reforms to make health insurance more available and affordable, including forcing insurers to price policies fairly and preventing them from denying coverage to less healthy patients. Sacramento legislators should make the system fairer, regulate healthcare costs, then expand subsidies for low-income families. They should fix the broken market, not foist it on the public.

Mandatory purchase is nothing but a sop to top health insurers, which have given more than $4 million in campaign contributions to Sacramento politicians since 2001. Health insurers have had a hard time selling their increasingly expensive and less generous policies. So their plan is to make the government the big stick to force more customers into this market.

There is a big difference between mandatory participation in a cost-effective government program that protects us all (like Medicare) and being forced to buy an unregulated private product. This proposed mandate may get us closer to universal insurance coverage, but we’ll still be far from achieving universal healthcare. Why? Because the requirement will likely be for “affordable,” bare-bones policies — the kind that come with $5,000 deductibles, big co-pays and holes in coverage and benefits.

Research shows that high-deductible policies discourage patients of moderate incomes from seeking preventive treatment. So low- and middle-income patients likely will wind up with coverage they won’t or cannot use until they are very sick, the point at which their illnesses are the most expensive to treat.

Forcing citizens to buy an expensive, unregulated private product is nothing less than taxation without representation. If California were to follow the Massachusetts model for mandatory private insurance purchase (the only one in the United States), Californians would have to prove on their tax returns that they were insured or face tax penalties.

Insurance companies, meanwhile, remain beholden only to profit-driven shareholders, not taxpayers or their elected representatives. That will mean either bigger premiums or fewer benefits. In Greenfield, Mass., for instance, a couple in their 50s with one child pays $767 a month for the cheapest mandatory health plan, one without prescription drug coverage. If legislators want to enact their universal private insurance program, they should do it honestly through an across-the-board tax — not a backdoor tax like this.

Most important, mandatory private insurance on this scale will not work. Mandatory auto insurance, which has been in force in California for more than two decades, has failed miserably. That’s why a portion of our auto insurance premiums today go to pay for “uninsured motorist” coverage.

One in seven drivers has no auto insurance, compared to one in five without health insurance under a nonmandatory system. California’s auto insurance is the most tightly regulated in the nation, and because of that, premiums have declined since Proposition 103 was passed in 1988. When car insurance was required, but before the industry was regulated, the uninsured motorist rate was double what it is today.

We can choose not to own a car and not to be subject to mandatory insurance, as inconvenient as that might be. Californians’ only choice to avoid mandatory health insurance would be to flee the state.

Jamie Court is president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

Cost savings through prevention and wellness

Prevention isn't health care answer

By Steve Jacob
The Sacramento Bee
September 25, 2007

When Sen. Hillary Clinton, D-N.Y., unveiled her $110 billion health care plan last week, one of her strategies for paying that bill was savings resulting from disease prevention and “wellness.”

As with most presidential campaign program proposals, there were few details on this, such as how prevention is being defined and how much savings would result. But this dubious claim is reminiscent of presidential candidate Ronald Reagan’s pledge to balance the federal budget by eliminating government mismanagement, fraud and abuse. And we know how well that worked. It is hard not to feel like your intelligence is being insulted.

To recast Benjamin Franklin’s aphorism, the argument is that a dime’s worth of prevention today erases a dollar’s worth of cure tomorrow. Some earnest health care reformers echo Clinton in asserting that widespread preventive care and aggressive treatment of chronic conditions result in net savings by heading off larger future medical bills resulting from lack of detection or neglect.

Prevention is a hot topic these days. Medicare officials toured 48 states this summer to promote the program’s extensive menu of reimbursed screenings, inoculations and counseling. The government’s Centers for Medicare and Medicaid Services found that fewer than 10 percent of Medicare recipients were getting the battery of recommended immunizations and screenings, and more than a third failed to take advantage of a free flu shot in 2005.

This rediscovery of Franklin’s centuries-old wisdom is difficult to dispute. But there are some fundamental flaws in seeing preventive care as the Holy Grail for cutting health care costs: People don’t like it. Flu shots and immunizations are not pleasant. Annual checkups are inconvenient, and frequently not covered by insurance. Shedding your vices requires an iron will. A lack of urgency invites inaction.

For health care providers, it isn’t profitable. They get paid to do stuff: surgeries, procedures, lots of patient appointments.

Spending the time to nag you about smoking and excessive food intake doesn’t ring the cash register.

There is no scientific proof that universal preventive care saves money. However, the return on investment is evident when it is targeted at high-risk groups.

A few hospital systems nationally are providing free preventive care to patients who repeatedly visit emergency rooms for expensive treatment for chronic ailments.

Some companies are claiming that “workplace wellness” has a significant payback in reduced absenteeism and health care costs, but the evidence remains elusive.

Safeway has been hailed as a corporate pioneer when its health coverage costs fell 11 percent in 2006 after its 2005 health care costs exceeded its annual net profits. Its preventive health plan includes a 24-hour hot line for medical advice, lifestyle counseling and a 17,000-square-foot fitness facility at its corporate headquarters.

But its first-year savings were exclusively from changing its health insurance plan design. The jury is still out on long-term impact.

No one opposes prevention. As a political stance, none is safer. Well over half of U.S. health care costs stem from individuals’ poor lifestyle choices. Bad habits do not have many advocates.

But relying on people to change them, thus ultimately creating the funds to help cover the uninsured, is a fairy tale.

Universal prevention practices will make us healthier, but they are unlikely to save money.

A 2002 Rutgers University study found that last-year-of-life medical care accounts for 26 percent of Medicare expenditures and 22 percent of all medical expenditures. The real savings in healthcare is in rationing it, especially among those whose imminent death is inevitable.

You won’t find that in any candidate’s position papers.

About the writer:
Steve Jacob is a member of the Fort Worth Star-Telegram Editorial Board and a master’s student in health policy and management at the University of North Texas Health Science Center in Fort Worth.

http://www.sacbee.com/110/story/396210.html

Comment:

By Don McCanne, MD

Prevention and wellness programs are certainly to be encouraged for their beneficial impact on health. They should be an integral part of our health care delivery system. Much more importantly, they should be incorporated into all other appropriate public and private endeavors.

Ranging from educational programs in schools, to safety design of products, to development of community recreation facilities, to food industry marketing of healthier options, and on and on and on, the prospects are almost endless on how we can encourage prevention and promote wellness. Continuing awareness of the possibilities should be made a part of our culture.

But what we should NOT do is allow the dialogue on providing affordable health care for everyone to be diverted away from the well defined deficiencies in our system into some kind of nebulous wellness mumbo jumbo. During this open window of opportunity, we cannot afford to be distracted from our primary mission to reform health care financing for the benefit of all.

End the shame of our health-care crisis

Chicago Tribune
Letter to the Editor
09/26/2007

Presidential candidate Hillary Rodham Clinton presents us with yet another health-reform proposal based on the fatal strategy of keeping private insurance companies in the driver’s seat.

Her proposal won’t cover the 47 million uninsured, or even guarantee that people who have coverage today will have it when they fall ill and are unable to work.

Clinton’s proposal “preserves existing health insurance,” and includes the responsibility of individuals “to get and keep insurance” through the current private insurance market, or through a Health Choices Menu of private plans, or through a Medicare-type public program.

Thus her proposal is an individual mandate to purchase private insurance that is no longer affordable for average-income individuals, or to purchase a public plan that will be even more expensive because of adverse selection.

To make the plans affordable for individuals, she would use a combination of refundable tax credits and a cap on premiums at a percentage of income.

Assuming that the plans would provide adequate benefits and adequate protection against financial hardship, the increased spending through the tax system would be exponentially more than the estimates in her plan.

And most of the proposed savings to pay for these increases are largely nebulous, and some of those measures would actually increase costs.

Further, the administrative complexities of refundable tax credits and means-tested premium caps would still leave many without coverage.

Coverage will never be universal unless it is truly automatic for everyone.

If we are going to use the tax system to pay for health care anyway, then why should we waste funds on the profoundly inefficient system of segregated private health plans?

A universal risk pool that is equitably funded through the tax system is the most efficient and least expensive method of ensuring comprehensive coverage for everyone.

Also known as Medicare for All, a single-payer national health-insurance system would bring quality care to all Americans at a cost we can afford.

Indeed we are already paying for it: Americans pay the highest taxes for health care in the world.

Many will try to contrast the differences in the Clinton, Barack Obama, John Edwards and GOP proposals, but they are all basically the same. In spite of their rhetoric, they have each made the protection and enhancement of the private insurance plans a higher priority than patients.

It’s time for Medicare for All., which has 82 co-sponsors in the Congress. With the right presidential leadership, it could end the national shame of our health-care crisis.

Quentin D. Young, MD
National coordinator

Don McCanne, MD
Senior health policy fellow
Physicians for a National Health Program

Inexorably rising costs

The Battle Over Health Care

The New York Times
Editorial
September 23, 2007

In 2008, when it comes to health care, which is emerging as a defining domestic issue, voters will find stark differences in philosophy and commitment between Democrats and Republicans.

The three leading Democratic candidates all want to achieve universal or near universal health insurance coverage. The four leading Republican candidates espouse no such goal and barely mention the uninsured. The Democrats are willing to put substantial federal money into health care reform. The Republicans are not. The Democrats would expand government health insurance programs and give the federal government a greater role in regulating the insurance industry. The Republicans generally want to shrink federal programs and free the insurance industry from what they consider regulatory shackles.

Compared with these sharp differences between the two parties, the distinctions between leading candidates within each party are small, mostly a matter of tactics to achieve comparable goals. We far prefer the Democrats’ approach to health insurance, since at least they want to address an issue that must be resolved for reasons of economics, public health and fairness. Sadly, none of the leading candidates, in either party, has the vision or the political courage to propose radical solutions for the big underlying problem behind America’s health care crisis: the inexorably rising costs.

http://www.nytimes.com/2007/09/23/opinion/23sun1.html?ref=opinion&pagewanted=all

Health Coverage in the Balance

The New York Times
September 25, 2007

To the Editor:

Re “The Battle Over Health Care” (editorial, Sept. 23):

As long as we continue to build on our current fragmented system of financing health care through a multitude of private plans and public programs, we will never get a handle on rising health care costs.

The administrative efficiencies of a single national health insurance program would free up enough funds to pay for care for the uninsured and under-insured. But reducing administrative waste alone is not enough.

With our own national health program we could improve incentives that would reinforce our rapidly deteriorating primary care infrastructure. Providing everyone with access to a primary care medical home has been demonstrated to slow cost increases while improving quality.

Appropriate specialized high-tech services certainly provide value, but such care very often is overused, resulting in no benefit while driving up costs. A trusted primary care practitioner can provide each of us with advice on those services that actually would be of benefit.

Don McCanne, M.D.
Senior Health Policy Fellow
Physicians for a National Health Program
San Juan Capistrano, Calif.
Sept. 23, 2007

http://www.nytimes.com/2007/09/25/opinion/l25health.html

Comment:

By Don McCanne, MD

Providing health care coverage for everyone and making health care affordable are two different issues, though they are both problems that are inversely related to income.

Covering everyone is the easy problem. As in every other industrialized nation, the legislators merely need to establish public policies that would accomplish that goal. In spite of the rhetoric about controlling costs, the three leading Democratic candidates have focused primarily on this one issue, though their proposals would fall short even on this goal.

Controlling costs is quite another matter. The average premium for employer-sponsored family health insurance now exceeds $12,000. With a median household income now at $48,000, these numbers no longer work. Health care costs have risen to a level that makes it impossible for private insurers to market products with reasonably comprehensive benefits that have premiums that are still affordable for average-income families.

Furthermore, private insurers control health care financing for a majority of us, but they have had no significant impact on controlling health care costs (except for a blip in the curve when they instituted private sector price controls). Leaving the private plans in charge can only result in a continued failure to slow the growth of health care costs.

A single payer national health program would accomplish both goals. It would automatically cover everyone, and it would put into place mechanisms that would slow the rate of growth in health care spending while actually increasing value in our health care purchases. Reinforcing our primary care infrastructure, as mentioned in the letter above, is one of the more important measures, though the single payer model includes several other mechanisms that are also important.

The candidates hear and understand our message, but they remain timid. Why? Because we have failed to enlist enough support of the roughly 35 percent or so of Americans who are healthy and have what they believe, on blind faith, to be adequate private insurance coverage. They are beginning to understand their vulnerability, but we have much more work to do to educate them. And we must do it now, while the window is open.

Health Coverage in the Balance

The New York Times
Letters to the Editor
September 25, 2007

To the Editor:

Re Ć¢ā‚¬Å“The Battle Over Health CareĆ¢ā‚¬Ā (editorial, Sept. 23):

As long as we continue to build on our current fragmented system of financing health care through a multitude of private plans and public programs, we will never get a handle on rising health care costs.

The administrative efficiencies of a single national health insurance program would free up enough funds to pay for care for the uninsured and under-insured. But reducing administrative waste alone is not enough.

With our own national health program we could improve incentives that would reinforce our rapidly deteriorating primary care infrastructure. Providing everyone with access to a primary care medical home has been demonstrated to slow cost increases while improving quality.

Appropriate specialized high-tech services certainly provide value, but such care very often is overused, resulting in no benefit while driving up costs. A trusted primary care practitioner can provide each of us with advice on those services that actually would be of benefit.

Don McCanne, M.D.
Senior Health Policy Fellow
Physicians for a National Health Program
San Juan Capistrano, Calif.
Sept. 23, 2007

To the Editor:

It is amazing how the presidential candidates are determined to come up with health insurance programs that are invariably complicated, often tied to employers, and frequently based on taxation gimmicks. They seem to ignore the one insurance program that is overwhelmingly popular and already has infrastructure in place: Medicare.

It is a highly efficient program that confounds all the critics of government-run health care. There are no restrictions on choosing doctors, the medical providers do not work for the government, and the processing of insurance claims is virtually transparent to the consumer.

In fact, from a consumer standpoint, Medicare is the best health insurance program ever invented.

The easiest solution to the problem of health care coverage, without resorting to one of the half-baked schemes offered by the candidates, is to simply offer Medicare coverage to anyone who wants it.

Of course, indigent people would be given a break on premiums. Employers could still offer insurance coverage if they wish, as a way of attracting employees. And if an individual does not like Medicare coverage he can still go to the private market.

As for states enacting their own insurance plans, sure, go to it. But letĆ¢ā‚¬ā„¢s also offer consumers another choice: voluntary Medicare. Then, the consumers themselves, not the politicians, can decide whether they want public or private health insurance.

Ron Sheppe
Rochester, N.H., Sept. 23, 2007

To the Editor:

Thank you for your excellent editorial focusing on the heath care Ć¢ā‚¬Å“debate.Ć¢ā‚¬Ā There is another major factor in the debate, however, that was largely absent from your editorial. Specifically, your discussion only briefly touched on excessive insurance company costs and profits.

You commented on the fact that all of the Democratic candidates are looking at a system of universal coverage provided by private insurance companies and government programs. While that is likely our current political reality, it does not negate the need to look far more closely at insurance companies.

The fact is that private insurance companies spend far more on administrative costs than their government counterparts. Further, the amount of profit that the insurance companies retain is often excessive. If the United States is going to provide care to an additional 47 million people, we cannot afford inefficient administrative systems and the payment of outrageous profits to insurance companies.

Ellen Schiff
Los Angeles, Sept. 23, 2007

To the Editor:

The Democratic candidates for president all have similar proposals, which are steps in the right direction, but as your editorial points out, they lack measures for cutting costs. The most effective way to cut costs is to adopt a single-payer system, which is now available as Medicare, and would cut administration costs in half.

Since that seems to be beyond the pale, it is doubtful that any realistic cost savings will occur. It is apparent that a reassessment and redefinition of hospital goals and practices is in order.

Hospitals should be cooperative institutions rather than competitive institutions. As long as hospitals are profit-seeking and competitive, all will need to be full-service hospitals, maintain significant advertising and public relations budgets, and continue the plethora of building and expansion programs. Like all profit-seeking corporations, they canĆ¢ā‚¬ā„¢t afford to appear as second best.

Hospitals are not the only problem area. Medical schools, insurance companies, pharmaceutical corporations and physicians all contribute to the high cost of health care. As long as we continue the myth of health care as market-driven and profit-oriented, the costs will continue to increase. The Democrats should have enough backbone to do the right thing and endorse what we all know is best: a single-payer system.

Harry E. Berndt
Webster Groves, Mo., Sept. 23, 2007

To the Editor:

Your attempt to address Ć¢ā‚¬Å“The Battle Over Health CareĆ¢ā‚¬Ā is admirable, but your conclusions under the heading of Ć¢ā‚¬Å“WhatĆ¢ā‚¬ā„¢s MissingĆ¢ā‚¬Ā are as timid as those of the political candidates. If we value the health of our citizens, then just as we provide basic fire protection and police protection, we should also provide basic medical protection.

We cannot morally countenance winners and losers in the free-market sense in health care, just as we cannot in security and fire protection. ItĆ¢ā‚¬ā„¢s time to drop the ridiculous phobia of the Ć¢ā‚¬Å“single payerĆ¢ā‚¬Ā system and set about designing the most efficient government-run program we can, caring for the greatest number of people without driving up costs artificially for third parties like insurance industries.

Pam Dassenko
San Luis Obispo, Calif.
Sept. 23, 2007
The writer is a dentist.

To the Editor:

Paul KrugmanĆ¢ā‚¬ā„¢s mention of the scare tactics of health care reform opponents should have included the demonization of universal health care by the news media among his fears (Ć¢ā‚¬Å“Health Care Hopes,Ć¢ā‚¬Ā column, Sept. 21).

Despite polls suggesting a high popularity for such a system, the news media regurgitate myths and fail to explain the proposals of the health care debate. Single-payer health care is frequently described as Ć¢ā‚¬Å“government runĆ¢ā‚¬Ā or Ć¢ā‚¬Å“socialized medicine,Ć¢ā‚¬Ā even though the Canadian, French and German systems involve private doctors, hospitals and other caregivers who merely get paid by the government. Even Senator Hillary Rodham ClintonĆ¢ā‚¬ā„¢s tempered proposal that would involve a private-government partnership did not escape inaccurate accusations.

Until the mainstream media stop distorting reality on behalf of the industry, health care reform will remain at the fringe of political viability, and it will be dead on arrival for the foreseeable future.

Spyros Andreopoulos
Stanford, Calif., Sept. 21, 2007
The writer is director emeritus, Office of Communication and Public Affairs, Stanford University Medical Center.

To the Editor:

Could a Democratic candidateĆ¢ā‚¬ā„¢s determination to deliver on his or her health care promise to voters be undermined by large contributions from companies in the insurance and pharmaceutical industries? And why does it take so much political courage to give the American people what they want? Is there a correlation here?

Barbara H. Peters
Richmond, Va., Sept. 21, 2007

Care under Conyers' bill vastly superior to status quo

The Palm Beach Post
Letter to the Editor
Tuesday, September 25, 2007

The writer of “Conyers’ universal care proposal is unmanageable,” (Sept. 8) Opinion, about the Conyers bill for universal health care is revealed as both unthinking and unfeeling.

He is the former because the bill in no way emulates Sweden’s health-care system nor could it in any way result in stunting our economic growth. He makes it sound as though huge new taxes would be required, whereas the contrary is true. Eliminating more than 1,000 insurance companies with their staffs of clerical workers, advertising and lobbying expenses, dividends to shareholders and large CEO compensation would save the system $400 billion. That is enough to cover every person in the United States. It doesn’t call for adopting a system based on Sweden’s but on simply expanding our own functioning Medicare. That system, initiated for those 65 and older 42 years ago, would now cover all.

As for the bureaucracy he warns about, nothing could possibly be worse than that now in effect, where non-medical insurance company employees make life-and-death, long-distance decisions denying procedures ordered by physicians or delaying care for long periods while searches are made for reasons to deny it.

I call the writer unfeeling because nowhere does he make any mention of the 47 million Americans with no insurance, of their sleepless nights worrying about what they’d do if faced with serious illness and of the more than 18,000 who die needlessly each year because they couldn’t get the care that could have saved them. The writer displays not one iota of concern of this worsening breakdown. He treats this issue as though naive legislators such as Rep. John Conyers, D- Mich., are promoting a foolish bit of do-goodism.

I, in supporting this desperately needed program, am accused by people like the writer, of being a bleeding heart. I infinitely prefer that to being heartless.

H. DAVID PRENSKY
Palm Beach

Care under Conyers’ bill vastly superior to status quo

The Palm Beach Post
Letter to the Editor
Tuesday, September 25, 2007

The writer of “Conyers’ universal care proposal is unmanageable,” (Sept. 8) Opinion, about the Conyers bill for universal health care is revealed as both unthinking and unfeeling.

He is the former because the bill in no way emulates Sweden’s health-care system nor could it in any way result in stunting our economic growth. He makes it sound as though huge new taxes would be required, whereas the contrary is true. Eliminating more than 1,000 insurance companies with their staffs of clerical workers, advertising and lobbying expenses, dividends to shareholders and large CEO compensation would save the system $400 billion. That is enough to cover every person in the United States. It doesn’t call for adopting a system based on Sweden’s but on simply expanding our own functioning Medicare. That system, initiated for those 65 and older 42 years ago, would now cover all.

As for the bureaucracy he warns about, nothing could possibly be worse than that now in effect, where non-medical insurance company employees make life-and-death, long-distance decisions denying procedures ordered by physicians or delaying care for long periods while searches are made for reasons to deny it.

I call the writer unfeeling because nowhere does he make any mention of the 47 million Americans with no insurance, of their sleepless nights worrying about what they’d do if faced with serious illness and of the more than 18,000 who die needlessly each year because they couldn’t get the care that could have saved them. The writer displays not one iota of concern of this worsening breakdown. He treats this issue as though naive legislators such as Rep. John Conyers, D- Mich., are promoting a foolish bit of do-goodism.

I, in supporting this desperately needed program, am accused by people like the writer, of being a bleeding heart. I infinitely prefer that to being heartless.

H. DAVID PRENSKY
Palm Beach

Cracks in the moral hazard foundation

American Health Policy: Cracks in the Foundation

By John A. Nyman
Journal of Health Policy, Politics and Law
October 2007

Abstract

Much American health policy over the past thirty-five years has focused on reducing the additional health care that is consumed when a person becomes insured, that is, reducing moral hazard. According to conventional theory, all of moral hazard represents a welfare loss to society because its cost exceeds its value. Empirical support for this theory has been provided by the RAND Health Insurance Experiment, which found that moral hazard — even moral hazard in the form of effective and appropriate hospital procedures — could be reduced substantially using cost-sharing policies with little or no measurable effect on health.

This article critically analyzes these two cornerstones of American health policy. It holds that a large portion of moral hazard actually represents health care that ill consumers would not otherwise have access to without the income that is transferred to them through insurance. This portion of moral hazard is efficient and generates a welfare gain. Further, it holds that the RAND experiment’s finding (that health care could be reduced substantially with little or no effect on health) may actually be caused by the large number of participants who voluntarily dropped out of the cost-sharing arms of the experiment. Indeed, almost all of the reduction in hospital use in the cost-sharing plans could be attributed to this voluntary attrition. If so, the RAND finding that cost sharing could reduce health care utilization, especially utilization in the form of effective and appropriate hospital procedures, with no appreciable effect on health is spurious.

The article concludes by observing that the preoccupation with moral hazard is misplaced and has worked to obscure policies that would better reduce health care expenditures. It has also led us away from policies that would extend insurance coverage to the uninsured.

Introduction

The direction of health policy in the United States over the past thirty-five years is well known: increased cost sharing in the form of higher deductibles and coinsurance rates; the “management” of care by utilization reviews, exclusive contracting with certain providers, capitation, and bundling of services; and most recently health savings accounts (HSAs) and “consumer-driven” health care. Less well understood, however, are the foundations of these policies, especially among those who see such policies as mainly restricting access to care.

Two of these foundational studies are (1) the theoretical analysis of the welfare implications of moral hazard (Pauly 1968; Feldstein 1973) and (2) the RAND Health Insurance Experiment (HIE) findings concerning the health consequences of reducing moral hazard (Manning et al. 1987; Newhouse and the Insurance Experiment Group 1993).

This article presents a critical view of these two foundational studies. First, it suggests that much of the additional health care that consumers purchase when they are insured — that is, much of moral hazard — is actually efficient and welfare increasing: its value to patients exceeds (and often far exceeds, in the case of expensive, life-saving, hospital procedures that patients would not be able to afford without insurance) the cost of providing that care. Second, it suggests that the RAND HIE did not really capture consumers’ willingness to substitute other goods and services for medical care in response to increases in the price of medical care, but instead the study largely captured participants who became ill, dropped out of the experiment, and received the needed medical care under their original insurance policies outside the experiment. Because these participants received treatment outside the RAND experiment, their health care utilization was not recorded. Thus, the finding that moral hazard, especially the portion of moral hazard represented by additional hospital procedures, could be reduced dramatically by cost sharing with only a negligible health effect is spurious.

New Theory

The fundamental error in conventional theory is that it did not recognize that, while the price of medical care might drop to zero for all those who are insured, for most medical care — especially the expensive, hospital-based procedures and associated care that comprise the bulk of medical care expenditures in the United States — it is really only those who are ill who respond to that price reduction. For example, what healthy person would purchase a coronary bypass procedure, a leg amputation, or a liver transplant just because the price has fallen to zero? This means that only those who become ill are responsive to the insurance price reduction. If so, the price reduction becomes the vehicle by which income is transferred from those who purchase insurance and remain healthy to those who purchase insurance and become ill. This is an important distinction because it changes the welfare implications of moral hazard dramatically and implies that much, if not most, of moral hazard is efficient and generates a welfare gain (Nyman 1999, 2003).

New Interpretation

Of the various responses to cost sharing that were observed in the participants of the RAND HIE, by far the strongest and most dramatic was in the relative number of RAND participants who voluntarily dropped out of the study over the course of the experiment. Of the 1,294 adult participants who were randomly assigned to the free plan, 5 participants (0.4 percent) left the experiment voluntarily during the observation period, while of the 2,664 who were assigned to any of the cost-sharing plans, 179 participants (6.7 percent) voluntarily left the experiment. This represented a greater than sixteenfold increase in the percentage of dropouts, a difference that was highly significant and a magnitude of response that was nowhere else duplicated in the experiment.

The explanation that makes the most sense is that the dropouts were participants who had just been diagnosed with an illness that would require a costly hospital procedure. If they dropped out, their coverage would automatically revert to their original insurance policies, which were likely to cover major medical expenses (such as hospitalizations) with no co-payments. This is because HIE participants had agreed to relinquish their existing policies to RAND as a condition of participation, but they could revert back to their existing policies whenever they wanted if they dropped out of the experiment. Thus, when faced with a large hospital expense, the participants could have simply dropped out of the experiment but received the inpatient care outside the experiment.

As a result of dropping out, these participants’ inpatient stays (and associated health care spending) did not register in the experiment, and it appeared as if participants in the cost-sharing group had a lower rate of inpatient use. In reality, however, this finding would have been because participants who remained in the cost-sharing group simply had fewer diagnoses that required hospitalization.

Conclusion

The conventional theory of the moral-hazard welfare loss and the conventional interpretation of the RAND HIE results have created a policy environment in which health insurance is viewed as more of a problem than a solution (Gladwell 2005). We must recognize, however, that much of moral hazard generates a welfare gain that society should encourage rather than discourage. Because of this reevaluation of moral hazard, we must also realize that health insurance is much more valuable than has been recognized. Indeed, there is probably no other investment that we can make as a society that would generate as great a net return on welfare as finding a politically acceptable mechanism for insuring the large portion of U.S. citizens who are currently uninsured.

Abstract:
http://jhppl.dukejournals.org/cgi/content/abstract/32/5/759

Full article (25 pages):
http://jhppl.dukejournals.org/cgi/reprint/32/5/759

Comment:

By Don McCanne, MD

This landmark report turns upside down the policy basis of moral hazard. The entire article should be downloaded so that it can be used to refute those who insist that patients who decline health care when they have to pay for it out-of-pocket will not adversely affect their own health because they will decline only that care that has no measurable benefit on their health outcomes.

These two cornerstones of American health policy, the moral hazard theory and the RAND Health Insurance Experiment, have crumbled, taking down with them the rationale of the cost-sharing basis of the consumer-directed health care movement.

Professor Nyman has shown us that the new interpretation of the moral hazard of insurance insulation against health care costs does not produce a welfare loss, but, in fact, produces a welfare gain. That is why we need a national health program that covers all of us and that eliminates financial barriers to beneficial services.

We really don’t have to worry, after all, about unleashing a stampede for free leg amputations or free liver transplants.

The Battle Over Health Care

New York Times
Editorial
September 23, 2007

One of the enduring frustrations of presidential elections is that candidates and their parties sound like Tweedledum and Tweedledee on many issues. In 2008, when it comes to health care, which is emerging as a defining domestic issue, voters will find stark differences in philosophy and commitment between Democrats and Republicans.

The three leading Democratic candidates all want to achieve universal or near universal health insurance coverage. The four leading Republican candidates espouse no such goal and barely mention the uninsured. The Democrats are willing to put substantial federal money into health care reform. The Republicans are not. The Democrats would expand government health insurance programs and give the federal government a greater role in regulating the insurance industry. The Republicans generally want to shrink federal programs and free the insurance industry from what they consider regulatory shackles.

Compared with these sharp differences between the two parties, the distinctions between leading candidates within each party are small, mostly a matter of tactics to achieve comparable goals. We far prefer the Democrats’ approach to health insurance, since at least they want to address an issue that must be resolved for reasons of economics, public health and fairness. Sadly, none of the leading candidates, in either party, has the vision or the political courage to propose radical solutions for the big underlying problem behind America’s health care crisis: the inexorably rising costs.

The Republican Candidates

Two Republican candidates have yet to grapple seriously with health care reform. John McCain, running largely on Iraq and national security, has not said anything substantial about health care, nor has he even included it among issues listed on his campaign Web site. Fred Thompson has only a brief paragraph on his Web site in which he opposes new mandates, higher taxes or a Washington-controlled program, and calls for free-market solutions. He has also called for reduced spending on entitlements and says he would have opposed the new Medicare prescription drug benefit.

Rudolph Giuliani, who leads the Republican field in national polls, has only sketchy plans but has made it clear that he favors free-market approaches and is strongly opposed to what he mislabels as the Democrats’ push for socialized medicine. Borrowing from President Bush, he proposes a tax deduction of up to $15,000 to help families buy private health insurance instead of getting it through their employers. He believes millions of people might choose that option, creating a market in which insurance companies would rush in with affordable policies to cover them, and the nation would begin to move away from the employer-based system that the Democrats are trying to bolster. For the poor, he envisions some combination of vouchers and tax refunds to help buy policies but has given no indication of how much that program would cost or how he would pay for it.

His proposals are not likely to make much of a dent in the ranks of the uninsured. Tax deductions are of little use to low-income people who pay little or no income tax, and insurers are notorious for refusing individual policies to high-risk or chronically ill people. Given Mr. Giuliani’s eagerness to ease regulation of insurance companies it is hard to see how he could make that market work better.

Mitt Romney has the most developed health plan among the Republicans, as one might expect given his prominent role in spurring health care reform in Massachusetts. As governor of that left-leaning state, he helped make Massachusetts a leader in providing universal coverage, mostly by mandating that everyone must buy health insurance or pay a financial penalty. But as a candidate in the Republican primaries he has changed course, disavowing any need for mandates and contending that what was right for Massachusetts would not be right for the country.

Instead of a national reform effort, he wants the 50 states to devise their own plans, but without much financial help from the federal government. He promises federal incentives to help states deregulate their health insurance markets to encourage cheaper policies.

His key proposal at the national level centers on tax deductions to help people pay for health care. He would allow individuals to deduct their out-of-pocket expenditures — and any premiums paid for insurance policies they bought on their own rather than through their employer — from their taxable income. For those who still cannot afford coverage, he would encourage states to redirect money now used for charity care to help low-income people buy private health insurance. There would be no new federal money for this purpose. His advisers estimate the proposals would cost a modest $10 billion a year in reduced revenues to the United States Treasury.

The problem of relying on tax deductions to increase insurance coverage is that they mostly favor the better off. The problem with relying on the states to enact the needed reforms is that the plight of the uninsured would be left to the whims of geography. Few states have the financial resources that allowed Massachusetts to move to universal coverage, and many states lack the expertise to mount a sophisticated program.

The Democratic Candidates

Although Republicans routinely lambaste the Democrats for supporting socialized medicine or government programs in which bureaucrats would dictate your health coverage, the plans put forth by the three leading Democratic candidates — Hillary Clinton, Barack Obama and John Edwards — are all very careful to build on the existing system of employer-based coverage supplemented by government programs like Medicare, Medicaid and the State Children’s Health Insurance Program.

None of them is proposing a “single payer” system run by the government. And all bend over backward to reassure people that they can maintain their current coverage if they like it. Their political goal is to head off opposition from those who fear that their own coverage might suffer in the course of covering some 47 million uninsured people.

The Democratic plans have far more similarities than differences. All three would move toward universal coverage and would rely heavily on mandates to do so. Mrs. Clinton and Mr. Edwards would require everyone to take out health insurance. That would bring young and healthy people into the system to help subsidize coverage for the more sickly, and would eliminate the problem of “free riders,” who show up uninsured at the emergency room and get very expensive care without paying. Mr. Obama would require parents to get insurance for their children but has no mandate for adults.

All three would require big employers to provide health insurance or contribute to the cost of covering their employees outside the workplace. But they differ in the treatment of small businesses, whose opposition helped derail the last big reform effort in 1993. Mr. Edwards is the toughest. He would require small businesses to provide insurance coverage or help pay for coverage elsewhere. Mr. Obama would exempt them from any mandate. Mrs. Clinton, in what looks suspiciously like a bribe to buy small business support, promises them a tax credit for providing coverage.

The Clinton plan would cost an estimated $110 billion a year, the Edwards plan $90 billion to $120 billion, the Obama plan $50 billion to $65 billion. All three would finance their programs partly by rolling back Bush-era tax cuts for those making more than $250,000 a year and partly with debatable savings they would get through cost-cutting.

All three would require insurers to accept everyone without regard to pre-existing conditions, would provide tax subsidies to low-income people, and would establish purchasing pools to help individuals get low group rates.

There would be a menu of options for people dissatisfied with their current policies because of high costs or limited benefits, including both private health plans and a public program that would compete alongside them. That would provide an interesting test of whether government or private plans are more effective and popular, a matchup that critics of “government-run” programs seem determined to avoid.

The Clinton plan has an innovative proposal to limit the premiums that families have to pay to a certain percentage of their income, as yet undefined. That is a welcome protection for consumers but could cause problems if medical costs continue to rise far faster than wages.

WHAT’S MISSING

All of the plans, both Republican and Democratic, fail to provide a plausible solution to the problem that has driven health care reform to the fore as a political issue: the inexorably rising costs that drive up insurance rates and force employers to cut back on coverage or charge higher premiums. All of the plans acknowledge the need to restrain costs, but most of the remedies they offer are not likely to do much.

Electronic medical records to eliminate errors and increase efficiency, more preventive care to head off serious diseases, and better coordination of patients suffering multiple, chronic illnesses are all worthy proposals, but there is scant evidence they will reduce costs. Proposals to import drugs from abroad, allow Medicare to negotiate drug prices, restrain malpractice expenses, increase competition among health plans, and empower consumers to shop more wisely for medical care might help a bit. But many experts doubt that any of this will truly put the brakes on escalating health care costs.

No top candidate in either party has broached more drastic remedies, like limiting the use of expensive new technologies, cutting reimbursements to doctors and hospitals, or forcing people to use health maintenance organizations. And no one has suggested imposing higher taxes on everyone, not just the wealthy, to finance universal coverage. These solutions are not even discussed on the campaign trail lest they alienate voters and interest groups.

At this stage, the various plans should be considered as broad outlines of where the candidates want to go, with details to be worked out later. Voters who put a high priority on covering all or most of the uninsured will prefer the Democrats’ approach, as we do. The chief danger is that the Democrats have a tendency to imply that everyone can be covered with good benefit packages without inconveniencing anyone but the wealthy. Their cost and savings assumptions will need thorough analysis when more detailed plans emerge.

Voters who put a higher priority on reshaping the health care system along free-market lines than on achieving universal coverage will prefer the Republican plans. Those plans’ likely impact on costs will also need to be analyzed when more details emerge. The “magic of the market” may be less than magical.

Given the wide split between Republican and Democratic approaches, the polarized politics in Washington, and the overriding need to find a way out of the morass in Iraq, it will be an uphill battle to achieve consensus on health care any time soon. But at least voters will have a clear choice of which way the candidates are headed.

Single-Payer, or Medicare for All, Only Way To Go

by Alison Landes
Palm Beach Post
Sep 23, 2007

Excerpt

Dr. Richard Rodman’s Aug. 26 commentary, “Universal coverage, but rationed care,” misses the pivotal distinction between universal and single-payer health care. Universal care, the catch-all reference touted in political debates, glosses over the major element that sets the two apart.

Single-payer, detailed in HR 676, The United States National Health Insurance Act pending in Congress, highlights the difference. Single-payer, based on expanded and improved Medicare for All (not socialized medicine) eliminates for-profit health insurance companies. Universal care retains them through convoluted means, including subsidizing to reduce costs and premiums and providing incentives to employers to lower costs. But it all boils down to this: Keeping insurance companies in the equation means more profits for the companies, bigger campaign contributions for politicians and less care for patients.

U.S. health care is already rationed; note the exclusion of 45 million to 75 million uninsured and 50 million underinsured for myriad reasons: inability to pay as costs rise, loss of job, preexisting conditions, chronic diseases and employers hiring part-timers, circumventing benefits entirely. HR 676 ensures that all Americans and all residents living in the U.S. territories are covered.

Coauthored and introduced by Reps. John Conyers, D-Mich., and Dennis Kucinich, D-Ohio, HR 676 is cosponsored by 78 representatives and endorsed by Physicians for a National Health Program, the California Nurses Association, the National Nurses Organizing Committee, the Alliance for Retired Americans and hundreds of labor unions nationwide.

Under HR 676, all medically necessary services are covered – primary care, inpatient care, outpatient care, emergency care, prescription drugs, durable medical equipment, long-term care, mental-health services, dentistry, eye care, chiropractic and substance-abuse treatment. Patients get to choose their physicians, providers, hospitals, clinics and practices with no co-pays or deductibles, and private health insurers are prohibited from selling coverage duplicating these benefits.

Transition to not-for-profit health care would take place over a 15-year period through the sale of U.S. Treasury bonds. The hallmark is fairness for the greatest number of people. Displaced employees are the first hired and retrained for employment, reimbursement rates are set annually for physicians, and pharmaceutical companies, no longer given free rein, will negotiate prescription-drug prices….

Proposed financing includes a modest payroll tax on employers and employees of 3.3 percent each, added to the 1.45”percent payroll tax each pays now, totaling 4.75 percent each. There is a 5 percent health tax on the top 5 percent of income earners; 10 percent tax on the richest 1 percent and a small tax on stock and bond transactions amounting to one-third of 1 percent. Closing corporate tax loopholes and repealing the Bush tax cut for the highest income-earners add up to an estimated savings of $56 billion.

For-profit health insurance and pharmaceutical companies’ prosperity is enhanced by each dollar saved in treating or in denying treatment. Medicare’s 3 percent administrative costs are far less than the for-profits’ 20 percent to 30 percent. And, not surprising is opposition to HR 676 from the 20 largest HMOs ($10.8 billion in profits in 2005) or the 12 top HMO executives (combined $222.6 million in compensation).

The top seven insurers together earned $10 billion in 2006. In 2004, top executives of the 11 largest health insurers made $85 million in combined income; the world’s 13 largest drug companies had $62 billion in profits; and the top 12 drug companies’ executives collected $192.7 million. At the close of 2005, Dr. William McGuire, United Healthcare’s former CEO, had an $8 million salary and $1.6 billion in stock options. What’s wrong with this picture when one person’s salary could cover health-care costs for 34,000 people?

Health care is or should be a basic human right. It is incumbent upon the government to ensure accessibility to all Americans and that it is not rationed according to ability to pay.

The press needs to tell us more about Canada's single-payer health-care system

By Morton Mintz
mintzm@earthlink.net

Nieman Watchdog
COMMENTARY | September 21, 2007
http://www.niemanwatchdog.org/index.cfm?s=0440erl1clzons1f

Substantial mainstream reporting on single-payer health insurance should have been triggered–or so one might think–by a succession of studies over the years that establish that Canada’s health-care system saves or improves large numbers of lives while not wasting money on administrative expenses and fat executive-pay packages. Almost without fail, Canada gets higher ratings than the U.S.

In 2000, for example, the World Health Organization examined and rated the health systems of 191 nations. The United States ranked 37th. Canada scored significantly better although it was not outstanding–it placed 30th. But this study was only one of many that had Canada topping the U.S. (Click here and go to pages 152 to 155 in a PDF file for the rankings of all 191 countries.)

Between November 2002 and March 2003, the official statistics agencies of the United States and Canada did their first-ever joint survey of the health status, rates of illness, behavioral risk factors, use of health care, and access to health care. The survey included 3,505 Canadians and 5,183 U.S. residents. The results were analyzed by two associate professors of medicine at Harvard Medical School.

“A single-payer national health insurance system would avoid thousands of needless deaths and hundreds of thousands of medical bankruptcies each year,” Drs. Steffie Woolhandler and David Himmelstein concluded in the July 2006 issue of the American Journal of Public Health. In addition, U.S. residents turned out to be less healthy than Canadians, with higher rates of nearly every serious chronic disease examined in the survey, including diabetes, arthritis, and chronic lung disease. And more than seven times as many U.S. residents as Canadians reported that cost kept them from getting needed care.

Some other examples:

* In April 2007, the Canadian online medical journal Open Medicine examined the results of 38 major studies that compared health outcomes of patients in Canada and the United States with “diverse problems…including cancer, coronary artery disease, chronic medical illnesses and surgical procedures.” The key finding: “Available studies suggest that health outcomes may be superior in patients cared for in Canada versus the United States, but differences are not consistent.” Yet Canada spends only about 10 percent of its gross domestic product on health care while the U.S. spends approximately 15 percent of its GDP, or 50 percent more, the journal noted. And in 2003 Canadians were spending only 53 percent as much per capita for health care as were Americans: US$3,003 per Canadian v. US$5,635 per American.

* In May, the Commonwealth Fund compared the quality of care, access to it, and other key issues in six countries: the U.S, Australia, Canada, Germany, New Zealand and the United Kingdom on such key issues. The U.S. ranked last.

* In July, New York Times columnist Paul Krugman pointed out that the U.S. health care system does worse than others that cost far less, including Britain’s, “which spends only about 40 percent as much per person as we do.”

And in August, Associated Press Writer Stephen Ohlemacher wrote:

Americans are living longer than ever, but not as long as people in 41 other countries.

For decades, the United States has been slipping in international rankings of life expectancy, as other countries improve health care, nutrition and lifestyles. Countries that surpass the U.S. include Japan and most of Europe, as well as Jordan, Guam and the Cayman Islands.

“Something’s wrong here when one of the richest countries in the world, the one that spends the most on health care, is not able to keep up with other countries,” said Dr. Christopher Murray, head of the Institute for Health Metrics and Evaluation at the University of Washington.

“A baby born in the United States in 2004 will live an average of 77.9 years. That life expectancy ranks 42nd, down from 11th two decades earlier, according to international numbers provided by the Census Bureau and domestic numbers from the National Center for Health Statistics.”

Also in August, a thoroughly researched lead editorial in the Times called it a “delusion that we have ‘the best health care system in the world,’ as President Bush sees it, or provide the ‘best medical care in the world,’ as Rudolph Giuliani declared.”

Single-payer is government-financed, not government-run, and it is therefore not “socialized,” as are some other universal-care systems. Private physicians, private hospitals, and other private caregivers are paid by the government of Canada, just as their U.S. counterparts are paid under Medicare.

These are simple, instantly-available facts. Yet Americans are deluged by uninformed and false and misleading commentary, ideologically-driven denunciations of “socialized medicine,” and bad-mouthing of Michael Moore and “Sicko.” Here are some examples from a compilation by Caroline Kao in the August “Extra! Update”:

Single-payer healthcare…is frequently described as ‘government-run’ or ‘socialized’ health care or medicine (e.g., US Today, 6/13/07; CNN, 6/25/07; O’Reilly Factor, 6/27/07…

On CNBC (Kudlow & Co., 6/20/07), right-wing filmmaker Stuart Browning mourned the loss of personal choice, saying Moore and HR 676 (a U.S. single-payer bill] supporters “advocate systems in which we would not be able to spend our own money on our own bodies.”

Fox’s Morton Kondracke (Beltway Boys, 6/24/07) warned of a slippery slope from single-payer care to a socialist dictatorship, saying that “Moore basically wants socialized everything…”

The same network’s Sean Hannity called Michael Moore “‘a pathetic propagandist'” who is “‘not even any good at it’ (Hannity and Colmes, 6-19/07).

On Sept. 14, during an hour-long report on “America’s health-care system,” ABC’s 20/20 co-host John Stossel, MediaMatters reported, “interviewed five advocates of free-market approaches to health care but only one advocate of increased government-mandated health coverage. The five free-market advocates were interviewed on air for a total of 6 minutes, 24 seconds, while the lone advocate of a public health system, filmmaker Michael Moore, was interviewed on air for a total of 1:40.”

A few days earlier, New York Times op-ed columnist David Brooks wrote three sentences indicating that he shares the dedication of President Bush to the preservation of private insurers no matter what.The first sentence: “Some liberals, believing that government should step in as employers withdraw, support a European-style, single-payer health care system.”

Europe has several different systems of universal health care; Canada has long had single-payer in its purest form. Yet Brooks somehow found it necessary to cross the Atlantic, in a manner of speaking. Of course, associating single-payer with Europe, not to mention liberals, is much more likely to turn off readers on it than would be associating it with our next-door neighbor.

Brooks’s second sentence: “That would be fine if we were Europeans.” Leading readers to imagine themselves as Europeans is confusing and vague (who are these Europeans? Belgians? Dutch? French? Germans? Italians?) and consequently also a more likely turn-off than would be leading readers to imagine themselves as our familiar northern neighbors.

And the third sentence: “But Americans, who are more individualistic and pluralistic, will not likely embrace a system that forces them to defer to the central government when it comes to making fundamental health care choices.”

Really? Since 1965, Medicare has been, as Brooks would have it, forcing all elderly Americans “to defer to the central government.” In the ensuing 42 years, has anyone noticed signs of a rebellion among the “more individualistic and pluralistic” Americans who happen to be Golden-Oldies?

Most importantly: Single-payer is, at bottom, Medicare for all. What evidence would Brooks offer that Medicare for all would not be embraced by, say, the 47 million Americans who have no health insurance? Or by the 40 of 100 Americans found in a Consumer Reports survey to be inadequately insured? Or by the 44 out of 100 Americans, who, in a Wall Street Journal/NBC News poll, identified “health care costs” as their top economic worry?

The lack of mainstream in-depth coverage of universal health-care systems–established long ago by every industrialized nation except our own–has given a pass to sloppy, biased reporting and deceptive, misleading punditry. The impoverishment of our politics and governance–and health-care and pocketbooks–were natural consequences.

Morton Mintz (Nieman ’64) is a senior adviser to the Nieman Watchdog project.

State health reform a charade

BY ROSE ANN DEMORO
LA Daily News
09/22/2007

ANYONE wondering why so many voters distrust politicians might want to take a look at the charade on health care reform being performed in Sacramento.

Under the whip of California Assembly Speaker Fabian NuƱez and Senate President Don Perata, with the active prodding of some labor and interest groups desperate to settle for any health care legislation no matter how bad it is, the California Legislature last week passed a fundamentally flawed bill that just might set back real reform for years.

To make matters worse, they passed a bill they know will be vetoed by Gov. Arnold Schwarzenegger as a starting point for negotiations to pass an even worse bill in a special legislative session now under way.

Ironically, the Democratic leadership passed the weak bill, AB 8, after refusing to unite behind a single-payer, Medicare-for-all approach, SB 840, as they did last year, because they said SB 840 would be vetoed.

For careful observers of the California political scene, this united front might have a familiar ring. The same consensus produced the hurried passage a decade ago of energy deregulation. That was followed by blackouts, skyrocketing energy costs for consumers, and open thievery by Enron and other energy corporations.

Second was the demolition of workers’ compensation in California by the same coalition. That call to slash business costs – backed by the same folks now touting AB 8 – led to a rushed “reform” that, according to a employer/worker state commission, ended up cutting average benefits by 50 percent for workers on permanent disability due to work-related job injuries.

Following that history of failure, we now have the framework for the latest debacle. The bill passed by the legislature has:

No controls on runaway costs of premiums, deductibles, co-pays, co-insurance, drug prices, or annual fees imposed by doctors.

No minimum standard of health benefits for middle-income employees who don’t qualify for state subsidies. The likely result is those people would end up with junk insurance – high-deductible plans with low standards of covered benefits, and costs that will continually rise.

New taxes on employers who don’t provide health coverage for workers that is substantially less than what the average California business offering health plans now pay. That’s a huge incentive for employers to reduce health coverage, shifting more of the financial burden to California families, or drop benefits entirely and just pay the tax.

A false promise of requiring insurance companies to cover everyone. In fact, the bill has a huge loophole that will allow insurance companies to dump people with “serious medical conditions” into a public pool that will probably be bankrupted by having to pay for the sickest patients – while the insurance companies make hundreds of millions more in profits by only covering the healthiest people.

The final package is also expected to include a tax on hospitals that could further jeopardize the survival of public hospitals. The formula, which includes a match of federal funds for the poor, is written in a way that it would return $1.7 billion to private hospital corporations, while California counties would lose about $600 million statewide.

Big California hospitals agreed to the tax as a little-noticed separate bill was being passed by the Legislature that delays until 2020 the requirement that unsafe hospital buildings meet seismic safety guidelines. So you’ll have to pay more for health care coverage, and if you can afford to get into a hospital, it just might fall down on you in an earthquake.

Perhaps most importantly, AB 8, and the final weaker version that will come from the special session, reinforces the existing dysfunctional system, throwing millions of more people into the insurance-industry meat grinder, while giving the newly “insured” policies they may find will cover immunizations but not cancer.

This is not reform, it’s an insurance-industry heist. Rather than completing this fiasco in the special session, it would be better to call it off and start over.

Rose Ann DeMoro is executive director of the California Nurses Association/National Nurses Organizing Committee.